It has been some time since Tesla revamped its Model 3 electric vehicle and subsequently rolled out an updated version of the Model Y in the U.S. market. However, recent rumors suggest that the company’s efforts to develop a more affordable SUV, set to be assembled in the United States, are experiencing delays.
As reported by Reuters, Tesla initially aimed to produce nearly 250,000 units of its budget-friendly Model Y variant by 2026. This timeline has now been pushed further back, and details about a revised launch plan for the vehicle, codenamed E41, remain uncertain.
According to sources, “Mass production of the lower-cost Model Y, internally referred to as E41, is slated to start in the U.S., but this will happen several months later than previously outlined in Tesla’s public strategy. Revised timelines range from the third quarter of this year to early next year,” the report claims.
What can we expect from a more affordable Model Y?
The scaled-down Model Y variant is expected to have a smaller design and might be priced about 20% lower than its counterparts. For reference, the Long Range All-Wheel Drive (AWD) version currently sells for around $41,490 in the U.S., inclusive of a $7,500 federal tax credit.
The new model is anticipated to be priced slightly under $40,000 before any applicable tax credits, which would put Tesla in direct competition with brands such as Hyundai, Kia, Chevrolet, Toyota, Volkswagen, and Ford.
Notably, Tesla has increased its local parts sourcing in recent quarters, which may mitigate the impact of tariffs if the company proceeds with mass production of the E41 variant. Nevertheless, the landscape remains unpredictable, as Tesla has recently experienced a notable decline in sales.
Tesla’s market share dipped below 50% in California during the first quarter of 2025, a significant territory for electric vehicles in the country. “An aging product lineup and backlash against Elon Musk’s political stances may be major factors contributing to the drop in Tesla’s BEV market share,” the California New Car Dealers Association indicated regarding the decline.
In addition to launching a more affordable Model Y, Tesla is currently engaged with its Cyber Cab project. Interestingly, the Reuters report also suggests that Tesla is developing a simplified version of its Model 3. The company was reportedly considering an economical EV priced around $25,000, but those plans seem to have been put on hold for the time being.
