Tesla Delays Launch of Affordable Model Y Amid Sales Struggles

SAN FRANCISCO, April 18 (Reuters) – Tesla has postponed the production launch of its much-anticipated affordable electric SUV, the Model Y, in the United States, according to three sources familiar with the situation. Originally slated to begin in the first half of 2025, production timelines for the lower-cost Model Y, internally known as E41, have now been pushed back by several months, with new estimates ranging from the third quarter of 2025 to early 2026.

The delay is a significant concern for Tesla, which has promised these affordable models as a means to boost dwindling sales and regain market share. With the E41 expected to costs 20% less to manufacture than the current Model Y, it was seen as a key component of Tesla’s turnaround strategy. Sources revealed that Tesla aims to produce 250,000 units of the cheaper Model Y in the U.S. by 2026.

Although the reason for the delay remains unclear, the situation reflects ongoing challenges for the company. After reporting its first annual drop in vehicle deliveries last year, analysts predict further declines in 2025, highlighting the urgency for Tesla to deliver on its commitments to affordably-priced electric vehicles.

The automotive landscape is increasingly competitive, especially from cheaper rivals, particularly those based in China. During this critical time, Tesla chairman and CEO Elon Musk has faced scrutiny from investors over the company’s direction and alleged disconnect with consumer expectations. The recent silence from Tesla regarding production timelines and targets has only intensified these concerns.

In addition to the Model Y, Tesla is also preparing a stripped-down version of its Model 3 compact sedan, but its release date is still undetermined. The company’s next earnings call is set for Tuesday, where analysts will be closely watching for further insights into production issues and future plans.

Facing rising geopolitical and economic uncertainties, including increased tariffs that complicate materials sourcing, Tesla’s delayed rollout of the affordable Model Y could have larger implications for its market strategy and investor relations.