While the price point for an "affordable" Tesla hasn't been revealed, Musk has long talked about an affordable EV for around $25,000, which would be roughly half the price of the current Tesla Model Y. The company may be hoping that a cheaper Tesla would help the company boost sales during a difficult time period.

A smaller and more affordable Model Y that's 20% cheaper to produce was initially planned to be released in the first half of this year

President Donald Trump's 25% auto tariffs aren't helping Tesla's ability to produce a lower-cost vehicle at scale, Wedbush's Dan Ives said.