Tesla Delays Launch of Budget-Friendly EV in the U.S., Raising Concerns Over Strategy
Tesla has delayed the U.S. production of its long-anticipated low-cost electric vehicle, signaling a major shift in the company’s efforts to expand its market reach and increase sales, according to a Reuters report citing insiders.
The vehicle in question—a more affordable variant of the Model Y SUV known internally as “E41″—was initially scheduled to enter production in early 2025. However, sources now suggest that manufacturing will not begin before late 2025 or potentially early 2026.
Designed to be a simplified and more economical alternative to the current Model Y, which has a starting price of around $49,000 (prior to tax credits), the upcoming model is expected to feature a scaled-back design and a significantly lower price tag.
Although Tesla has not publicly addressed the delay, the decision raises concerns about the automaker’s ability to meet its long-standing promise of delivering an affordable EV—particularly as sales growth slows and global competition in the electric vehicle market intensifies.
Two individuals familiar with the matter told Reuters that Tesla still plans to manufacture roughly 250,000 units of the lower-cost Model Y in the U.S. by 2026. Additional production is expected in Europe and China, though specific timelines for those regions remain unclear.
In addition to the Model Y, Tesla is reportedly working on a budget-friendly version of its Model 3 sedan. However, the launch schedule for that vehicle is also uncertain.
The delay comes at a time when Tesla is grappling with declining deliveries, increased competition from international automakers, and the economic impact of renewed U.S. tariffs on Chinese electric vehicles and components.
Tesla experienced its first annual drop in vehicle deliveries in 2024. Industry analysts predict further challenges ahead, citing the company’s aging product lineup and growing criticism linked to CEO Elon Musk’s political associations.
Consumers and investors alike have been anticipating the debut of a $25,000 Tesla model—an ambitious goal that Musk previously vowed to achieve. Yet with Tesla now placing more focus on autonomous driving technology and robotaxis, the fate of its affordable EV offering appears increasingly uncertain.
