Tesla finally makes move fans, and investors, have been waiting for

Tesla disappointed many of its day-one fans when it revealed it was mothballing the Model S and Model X due to low demand, so it could shift production capacity to other projects, such as humanoid robots.

This week, however, reports indicate the company is gearing up to produce a new vehicle that follows the success blueprint laid out by its popular Model 3.

Tesla has contacted suppliers in recent weeks as it develops an all-new, smaller, cheaper electric SUV, Reuters reported Thursday, April 9, citing four people familiar with the planning.

This is the same formula Tesla used to turn the Model 3 into the enormous success it became after its July 2017 debut. Tesla was never the same after it shifted from making luxury-priced vehicles to an affordable model for the mass market.

The Model 3 was priced at $35,000 at launch, much more in line with what Americans are used to paying for their sedans.

Tesla has bundled its Model 3 delivery numbers with those of its other successful brand, Model Y, since 2020, so exact sales numbers are difficult to determine.

But last year, Tesla China VP Grace Tao shared on Weibo, the Chinese version of Twitter, that the company had sold more than 3 million Model 3s worldwide since 2017, according to Teslarati.

In the first quarter this year, Tesla’s Model 3 and Model Y accounted for 341,893 deliveries, while the “other models,” like the Model S and Model X (which will officially end production forever later this year) and the Cybertruck, accounted for the remaining 16,000+ deliveries.

Now, Tesla is looking to rekindle that magic with a new SUV.

Tesla is building a new, affordable SUV for the mass market

Tesla is developing a new electric SUV and has contacted suppliers about manufacturing logistics and specifications for various components, Reuters reported Thursday, April 9.

The vehicle is more than 18 inches shorter in length than Tesla’s current Model Y SUV (14 ft vs 15.7 ft) and will be cheaper than the Model Y, which currently has an MSRP of $39,990 for the lowest-tier model.

The vehicle would be produced in China, according to Reuters sources, with future plans to expand production to the U.S. and Europe. Tesla’s Shanghai factory, which exports to Europe and other markets, saw production rise by nearly 9% year over year to 85,670 in the first quarter.

When Tesla confirmed it was ending Model 3 and Model X production, it said it would refocus its efforts on humanoid robots and driverless cars. However, according to Reuters sources, Tesla also realizes that “global markets won’t see meaningful adoption — nor regulatory acceptance — of driverless vehicles for years.”

So in the meantime, while the company says it is not a car company, it will lean more into cars as it waits for consumers and regulators to catch up to its vision of the future.

The vehicle is still in the early development stage, and Reuters couldn’t verify that Tesla has actually green-lighted its production. The news service noted that Tesla has hinted at producing numerous vehicles in the past (including a Roadster super car and Semi freight truck in 2017) and then showed little to no follow-through on actually producing those vehicles.

In the end, this news may be much ado about nothing. But it does signal that the company is at least thinking about how it can turn around its struggling car business.

Tesla prepares to develop a new, smaller, cheaper electric SUV.

Morris/Bloomberg via Getty Images

Tesla has strong 2026 start after dismal 2025 deliveries

Tesla as a whole has seen demand issues for a while, as falling EV sales in the U.S. and China in general have combined with Elon Musk’s deteriorating personal brand.

Tesla’s annual revenue declined in 2025 for the first time ever, as deliveries also fell for the second consecutive year. Tesla says it is much more than a car company, and that its future lies in artificial intelligence and autonomous driving.

Related: Europe has outmaneuvered Trump in trade war, auto exec says

But as much as Tesla likes to say it is not just a car company, more than 70% of its revenue ($69.5 billion in 2025) comes from automotive sales, which includes leasing, regulatory credits, and vehicle sales.

Service revenue stemming from its vehicles (this includes supercharging, vehicle insurance, and repairs) generated another $12.7 billion.

Auto sales already aren’t a high-margin business, and its automotive gross margin (excluding regulatory credits) actually dipped into the red for the first time in 2025, according to Reuters.

Stakes for Tesla “could not be higher,” analysts say

Earlier this year, Tesla indicated it was pulling the plug on the Model S and Model X and would replace that production capacity with Optimus humanoid robots as part of the company’s plan to build 1 million of them per year.

That plan may worry investors, since there is currently no discernible market for humanoid robots, and selling 10,000 of them in a year would be impressive. But the vehicle models the company is getting rid of haven’t sold, either, so that it may be a wash in the end.

However, analysts at BNP Paribas aren’t taking this Tesla experiment lightly because the company is also spending a lot to make it happen.

“Given Tesla’s sizable cash burn this year ($7 billion estimate by BNPP) and indications for massive multi-year investments on the horizon tied to a TeraFab and 100 GW solar capacity, the ‘stakes’ of TSLA’s demonstrated robotaxi and Optimus progress could not be higher,” analysts said in a recent note.

According to BNP, the other models that combined delivered 16,000 vehicles in the quarter benefited from demand that was artificially inflated, so once again, moving off of them makes sense. Still, Musk has made some pretty big promises about what Optimus and Robotaxi can do, and the firm says it’s time for Tesla to “put up or shut up” in 2026.

“We view 1Q26’s deliveries — modestly below consensus — as yet another input to the TSLA stock’s challenged setup for this year, with EGS storage deployments also meaningfully light,” BNP analysts said.

“A critical factor to this year is the Co.’s progress rate in its active Robotaxi fleet, which is climbing yet still limited to just two cities. The core catalysts for TSLA center on its ability to show meaningful progress toward its AI-defined future, inclusive of Robotaxi fleet expansion (targeting 7 new cities in 1H26) and commercialized production of Optimus by year-end.”

If their analysis seems a bit dim, the firm is one of the few on Wall Street with a negative view of the stock.

BNP reiterated its underperform rating and $280 price target on Tesla shares, representing a potential 22% downside from the stock’s current level.

Tesla shares were up 1.3% to $347.57 at last check Thursday afternoon, April 9.

Related: Tesla dodges more headaches as autonomous driving scores a win

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