Tesla Postpones More Affordable Smaller Model Y, Intends to Introduce Simplified Model 3 | Carscoops

      A smaller, more affordable Model Y that is 20% less expensive to produce was supposed to be launched in the first half of this year.

      Recent updates indicate that the release of this budget-friendly electric vehicle has been postponed for several months.

      The company intends to manufacture around 250,000 units of this new model in the United States.

      Following its first-ever drop in annual deliveries last year, Tesla is preparing for yet another disappointing year. Analysts point to several factors contributing to the declining demand, including reputational harm linked to CEO Elon Musk's new role in the U.S. Government. Additionally, increasing competition abroad, especially in China (which is Tesla's second-largest market), and an aging product lineup are also viewed as issues.

      More: Tesla Plans Smaller Model Y That’s 20% Cheaper to Produce

      Fans and investors have been expressing hopes for relief, as the lower-cost Tesla Model Y “Juniper” variants are anticipated to boost sales. Many were eager for the debut of Tesla's most affordable EV to date. Insider sources indicate this model will be a smaller, simplified version of the current Model Y, codenamed E41, which is expected to be at least 20% cheaper to produce.

      Delay and New Timeline

      Tesla had originally announced plans to release and start production of the cheaper new model in the first half of 2025, with a Reuters report suggesting that mass production would ramp up in early 2026. However, reports now indicate that the launch has been postponed.

      According to insider sources cited by Reuters, the “cheaper Model Y” has been delayed by several months, although the exact reasons are unclear. These same sources mentioned that the initial rollout will concentrate on U.S. customers, with a goal of producing 250,000 vehicles in the United States using existing Model Y production lines.

      The introduction of the E41 in China is now expected to begin later in 2026, with considerations for European production also in progress, although a definitive timeline has yet to be shared. This new vehicle is projected to be around 20 percent cheaper to manufacture than the best-selling Model Y.

      Bare-Bones Model 3 on the Way

      Plans are also in motion to release a basic version of the Model 3. While specifics are still vague, this simpler variant will likely be derived from the rear-wheel-drive model.

      To cut costs further, Tesla will likely need to eliminate features, such as swapping out leatherette ventilated seats for cloth, similar to what has been implemented in Mexico, while potentially reducing the number of speakers and employing other cost-cutting strategies akin to the new basic version of the Cybertruck. If Tesla fully commits, they might even decrease the battery size, although this would affect the vehicle's range.

      The $25,000 “Model 2” Canceled

      However, neither of these new vehicles will be the $25,000 “Model 2” EV that Elon Musk promised back in 2018. Plans for an affordable, entry-level EV were abandoned in favor of the autonomous RoboTaxi, with Musk mentioning on an earnings call last year that having a standard $25,000 model would be redundant.

      More: A $25,000 Tesla Model 2 Could Hit the Sweet Spot for EV Buyers

      The cheaper E41 will still need to navigate the 25 percent tariffs imposed on auto parts. To mitigate the impact of these tariffs, Tesla has reportedly increased its sourcing of parts from North America, which will help to lessen the E41’s vulnerability to ongoing supply chain disruptions.

      Note: The lead image is a digitally altered version of the current Model Y.