SAN FRANCISCO/SHANGHAI: Tesla is exploring a return to more affordable electric cars with a new compact SUV under development, according to four people familiar with the matter, in a move that could signal a shift in strategy after years of prioritizing autonomous technology.

The automaker has recently approached suppliers to discuss specifications and manufacturing processes for the proposed vehicle, which would be a completely new model rather than a variant of its existing Model 3 or Model Y lineup, the sources said.

The compact SUV is expected to be smaller than Tesla's best-selling Model Y, measuring about 4.28 meters (14 feet) in length, significantly shorter than the roughly 15.7-foot Model Y, two of the sources said.

Three of the people said the vehicle would initially be produced in China, with plans to expand manufacturing to the United States and Europe. Production timing remains uncertain, and the project is still in early development, with no confirmation of final approval.

Tesla did not respond to requests for comment.

The development comes after Chief Executive Elon Musk scrapped a highly anticipated low-cost EV project in 2024, pivoting the company's focus toward robotaxis and humanoid robots.

It remains unclear whether the new SUV represents a renewed push into the mass-market EV segment or aligns with Tesla's longer-term autonomous ambitions.

One person familiar with the project and a Tesla employee said the company's current philosophy is to design vehicles that could operate autonomously while still offering the option for human driving.

The employee declined to confirm details of the specific vehicle but said Tesla recognizes that many markets will take years to fully adopt driverless cars or to approve them under regulation. Offering both autonomous and manually driven configurations could help sustain sales and keep production facilities running at high capacity.

Analysts have warned that Tesla may face a third consecutive year of declining sales for its traditional electric vehicles, which still account for the bulk of its revenue. The company currently operates a limited robotaxi service in Austin, Texas, many of which include human safety monitors.

The new model is expected to be priced significantly below Tesla's current entry-level Model 3 sedan, which starts at about US$34,000 in China and around $37,000 in the United States, two sources said.

Cost reductions would likely come from design and engineering changes, including using a smaller battery, resulting in a shorter driving range than the Model Y's 306 to 327 miles.

One source said Tesla also plans to use a single electric motor instead of a dual-motor configuration and aims to reduce the vehicle's weight to about 1.5 metric tonnes, compared with roughly two tonnes for the Model Y.

Three of the sources said production would take place at Tesla's Shanghai factory, though it is unlikely to begin this year.

The project revives long-standing questions about Tesla's commitment to affordable EVs.

Since its founding, Musk has said that Tesla's broader mission has been to produce mass-market electric vehicles to help combat climate change. However, efforts to develop a low-cost model have repeatedly stalled.

A proposed $25,000 EV, often referred to as the "Model 2", was expected to drive rapid sales growth. But Reuters reported in 2024 that Tesla had abandoned the project, even as it continued work on a robotaxi built on a similar platform.

Musk later said it would be "pointless" and "silly" to produce a low-cost EV for human drivers given the company's focus on autonomy.

A former Tesla manager said that, as recently as mid-2025, the company had deprioritized traditional affordable cars in favor of robotaxis, which were seen as a way to reduce users' cost per mile.

When Tesla later introduced more affordable versions of its existing vehicles, they were stripped-down trims of the Model 3 and Model Y, offering only modest price reductions. U.S. prices of $36,990 and $39,990, respectively, were viewed by some investors as too high to significantly expand the customer base.

Meanwhile, Tesla has continued to promote its future in autonomous mobility. The company plans to begin production of its Cybercab robotaxi, a two-door vehicle without pedals or a steering wheel, first unveiled in 2024.

However, it remains unclear when the Cybercab will be commercially deployed. The automaker has not yet sought a federal exemption required to sell a vehicle without traditional driving controls, according to a spokesperson for the National Highway Traffic Safety Administration.