• Both new projects have now entered the validation testing phase, according to a report by 36kr.
• Tesla also intends to restart the $25,000 EV project, according to the report.

Tesla (NASDAQ: TSLA) is reportedly advancing efforts in China to develop lower-cost variants of its existing models, following the launch of similar variants in its US home market earlier this month.

Tesla China is advancing two new vehicle projects, internally codenamed E41 and D50, which are stripped-down versions of the current Model Y and Model 3, local media outlet 36kr reported yesterday, citing multiple sources.

Parts of the design and validation reports for both new projects reuse the ones from the current Model Y and Model 3, and both have now entered the validation testing phase, sources said.

Preliminary information from multiple sources indicates these slimmed-down models may enter production in China around mid-2026 or later, 36kr said.

Tesla's China factory primarily supplies the Chinese and European markets. Launching simplified models in China can be seen as preparation for introducing lower-priced vehicles in these markets, the report noted.

The US electric vehicle (EV) maker launched slimmed-down Standard variants for the Model 3 and Model Y in the North American market on October 7, reducing starting prices by $5,000-$5,500 by eliminating or simplifying over 20 features.

On October 10, the Model Y Standard began appearing on Tesla's Norwegian, German, and Swedish websites, with official launches scheduled for November and December this year.

In a March report, 36kr said that Tesla's China team led the development of a lower-cost Model Y with minimal changes to its battery, powertrain, and chassis.

Tesla China developed this new model using the "depop" approach -- an internal strategy enabling rapid product launches by simplifying configurations while preserving core functionality, according to the report.

The launch timing hinges on order performance for the refreshed five-seat Model Y launched January 10, the report said, adding that if sales of the updated Model Y fall short of expectations, Tesla may introduce this more affordable variant in the second half of this year.

However, Tesla has not yet launched this model. Instead, it rolled out the six-seat Model Y L in China on August 19, with deliveries commencing in early September.

The Model Y L has gained significant consumer acceptance, which is seen as one of the core reasons Tesla has not yet launched a slimmed-down version in the Chinese market, 36kr said in the latest report yesterday.

The revival of the simplified model in China now indicates Tesla's growing concern over sales growth, according to the report.

Additionally, Tesla intends to restart development on the NV91 and NV93 projects to create new models smaller than the Model Y, a source close to Tesla headquarters told 36kr.

The NV91 project refers to the $25,000 vehicle previously mentioned by Tesla CEO Elon Musk. Originally slated for mass production in August 2025, it was halted in February 2024, the report noted.