Tesla has postponed the production launch of its long-awaited affordable version of the Model Y SUV in the United States, sources familiar with the matter told Reuters. Initially expected to begin in the first half of the year, the global production of the lower-cost Model Y, codenamed E41, will now be delayed by several months, with new targets ranging from the third quarter of 2025 to early 2026.
While the exact reason for the delay remains unclear, Tesla had promised to introduce affordable vehicles to boost its sales, which have been under pressure due to market saturation and rising competition. The affordable Model Y, which is expected to be made in the United States, will eventually be produced in China and Europe as well, according to sources.
Tesla had originally planned to produce 250,000 units of the cheaper Model Y in the U.S. by 2026. The E41 version of the vehicle, which will be smaller and cost around 20% less to produce than the current Model Y, has been widely anticipated by Tesla investors and fans eager for more budget-friendly options. Despite the delays, the automaker continues to work on a stripped-down version of its Model 3 sedan, which is also part of Tesla’s strategy to target the mass market.
The delay of the affordable Model Y could affect Tesla’s ability to reverse declining sales. The automaker recently reported its first annual decline in deliveries, and analysts expect sales to continue to be sluggish. Furthermore, Tesla faces external challenges, including higher vehicle prices, supply-chain disruptions, and ongoing tariff concerns.
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Tesla has increased its North American sourcing for parts to mitigate the impact of tariffs, particularly those imposed by former U.S. President Donald Trump on vehicles and auto parts imported from abroad.