Engineering design courses in the first year of undergraduate engineering education offer several benefits to students new to engineering. Students however face challenges like limited technical knowledge, lack of prior experience in long-term team-based problem-solving, and time, resource, team, and project management, dealing with multiple perspectives and ambiguity, which is endemic to design problems. Students also face issues specific to the phases of the engineering design process, which this study investigates. This study investigates the nature and types of challenges that students face during the phases of ideation to detailed design and detailed design to prototyping in a mechatronics course. The study adopts a qualitative approach to elicit the challenges through group interviews with 7 teams with 25 students. Thematic analysis reveals challenges related to four themes: breadth of knowledge, functional complexity, structural complexity, and spatial visual ability. We contribute to the body of knowledge by consolidating interventions, both in-person and technology-enabled, which engineering educators can adopt to mitigate the challenges and offer effective learning environments for first-year design courses.