News

Tesla will launch a cheaper variant of the Model Y in a bid to increase sales after posting one of its worst ever quarterly sales declines.

In January, Tesla boss Elon Musk to launch a range of "more affordable models" by this summer in a bid to broaden its appeal. Rather than an entirely new model, this has instead amounted to a stripped-out version of the American EV brand's best-seller.

Production is scheduled to begin from around August or September.

Musk hasn't said whether other affordable models, such as a new Model 3, are planned. Nor has he provided more information, such as which markets the new Model Y would be sold in, target volumes or a target price.

The current cheapest version of the SUV starts at £51,990.

Tesla hopes the new base model wil especially help to incentivise sales in the US, where current $7500 government electric car grants are due to be stopped as part of president Donald Trump's rollback of emission mandates.

The new model announcement has come after Tesla posted heavy losses in the second quarter of 2025. Musk warned that the trend is set to continue in what is expected to be one of Tesla's most challenging periods.

The key pullout from the EV maker’s second quarter earnings, released on Wednesday night, was a 16% dip in income to $1.17 billion.

Tesla blamed this on a 13% decline in sales, a reduction in its average model selling price and an increase in operating expenses.

Most importantly, revenue from electric car credits, bought by other manufacturers to hit mandated emissions targets – which Tesla has hugely profited from previously – has dropped by 51% (or $441 million) since Q2 2024, including $154m since the previous quarter alone.

This has been driven by Trump’s winding down of electric car regulations in the US, meaning car makers no longer need to hit certain EV production targets and therefore have no need to buy credits.  

Announced in January, the revocation of former president Joe Biden’s legislation – which mandates that by 2030, 50% of all new cars sold in the US must be electric – is due to take effect in the coming months.

As such, Musk told reporters on the earnings call that Tesla “probably could have a few rough quarters; I’m not saying we will, but we could”. 

His comments resulted in share prices in the firm dropping 7%.

This year has been difficult for Tesla. Despite introducing an updated version of the Model Y earlier this year, it has struggled in China – previously one of its most significant makerts – due to tariff tensions and sales drops linked to Musk's ties with Trump.

While Tesla seemingly has no other mainstream models in the pipeline, a buoyant Musk said he expected a wave of revenue to come from the brand’s upcoming self-driving technology, such as its robotaxi service (currently being trailed in Texas) and vehicles such as the Cybercab. It has also invested heavily in the development of humanoid robots.

“Once you get to autonomy at scale in the second half of next year, certainly by the end of next year, I think I'd be surprised if Tesla's economics are not very compelling,” said Musk.

Subaru is mulling a potential return to the B-segment with an affordable electric hatchback following the success of the new Renault 5.

The move would bolster the Japanese marque’s position in Europe by lowering entry into its EV line-up, made up of the recently revised Solterra, new Uncharted SUV and new E-Outback crossover. 

The brand's most famous B-segment model was the Justy, sold in in the UK various guises between 1987 and 2009. 

Speaking to Autocar, Subaru’s global EV product boss Inoue Masahiko said the brand was pondering the introduction of a car that could sit below the Uncharted, such has been the success of the 5 since it launched at the turn of the year: 30,000 sales in Europe so far.

“It’s something that is up for consideration, because we need to prepare a wider range of BEVs to meet every customer’s expectations,” said Masahiko. 

Given Subaru has a strategic partnership with Toyota (the Solterra is heavily related to the bZ4X and the Uncharted is based on the new C-HR+), it's likely that the two will join forces again, and a previously mooted electric successor to the Yaris would be the perfect tie-up.

A launch date in the latter end of the decade would make sense, given that Toyota product boss Andrea Carlucci previously confirmed to Autocar that an electric Yaris “is the idea” but “this is not quite now”.

What’s more, Subaru Europe boss David Dello Stritto said that the concept of a Subaru electric supermini was worth exploring, given the segment has been reignited by the likes of the 5 and the impending arrival of the Volkswagen ID 2 and Cupra Raval and the prospect of an 'MG 2' by 2028.

However, Dello Stritto said that Subaru wants “to wait and see how the Uncharted does” before deciding if it needs to extend its EV line-up lower. 

“I reckon we need about two years to find out how it's performing,” he added. “We might have come up with new ideas during that period, so in two years' time we can talk again.”