Tesla’s new ‘affordable’ Model Y and Model 3 strike some as still too expensive

San Francisco - Tesla rolled out “affordable” versions of its best-selling Model Y sport utility vehicle and its Model 3 sedan, but the starting prices of US$39,990 (S$51,600) and US$36,990 were too high, some said, to attract a new class of buyers to the electric vehicle (EV) brand.

Chief executive Elon Musk has touted the car as a way to tap a wider swath of buyers, saying in 2024 that a price below US$30,000, after incentives, was the key.

Tesla is trying to reverse

falling sales of its ageing line-up

amid rising competition in Europe and China, and the loss of a US$7,500 US tax credit.

The new cars drop some premium finishes and features but offer driving ranges above 483km.

Tesla’s stock closed down 4.5 per cent on Oct 7 and Tesla bull Dan Ives, an analyst at Wedbush, said he was disappointed that the cars were only about US$5,000 cheaper than the next-level trims of the models.

The new Standard versions

cost more than the cheapest US models in September, when the now-expired tax credit was included.

Mr Musk has for years promised mass market vehicles, though in 2024 he cancelled plans for an all-new US$25,000 EV.

Instead, he chose to build lower-priced versions based on Tesla’s current models, sparking concerns among investors and analysts that the cheaper cars would cannibalise sales of existing vehicles and limit growth.

“I just don’t know that this is enough,” said Camelthorn Investments adviser Shawn Campbell. “Longer term, this news doesn’t solve the problem posed by lower cost Chinese competitors in global markets. In my opinion, Tesla needs a sub-US$30,000 EV.”

Fearing a drop in demand after losing the tax credits, some auto makers in the United States have already cut prices, while some others have figured out mechanisms to effectively extend the benefit of the incentives.

In Europe, where Mr Musk’s far-right political views have undermined brand loyalty, the new entries will be up against more than a dozen electric and plug-in-hybrid models with price tags below US$30,000.

Sales in the September-ending quarter rose to a record as consumers rushed to take advantage of the EV tax credit before its expiration on Sept 30, but expectations are that they will slow down for the rest of 2025, unless the affordable car comes to the rescue.

Both Tesla’s Standard versions offer 516km of range and less powerful acceleration than the current higher trims, called Premium. The Model 3 includes a smaller battery pack.

The Standard versions do not come with Autosteer, Tesla’s driver assistance system, touchscreens and seat heating for rear passengers. Tesla has also removed the LED light bar in the cheaper Model Y.

Both come with textile seats, with vegan leather available for the Model 3, and manually adjusted side-view mirrors.

Both cars can be ordered immediately, with deliveries set to start between December 2025 and January 2026 for many locations, Tesla’s website showed.

Mr Musk has been pivoting the company towards artificial intelligence, focusing on robotaxis and humanoid robots, but the new cars are key to hopes of near-term revenue growth.

“For the market, this is Tesla dropping its Steve Jobs turtleneck and slipping into a Walmart hoodie,” said Running Point chief investment officer Michael Ashley Schulman. “It’s no longer the cool rebel at the edge of innovation – it’s the establishment trying to play both Tesla and Toyota at once.” REUTERS