Tesla’s Model Y Aims to Reverse Sales Decline With Budget-Friendly Upgrade in 2026

• Tesla is launching a budget version of its Model Y vehicle.
• Elon Musk’s electric vehicle firm has suffered a dramatic decline in sales and share price.
• Analysts have claimed Musk’s ties to the White House may be contributing to poor performance.

Tesla is set to make a lower-cost version of its best-selling Model Y as the electric vehicle manufacturer battles dramatically declining sales.

The Elon Musk-led company will begin producing the new budget model in 2026, Reuters reported , citing sources familiar with the matter.

Tesla Budget Upgrade

Tesla’s new budget model will cost 20% less to produce than its earlier Model Y version and will be smaller in size, sources told Reuters.

The car, which will first be produced in Shanghai, will primarily be sold in China to defend its market share in the country, following major competition from rival BYD.

In November, BYD’s quarterly revenue surged by 24% to $28.2 billion CNY, well above Tesla’s $25.2 billion for the same period.

Tesla will also launch the model in North America and Europe, although a timeframe for this has not been confirmed.

The company’s previous Model Y retails at around $36,351.

Tesla’s Falling Sales

Tesla’s sales and stock have taken a dramatic tumble in 2025, with JPMorgan analysts claiming they could not think of another comparable moment in automotive history.

According to Bank of America’s analysts, the electric vehicle manufacturer’s sales in January fell around 50% in Europe from the previous year.

On Wednesday, March 12, after trading hours, Tesla had lost almost 49% of its market cap from December. Its peak value of $1.54 trillion from the end of 2024 fell to around $777 billion.

“We struggle to think of anything analogous in the history of the automotive industry, in which a brand has lost so much value so quickly,” JPMorgan analysts wrote in a note to clients, according to Forbes.

Elon Musk’s Political Involvement

Analysts believe Musk’s controversial work within the Department of Government Efficiency (DOGE) has negatively impacted consumers’ view of the vehicle.

“Mr. Musk’s work with the DOGE has proven controversial domestically, and while as many members of the political right may be pleased as those on the left are displeased, the effect on Tesla sales seems nevertheless negative,” analysts wrote.

At the end of last year, it seemed Musk’s intertwining relationship with President Donald Trump and the White House was going to pay off for Tesla’s stock.

The share price of the electric vehicle company soared in November following the Presidential victory.