In an effort to combat declining sales, the electric vehicle manufacturer introduces more budget-friendly versions of its popular models.
Published On 7 Oct 2025
Tesla has introduced more economical variants of its flagship Model Y SUV and Model 3 sedan, priced at $39,990 and $36,990 respectively. This move aims to counteract the recent downturn in sales and regain market traction amid intensifying competition in the electric vehicle sector.
The announcement of these new models was made public on Tuesday.
For years, CEO Elon Musk has pledged to deliver affordable electric cars to the mass market, although plans for a brand-new $25,000 EV were scrapped last year.
In late 2024, Musk indicated that the upcoming vehicle would be priced under the crucial $30,000 mark after factoring in U.S. EV tax incentives.
With the expiration of the U.S. federal EV tax credit at the end of September, effective prices rose by $7,500, which temporarily boosted quarterly sales to record highs. However, analysts anticipate a slowdown in sales unless the new affordable model stimulates demand.
“There is strong interest in purchasing the vehicle, but many potential buyers lack sufficient funds,” Musk explained during Tesla’s Q2 earnings call in July. “Making the car more accessible financially is essential.”
Over the weekend, Tesla stirred anticipation by sharing two teaser videos on X, featuring glimpses of headlights emerging from darkness and a spinning wheel, followed by the date “10/7,” signaling the October 7 reveal.
Although Musk initially targeted production to begin by June’s end, Tesla reported only initial builds in July, with customer availability expected in the final quarter of the year.
Challenges in Sales Growth
Facing a slowdown in sales of its existing models, Tesla is contending with mounting competition, particularly in markets like China and Europe. Additionally, Musk’s controversial political stances have reportedly affected brand loyalty in these regions.
Earlier this year, Tesla refreshed the Model Y, adding features such as updated light bars and a rear touchscreen to enhance appeal.
Shifting focus, Musk is steering Tesla toward advancements in artificial intelligence, including autonomous robotaxis and humanoid robots. While the company has hinted at launching more affordable vehicles, specific details remain scarce.
Insider sources have musk-says-hes-forming-america-party/” title=”After fallout with Trump, Elon … says he’s forming ‘America Party’”>revealed plans for a simplified version of the Model 3 sedan, aimed at broadening Tesla’s market reach.
Introducing cost-effective models is also critical for Tesla’s ambitious goal of producing 20 million vehicles over the next decade-a key milestone tied to Musk’s proposed $1 trillion compensation package approved by the company’s board.
Despite the strategic intent, market reactions to the new models have been lukewarm, with analysts citing the modest price reduction as a limiting factor.
Dan Ives, an analyst at Wedbush Securities, commented, “Launching a lower-priced model is a necessary step toward achieving a quarterly delivery rate of approximately 500,000 vehicles, especially with the EV tax credit ending. However, the $5,000 price cut compared to previous Model 3 and Y versions falls short of expectations.”
Following the announcement, Tesla’s stock price dropped nearly four percent by mid-afternoon trading in New York.
