Tesla debuts ‘affordable’ Model Y and 3 in US that strike some as too expensive | US news

Tesla launched “affordable” versions of its best-selling Model Y SUV and Model 3 sedan, but starting prices of US$39,990 and US$36,990 were too high, some said, to attract a new class of buyers to the electric vehicle brand.

CEO Elon Musk touted the car as a way to attract more buyers, saying last year that a price below $30,000, after incentives, was key.

Tesla is trying to reverse declining sales of its aging lineup amid growing competition in Europe and China and the loss of a $7,500 U.S. tax credit. The new cars drop some premium finishes and features, but offer a range of more than 300 miles (480 km).

Tesla’s stock closed down 4.5%, and Dan Ives, an analyst at Wedbush, said he was disappointed that the cars cost only about $5,000 less than higher-tier versions of the models.

The new Standard versions cost more than the cheapest U.S. models in September, when the now-expired tax credit was included.

Musk has been promising mass-market vehicles for years, although last year he canceled plans for an all-new $25,000 electric vehicle, Reuters first reported. Instead, it chose to build cheaper versions based on Tesla’s current models, sparking concerns among investors and analysts that the cheaper cars would cannibalize sales of existing vehicles and limit growth.

“It’s basically a pricing lever and not really a product enabler,” said Shay Boloor, chief market strategist at research firm Futurum Equities. “I don’t think this will unlock new demand on a large scale.”

Fearing a drop in demand after the loss of tax credits, some U.S. automakers have already reduced prices while others have found mechanisms to effectively extend the benefit of the incentives.

Investors and analysts said dropping the price below $40,000 would help boost sales as the latest offerings will compete next year with Chevrolet’s Equinox, Hyundai Ioniq 5 and Kia’s EV4. Some, however, expected a deeper cut from Tesla, below $30,000.

“I just don’t know if it’s enough,” said Shawn Campbell, an advisor at Camelthorn Investments. “In the longer term, this news does not solve the problem posed by lower-cost Chinese competitors in global markets. In my opinion, Tesla needs an electric vehicle under 30,000 vehicles.”

In Europe, where Musk’s far-right political views have undermined brand loyalty, the new entries will face more than a dozen electric and plug-in hybrid models priced below $30,000.

Sales in the quarter ending in September hit a record as consumers rushed to take advantage of the electric vehicle tax credit before it expires on September 30, but are expected to slow for the rest of the year unless the affordable car comes to the rescue.

“The desire to buy the car is very strong. [It’s] just [that] “People don’t have enough money in their bank account to buy it,” Musk said in July during Tesla’s second-quarter earnings conference call. “So the more affordable we can make the car, the better.”

The two Standard versions offer 516 km of range and less powerful acceleration than the current higher versions, called Premium. Tesla has reduced the battery size of both cars, according to its website and some influencers who have had a sneak peek.

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

Standard versions are not equipped with Autosteer, Tesla’s driver assistance system, touch screens and heated seats for rear passengers. Tesla also removed the LED light bar in the cheaper Model Y. Both come with side mirrors and manually adjustable textile seats, with vegan leather available for the Model 3.

Musk has moved the company toward artificial intelligence, focusing on robo-taxis and humanoid robots, but the new cars are key to near-term revenue growth hopes.

“For the market, this is Tesla ditching its Steve Jobs turtleneck and putting on a Walmart hoodie,” said Michael Ashley Schulman, chief investment officer at Running Point. “It’s no longer the cool rebel at the forefront of innovation, it’s the establishment trying to outplay both Tesla and Toyota.”