Tesla unveiled more affordable versions of its top-selling Model Y SUV and Model 3 sedan, but starting prices of $39,990 and $36,990 left some questioning whether they’ll attract new buyers to the electric vehicle brand.
Tesla’s stock dropped 4%, and Wedbush analyst Dan Ives, a Tesla bull, expressed disappointment that the new models are only about $5,000 cheaper than the next trim levels.
The new “Standard” versions also cost more than previous entry-level models, even factoring in the $7,500 tax credit that expired at the end of September.
Tesla shares fell on Tuesday despite unveiling a cheaper Model Y.
The launch is critical for Tesla as it seeks to reverse declining sales and market share amid growing competition in Europe and China, compounded by the loss of the U.S. tax credit.
CEO Elon Musk has long promised a mass-market Tesla, but last year canceled plans for a brand-new $25,000 EV, opting instead to create more affordable versions of existing models. This approach has raised concerns among investors and analysts that the cheaper vehicles could cannibalize sales of higher-end models and limit growth.
“It’s basically a pricing lever and not much of a product catalyst,” said Shay Boloor, chief market strategist at Futurum Equities. “I don’t see it as unlocking new demand at scale.”
Both “Standard” versions offer 321 miles (516 km) of range and slower acceleration compared with the higher-trim Premium models. Orders are open immediately, with deliveries scheduled for December 2025 through January 2026 in many locations, according to Tesla’s website.
The Standard trims omit Autosteer, Tesla’s driver-assistance system, and rear-seat touchscreens. The cheaper Model Y also loses the LED lightbar. Both vehicles feature textile seats, with vegan leather optional for the Model 3, and manually adjustable side-view mirrors.
The Model Y will start at just under $40,000.
Late last year, Elon Musk said the vehicle would be priced below the “key threshold” of $30,000 after U.S. EV tax credits. However, with the $7,500 credit expiring at the end of September, effective prices in the U.S. rose, boosting quarterly sales to a record but raising concerns that sales may slow unless the more affordable Model Y helps sustain momentum.
“The desire to buy the car is very high. It’s just that people don’t have enough money in the bank account to buy it,” Musk said in July during Tesla’s second-quarter earnings call. “So the more affordable we can make the car, the better.”
Over the weekend, Tesla fueled fan excitement with two short clips posted on X. One shows headlights piercing the dark, while the other briefly features a spinning wheel, accompanied by the date “10/7.”
CEO Elon Musk, pictured in May at the White House, has been steering Tesla toward artificial intelligence, with a focus on robotaxis and humanoid robots.
Musk had initially promised that production of the more affordable Model Y would begin by the end of June. In July, Tesla said it had completed only “first builds” of the vehicle and expected it to be available to customers sometime in the final three months of the year.
The company has been contending with slowing sales of its aging lineup amid rising competition, particularly in China and Europe, where Musk’s far-right political views have also affected brand loyalty.
Earlier this year, Tesla introduced a refreshed Model Y featuring new light bars and a rear touchscreen. While Musk has indicated plans to expand Tesla’s lineup with more affordable vehicles, the company has not yet shared detailed information.
A more affordable version of the Model 3 is priced at $36,990.
These lower-cost vehicles are also central to Tesla’s goal of producing 20 million cars over the next decade, one of several operational and valuation milestones outlined by the company’s board as part of its proposed $1 trillion compensation plan for Musk.
