Tesla's long-anticipated low-cost electric vehicle has reportedly been delayed by several months, pushing its launch to late 2025 or even early 2026.
Initially planned for release in the first half of 2025, the new model, known as the "E41," is expected to be a stripped-down version of the existing Model Y and is likely to cost at least 20% less to produce.
The delay comes at a tough time for Tesla. After experiencing its first annual drop in vehicle deliveries in 2023, the company is expecting another disappointing year. Tesla's aging product lineup, increased competition in key markets like China, and damage to the brand caused by CEO Elon Musk's political affiliations and growing involvement in U.S. government issues are all contributing factors. The slow ramp-up and unlimited demand for the Cybertruck have only added to the company's challenges.
At its 2020 Battery Day presentation, Tesla initially teased a $25,000 vehicle known as the "Model 2." However, those ideas were dropped in favor of developing cheaper variants of the Model Y and Model 3. The upcoming E41 model is expected to debut first in the U.S., with the production goal of 250,000 units, leveraging Tesla's current Model Y manufacturing infrastructure. Chinese production is expected to start later in 2026, with plans for Europe under consideration.
To cut costs further, Tesla is also creating a bare-bones Model 3, which could feature fabric seats and reduced sound systems. This will be similar to the cost-saving measures seen in the Cybertruck's base model.
Although this new model has the potential to increase Tesla's sales and widen its customer base, it will not be the promised $25,000 EV. Musk has dropped the plan altogether, considering it obsolete in the face of Tesla's focus on autonomous RoboTaxis.
Despite efforts to localize production and avoid exposure to tariffs and supply chain concerns, Tesla's delay could cost the company ground in an increasingly competitive electric vehicle market.