Tesla’s long-awaited plans for the affordable car include a stripped US version of the best-selling electric SUV, Model Y, but production launches are delayed.
Tesla has been offering a potential boost to flag sales with affordable vehicles since the first half of the year. Global production of the low-cost model Y, internally codenamed E41 is expected to start in the US, sources added that it is at least several months behind Tesla’s public plans, they added, and provided a revised target early in the third quarter of next year.
The reason for the delay was not clear.
The two people said Tesla aims to produce 250,000 inexpensive Model Ys in the US in 2026. The new vehicle is planned for final production in China and Europe, Reuters previously reported. No delays in US production and production targets have been reported previously.
Tesla reported the results Tuesday, with plans for new vehicles being a major issue.
Cheap mass market vehicles have been widely anticipated by Tesla fans and investors. They hope to attract fresh group of customers and erode market share by reducing sales of EV manufacturers. Tesla also updated the original Model Y with external and internal changes. The US long-range all-wheel drive version costs around $49,000 before the $7,500 federal tax credit.
Last month, Reuters reported that the launch of China’s E41 would occur in 2026. The E41 is small, 20% less than the refreshed Model Y, a source familiar with China’s plans told Reuters. The timing of the European rollout is unclear.
Tesla also plans to release a barebone version of the Model 3 compact sedan, the three said.
Tesla did not immediately respond to requests for comments regarding the delay in production of cheap Model Y, production targets, and other details reported here.
On January 2, the EV maker reported the first decline in annual delivery last year. Analysts expect sales to decline again this year for several reasons, including damage to the brand’s reputation due to Elon Musk’s close work with President Trump and support for far-right European politicians.
Another challenge for Tesla is that its vehicle is aging and there are no relatively inexpensive models.
Musk previously promised a new, inexpensive EV platform that cars are expected to be as low as $25,000, but dropped it to prioritize Robotaxi development.
After Trump imposes a 25% tariff on vehicles and auto parts imported from outside the US, automakers are tackling the outlook for rising prices and disruption in the supply chain.
Tesla has increased North American procurement for some of its many models over the past two years, reducing tariff exposure for the E41, said two people who are aware of the issue. Recently, it has suspended plans to ship components from China to the US for cybercabs and semi-trucks due to tariffs, one person told Reuters earlier this week.
