① Tesla (Tesla Motors, Inc.(TSLA.US))  CEO Elon Musk revealed on Wednesday that the company is about to launch its long-awaited affordable electric car, with mass production planned to begin in the second half of this year;

② Tesla VP of Engineering Lars Moravy added that Tesla will heavily promote existing models in Q3, with the affordable model launching in Q4;

③ The market eagerly anticipates Tesla launching a significantly cheaper new product, but analysts question the prospects of an affordable Model Y version.

Tesla released its Q2 earnings after the US market closed on Wednesday. CEO Elon Musk also revealed that the company is about to launch its long-awaited affordable electric car.

Responding to an analyst question during the earnings call, Musk indicated that this affordable car would be a new version of the Model Y. Tesla stated in its earnings report that it had begun preliminary production of this model in June and expects to start mass production in the second half of this year.

Tesla VP of Engineering Lars Moravy added that production capacity for the new model won't ramp up significantly until the end of the year. Given the expiration of the US EV tax credit on September 30 this year, Tesla will heavily promote existing models in Q3 to avoid complex supply issues. The more affordable model will be launched to the market in Q4.

The market has long anticipated Tesla launching a significantly cheaper new product to compete in the increasingly fierce affordable EV segment. Tesla has now taken this crucial step, but analysts question the prospects of an affordable Model Y version.

An Uncertain Future

Tesla previously claimed it would launch a $25,000 model, rumored to be named the Model Q, but never confirmed it. Wednesday's announcement implies the affordable car won't be a new design but a derivative of the popular Model Y.

Musk stated on Wednesday that consumer demand to buy the Model Y is very strong, but funds are insufficient. "That's the problem. We have no shortage of desire to buy, but a shortage of money. So we need to make the car as affordable as possible."

Currently, the Long Range Rear-Wheel Drive Model Y starts at $44,990, but eligible consumers can receive a $7,500 tax credit.

Experts say launching new models, especially low-priced ones, is clearly Tesla's only path back to growth. The product strategies of the world's largest automakers like GM, Toyota, and Volkswagen – whose annual sales are four to five times Tesla's – demonstrate this.

Analysts also explored how Tesla might reduce costs for the new model, suggesting the new Model Y might feature more basic equipment or cheaper materials. Tesla's affordable Model 3 variant launched in Mexico last year, offers clues: potentially using a smaller battery or other cost-saving materials.

While a lower price will help expand Tesla's customer base, the industry doubts whether a simplified version of an existing, ubiquitous model can capture market attention. Furthermore, whether Tesla can achieve its goals with this affordable car remains to be seen.