Reuters sources say the firm has told suppliers it wants to start mass production of a cheaper model in mid-2025.

Two of the sources described the vehicle as a compact crossover.

Right now, Tesla's cheapest car is the Model 3, which starts at just under $39,000 in the U.S.

But boss Elon Musk has long vowed to deliver a much cheaper vehicle.

He's promised to make one that can be sold at $25,000.

That plan may now be more urgent.

Tesla faces mounting competition from rivals like BYD, which can undercut it on price.

The Chinese firm overtook Musk's company as the world's top maker of EVs in the final quarter of last year.

High interest rates are also a worry.

They could crimp demand for relatively expensive cars like Teslas.

Now the Reuters sources say a model codenamed "Redwood" is being prepared for its debut.

They say Tesla has contacted suppliers about parts.

It has forecast weekly production of 10,000 units, with output to begin in June next year.

However, analysts warn the firm has a long history of missing targets for launch dates and pricing.

The firm didn't comment on the reports.

But Musk did say last year that Tesla was working on two new products with a potential for combined sales of 5 million units per year.