Tesla has informed its suppliers of plans to start producing a new mass-market EV, codenamed "Redwood," by mid-2025. Reuters broke the news less than 24 hours before Tesla’s call with shareholders. The media outlet used information from four sources “familiar with the matter,” with two describing the model as a compact crossover.
This can only be the $25,000 car, also known as the Model 2 or Next Gen. It’s not the first time that we’ve heard rumors of it being a smaller Model Y. The next-generation Tesla architecture, internally known as 'NV9X', is said to include at least two models. Tesla’s Master Plan suggested that there would be infinite demand for the less expensive car, projecting its fleet could match all of the other models combined.
Next Model in 2025
Tesla has approached suppliers requesting quotes for the "Redwood" model, forecasting a weekly production volume of 10,000 vehicles. Production is slated to begin in June 2025, according to three sources who spoke anonymously due to the confidential nature of the information. However, the fourth downplayed the timeline, stating that most of Tesla's new product launches have been overly optimistic, with volume output more likely to start in 2026.
Sources also revealed that Tesla has recently dismantled a Honda Civic, priced at $23,950 in the U.S., to study methods of producing more affordable cars.
Concept of Next Gen
Not a Tesla App
One of the most upvoted queries from investors, ahead of Tesla's fourth quarter and year-end report, concerned the timing of the next-gen compact vehicles, and for good reason. Tesla fell behind BYD as the world’s leading EV producer in the last quarter of 2023. Add that to the new push to gas-powered cars thanks to a refreshed attack on EVs since the Big 3’s labor strife. Tesla must put its shareholders at ease addressing these factors head-on, precisely what a mass market, less expensive vehicle would do.
The Long History of the Cheaper Tesla
Musk initially promised a $25,000 car in 2020, a plan he later paused and reinstated. Tesla's most budget-friendly model, the Model 3 sedan, currently has a starting price of $38,990 in the United States. In the previous year, Musk commented on the sensitivity of high-ticket items, such as cars, to rising interest rates among consumers. In May, Musk revealed that Tesla was developing two new products, potentially unveiled within the year, with a combined annual sales potential of 5 million vehicles.
During Tesla's shareholders meeting, he emphasized, "Both the design of the products and manufacturing techniques are head and shoulders above anything else that is present in this industry." Walter Isaacson's biography of Musk hints at the more affordable car and the Robotaxi based on the same vehicle architecture. There was even a picture that gave away several clues.
Picture from Elon Musk Biography
Not a Tesla App
Last March, Musk and other Tesla executives outlined plans to halve the cost of their next-generation vehicles, although a specific timeframe for these launches was not provided. About a year ago, chief designer Franz von Holzhausen said that the car he is most excited about is the one he is currently working on but could not talk about.
Musk stated last year that the affordable model would initially be manufactured at Tesla's factory in Texas. Additionally, Tesla plans to manufacture more affordable cars at its plant near Berlin and has expressed interest in establishing a factory in India to produce smaller, cheaper electric cars.
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Tesla has published a 16-post series covering a wide range of unique scenarios against which the company tests each FSD release. Tesla’s VP of AI, Ashok Elluswamy, also provided some additional context, which we’ll cover below.
These scenarios could be difficult for a regular driver to respond to and are a good demonstration of FSD’s capabilities. Let’s take a look at all the different scenarios that Tesla regularly tests against. According to Ashok, these tests are only one of 10 ways Tesla validates their software. These tests were done against FSD v12.5.6.3, the HW4 build that’s on approximately 20% of the fleet.
We’ve embedded each video below and also provided some additional information.
1. Reverse Cut-in (Occluded)
Every FSD release is rigorously tested, including rare and adversarial scenarios on closed courses — Here's 16 examples:
This first test is for a car reversing out of a parking space, while occluded (vision blocked) by another car or obstacle. In the test, the Model Y notices the incoming car and then brakes with space left over.
In this video, it's hard to even spot the car on the right that’s “peeking” forward—it's occluded by bushes on the side of the road. FSD notices and stops in time to let the other vehicle safely pass.
An incoming vehicle that takes a left turn to enter the same lane of travel as FSD - spotted, stopped, and then continuing smoothly. In the second shot, you can see FSD left a considerable amount of space to let the vehicle cut in.
This is honestly one of the most common scenarios on a highway - someone cuts in while obscured into your lane of travel. Once again, FSD does its thing with plenty of space to spare.
FSD’s path planner plans an overtake around a stationary vehicle here, sees the oncoming traffic, and politely waits its turn to continue. This is another everyday scenario, especially on urban and suburban streets.
There are a surprising number of people who don’t know how stop signs work. However, FSD does know how they work and also knows what to do if others act unpredictably. This is one of the best demonstrations of FSD’s capability to react quickly and effectively to unpredictable behavior on the roads.
Another overtake scenario, but this time the vehicle being overtaken throws open its door into traffic. Not necessarily the wisest of moves, but humans are unpredictable. Good to see Tesla working to save its vehicles from both hitting the door or having the door hit with its new Blind Spot Monitoring While Parked feature.
This scenario is another common one - someone is taking a right turn, and you expect them to complete the turn, but instead, they slam on the brakes. Here, you can see the vehicle’s Forward Collision Warning goes off due to the sudden reduction of distance between the Tesla and the vehicle in front of it. FSD still manages to brake in time before Automatic Emergency Braking kicks in.
This one is pretty clean-cut - someone takes a left turn even though you’re on your way through the intersection. This particular accident is one of the most common - 53% of cross-path accidents involve a left turn through an intersection where a side impact will be lethal. FSD can make a big difference - over 8,000 people die in North America alone in this particular scenario.
Here, FSD smoothly reacts to an object on the road as the vehicle ahead dodges it. We’d love to see this scenario done with different types of objects or debris, as this is another common item - especially with roadkill on country roads. A good demo of FSD’s collision avoidance maneuvers too!
Taking it one step further, FSD successfully notices, slows down, stops itself from hitting the bouncing cone, and then makes it around safely. If you’ve ever seen someone strap something down in the bed of a pickup and forget to say “This ain’t going anywhere” - this is that exact scenario.
Another high-speed occluded cut-in, this time for a vehicle making a U-Turn from an oddly shaped intersection. FSD started braking the moment the first couple pixels of the Model Y were beyond the bush occluding vision. With a human’s reaction time, this would have resulted in a T-bone.
Ashok Elluswamy mentioned that this is possible because of low latency and high intelligence - combined together, it enables FSD to make a threat assessment and decide what to do, very quickly. It also considers the potential of a rear-end collision - and there is collision avoidance baked into that decision-making.
Similar to the cone cut-out, this one happens at 73mph (117km/h)! FSD sees the car dodging, notices there’s an obstacle, and moves out of the way without dropping speed.
Another common scenario - in fact, the number one reason why pileups occur on highways is the harsh, sudden braking of vehicles in front. FSD once again notices and comes to a safe stop here.
Tesla has been previously greatly criticized for its ability to come to a safe stop for children playing on the road. Here, Tesla is demonstrating its capability of doing so - once again with highway speeds of 73mph.
And to really make the point - it can do it with a crossing child too. Tesla has made a strong commitment to safety for vulnerable road users, and this is a good way to show how it works.
That’s a lot of unique scenarios that Tesla tests against - and each and every build has to be vetted against this huge list of different safety tests in order to ensure that the build that ends up in customer hands is as safe as possible. With FSD v13 looking like it's coming soon, we’re excited to see where this takes Tesla next.
With Musk announcing that FSD v13 is coming soon, it really is starting to feel like Unsupervised FSD and Robotaxi could be pushed out sometime next year.
Tesla announced an updated roadmap for FSD in late October. With it, they announced that FSD v13, the one that’s expected to make Unsupervised FSD feature complete (although not 100% reliable), would start being sent to employees by the end of the week.
We have yet to see any hints or sightings of employees testing FSD v13, but Elon Musk has now stated that FSD v13 is coming soon.
It sounds like Musk is talking about the employee release as it usually does, but it’s not immediately clear. Tesla originally predicted that select owners would receive FSD v13.3 around Thanksgiving.
Musk also mentioned that FSD v13 is trending to be about 500% better than the current build of v12.5.5.3 on the Cybertruck. If that’s true, Unsupervised FSD is just a regulatory leap away, rather than a technical or training challenge. However, let’s remember that Musk has often thrown out these vast improvement numbers that don’t appear to materialize when the update rolls out to customers. There’s no doubt that FSD v13 will be a big milestone and have several new features, such as Autopark at destination, Unpark and more, but the much lower miles per intervention will likely come in later revisions.
Tesla has already seen drastic improvements this year, moving from V11.4.9 to v12.3.6, and then more recently to V12.5.4.2. Each successive build has had major improvements in how FSD is able to react and respond in real-time while also becoming smoother and safer.
We’re in for some exciting times as an even better FSD version makes its way to customers soon. And in order to really make the point, Tesla has also shown off how they conduct FSD Safety Testing in a series of videos, which we’ll include below.
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