Tesla Launches $41,990 AWD Model Y as Focus Shifts from Legacy Sedans

2026-02-03 companies

Austin, Tuesday, 3 February 2026.
On February 2, 2026, Tesla expanded its U.S. offerings with a new All-Wheel Drive Model Y priced at $41,990, aiming to capture cost-conscious buyers in a post-subsidy market. While the aggressive pricing addresses cooling EV demand and rising competition, the move serves as a prelude to a radical structural pivot. In a definitive break from its origins, Tesla is discontinuing the flagship Model S and Model X lines at its Fremont facility. This capacity will be reallocated to the production of Optimus humanoid robots and Cybercabs, marking a historic transition from luxury automotive manufacturing toward a future centered on mass-market volume and autonomous robotics.

Optimizing the Lineup

Tesla (TSLA) officially listed the new Model Y All-Wheel Drive (AWD) on its website on Monday, February 2, 2026 [1]. Priced at $41,990, this variant slots into the lineup just above the entry-level Rear-Wheel Drive (RWD) model, which is listed at $39,990 [2]. The new configuration boasts an EPA-estimated range of 473 km (294 miles) and accelerates from 0 to 96 km/h (60 mph) in 4.6 seconds [2][3]. This launch coincides with a rebranding effort where Tesla has discarded the “Standard” naming convention for its entry-level trims, simplifying the hierarchy to focus on drivetrain configurations [2]. The new U.S. lineup now consists of five distinct variants, capping out at the Performance AWD model priced at $57,490 [2].

Strategic Shifts Amidst Global Competition

The introduction of this competitively priced AWD option appears to be a direct response to a cooling electric vehicle market, exacerbated by the expiration of the $7,500 federal tax credit in September 2025 under the Trump administration [1]. By positioning the new AWD model only 2000 $2,000 higher than the base RWD version, Tesla offers consumers a low-cost entry into dual-motor performance [2]. This follows a broader strategy initiated in October 2025, where the company introduced lower-priced versions of the Model Y and Model 3, undercutting previous base models by approximately $5,000 to maintain demand without relying on a new mass-market vehicle platform [1].

Retooling for a Robotic Future

Beyond immediate pricing tactics, Tesla is executing a profound operational pivot. CEO Elon Musk confirmed last week that the company will cease production of its legacy flagship vehicles, the Model S sedan and Model X SUV [1]. These models, which established Tesla as a luxury brand, will be phased out to free up manufacturing capacity at the Fremont, California factory [6]. The facility is set to be retooled for the mass production of the Optimus humanoid robot and the dedicated robotaxi, known as the Cybercab [6].

Sources

Electric Vehicles Tesla