‘The biggest obstacle is money’: Can a cheaper 2026 Tesla Model Y to rival the XPeng G6, Kia EV5 and Geely EX5 turn around the EV brand’s fading fortunes after its worst quarter in a decade?

In a Tesla financial results call following one of the auto brand’s worst quarters on record, Tesla CEO Elon Musk confirmed a more affordable version of its most popular model is on the way.

A question to Musk about the long-rumoured ‘cheaper new model’ the brand was expected to announce resulted in the controversial CEO ‘letting the cat out of the bag’ and confirming it will be a more affordable variant of the Tesla Model Y.

The confirmation followed Musk saying he expects there will be more “rough” financial quarters to come after the brand’s share prices dropped almost 5 per cent and revenue was down 12 per cent in the second quarter of 2025.

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“We probably could have a few rough quarters,” Musk said in response to a question.

“Um, I'm not saying we will, but we could.”

The more affordable car set to start production later this year is one strategy to try and turn the financial slump around.

“It’s the Model Y,” Musk explained.

2026 Tesla Model Y (Image: Chris Thompson)

“The biggest obstacle remains that… the desire to buy the car is very high, but people don’t have enough money in their bank account to buy it.

“Not a lack of desire but a lack of ability. So, the more affordable we can make the car, the better.”

The Tesla Model Y currently starts from $58,900 before on-road costs in Australia, which is still competitive compared to many established rivals. However, it is starting to look expensive compared to newer entries in the market from Chinese brands like BYD and XPeng.

2026 Tesla Model Y (Image: Chris Thompson)

The feature-packed Sealion 7 starts at $54,990 while the XPeng G6 costs even less at $54,800.

Musk hopes the future plan to run a fleet of Tesla ‘Robotaxis’ will aid potential buyers in getting in on the ground floor, the idea being that owners can allow others to use their personal Model Y as a Robotaxi, AirBnB style.

“It will be a very big deal when people can release their car to the fleet and have it make money for them.”

Musk wouldn’t divulge any more information about the cut-price Model Y, though it would be safe to anticipate fewer features and a more rudimentary electric drivetrain setup.