US electric car brand Tesla is planning to fight back against emerging lower cost Chinese EVs with the launch of a new entry-priced model from 2025.

Tesla was the world's largest EV maker until it was overtaken by China's BYD at the end of 2023.

Chief executive Elon Musk has been concerned about the impact of high interest rates on consumer appetite for spending on big ticket items, and Tesla has adjusted the price of its new cars on several occasions to boost demand.

He confirmed this month that Tesla will begin production of its next-generation electric vehicle at its Texas factory in the second half of 2025.

Codenamed 'Redwood', the car is expected to be a small electric crossover priced for mass-market sales - reports suggest it could go on sale for around $25,000 (£20,000), becoming the cheapest Tesla in the company's history.

“Chinese car companies are the most competitive car companies in the world,” Musk said on Tesla's fourth quarter earnings call. “Frankly, I think if there aren't trade barriers established, they will pretty much demolish most other car companies.”

Tesla is likely to wrest back its battery electric vehicle (BEV) sales crown until 2030 despite BYD’s competition, Bloomberg Intelligence’s (BI) latest Global BEV sector study reported this month.

According to BI, Tesla's new capacity, competitive pricing and new models should enable it to retain its annual sales crown, though success will rely on the ramp up of Cybertruck volume and the rollout of a cheaper Model 2 versus BYD which has more limited opportunities for growth outside of China.

“Tesla and BYD will run neck-and-neck for BEV supremacy in 2024 though we anticipate consumer appetite for BEVs, bar China, will cool amid high prices, range anxiety and a lack of public fast chargers," said Michael Dean, BI senior industry analyst – autos.

In the UK Tesla now has more than 40 stores and galleries