After facing a sales slump over the past year, Tesla’s introducing cheaper versions of two popular models. The company launched a Model Y priced below $40,000 and a Model 3 under $35,000. These new budget versions arrive as Tesla works to regain market share from competitors.
To keep costs down, Tesla stripped away several features from both models. The budget Model Y comes with a 321-mile driving range instead of the longer range offered before. The interior uses fabric instead of microsuede. The panoramic glass roof and second-row touchscreen are gone. Standard audio speakers are fewer in number. The Model 3 lost ambient lighting and some driving range capabilities as well.
The announcement came on Tuesday, and Tesla’s stock fell 2.5% to $441.08 following the product introduction. This happened during a challenging period for the company. Sales and profits dropped in recent quarters despite the stock trading near all-time highs. One identified cause was anti-Elon Musk boycotts. Furthermore, the federal EV tax credit worth $7,500 expired at the end of September, which effectively raised prices.
Tesla’s strategy represents a shift from earlier promises. Elon Musk had previously canceled plans to build a $25,000 EV model. He’d stated a target price below $30,000 including tax credits. Now the company is focusing on reducing costs of current models rather than developing new platforms. The affordability push is critical for achieving Tesla’s ambitious goal of delivering 20 million vehicles over the next decade.
The Mexico market got the first stripped-down Model 3 variant. This version features standard cloth seats, which is a first for Tesla. It also lacks a heated steering wheel and seat options. The intense pressure on Tesla to increase sales has driven these aggressive pricing decisions. The interior has only a white light bar, and there’s no rear screen. The Model Y currently retains the best value among Tesla’s lineup at 58.5% after three years.
Tesla faces tough competition in this price range. The Ford Mustang Mach-E, Chevrolet Equinox EQ, and Hyundai’s Ioniq 5 all compete in the same market space. The company is working to balance affordability with the features customers want. These new budget models represent Tesla’s attempt to compete while maintaining profitability during a difficult sales period.