In the months before this April 2025 report, rumours had multiplied about a more affordable Tesla, an entry-level model expected in the first half of 2025. The report stated, following the 22 April earnings call, that the lower-cost vehicle project would be delayed by a few months and would use a simplified or revised Model Y and/or Model 3 rather than an entirely new platform.

The “E41” possibility

Tesla’s plan appeared to be moving towards a more pragmatic strategy. Rather than launching a completely new model, such as the much-discussed “Model Q” or “Project Redwood”, the company was reportedly working on a stripped-back Model Y, internally identified as E41. According to the report, US production was expected to begin in 2025, with launch planned for 2026.

Despite the delay, Tesla was reportedly targeting substantial volumes: around 250,000 units of the new version in 2026 alone. This pointed to confidence in the approach as a way to reach new customer groups, particularly amid growing competition, especially in China, and a slight decline in global sales.

Model 3 could follow the same approach

The reports extended beyond Model Y. Reuters also described the arrival of an ultra-basic Model 3, even simpler than the variant intended for Mexico. This would indicate a change of direction: instead of an entirely new $25,000 car, optimising existing models to lower production costs.

Lower-priced Model Y and Model 3 variants could potentially meet the requirements for the US federal EV incentive at that time, making the final price more competitive without completely reworking the production lines.

Global production and uncertainty in Europe

External factors could also be influencing the delay, including rising trade tensions. The prospect of new tariffs on imported components and vehicles had encouraged Tesla to strengthen its North American supply chain to limit cost impacts. This was especially relevant given reported logistics difficulties affecting other projects, including Cybercab and Tesla Semi, which were said to have slowed because of tariffs on Chinese components.

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Giorgio Rebecchi

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Giorgio Rebecchi
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