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Bargain EV incoming! Tesla's cheap electric car is finally coming in 2025 with 'Project Redwood' Tesla Model 2 to take the fight to China and BYD in Australia: report 

Tesla's cheapest model ever is reportedly around the corner (Image: Kleber Silva).

Tesla's cheapest electric vehicle ever is just around the corner, according to new reports, with Elon Musk planning a mid-2025 launch for what it calls "Project Redwood", which will likely be launched as the Model 2.

International news site Reuters has the exclusive on this one, with the agency quoting four sources who say the model will be a compact crossover which will enter production by June next year.

The move is seen as an effort to ward off China's BYD, which has taken Australia and the world by storm with affordable new-energy vehicles like the Dolphin, Atto 3 and Seal.

In fact, BYD last year took over Tesla as the world's biggest supplier of new-energy vehicles, which the American brand predicting a slower growth rate in 2024 in its last quarterly report.

"In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next-generation vehicle at Gigafactory Texas," Tesla said.

And it would now appear that the next-generation vehicle will be the Tesla Model 2, currently coded as Project Redwood, with the car the realisation of Elon Musk's promise to launch a US$25,000 EV.

On a straight currency conversion basis, that would make the new model $38,000, giving the US brand a genuine shot at delivering Australia's cheapest electric vehicle, undercutting the BYD Dolphin, the MG4 Excite 51 and the GWM Ora.

But even if it landed somewhere in the $40k bracket, it would likely be revolutionary for EV sales in Australia, given the popularity of Tesla products here.

Musk has long said that Tesla is working on a new platform that will halve the cost of producing EVs, paving the way for the long-promised entry-level Tesla model in Australia and around the world.

And Musk has big plans for the cut-price Tesla, saying the new affordable model will outsell the Tesla Model 3 and Tesla Model Y combined, and describes the project as "the primary focus of our new vehicle development team".

And now, it seems, it's coming. So watch this space.