Tesla debuts 'affordable' Model Y and 3 that strike some as too expensive

By Abhirup Roy and Harshita Mary Varghese (Reuters) -Tesla rolled out "affordable" versions of its best-selling Model Y SUV and its Model 3 sedan, but the starting prices of $39,990 and $36,990 were too high, some said, to attract a new class of buyers to the electric vehicle brand. CEO Elon Musk has touted the car as a way to tap a wider swath of buyers, saying last year that a price below $30,000, after incentives, was the key. Tesla is trying to reverse falling sales of its aging lineup amid rising competition in Europe and China, and the loss of a $7,500 U.S. tax credit. The new cars drop some premium finishes and features but offer driving ranges above 300 miles (480 km). Tesla's stock closed down 4.5% and Tesla bull Dan Ives, an analyst at Wedbush, said he was disappointed the cars were only about $5,000 cheaper than the next-level trims of the models. The new Standard versions cost more than the cheapest U.S. models in September, when the now-expired tax credit was included. Musk has for years promised mass-market vehicles, though last year he canceled plans for an all-new $25,000 EV, Reuters first reported. Instead, he chose to build lower-priced versions based on Tesla's current models, sparking concerns among investors and analysts that the cheaper cars would cannibalize sales of existing vehicles and limit growth. "It's basically a pricing lever and not much of a product catalyst," said Shay Boloor, chief market strategist at research firm Futurum Equities. "I don't see it as unlocking new demand at scale." Fearing a drop in demand after losing the tax credits, some automakers in the U.S. have already cut prices while some others have figured out mechanisms to effectively extend the benefit of the incentives. Investors and analysts said dropping the price below $40,000 will help drive sales as the latest offerings compete next year with Chevrolet's Equinox, Hyundai Ioniq 5 and Kia's EV4. Some, though, expected a bigger slash by Tesla to below $30,000. "I just don't know that this is enough," said Shawn Campbell, an advisor at Camelthorn Investments. "Longer term, this news doesn't solve the problem posed by lower cost Chinese competitors in global markets. In my opinion, Tesla needs a sub-30k EV." In Europe, where Musk's far-right political views have undermined brand loyalty, the new entries will be up against more than a dozen electric and plug-in-hybrid models with price tags below $30,000. Sales in the September-ending quarter rose to a record as consumers rushed to take advantage of the EV tax credit before its expiration on September 30, but expectations are that they will slow down for the rest of the year, unless the affordable car comes to the rescue. "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." 'A WALMART HOODIE' FOR TESLA Both Standard versions offer 321 miles (516 km) of range and less powerful acceleration than the current higher trims, called Premium. Tesla has reduced the size of the battery on both cars, according to its website and some influencers who got a preview. Both cars can be ordered immediately, with deliveries set to start between December 2025 and January 2026 for many locations, Tesla's website showed.  The Standard versions do not come with Autosteer, Tesla's driver assistance system, touchscreens and seat heating for rear passengers. Tesla has also removed the LED lightbar in the cheaper Model Y. Both come with manually adjusted side-view mirrors and textile seats, with vegan leather available for the Model 3.  Musk has been pivoting the company toward artificial intelligence, focusing on robotaxis and humanoid robots, but the new cars are key to hopes of near-term revenue growth. "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 cool rebel at the edge of innovation – it's the establishment trying to play both Tesla and Toyota at once." (Reporting by Abhirup Roy in San Francisco and Akash Sriram and Harshita Mary Varghese in Bengaluru; Editing by Peter Henderson, Richard Chang, Sriraj Kalluvila, Alan Barona and Lincoln Feast.)

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