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Tesla (TSLA), which is no stranger to model launch delays, is pushing back its timeline for a U.S. launch of a more affordable version of its Model Y SUV, according to Reuters. The news comes one day ahead of the EV maker's 1Q25 earnings report and reinforces concerns about the company's ability to reignite its growth engine amid intensifying competitive pressures in its core U.S. and China markets. After deliveries declined by approximately 1% in 2024 -- TSLA's first annual drop in deliveries in over a decade -- analysts and investors have been banking on the launch of new lower-priced models to reverse the deliveries and revenue growth downtrends. 

Now, however, it appears that this significant near-term growth catalyst has been removed, setting the stage for more downward revisions to revenue and EPS estimates for FY25. While a specific reason for the delay of the new affordable Model Y was not disclosed, TSLA's prioritization of its robotaxi platform is a likely culprit.

• When Elon Musk made the decision to cancel TSLA's plan for a new, next-generation $25,000 vehicle built on an "unboxed platform" back in 2023, to instead focus the company's resources on developing the robotaxi, a chain reaction was put into motion. As a result of this decision, TSLA opted to develop more affordable versions of existing vehicles -- including a stripped-down Model Y version -- on its production lines, rather than manufacturing all-new, low-cost models.
• This pivot and change in priorities have not only delayed the launch timeline of the affordable Model Y (codenamed E41), but it's also probable that the release of a more basic Model 3 sedan has been pushed back by at least a few months. When TSLA reported 4Q24 earnings on January 29, it stated that it remained on track to begin production on new affordable models in 1H25, but now 2H25 or 1H26 is more likely.
• An aging fleet that lacks lower-priced models has opened the door for competitors to take market share from TSLA, especially in China. In 2024, it's estimated that TSLA's market share in China in the battery-electric vehicle (BEV) market slipped to 10.4% from 11.7% in 2023. New vehicle launches, such as Nio's (NIO) new sub-brand, Firefly, and BYD Company's (BYDDY) budget-friendly e2 and Seagull hatchbacks, have caused TSLA to cede more ground. 
• From a financial standpoint, TSLA's revenue is likely to remain stagnant, or worse, in the near-term due to the delay. Although the delay may help to preserve the current margin structure, which has been under pressure due to several rounds of price cuts, EPS will remain under pressure as flat/declining revenue, combined with rising costs amid a global trade war, apply pressure on TSLA's profits.

The delay of the affordable Model Y postpones a critical growth lever for TSLA, increasing near-term financial risks, while providing competitors more time to erode its market share. As the global EV market pivots towards affordability and scale, TSLA's aging product lineup positions the company for an extended period of stagnation in both sales and earnings.