After much anticipation, Tesla’s plans for an affordable car have been revealed to include a US-made, stripped-down version of its popular electric SUV, the Model Y. However, the production launch has been delayed, according to three sources with knowledge of the matter who spoke to Reuters.
Tesla had promised to introduce affordable vehicles in the first half of the year, which could potentially boost sales. The production of the lower-cost Model Y, internally known as E41, is expected to begin in the US. However, the sources indicated that it would be delayed by several months, with revised targets ranging from the third quarter to early next year.
Although the reason for the delay was not clear, two sources mentioned that Tesla aimed to produce 250,000 of the cheaper Model Ys in the US by 2026. This new vehicle is also planned for production in China and Europe. The delay in US production and the updated production target had not been previously reported.
As Tesla prepares to report its results on Tuesday, the plans for the new vehicles remain a major question. The introduction of less expensive mass-market vehicles has been eagerly anticipated by Tesla fans and investors who hope to attract a new group of customers and reverse the decline in sales and market share. Tesla has also refreshed its original Model Y with exterior and interior changes, with the Long Range All-Wheel Drive version in the US priced at around $49,000 before a federal tax credit.
Reuters previously reported that the China launch of the E41 is set for 2026. The E41 will be smaller and cost 20% less to produce than the updated Model Y. The timeline for the rollout in Europe is still uncertain.
In addition to the Model Y, Tesla is also planning to launch a basic version of its Model 3 compact sedan, according to three sources.
As of now, Tesla has not responded to requests for comments on the production delay of the cheaper Model Y, production targets, and other details reported here.
Following its first decline in annual deliveries last year, Tesla is expected to see another drop in sales this year due to various factors, including concerns about CEO Elon Musk’s associations with President Trump and far-right European politicians. Another challenge for Tesla is the aging of its vehicles and the lack of a relatively cheap model.
Although Musk had initially promised a new, cheaper EV platform with cars priced as low as $25,000, the focus shifted to prioritize robotaxi development.
With automakers facing rising prices and supply-chain disruptions due to Trump’s 25% tariffs on imported vehicles and auto parts, Tesla has increased its North American sourcing for parts of many models over the past two years. This move would reduce tariff exposure for the E41, according to two sources familiar with the matter. Recently, Tesla suspended plans to ship components from China to the US for the Cybercab and Semi truck due to tariffs.
