According to Chinese blog posts from earlier last week, now vetted by Reuters, Tesla intends to produce a cut-down version of the Model Y, initially for the Chinese market, sometime in 2026.
This follows the launch of Tesla’s cut-down Model 3 for Mexico, as well as news that Tesla intends to launch their new next-gen model sometime in the near future.
Cut Down, But How?
The new Model Y, internally referred to as Project E41, is designed to lower the entry price of Tesla’s popular SUV—one of the most compelling options on the market due to its size, range, and versatility, especially following the launch of the refreshed Model Y.
To achieve this, Tesla is reportedly aiming to reduce the Model Y’s total cost by nearly 20%, according to reports from China. While exact changes remain unknown, we can make informed guesses based on the cost-saving measures Tesla implemented in the scaled-down Model 3 for Mexico.
Textile Seats and Trim
One of the most noticeable changes in the cost-cut version of the Model 3 in Mexico was the removal of vegan leather throughout the interior. In its place, Tesla opted for a durable textile fabric for the seats, reducing material costs. Additionally, any Alcantara trim pieces were replaced with the same textile in various areas.
No Heated or Cooled Seats
Another major cost-cutting measure was the removal of heated and cooled seats, along with the heated steering wheel. While these feature reductions may seem minor, eliminating them reduces various things, such as electrical components, harnesses, and ductwork that are required for seat ventilation.
No Rear Screen
One of the more unexpected changes in the reduced-cost Model 3 was the removal of the rear screen, despite it being powered by the same front infotainment computer as the front display. Given that the screen functions primarily as an additional display rather than a standalone system, the cost to include it is extremely low. It’s one of those really smart additions Tesla has added that increases value for the consumer with minimal cost to Tesla.
Tesla is unlikely to redesign or modify the vehicle’s wiring harness for this change, meaning a rear screen could potentially be retrofitted later by the customer. Based on replacement part estimates, the screen likely costs Tesla between $5 and $20 per vehicle, which acts as a secondary monitor for the infotainment computer.
Interestingly, new Tesla hardware was recently found by Greentheonly. While the computer has inputs for a front bumper camera, it lacks the output for a secondary screen, meaning that it could be suited for this upcoming cheaper Model Y.
Ambient Lighting, Acoustic Glass, Speakers
The final set of changes also focuses on the interior. Tesla replaced the RGB-capable ambient lighting with a simpler white-only version—likely saving only a few dollars per vehicle. While this may seem like a minor and somewhat unexpected cut, it could serve as an upsell opportunity to the standard RWD variant.
Additionally, Tesla reduced the use of dual-pane acoustic glass, now limiting it to just the front windows and windshield. This change drastically cuts costs but also affects cabin noise levels. The dual-pane glass played a key role in making the refreshed Model Y noticeably quieter, so this downgrade will likely bring noise insulation closer to that of the original Model Y.
As for audio, Tesla scaled down the speaker system in the Mexican Model 3 from 17 speakers to just nine, while also removing the subwoofers and one of the audio amplifiers. While this cuts costs due to wiring and speakers, it also has a large impact on the audio quality in the vehicle.
Project E41 is Not the Next-Gen Model
It’s important to note that Project E41 is not the same as the upcoming, more affordable next-gen platform, which is internally referred to as Project Redwood. While Project E41 focuses on a reduced-cost version of the Model Y, Project Redwood is designed to test Tesla’s manufacturing capabilities, using their innovative unboxed assembly method to reduce both costs and production time. The goal is to create a vehicle that is smaller and more affordable, while also keeping it safe and capable of self-driving.
Tesla previously confirmed that they plan to unveil new models—distinct from cut-down versions of the Model 3 or Model Y—during their Q4 2024 Earnings Call. However, the executive team has been careful not to divulge too many details about the upcoming model during interviews. This suggests there may be a lot more that has yet to be unveiled.
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We’ve known for a while now that Tesla has been using a custom build of FSD to allow its newly produced vehicles at Giga Texas and Fremont to autonomously navigate themselves from the production line to the outbound delivery lot.
While we knew they were using a custom build of what was likely FSD Unsupervised, thanks to a recent post from Tesla AI on X, this has now been confirmed. Tesla has also confirmed it has accrued over 50,000 driverless miles, totalled from vehicles autonomously driving themselves to delivery lots.
Giga Texas production now uses FSD Unsupervised to deliver cars from end of line to the outbound logistics lot.
Over 50,000 driverless miles have been accrued between California and Texas factories so far pic.twitter.com/79zKY0U6Ox
For most of Tesla’s vehicles - that’s a 1.4-mile trip that is shared with pedestrians, cars, trucks, and construction equipment. You can see in the video that the Teslas are navigating public roadways and encountering real human drivers.
That’s great news, especially since many were wondering whether Tesla would secure the necessary approvals in time to launch their Robotaxi network in June.
Increased Confidence
Following Tesla’s post to X, Musk followed up by saying that when Tesla launches FSD Unsupervised soon, it will be the first time there will be a generalized, pure AI solution to autonomy. Tesla and several executives continue to post more content about autonomy and the Robotaxi network, leading us to believe they’re feeling confident in the June launch.
Model Ys autonomously navigate a 1.4 mile trip on a road shared with pedestrians, cars, semi trucks, construction equipment & more pic.twitter.com/iPx2fs78v2
Back when Tesla initially announced the autonomous travel of its vehicles from production to loading lots, they mentioned that the Cybertruck was the only vehicle at Giga Texas not receiving that same treatment.
Now, that’s changed - Cybertruck is now also navigating through the Cybertunnel to make its way from the factory directly to the loading docks, all on Unsupervised FSD. And that’s making us even more excited, especially because Tesla was supposed to launch an FSD Update for the Cybertruck a little while ago - but it hasn’t made it to production yet. This update is set to bring Start FSD from Park, as well as Actually Smart Summon - bringing the Cybertruck to feature parity with Tesla’s other AI4 vehicles.
Cybertrucks autonomously navigate a 0.6 mile route traversing beneath one of America's fastest highways, emerging through a steep 17% grade to reach their destination pic.twitter.com/3ZMYCRPhIj
Now that Tesla is confidently using a build of Unsupervised FSD to navigate the tight confines of the tunnel and park, we’re pretty sure that Tesla will likely launch the expected FSD update in the near future.
FSD Update Soon?
It’s been a while since any FSD hardware variant has received an FSD update. It appears that Tesla has been focused on Unsupervised FSD and launching FSD outside of North America.
It seems like we may get a new FSD update soon, and we don’t believe it’ll be just for the Cybertruck. Those who have the opportunity to sign up for Tesla’s new Early Access program will likely be some of the first recipients to receive the FSD update, so stay tuned.
Lars Moravvy, Tesla's Vice President of Vehicle Engineering, recently took to X to pose a question to the community: “Let's make Teslas better… what do you all want for 2026?”
The question absolutely took off, and there were tons of fantastic suggestions about what Tesla owners would love to see from their vehicles in the future.
There were more than 12k suggestions, so let's take a look at some of the most popular feature requests.
Top Suggestions
CyberSUV - A classically styled SUV with a stainless steel exterior.
Faster Charging & Better Charge Curves - Tesla vehicles start off with fast charging speeds, but usually taper off quickly in comparison to other brands. This is especially true when compared to some Chinese brands, which sustain 500 kW charging at up to 70% state of charge. Let's get improved charging speeds on Teslas as well, especially with the 500 kW Superchargers coming in Q3.
450mi / 500mi range vehicles - Lots of customers want longer range vehicles, even though Tesla's analysis says the 300-mile range is ideal for 90% of its customer base. Range really does matter - especially for customers in more rural locations or those who choose to tow or haul with their vehicles.
Ambient Lighting Reacts to Music - This one is pretty straightforward, and it's surprising we don't already have this feature. Having basic integration with the currently playing audio is a neat feature, and really helps to make the entire experience even more seamless and premium.
Refresh Model 3 Signal Stalk Retrofit - Some people really love their signal stalks. While there aren't retrofits available just yet, we do recommend the Enhauto Stalks. For those who want an official retrofit, there is now some hope - Lars responded and said he'll try.
Lumbar Support in the Profile - Right now, lumbar support is the only seat item not saved to the Tesla Profile. This may change soon, as Lars followed up and mentioned that there are a few technical issues preventing it, but Tesla could make it work with some of their magic.
Model 3 Track Pack - The Model S has an exclusive Track Pack as a post-factory retrofit offered by Tesla, including premium brakes, tires, and wheels. The Refreshed Model 3 Performance is a killer track vehicle - but getting real track support from Tesla would be a game-changer for those who love to race.
Some of Our Favorites
Sentry Mode Improvements - Several users suggested adding B-pillar recording to Sentry Mode. And it looks like Tesla has already been working on this, and it'll be available in the upcoming 2025 Spring Update, which will be update 2025.14. Unfortunately, it'll be limited to what appears to be HW4 vehicles due to the additional processing.
Massaging Seats - A touch of luxury for Tesla's most premium models would be nice. Many other luxury brands already offer massaging seats so it’d help keep the Model S on par with these brands. Edit: Corrected that the Model S has never come with massaging seats.
Powershare for More Vehicles - Powershare is a fantastic feature, and bringing it to every Tesla is a must, especially as many other brands, including Ford, Kia, and Hyundai, offer either Vehicle to Load or Vehicle to Home capabilities as an option on their EVs. Tesla recently introduced the Mobile Connector with Powershare capabilities and an Outlet Adapter, but it's still exclusive to the Cybertruck for now.
Starlink Integration - Tesla currently uses cell networks for connectivity, which can sometimes be spotty. Starlink is a clear, high-tech solution that could provide data to vehicles when they have a clear line of sight to the sky.
Grok in Vehicles - Musk has already confirmed that Tesla will be integrating Grok into Tesla vehicles. We expected it to be included in Tesla's Spring Update, but it looks like they'll need a little bit longer. One of the lead xAI/Grok developers mentioned the request with a wink emoji, so it's clear it’s a feature that Tesla and xAI are actively working on. The way users will be able to naturally talk to AI will be game-changing for many users who are used to driving alone.
There was a lot of positivity in the comments, as well as a ton of interesting requests that could eventually be implemented in Tesla vehicles. Lars also responded to quite a few of the comments, which was nice to see.
While nothing is certain, some of these popular requests may come in a future update, while others may need hardware changes if Tesla wants to implement them.
2026 may seem far away, but there's already plenty of coming this year with a cheaper vehicle and the launch of the Robotaxi network.
If you love reading about feature suggestions, we also recently covered the top feature requests for Tesla, based on the many requests we hear about.
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