Tesla only decided to build such an entry entry-level vehicle to compete with BYD, whose EV sales exceed Tesla, and who has a much more diversified and integrated worldwide battery manufacturing system. BYD's bestselling Han goes for about $40k in the OECD, but they could conceivably sell the Dolphin in the US at around $20k after additional duties, targeted taxes, and price adjustment to the US market (it's ~$15k in China).

BYD is not the only foreign EV manufacturer who can, does, and will undercut Tesla if they get into the same market. It's only a matter of what Tesla's strategy will be. Arguably from some in the business, Tesla should not compete at the budget level, and instead remain a brand name like BMW or Apple. The arrival of low-cost players will expand the share of consumers who choose EVs in the first place, and thus the number of consumers who will later upgrade to a luxury brand -- thus Tesla would encourage its low-cost rivals to enter the US.