Tesla (NASDAQ:TSLA) is developing an all-new compact electric SUV priced well below its current lineup, as the company faces mounting pressure to demonstrate that its core vehicle business can stage a meaningful recovery.

Morningstar analyst Seth Goldstein expects the company’s slump to persist, noting: “Globally, I’m forecasting a third straight year of deliveries decline in 2026.”

Legendary short-seller James Chanos had a concise take on Tesla’s predicament. When a user posted on X that “the selling pressure on Tesla is a bit suspicious,” Chanos replied: “Yeah, totally suspicious. Why would anyone be selling a stock at 170x declining earnings (EPS peaked in 2022)…?!”

What We Know About The New Model

The compact SUV will measure roughly 14 feet in length, significantly shorter than the Model Y. Three sources said it would be produced at Tesla’s Shanghai factory, with one adding that production may expand to the US and Europe.

Tesla aims to price it substantially below the entry-level Model 3, with cost savings coming from a smaller battery, reduced driving range, and a single electric motor. Production is unlikely to begin this year.

One person familiar with the project said the new model may be designed to support both human-driven and autonomous operation, giving Tesla flexibility in markets where driverless regulation remains years away.

SpaceX IPO

Musk is targeting a SpaceX IPO this summer at a $2 trillion valuation, making a sustained TSLA slump an awkward backdrop.

Jim Cramer has warned that retail investors may sell Tesla to buy into SpaceX, writing on X: “…People are going to sell this one to buy SpaceX.”

Meanwhile, Wedbush analyst Dan Ives has floated a potential Tesla-SpaceX merger as early as 2027, calling the combination the “holy grail” of disruptive tech.

What Prediction Markets Say

A California robotaxi launch by June 30 is priced at 12% on Polymarket, and continues to decline.

Optimus hitting public sale by the same date sits at a skeptical 6% on Polymarket. On Kalshi, the odds of Optimus being released this year are at 17%.

The rumored Tesla-SpaceX merger thesis only sits at 6%.

Tesla is only at 1% to be the largest company by market cap at the end of 2026; SpaceX is at 3%.

A sub-$25K SUV that doubles as a potential robotaxi platform may be Tesla’s most pragmatic bet recently, an affordable car for today’s market that keeps the autonomous dream alive for tomorrow.

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