Exclusive-Tesla to delay US launch of affordable EV, a lower-cost Model Y, sources say

SAN FRANCISCO/NEW DELHI/SEOUL (Reuters) – Tesla’s much-awaited plans for an affordable car include a stripped-down version of its best-selling electric SUV, the Model Y, that will be made in the United States, but the production launch has been delayed, three sources with knowledge of the matter told Reuters. 

Tesla has promised affordable vehicles beginning in the first half of the year, offering a potential boost to flagging sales. Global production of the lower-cost Model Y, internally codenamed E41, is expected to begin in the United States, the sources said, but it would be at least months later than Tesla’s public plan, they added, offering a range of revised targets from the third quarter to early next year.

Two of the people said Tesla aimed to produce 250,000 of the cheaper Model Ys in the United States in 2026. The new vehicle is also planned for eventual production in China and Europe, Reuters has previously reported. The delay of U.S. production and the U.S. production target have not been previously reported.

Tesla reports results on Tuesday, and plans for the new vehicles are a major question. 

The less expensive mass-market vehicles have been widely anticipated by Tesla fans and investors who hope they will attract a fresh group of customers and reverse the EV maker’s falling sales and eroding market share. Tesla also has refreshed its original Model Y with exterior and interior changes. The Long Range All-Wheel Drive version in the United States costs about $49,000, before a $7,500 federal tax credit.

Reuters reported last month that the China launch of the E41 will occur in 2026. The E41 will be smaller and cost 20% less to produce than the refreshed Model Y, the sources familiar with China plans told Reuters. The timing of the rollout in Europe is not clear.

Tesla is also planning to launch a bare-bones version of its Model 3 compact sedan, three people said. 

Tesla did not immediately respond to a request for comment on the delay of production of the cheaper Model Y, production targets and other details reported here.

The EV maker on Jan. 2 reported its first decline in annual deliveries  last year, and analysts expect sales to fall again this year for several reasons, including damage to the brand reputation by Chief Executive Elon Musk’s close work with U.S. President Donald Trump and support of far-right European politicians. 

Another challenge for Tesla is that its vehicles are aging and there is no relatively cheap model.

Musk earlier promised a new, cheaper EV platform with cars expected to be priced as low as $25,000, but dropped that to prioritize robotaxi development. 

Automakers are grappling with prospects of rising prices and supply-chain disruption, after Trump imposed 25% tariffs on vehicles and auto parts imported from outside the United States. 

Tesla has increased North American sourcing for parts of many models over the last two years, which would decrease tariff exposure for the E41, two people aware of the matter said. It recently suspended plans to ship components from China to the United States for the Cybercab and Semi truck due to tariffs, one person told Reuters earlier this week.

(Reporting by Abhirup Roy in San Francisco, Aditi Shah in New Delhi, Hyunjoo Jin in Seoul, and Zoey Zhang and Zhuzhu Cui in Shanghai; Editing by Peter Henderson and Matthew Lewis)