Tesla is Delaying its Much-Hyped, Low-Cost Model Y – Again

Delays are commonplace with Tesla

When CEO Elon Musk took over at Tesla all those years ago, the game plan was simple: build six-figure electric vehicles to help fund low-cost EVs for the masses in a few years. The Roadster, Model S, and Model X did bring us the Model Y and Model 3, but we’ve still not seen the “everyman” EV Tesla promised us. Now it seems we never will, as news that a simplified version of the Model Y – the vehicle many believed was the mythical low-cost EV – has been delayed yet again.

Reuters reports that the vehicle, codenamed E41, was set to begin production and sales in the United States in the first half of this year, with a global production expansion to China and Europe later this year or possibly in 2026. The report notes that Tesla plans to build 250,000 low-cost vehicles in 2026, but there are no details on when production might occur or if those plans were solidified internally. For now, it’s safer to assume Tesla will again balk.

The low-cost EV that never was

When Tesla unveiled new battery technology in 2020, Musk claimed the company would produce a $25,000 vehicle by the end of that year. Nearly five years later, we’re still without a low-cost EV. At some point, Musk’s thinking changed on the low-cost EV. In late 2024, he said it was now “completely at odds with what we believe.”

When it first began taking pre-orders for the Model 3, Tesla said it would soon build a low-cost version for the United States market. To its credit, Tesla offers a low-cost, stripped-down Model 3 in Mexico that lacks features like the second-row screen and ambient lighting, and uses fabric instead of vegan leather for its seats.

Reuters also reports that the E41 is still set to launch in China in 2026, though it’s not known when exactly Tesla plans to begin selling the car there. The low-cost E41 is said to be “smaller” than the existing Model Y and costs up to 20 percent less to produce.

Sources also claim that E41 will be accompanied by a low-cost Model 3. It’s not clear if the variant for sale in Mexico will simply be rolling out elsewhere globally or if other markets will see a uniquely new low-end Model 3. It’s worth noting that details about range and charging for these two incoming vehicles are conspicuously missing. Expect a middling range and average charging speed; lithium is the easiest place to reduce the cost of an EV.

What about Cybercab and Model 2?

A separate report from The Information details how the fates of the Robotaxi (or Cybercab, whatever you prefer) and Model 2 were intertwined. The Cybercab is Tesla’s fully automated ridesharing vehicle, while the Model 2 was a smaller, stripped-down sibling to the Model 3. Both vehicles were said to be essentially the same car; one drove you, and you drove the other.

The report claims that, according to Tesla’s calculations, the Cybercab would actually lose the company money because it wouldn’t be able to achieve the needed market saturation. The model was set to sell for $25,000, and Tesla would gain additional revenue by taking a cut of the fares people paid to be shuttled around town. It’s essentially the Uber or Lyft business model without drivers.

Internal reports allegedly stated that ride income would be slow and that launching the service outside the United States would be nearly impossible due to regulatory hurdles. In the wake of this report, Musk apparently decided to kill the Model 2 in favor of the E41 and greenlight the Cybercab. Neither vehicle has seen production lines.

Final thoughts

Tesla’s Q1 2025 earnings show a company in steep decline. Many analysts believe Musk’s efforts within the U.S. government have disillusioned Tesla’s target market, and a complete rebound may take a long time if it’s even possible. It’s ironic; the best time for a low-cost EV from Tesla is now, but Musk might have tarnished the brand so much that the vehicle won’t really make a difference in the bottom line.