Tesla plans six-seat Model Y expansion in China

Tesla is gearing up to expand its Model Y production in China with the introduction of a six-seat variant, slated for launch in late 2025. The move comes as the American electric vehicle (EV) manufacturer seeks to enhance the appeal of its best-selling yet ageing model.

According to two sources with direct knowledge of the matter, Tesla has instructed its suppliers to prepare for a significant increase in Model Y output at its Shanghai factory. One of the sources, who requested anonymity, indicated that the company is targeting double-digit production growth.

While Tesla did not immediately respond to a request for comment, it has been actively seeking approval to expand its Shanghai factory on 70 hectares of former farmland. This expansion, coupled with the launch of a revamped Model Y version last year, has already contributed to a 6% year-over-year increase in domestic and overseas deliveries of the Model 3 during the first half of 2024.

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The upcoming six-seat Model Y variant is part of Tesla's broader efforts to revitalise its product lineup. The company has been working on a project codenamed "Juniper" to revamp the Model Y, with the five-seat version expected to hit the market in early 2025.

The introduction of a six-seat Model Y underscores the growing competition in the Chinese EV market. Domestic rivals have been aggressively launching new models with spacious interiors and competitive pricing, challenging Tesla's dominance. Nio's Onvo L60 and Zeekr's 7X are just two examples of recent additions to the market.

Despite facing increased competition, the Model Y remains the best-selling car in China, with sales of 207,800 units during the first six months of 2024. However, BYD's Seagull sedan is gaining traction and is expected to challenge the Model Y's leadership.

Tesla is optimistic about its overall China sales in the third quarter, anticipating strong growth in smaller cities. The company's decision to reduce its sales force as part of global layoffs in May has not hampered its sales performance, indicating improved profitability.

Furthermore, the introduction of Tesla's Full Self-Driving feature in China by the end of the year is expected to provide a sales boost.

While Tesla offers a seven-seat Model Y in the U.S., the cramped third row is unlikely to be popular in China, where spaciousness is a key preference for consumers. The upcoming six-seat variant addresses this concern and positions Tesla to better compete with domestic rivals.