Tesla delays US launch of affordable Model Y variant

Tesla's long-awaited plans for an affordable car include a US-made, stripped-down version of its best-selling electric SUV, the Model Y, 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, providing a potential boost to flagging sales. Global production of the lower-cost Model Y, internally code-named E41, is expected to begin in the US, the sources said. That would occur at least a few months later than outlined in Tesla's public plan, they added, offering a range of revised targets from the third quarter to early next year.

The reason for the delay was not clear. Two of the people said Tesla aimed to produce 250,000 of the cheaper Model Ys in the US in 2026. The new vehicle is also planned for eventual production in China and Europe, Reuters has previously reported. The delay of US production and the US 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 US costs about $49,000 (R922,273), before a $7,500 (R141,164) 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 January 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 CEO Elon Musk's close work with US President Donald Trump and support of far-right European politicians.

Another challenge for Tesla is that its vehicles are ageing 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 (R470,547), but dropped that to prioritise robotaxi development. Carmakers are grappling with prospects of rising prices and supply-chain disruption, after Trump imposed 25% tariffs on vehicles and car parts imported from outside the US.

Tesla has increased North American sourcing for parts of many models over the past 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 US for the Cybercab and Semi truck due to tariffs, one person told Reuters earlier this week.