Tesla has introduced more affordable variants of its Model Y and Model 3 in the United States, a move aimed at bolstering sales following the expiration of a significant U.S. tax credit for electric vehicles.
However, the electric car manufacturer’s stock experienced a decline of approximately 4% as investors expressed a lukewarm reception to the announcement. The price reduction for these new versions is approximately $5,000 less than their predecessors.
Facing increasing competition in the EV market, Tesla’s market position has been challenged by a perceived slowness in introducing new, budget-friendly options, despite the recent unveiling of a new Model Y variant.
CEO Elon Musk had previously committed to developing a more economical vehicle but reportedly shelved those plans last year to prioritize robotaxis and humanoid robots.
“Elon has this way of getting people to really focus on the future. And today is the downside of that,” noted James Stanley, a macro analyst at StoneX, reflecting on Wall Street’s reaction.
“It’s a lower-cost EV [electric vehicle] that everyone pretty much saw coming.”
Despite Musk’s increased focus on ventures related to artificial intelligence, Tesla continues to rely on its core automotive business, which is currently facing pressures on multiple fronts.
These pressures include reductions in U.S. government incentives for electric vehicles, competition from Chinese automakers, and consumer disapproval of Musk’s involvement with the Trump administration earlier in the year.
In July, the carmaker announced that its sales had decreased by 12% in the second quarter, totaling $22.4 billion – the most significant decline in at least a decade – following a 14% drop in deliveries.
Last week, Tesla was among the automotive companies that reported record electric vehicle sales over the previous three months. However, analysts attributed this surge to a rush to purchase EVs before the expiration of a government subsidy.
Following the expiry of the U.S. tax credit at the end of September, Tesla vehicle prices for U.S. consumers increased by up to $7,500 (£5,588) this month.
Tesla executives have acknowledged that the discontinuation of the tax credit for electric vehicle buyers in the U.S. is likely to have a negative impact on the company’s performance.
The newly introduced, more affordable models, which are partly intended to offset the loss of the EV credit, will lack some of the features found in other Tesla vehicles.
According to Tesla’s website, the lower-cost, stripped-down versions of the Model Y and Model 3 will be priced at $39,990 and $36,990, respectively, in the U.S. These models were not immediately visible on the UK version of Tesla’s website.
Tesla’s most recent significant vehicle launch, the Cybertruck, has produced mixed results, with approximately 52,000 units sold in the U.S. since deliveries began in 2023, according to Cox Automotive.
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