According to a report from Reuters, obtained from three sources with inside knowledge, Tesla is delaying the launch of its more affordable model - the cheaper variant of the Model Y. Tesla has promised the launch of a more affordable model in the first half of 2025, but we have yet to see anything come to light.
Tesla has been especially secretive with new product launches - the fact that nobody leaked the announcement of the Robovan or the final design of the Cybercab for We, Robot shows Tesla’s commitment to keeping things under wraps.
Tesla’s Affordable Vehicle Plan
The Reuters report sheds some light on what Tesla's immediate affordable vehicle plans might actually entail with a changed approach: a stripped-down version of its best-selling Model Y SUV, internally code named E41. This approach seems to align with earlier speculation that Tesla might opt for more affordable versions of existing platforms rather than launching an entirely new vehicle like the often-rumored "Model Q" or "Project Redwood."
According to Reuters' sources, the US production launch for this cheaper Model Y has slipped. Instead of the first half of 2025, the target for the start of US production is now reportedly somewhere between Q3 2025 and early 2026. The specific reason for this delay wasn't made clear in the report.
‘E41’ Speculations
Despite the delay, Tesla appears to have set a production target for the vehicle in the US, aiming for 250,000 vehicles in 2026. This suggests that Tesla is banking on this being a high-volume vehicle, and expects significant demand at the price point. The report also reiterates previous accounts that this affordable Model Y variant is planned for eventual production in China and Europe as well.
Sources familiar with the Chinese plans indicated a 2026 launch there, with the vehicle potentially being smaller and costing 20% less to produce than the current refreshed Model Y. The timing for a European rollout remains unclear, but would likely follow a Chinese launch.
Affordable Model 3
Interestingly, the Reuters report also mentions, based on the three sources, that Tesla is planning a similar strategy for the Model 3, intending to launch a bare-bones version. This will likely be an even more cut-down version of the Mexican Model 3. This further supports the idea that Tesla's path to affordability, for now, involves cost-optimizing its existing popular models.
These more affordable vehicles will be crucial for Tesla. The company reported its first annual delivery decline recently, and faces analyst expectations of another drop this year. Factors cited include increased Chinese competition and potential brand reputation impacts. A cheaper Model Y and Model 3 could help attract new customers.
Strategy Pivot
This strategy also exists in the context of Tesla's potential pivot away from a dedicated, all-new $25,000 platform. Elon had previously indicated that the project was deprioritized in favor of focusing resources on developing the Robotaxi network and Cybercab.
The E41 and cheaper Model 3 appear to be the revised approach to hitting lower price points using existing manufacturing lines and platforms, albeit likely not reaching the originally hoped-for $25,000 base price - perhaps after the Federal EV Rebate.
Tariff Impact
Finally, the report touched upon the challenging geopolitical and economic landscape, particularly potential US tariffs. Automakers are wary of rising costs from tariffs on imported vehicles and parts. Tesla has reportedly increased its North American sourcing for many components over the past couple of years, a move that could lessen the tariff impact on a US-produced E41.
This contrasts with recent reports suggesting Tesla suspended plans to ship some components from China for the Cybercab and Semi programs, specifically due to tariff concerns. This highlights the complex supply chain calculations Tesla is making as it tries to balance production cost, tariffs, and vertical supply chain integrations.
With Tesla's Q1 2025 earnings call scheduled for Tuesday, everyone, including us, will be keenly listening for the next steps on these crucial affordable models.
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In a live two-part interview with CNBC’s David Faber yesterday, Elon Musk laid out his ambitious near-term plans for Tesla’s Robotaxi Network and the broader rollout of Unsupervised FSD. Speaking from Giga Texas, Elon confirmed that Tesla will be launching its initial Robotaxi pilot service on Austin’s roads by the end of June 2025.
Tesla Already Testing Robotaxi With Safety Drivers
The upcoming Austin launch is the start of Tesla’s long-stated Robotaxi ambitions. After promising true FSD for years, it appears that Tesla is finally ready to debut it, albeit it’ll be closed to the public initially, and it will only be available on Tesla-owned vehicles for now.
Elon expressed confidence in that end-of-June timeline, revealing some of the extent they’ve gone to behind the scenes. Tesla has had test vehicles driving in Austin 24/7, currently with drivers in the cars. However, they’ve seen essentially no interventions required from the safety drivers during the testing phase, which is good news.
The initial deployment in Austin will be deliberately small to ensure that everything operates as expected.
"So we want to be very careful with the first introduction of unsupervised full self-driving, meaning that there’s the cars driving around with no one in it... Well, yes, and sometimes no one in it at all. Just going to pick someone up. So the car obviously has to be incredibly safe." - Elon Musk on CNBC
How the Robotaxi Network Will Operate
Musk said that Tesla intends to launch with just 10 Robotaxis for the first week and then slowly increase it to 20, 30, 40, and higher. All of that is to be done without a safety driver. Tesla will still have teleoperators supervising the vehicles remotely if they get stuck, but other than that, they will be in motion without an occupant in the driver’s seat.
The goal is to hit 1,000 active Robotaxis within a few months and then focus on expansion towards San Francisco, Los Angeles, and San Antonio. While Tesla could start with 1,000 or 10,000 - given that the initial vehicles are just Model Ys, Tesla wants to keep a tight leash on the fleet and make sure that both the safety and experience are up to snuff.
Geofenced and Avoid Certain Intersections
To further increase safety during the early phases, Elon confirmed that Tesla will geofence the Robotaxis' operational areas within Austin, limiting them to parts of the city where Tesla has the highest confidence in the system's performance. He stated they would avoid intersections unless the system is proven to handle them well, or route around them. While the goal is for the cars to operate without safety drivers, there will be rigorous remote monitoring of the fleet's activities.
Looking at the broader regulatory picture, Elon acknowledged the current complexities, with rules varying by state and even by city. He reiterated his call for a "unified set of national regulations" for self-driving vehicles in the U.S. to ensure consistency and prevent a confusing patchwork of differing rules as vehicles travel across jurisdictions.
This seems to be a great idea, at least initially. Autonomous cars will be safer if they adhere to the same rules everywhere rather than having different rule sets based on the state. However, one issue is that pedestrians and human-driven vehicles may expect the vehicles to either perform or refrain from certain actions, such as not turning right at red lights, and having different rules for self-driving vehicles could cause confusion.
Adding Your Vehicle to the Robotaxi Network
During the interview, Elon painted a picture of a rapidly expanding fleet of privately owned Teslas capable of unsupervised FSD. He offered a bold prediction for the near future:
"My prediction is that probably by the end of next year [end of 2026] we will have probably hundreds of thousands, if not—... Over a million Teslas doing self-driving in the U.S. ... Unsupervised full self-driving, where you do not need to pay attention." - Elon Musk on CNBC
Tesla eventually plans to allow vehicle owners to add or subtract their cars from the Robotaxi fleet, creating a model he likened to a combination of Uber and Airbnb. This would allow owners to generate revenue when their vehicle isn’t being used, with Tesla receiving a portion of the revenue.
He also mentioned that Tesla owners will likely even make more from their cars participating in the fleet than their lease costs. Elon seemed confident in Tesla's ability to manage the logistics, stating, "Tesla has all the ingredients necessary to offer a vast self-driving fleet overnight."
Elon on Vision-Only and Licensing FSD
Elon also took the opportunity to emphasize that Tesla’s approach to autonomy, based on vision, is the ideal approach. The road system is designed for humans with eyes, so using neural nets with cameras is the ideal solution.
"Because the way that the road system is designed is for AI. It’s basically, I should say, it’s for intelligence, biological neural net, and eyes. That’s how the whole road system is designed. So what will actually work best for the road system is artificial intelligence, digital neural nets, and cameras... And what we found is that, when you have multiple sensors, they tend to get confused. So do you believe the camera or do you believe lidar? - Elon Musk on CNBC
While Tesla previously included radar in its vehicles, the disagreements between the radar and camera data led to uncertainty, prompting Tesla’s engineers to turn the radars off instead. The decision wasn’t about the expense, as per Elon’s comments, but rather on the reducing utility of other sensor types when camera vision becomes more accurate.
Elon also confirmed that Tesla is "very much open" to licensing its FSD technology to other major automakers and is currently in discussions with several. "The more we demonstrate the capability of self-driving, the more that they will want to license it, and we’re happy to help," he added.
Optimus and Learning
While the interview primarily focused on Tesla’s ambitions for autonomy, Elon also touched on other key aspects of Tesla’s business and future. He reiterated that Optimus and autonomy will “overwhelmingly” dominate the future financial success of Tesla. At multiple Earnings Calls, Elon has said much the same, so it's not surprising to see him stick to this belief.
Elon provided more color on Optimus's development, noting that while achieving the goal of billions of humanoid robots is at least a decade away, even with insatiable demand. He reaffirmed that the target of producing a million robots by 2030 was still reasonable. The training process is evolving; currently, human operators in motion capture (MOCAP) suits perform basic tasks (picking up objects, opening doors, dancing) to bootstrap the robot's intelligence.
The next threshold, Elon explained, is for Optimus to learn from watching videos, like YouTube "how-to" guides, enabling dramatic "task extensibility." Following that, "self-play," where robots learn by interacting with objects, like a child with toys, guided by a reward function, will be key.
Within five years, Tesla envisions Optimus being capable of household chores like doing dishes, walking the dog, and even proactively understanding and fulfilling user needs. This level of AI advancement requires immense compute. Elon confirmed Tesla's own Dojo training program, based in New York, is contributing, though Tesla will continue to buy many GPUs from Nvidia.
Watch the CNBC Interview
FULL ELON INTERVIEW ON CNBC (PARTS I & II)
Here's the complete, consolidated interview of Elon Musk with David Faber, recorded yesterday in two parts at Giga Texas. (The second part starts at 23:54)
Like Europeans, Australian Tesla owners have been eagerly awaiting the arrival of FSD for years, but it looks like there’s finally some good news coming. Thom Drew, Head of Tesla Australia, has confirmed that the company is actively working to bring FSD to Australian roads and, most importantly, sees no regulatory challenges blocking its path.
This update from Thom follows a video that was shared by Tesla’s AI account on X, where they showed off FSD successfully navigating the streets of Melbourne.
Speaking to Australia’s News.com, Thom Drew provided some context behind Tesla’s Australian FSD efforts. He noted that Elon’s push and focus is the deployment of FSD globally. The engineering team is working across a lot of markets to actively push out FSD wherever possible.
Notably, Drew emphasized the favorable regulatory environment in Australia. He specifically noted that “There’s currently no blockers in Australia to releasing FSD, as we have in North America.” While he didn’t provide a specific timeline for launch, it was clear he was enthusiastic.
The lack of a regulatory blocker is great news for Australians, as Tesla’s FSD efforts in Europe have been plagued with regulatory issues. While the Australian market poses some new challenges as a right-hand drive market, at least Tesla is in control there.
Hook Turn
At the end of the video above, FSD tackles something unique to Australia - the Hook Turn. This is a relatively unique maneuver that’s specific to Melbourne’s Central Business, where vehicles turn right from the far-left lane.
For those familiar with Melbourne, that maneuver is notoriously tricky—and at times even unsettling—since even experienced human drivers can struggle with the unusual complexity of that turn. Having FSD successfully demonstrate its skill in navigating these local complexities and laws is an indication that Tesla’s data-gathering methods work well and are scalable to unique location-based rules and regulations.
What This Means for Australian Owners
Given that Australian FSD is in active development and that there’s a clear regulatory path for Supervised FSD in Australia, that’s a good sign of things to come. It seems fairly likely that Tesla will be able to release FSD in Australia by the end of 2025, if not sooner.
Last year, Tesla initially said that RHD markets would receive FSD in Q1/Q2. With Q2 coming to an end in about a month, Tesla may not be too far off the mark here.
It's important to remember that this refers to FSD (Supervised), meaning the driver must remain vigilant and ready to take control at all times, consistent with its behavior in North America and China. However, Australia's lack of regulatory blockers is a huge advantage for Tesla compared to other regions like Europe and even China, where Tesla needed to jump through hoops to get FSD approved.
If you’re in Australia, keep an eye out; FSD may be coming sooner than you think.
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