Tesla CEO Elon Musk has confirmed that the electric car maker plans to start production of its next EV - codenamed Redwood - in the second half of 2025.

The future car – which could be called the Tesla Model 2 in production – is tipped to cost less than £25,000 when it goes on sale in the UK.

Tesla has long stated its desire to create an entry-level model, with Musk initially mooting a $20,000 EV back in 2020.

In 2023, he told shareholders that Tesla was developing “two new products”, one the recently launched updated Tesla Model 3 and the other the Redwood project.

Speaking at the American company's 2023 earnings report yesterday (24 January), Musk said he's "often optimistic" about the new car reaching production as scheduled. 

Its need for cheaper models has been brought into focus this year, with BYD, a Chinese car maker with a wide variety of models in different price points, overtaking Tesla to become the best-selling electric car maker globally in the final quarter of 2023.

Potential manufacturing locations for the Redwood car have been mooted for Mexico. It's likely to be decided later this year.

In a quarterly results report earlier this week, Tesla stated: “In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next-generation vehicle.”

Reports from Reuters have suggested that Tesla has already put out “requests for quotes” to suppliers for the Redwood project.

Industry experts claim making a profit from cheap EVs will be challenging, considering the costs of batteries, the technology offered inside the cars and the tooling and machinery needed to build something in sufficient quantities.