Tesla to Launch Affordable Model and Expand Robotaxi Service in 2025

Tesla has confirmed that production of its new, more affordable electric vehicle has started, with sales scheduled to begin in the fourth quarter of 2025. The company stated during its Q2 2025 earnings call that the new model, internally referred to as E41, will be a simplified version of the Model Y, rather than a completely new design. Production ramp-up is expected throughout the third quarter of 2025, with the vehicle being assembled at Tesla's Fremont and Giga Texas facilities.

Tesla attributed the slower-than-expected production ramp to recent reductions in the U.S. electric vehicle tax credit and the need to retool factory lines currently operating at full capacity. The company has prioritized manufacturing existing models to allow customers to benefit from remaining tax incentives. The new affordable model is expected to feature cost-saving measures such as textile seats and reduced features, potentially resulting in a starting price around $35,990 before incentives, according to prior project details and market estimates.

Looking ahead, Tesla indicated ongoing development of new battery technologies and drivetrain options for future models, but noted that current market conditions do not favor the immediate introduction of a next-generation, lower-margin vehicle.

Separately, Tesla is expanding its Robotaxi ride-hailing service to the San Francisco Bay Area, following its initial launch in Austin. According to an internal memo cited by Business Insider, the Bay Area rollout will begin with an invite-only program for select Tesla owners, who can request rides through the Robotaxi app. For regulatory compliance, vehicles will operate with a human safety monitor in the driver's seat, as required by California's Department of Motor Vehicles. The service will function within a geofenced region covering Marin, San Jose, and parts of the East Bay. Tesla has not yet secured permits for fully driverless commercial operations but is proceeding under existing testing authorizations while working with state regulators. The company plans to expand the Robotaxi network to additional U.S. cities by the end of 2025.