Tesla has unveiled cheaper versions of its Model 3 and Model Y electric vehicles, but with starting prices still hovering near $40,000 (£29,820) investors and analysts say the cars fall short of chief executive Elon Musk’s promise of a truly mass-market EV.
The new Model 3 Standard starts at $36,990, while the Model Y Standard costs $39,990, roughly $5,000 less than Tesla’s premium trims but well above the sub $30,000 threshold Musk once said would unlock mass adoption.
The ‘budget’ models come stripped of features like autosteer, glass roofs, rear touchscreens, and leather seats, with smaller batteries reducing performance and range. Deliveries are due to begin later this year.
“This is cost-cutting, not reinvention”,said Matt Britzman, senior equity analyst at Hargreaves Lansdown, noting that the models were a stopgap after the expiry of the American $7,500 EV tax credit. “It helps bridge the affordability gap but doesn’t solve the demand issue”.
Tesla’s shares fell 4.5 per cent on Tuesday following the announcement. Wedbush analyst Dan Ives, typically a long-time Tesla bull, called the trims “a modest pricing lever” that failed to deliver the disruptive spark investors hoped for.
Global pressure on Tesla
Tesla is battling sliding global sales – down six per cent year-to-date – and fierce, growing competition from Chinese rivals BYD and Xiaomi, whose EVs often sell for under $30,000.
Musk’s move comes as the company loses ground in Europe, where consumer sentiment has been dented by Musk’s political rhetoric and growing brand fatigue.
The Model 3 and Y standard editions remain costlier than the Chevrolet Equinox EV ($35,100) or Nissan Leaf ($29,990), leaving Tesla’s ‘affordable’ positioning under scrutiny.
Musk has increasingly pivoted Tesla’s focus away from conventional vehicles toward its Optimus humanoid robot and self-driving robotaxi program.
Still, analysts say lower-cost cars are critical for near-term revenue. “For the market, this is Tesla dropping its Steve Jobs turtleneck and slipping into a Walmart hoodie”, said Michael Ashley Schulman, chief investment officer at Running Point. “It’s no longer the rebel innovator, it’s a company trying to be both Tesla and Toyota”.