Tesla delays new “affordable model” as it ramps up Model Y to cash in on last rebates

Tesla has today confirmed that it will be pushing back volume production of its affordable models into the second half of this year, after previously revealing that it was likely to be in the first half of 2025.

At the company’s Q2 earnings call today, the Tesla team highlighted that due to the incentives in the US ending in Q3, the company has shifted focus to producing more Model Ys for customers instead of ramping production of a new product, which could be quite complex in its initial ramp.

Vaibhav Taneja, Tesla’s CFO, did confirm that the production of the affordable model had begun, but unveiling and mass production of the model were expected in Q4 of 2025.

The new affordable model is seen as a shorter and smaller Model Y, all but confirmed during investors’ question time when Tesla CEO Elon Musk was asked about what the affordable model may look like, to which Musk joked that it would look like the Model Y.

Musk also insisted that people really want to buy Teslas, and that it is a desirable product – Tesla reports record levels of test drives despite its fall in sales. Tesla concedes its EVs are not yet affordable enough, particularly in the light of Chinese competition, which is the aim of the release of this new model in the second half of 2025.

Other parts of the calls covered the launch of Tesla’s Robotaxi service and the world’s first autonomous delivery of a car from factory to a customer in Austin.

The company shared that they have quickly expanded the service area of the Robotaxi service in Austin and aims to have the service available in many parts of the US by the end of the year.

This would include the Bay Area in California, Arizona, Florida and more with Musk stating that Tesla’s goal is to be able to potentially service half of the population in the US by the end of 2025: “I think we’ll have Robotaxi in half the population of the US by the end of the year,” he said. That, however, depends very largely on approval from regulators, which is not guaranteed.

Speaking of Robotaxis and the success of the launch in Austin, Musk insisted that Tesla is the best company when it comes to real-world AI: “Tesla is by far the best in the world in real-world AI.

He compared Tesla to Waymo, which is run by Google, saying that Google is really good at AI, just not real-world AI, referring to real-world applications such as Tesla’s Autopilot & recently released FSD suite.

On the AI front, Tesla also shared that cars with AI5 hardware for FSD will be going into production in 2026 with current vehicles coming out with AI4 hardware.

This year, though, the company will be delivering cars from its Fremont factory to customers, taking another step to showcase its lead in autonomous driving technologies. This also follows the first fully autonomous delivery to a customer in Texas in June.

With much of the company now focused on its self-driving technology, AI and robotics, it’s no surprise that the latest earnings call focused on what these technologies would do for Tesla customers and investors in the coming years.

Delayed plans for the affordable model may be taken by some as a misstep but the company continues to generate interest with its Robotaxi launch and now the rapid expansion into other markets in the US.

This also sets the stage for Tesla’s FSD launch in Australia in the coming months but it’s likely to be in stages on limited cars. Either way, it’ll keep many current and future Tesla owners intrigued with the next 6 months quite pivotal for Tesla’s long-term success.

See also: Tesla battery division posts record earnings. Will it soon overtake auto?