Tesla will delay the production of cheap EVs

Tesla has pushed back the launch of its long‑promised low‑cost electric vehicle, a stripped‑down version of the top-selling Model Y. 

According to sources familiar with the plan, global production of the cheaper model, known internally as E41, is now expected to start in U.S. plants no earlier than the third quarter or possibly early next year. The launch is missing the timetable Tesla had shared publicly.

The reason for the slip was not disclosed. Two of the sources said the company still intends to assemble about 250,000 of the lower‑priced Model Ys in the United States during 2026 and later add lines in China and Europe, a U.S. goal and delay that have not been reported before.

Investors will look for details when Tesla reports quarterly results on Tuesday because fresh vehicles are central to hopes for reviving slow sales and reclaiming market share.

Tesla lovers have waited for an affordable Tesla since Chief Executive Elon Musk first floated the idea of a mass‑market car. The current Long Range All‑Wheel Drive Model Y lists for roughly $49,000 before a $7,500 federal tax credit, leaving many buyers priced out.

Tesla has already refreshed the existing Model Y with exterior and interior tweaks, but the E41 is planned to be smaller and 20 percent cheaper to build, people briefed on the China program said last month. Reuters reported that the launch in China is scheduled for 2026, while the timing for Europe remains undisclosed.

The three sources said that the company is also drawing up a bare‑bones version of its Model 3 compact sedan. Tesla declined to comment on the delay, the 2026 production target, or any other points raised by Reuters.

Tesla’s sales have been dropping

On Jan. 2 the automaker reported its first yearly drop in deliveries. Analysts expect another decline this year, citing slowing demand, aging products, and what they describe as brand damage from Musk’s close work with former U.S. president Donald Trump and backing of far‑right politicians in Europe.

A fresh hurdle is the absence of a truly low‑priced model. Musk once promised a new platform that could yield a $25,000 car, but later shifted engineers to focus on a planned robotaxi.

Broader industry pressures add to the strain. Manufacturers face higher costs and supply‑chain uncertainty after Trump imposed a 25 percent tariff on vehicles and parts shipped from outside the United States.

To blunt that risk, Tesla has raised North American sourcing for components in several models over the past two years, which would curb tariff exposure for the E41.

Even so, the company this week paused plans to move Cybercab and Semi truck parts from China to the United States because of tariffs, one person said.

China remains key to Tesla’s volume strategy. Reuters has reported that the Shanghai plant is expected to make the cheaper Model Y in 2026, mirroring the U.S. design.

Exact figures for savings or prices were not shared, but the sources said the E41 aims to deliver a roughly 20 percent cost reduction versus the revamped Model Y, highlighting its role in Tesla’s bid to reach new customers.

Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot