Tesla has postponed the US production launch of its long-promised affordable electric vehicle, marking a significant setback in its plans to boost sales and market share, Reuters reported Friday, citing sources familiar with the matter.

The delayed model, a lower-cost version of the popular Model Y SUV, internally codenamed E41, was originally expected to begin production in the first half of 2025.

However, sources say the launch is now unlikely before late 2025 or early 2026.

The stripped-down version is expected to cost significantly less and be simpler in design compared to the current Model Y, which starts at around $49,000 before federal incentives.

While no official reason was given for the delay, the move raises questions about Tesla’s ability to deliver on affordability promises at a time when sales are slowing and competition in the EV market is intensifying.

Two sources told Reuters that Tesla aims to produce 250,000 of the cheaper Model Ys in the US by 2026. Production in China and Europe is also planned, though timelines remain uncertain.

Tesla is also reportedly planning a budget version of its Model 3 sedan, though its release timeline remains unclear.

The delay comes at a time when Tesla is navigating slowing sales, intensifying global EV competition, and increasing pressure from the Trump administration’s renewed tariff regime.

Recent US trade policies have introduced broad new tariffs on Chinese-made EVs and components, adding financial strain to automakers dependent on global supply chains.

Tesla reported its first annual drop in vehicle deliveries in 2024, and analysts forecast further declines, citing aging vehicle designs and reputational risks tied to CEO Elon Musk’s political affiliations.

Investors and consumers have long awaited a $25,000 Tesla model, a target once promised by Musk. But with the company prioritizing robotaxi development, the future of budget EVs appears uncertain once again.

Tesla declined to comment on the reported delay.