Tesla CEO Elon Musk in 2022 announced plans for a next-generation platform that would allow the company to launch electric vehicles smaller than the Model 3 and Model Y, and with lower price points. However, he didn't announce timing.

Citing four people familiar with the matter, Reuters reported on Wednesday that Tesla has told suppliers it wants to start production of a vehicle based on the next-generation platform in mid-2025. Two of the people described the vehicle, which is code-named Redwood, as a compact crossover.

Musk in 2020 said Tesla's next-generation platform would enable the company to introduce a vehicle priced from $25,000, though it isn't clear whether that is the same vehicle mentioned in the Reuters report.

A separate source told Reuters that Tesla reverse engineered a Honda Civic several years ago to study how to build affordable vehicles. The compact Honda starts at about $24,000.

The Model 3 is the most affordable Tesla currently on sale and is priced at almost $40,000 in base trim.

Musk has also previously said that Tesla is planning at least two vehicles on its next-generation platform. At the Cybertruck launch last fall, Musk said production of vehicles based on the next-generation platform would start at Tesla's plant near Austin, Texas. A second production location may be a new plant in Mexico that Tesla announced last year.

Tesla is starting to face stiff competition from rival EV manufacturers, particularly in China where a number of companies offer EVs with much lower price tags than what Tesla charges. One of those companies is BYD, which overtook Tesla as the world's top EV manufacturer in the final quarter of 2023, delivering 526,409 units versus Tesla's tally of 484,507 units.