Tesla investors and consumers were disappointed after the company unveiled its long-awaited, less expensive versions of the Model 3 and Model Y.
Intended to help Tesla reach a broader customer base and shed its reputation as a company that caters only to the wealthy, the new models are still not affordable enough and unlikely to trigger a buying spree, analysts said.
The new models come just after the expiration of a $7,500 tax credit for new electric vehicles, which is expected to strangle growth at EV makers this month and going forward.
Tesla unveiled the vehicles on Tuesday on Chief Executive Elon Musk’s social media site, X. The Model 3 Standard has a starting price of $36,990, just $5,500 less expensive than the existing version of the Model 3. The Model Y Standard starts at $39,990, $5,000 less than its pricier counterpart.
Tesla previously had plans to release a vehicle priced at less than $30,000 that never came to fruition. The new models may boost sales, said Wedbush analyst and Tesla bull Dan Ives, but they don’t represent a drastic enough change.
Cheaper models “will be important to stimulate demand with the EV tax credit expiring,” Ives wrote in a note Tuesday. “But we are relatively disappointed with this launch as the price point is only $5,000 lower.”
The EV leader has long teased the idea of making more affordable vehicles to allow people with lower incomes to go green. The price cuts for stripped-down versions of the models fail even to offset the loss of the federal tax credit.
On price, Tesla faces significant competition. A handful of electric vehicles and plug-in hybrids are on the market for $35,000 or less, even as auto tariffs threaten to raise the cost of cars and parts.
The Hyundai Kona Electric and the Chevrolet Equinox EV both have starting prices between $32,000 and $34,000. The Nissan Leaf starts at $28,140.
Tesla’s new Model 3 and Model Y vehicles will both have an all-electric range of 321 miles, about 40 miles less than the premium versions. The latest models are expected to hit the market before 2026.
Industry insiders say the company will need to do more than lower prices by less than 13% to gain back the market share it lost to competitors.
Tesla needs to repair the damage the brand took from Musk’s foray into politics, which rubbed many electric vehicle buyers the wrong way. It also needs to continue expanding its charging network and deliver on its self-driving technology.
Despite Tesla’s struggles, investors have remained optimistic that the company will regain its footing and eventually be bolstered by its self-driving robotaxi and humanoid robot ventures.
Over the last 12 months, Tesla shares have surged by nearly 80%, while the tech-heavy Nasdaq composite index has risen by less than 30%.
After Tuesday’s announcement of the new vehicles, however, shares fell more than 4%.
