It’s been a while since Tesla gave a long-awaited makeover to its Model 3 EV, and followed it with the introduction of an updated Model Y in its home market. However, the company’s rumored plans for a more affordable SUV that will be assembled in the US have reportedly run into a delay. 

According to Reuters, Tesla was hoping to assemble nearly a quarter million units of its cheaper Model Y variant in 2026. The goalpost has now been shifted, and there is no clarity regarding a revised market launch plans for the vehicle, which is said to be in development under the codename E41. .

“Global production of the lower-cost Model Y, internally codenamed E41, is expected to begin in the United States, 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,” says the report. 

What to expect from a cheaper Model Y?

The watered-down Model Y variant will reportedly have a smaller footprint and is touted to sell at a 20% lower sticker price. For comparison, the Long Range All-Wheel Drive (AWD) trim of the Model Y currently goes for $41,490 in the US, after applying the federal tax credit worth $7,500 in the US. 

Based on the report, the upcoming car could be priced a hair under the $40,000 mark before tax credits are put into the mix. With an asking price like that, Tesla would would put itself in direct competition with the likes of Hyundia, Kia, Chevrolet, Toyota, Volkswagen, and Ford. 

Notably, Tesla is said to have ramped up local sourcing of parts in the past few quarters, which means if the company moves ahead with plans of mass manufacturing the Model Y “E41” variant, the impact of tariff won’t be felt as much. However, the situation remains volatile as Tesla has seen a sharp decline recently. 

The company’s market share slid below 50% for 2025’s first quarter in California, one of the biggest EV markets in the country. “An aging product lineup and backlash against Elon Musk’s political initiatives are likely key factors for the decline in Tesla BEV market share,” the California New Car Dealers Association said about the slump. 

In addition to a stripped down Model Y, the carmarker is currently occupied with its Cyber Cab project. Interestingly, the Reuters report mentions that Tesla is also working on “a bare-bones version of its Model 3.” The company was recently said to be working on an affordable EV that could cost as little as $25,000, but those plans have been shelved, for now.