Image: Tesla
Tesla’s fabled low-cost Model Y has been spotted testing on public roads in California, wrapped in camouflage. The sighting, captured in Palo Alto by local Tesla owner @omg_tesla, marks the first time the stripped-down variant has been seen outside a factory environment.
The vehicle in question is believed to be the upcoming “cheaper Model Y,” internally codenamed E41. This comes just weeks after details about the budget-friendly crossover surfaced in Tesla’s vehicle firmware, revealing the long list of feature cuts designed to bring the price down.
According to the code, the new variant will skip amenities such as the glass roof, second-row display, and power-folding mirrors, while offering pared-back audio options and simplified components like a fiberglass headliner and single-axis seat controls.
Earlier this summer, footage of what appeared to be an early production unit wrapped in black camouflage emerged from one of Tesla’s U.S. factories. Now, with a camouflaged prototype cruising through California streets, it seems Tesla has moved into real-world validation testing — one of the final steps before launch. Given the location, this unit was most likely built at Tesla’s Fremont factory.
CEO Elon Musk confirmed during Tesla’s Q2 2025 earnings call that production of the cheaper Model Y had technically begun, though full ramp-up isn’t expected until Q4 2025. The timing appears strategic, immediately following the September 30 expiration of the $7,500 U.S. EV tax credit.
Tesla’s low-cost Model Y will be the company’s most affordable vehicle in North America yet. The E41 is expected to be offered in both RWD and AWD trims, but no Performance variant has been spotted so far. With competition intensifying in the entry-level EV space, Tesla’s low-cost Model Y could prove critical to expanding the company’s reach and maintaining its lead in key markets.
