More bad news for Tesla: launch of the new lower-cost Model Y delayed
The long-promised affordable Tesla SUV won’t arrive as soon as expected, and no one’s saying exactly why.
Tesla’s long-promised, lower-cost version of its best-selling Model Y has hit a snag – and the company won’t say why. Production of the more affordable electric SUV, codenamed E41, was supposed to begin in the U.S. sometime in the first half of 2025. But three sources have told Reuters that production will now be pushed back by months, with revised timelines ranging from Q3 2025 to early 2026.
This delay comes as Tesla (TSLA.O) struggles with falling sales, shrinking market share, and increasingly vocal investor pressure to deliver on its long-standing promise of affordable electric vehicles. The scaled-back Model Y, expected to cost 20% less to produce than the refreshed version already on sale, had been billed as a key part of that turnaround strategy.
What’s going on with the cheaper Model Y?
Tesla hasn’t offered a public explanation for the delay. Internally, the company is still aiming to build 250,000 units of the cheaper Model Y in the U.S. by 2026, sources said. But those numbers and timelines have never been formally disclosed — and the company’s recent silence has only added to uncertainty ahead of its earnings report on Tuesday.
Globally, plans for the E41 still include production in China and Europe. The Chinese launch is tentatively set for 2026, though the European timeline remains unclear. Meanwhile, the U.S. version – now expected to begin rolling off production lines late next year at best – will also benefit from Tesla’s increased use of North American parts, limiting exposure to Trump-era tariffs on Chinese imports.
What else is Tesla working on?
In addition to the E41, Tesla is also preparing a stripped-down version of its Model 3 compact sedan. But it’s unclear if that will arrive any sooner. And while CEO Elon Musk once floated the idea of a $25,000 EV platform, that project has been shelved in favor of the more speculative robotaxi initiative.
All this leaves Tesla in a tough spot. The refreshed Long Range All-Wheel Drive Model Y currently sells for about $49,000 (before the $7,500 federal EV tax credit). But with no genuinely affordable new model available, Tesla risks losing ground to cheaper rivals, particularly from China.
A troubling pattern of delays and distractions
Tesla reported its first annual drop in vehicle deliveries last year, and analysts expect another decline in 2025. Beyond product delays, the company is also dealing with reputational fallout from Musk’s political activity – including support for Donald Trump and far-right European figures – which some investors fear is alienating buyers.
And the E41 isn’t the only victim of rising geopolitical and economic uncertainty. Plans to ship Chinese components to the U.S. for Tesla’s upcoming Cybercab and Semi truck were recently suspended due to escalating tariffs.
With investor eyes now firmly fixed on Tesla’s next earnings call, the delayed rollout of the lower-cost Model Y could be a bigger problem than the company wants to admit.
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