Tesla’s long-anticipated affordable electric vehicle, a lower-cost version of the Model Y, will face a production delay in the United States, according to sources familiar with the matter. The revised timeline could push the launch into late 2025 or early 2026, despite earlier commitments for a mid-2025 rollout.
Internally codenamed E41, the new stripped-down Model Y variant is expected to be manufactured in the U.S. and marketed as a more accessible entry point for consumers. Sources indicate that Tesla plans to produce up to 250,000 units of the model in 2026, with similar production planned later in China and Europe.
While Tesla has not publicly confirmed the delay or the production targets, the development marks a critical moment for the EV giant, which is under increasing pressure to boost sales and reclaim market share amid rising competition and softening demand for electric vehicles.
Unclear reasons behind the delay
The specific reasons for the postponement were not disclosed. However, the delay adds to concerns among analysts and investors who are eager for Tesla to refresh its lineup and accelerate access to lower-priced models. Tesla is also expected to report quarterly results on Tuesday, with many eyes on updates about its new product roadmap.
Two sources close to the matter noted that the E41 will be smaller and roughly 20% cheaper to produce than the refreshed version of the Model Y, which currently starts at approximately $49,000 before a federal tax credit of $7,500.
Affordable models essential to Tesla’s future growth
The launch of a more affordable Tesla has long been a point of speculation. CEO Elon Musk has previously teased such developments as part of the company’s efforts to reach a broader customer base and maintain momentum in the maturing EV sector. Tesla is also reportedly working on a bare-bones version of its Model 3 sedan, aimed at budget-conscious buyers.
In China, the rollout of the E41 is slated for 2026. Plans for European production have not yet been finalized.
Tesla’s challenges mount
Tesla’s vehicle lineup is aging, and the lack of a genuinely low-cost model is becoming a competitive disadvantage. The company reported its first annual delivery decline in 2024 and may face another drop this year. Analysts point to reputational concerns stemming from Elon Musk’s increasingly political public persona, including his alignment with U.S. President Donald Trump and far-right European politicians.
Meanwhile, rivals continue to introduce newer, more affordable EVs, adding pressure on Tesla to innovate and adapt quickly.
