Tesla will make a lower-cost version of its best-selling Model Y in Shanghai, three people with knowledge of the matter said, aiming to regain ground lost during a price war in its second-largest market.

Sources say the new EV will be a smaller Model Y, with mass production starting in 2026. Local rivals like BYD are eroding Tesla’s market share, prompting a new affordable model. The new electric car will reportedly be produced in China,

Tesla has plans to produce a low-cost version of its best-selling Model Y to boost sluggish sales in China, according to a report. The car will cost at least 20% less to produce than the version launched last year,