The Ministry of Defence (MOD) has admitted "some initial challenges to overcome" with the Warrior armoured vehicle programme after it was revealed the upgrade is delayed and £227 million over budget.
The upgrade was first announced in 2011, at a cost of £1.3 billion, to extend the vehicles' service by at least 15 years.
It included improved interchangeable armour and increased firepower that could be used on the move.
The first of the vehicles was originally due to come into service next year, however, that will not now happen until at least 2023.
The vehicles are due to become the backbone for two armoured infantry brigades.
Commenting on the news, defence analyst Francis Tusa said:
"You need a tracked infantry combat vehicle for two of those brigades. If you don't have that, your strike power disappears."
The programme is now running more than three years late and over budget, with the permanent secretary at the MOD, Stephen Lovegrove stating "no commitment to manufacture has been made".
Writing to the chairwoman of the Commons spending watchdog, Mr Lovegrove said the Warrior was currently suffering from "shortfalls in fightability, lethality, survivability, growth potential and safe operation".
The overhaul, which is being carried out by US defence company Lockheed Martin, will see the vehicles being fitted with new gun turrets and stabilising 40mm cannon along with more armour and electronics updates.
This would allow for more accurate firing while in motion and would push the vehicles out of service date from 2025 to 2040.
The Warrior vehicle first entered service in 1988 and was used in the First Gulf War, Bosnia and Iraq.
A total of 380 of the UK's 789 vehicles will be upgraded, with 245 due to receive new turrets.
Shadow Defence Secretary, Nia Griffith, said: "The government’s complete failure to manage this programme properly is putting this important capability at risk.
"We have seen repeated delays and spiralling costs which have led to serious concerns about the affordability of the project.”
A Lockheed Martin spokeswoman said the company "continues to work collaboratively with the MOD on delivering this game-changing capability".
An MOD spokesman said: "As with any complex weapons programme there have been some initial challenges to overcome.
"However, we have brought this project back on track.
"We continue to work with Lockheed Martin to deliver this game-changing capability that ensures the infantry retains the Warrior fighting vehicle to beyond 2040."