A budget Tesla EV below the popular Model 3 has been on the anvil for long and the brand will be building this all-new EV, likely to be called the Model 2, at its upcoming factory in Berlin, Germany. According to Automotive News Europe (via Reuters) – citing an unnamed source – Tesla CEO Elon Musk confirmed the move during a visit to the German plant last week, but stopped short of confirming when it will arrive.

1. Upcoming budget Tesla could be called Model 2
2. Will take on the VW ID 2 and MG EV4 hatchbacks
3. Will get multiple battery, range options

Musk was in Germany following his visit to the UK, where he sat down with British Prime Minister Rishi Sunak for a conversation about the future of artificial intelligence, and made headlines for suggesting that the technology would one day "eliminate jobs".

His Berlin trip focused more specifically on the future of Tesla, and in addition to thanking staff at the plant for their efforts in scaling up Model Y production, he allegedly confirmed to them that the smaller new EV – known unofficially as the 'Model 2' – would be the second Tesla model to be built in Europe.

Tipped to hit the market at £21,670 (around Rs 22 lakh), the new Tesla Model 2 is primed to serve as a direct rival to the likes of both Chinese-made value EVs like the MG 4 EV and BYD Dolphin, as well as upcoming entry models from European marques, including the Renault 5 and Volkswagen ID 2.

This is the second indication so far this year that plans are progressing to bring an entry-level Tesla model to market. Earlier this year, Musk told shareholders that the firm was developing "two new products", one of which is thought to have been the refreshed Model 3 saloon, now on sale, and the other the smaller, all-new car (previewed below).

Tesla has previously stated its ambition to scale up production to one million cars per year at the Berlin site, up from an estimated 2,50,000. The updated Model 3 and the new model “will probably make in excess of five million units a year combined”, said Musk.