SHANGHAI (Reuters) -Tesla will make a lower-cost version of its best-selling Model Y in Shanghai, three people with knowledge of the matter said, aiming to regain ground lost during a price war in its second-largest market.

Not too long ago, Tesla had much of China’s new EV market to itself, but as local rivals like BYD are on their way to becoming international juggernauts, the American brand is now facing more competition than ever before. To combat this, Tesla’s Chinese division has reportedly developed a new, lower-priced version of the Model Y.

In a bid to regain market share in China, Tesla ( NASDAQ: TSLA) is reportedly developing a lower-cost version of its best-selling Model Y in Shanghai.

The stripped-down SUV is aimed at recovering market share from Chinese makers offering less-expensive models.

The US company’s share of the world’s largest EV market has dropped to 4.3 per cent from more than 16 per cent in 2022.

Telsa plans to make a slightly smaller Model Y that costs at least 20 percent less to build than the recently refreshed Model Y.