Tesla Model 2 release facing delays as Giga Mexico production plans for its cheapest EV stall

During the Investor Day event in May, Elon Musk teased that two new mass market electric vehicles are being "built" or "designed" by Tesla, with combined production goal of 5 million units annually. The one being in the design stage at the time could be the alleged cheapest Tesla Model 2 car, even though a Model Z might be a more fitting name as the rumors suggest it will look like a smaller Model Y.

The presentation slides at the event even teased its design outline, while the production start was revealed when Tesla announced in March that it will build its largest Gigafactory to date in the Mexican state of Nuevo León that borders Texas. There, Tesla directly states that "our next Gigafactory will be in Mexico, manufacturing our next-gen vehicle."

Local officials have also confirmed that "in future phases it would be a new model with a lower cost than the current ones." Furthermore, sources from its supply chain in China said that Tesla aims to assemble 2 million cars per year there when the US$10 billion investment is fully operational.

Tesla Model 2 release date now slated for 2026

Unfortunately, the purported start of Tesla Model 2 production may have now moved from 2025 to 2026, or even later. On last count, Tesla was pushing its Chinese suppliers to relocate or branch out to Mexico in an urge to replicate the supply chain around its most efficient Gigafactory in Shanghai on which it plans to model the one in Mexico.

Now, however, local publication Reforma cites several of those Tesla suppliers who claim that they have now been told to stand down with the relocation plans. Apparently, Tesla is facing some unspecified delays in the construction of Giga Mexico, so the ribbon-cutting ceremony may have been pushed to 2026.

The supplier has noted that they may have to now adjust their expansion plans in Mexico, or even decide what exactly production lines they will be building if the Tesla Model 2 launch is that far off. "Two or three months ago there was a lot of rush, lots of pressure to look for a location," they add, "but one month later, they told us to wait."

Previously, Tesla was rumored to be facing issues with workforce hiring in Mexico, ranging from higher labor costs due to unionization, to the need to raise productivity to the level of their Chinese counterparts at Giga Shanghai. Some local publications also informed recently that the permit process for the Mexican Gigafactory also appears to have stalled, so a combination of such factors may have now pushed the Model 2 release timeframe with another year or so.

That's not to say that Tesla won't announce the Model 2 earlier, as soon as it is done with the ongoing Model 3 Highland and Cybertruck production ramp brouhaha.

Get the 48A Tesla Wall Connector with 24" cable on Amazon