Tesla has launched a seven-seat version of its 2026 Model Y, marking a significant update to its popular SUV. The new configuration, priced at an additional $2,500, is available only with the Premium All-Wheel-Drive Long Range model. Tesla initially hinted at this option last year, promising 'seating for up to seven and enough room for everyone's gear.' The third-row seats appear to be designed primarily for children, offering limited legroom.

Tesla emphasizes that the interior features fold-flat seats in both the second and third rows, although it remains unclear if these seats fold electrically. This move comes as Tesla faces increased competition in the crossover and SUV sectors, particularly from brands like BYD. The company experienced another sales decline last quarter, intensifying the pressure to innovate.

Tesla previously offered a seven-seat Model Y in the US but discontinued it after a brief period. In China, Tesla launched a six-seat Model YL with a six-inch extended wheelbase, a feature not yet available in the US market. Elon Musk has hinted that this extended version might reach the US in late 2026, but he also suggested it might 'never' arrive.

Alongside the seven-seat option, Tesla has made minor updates to the Model Y lineup, limited to the Premium version. These include a 20-inch dark-grey 'Helix' wheel option, a new black headliner, a larger 16-inch display with higher resolution, and darker rear badging. These enhancements aim to keep the Model Y competitive amidst a rapidly evolving electric vehicle market.