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Tesla has introduced a more affordable and stripped-down version of its flagship Model Y car as Elon Musk’s group braces for slowing US demand following the expiry of electric vehicle federal tax credits.
The new $37,990 “standard” version is about 15 per cent cheaper than the previous base offering, and has a driving range that is 10 per cent less than the premium version.
The model also has fewer features, lacking the auto steer function, second-row touchscreen and heated seats. The company also unveiled a more affordable version of its Model 3 sedan starting at $36,990.
Shares in the carmaker fell more than 4 per cent on Tuesday.
Tesla’s third-quarter global deliveries hit a new record last month as US consumers rushed to buy electric cars ahead of the cancellation of $7,500 federal tax credits.
But the group has warned of tough quarters ahead as President Donald Trump seeks to further roll back rules to reduce vehicle emissions.
Rival carmakers including Ford, Stellantis to GM are expanding their petrol and hybrid line-ups as they predict declining EV sales and seek to capitalise on higher margins from their larger pick-up trucks and sport utility vehicles.
While the more affordable Tesla models are designed to boost demand, analysts have questioned how these launches will affect the company’s profit margins. Tesla had considered launching an even lower-priced $25,000 model but that plan was scrapped last year.
At its earnings briefing in July, Tesla’s engineering executive Lars Moravy emphasised that the goal of offering more affordable models, which the company started producing in June, was “not to negatively impact revenue or gross margin”.
In addition to Trump pulling EV incentives in the US, Tesla is grappling with weak demand in Europe due to Musk’s political activism as well as the rise of competitors such as BYD.
BYD’s UK sales have outpaced Tesla’s this year after the Chinese group’s sales surged nearly 10-fold in September, according to the Society of Motor Manufacturers and Traders. Globally, BYD is also well ahead of Tesla with sales of 1.6mn vehicles this year compared with 1.2mn for Musk’s group.
Despite a recent pivot to artificial intelligence and self-driving robotaxis, Musk would need to sell millions more cars and achieve several other milestones if he is to receive a proposed pay package worth $1tn over the next decade.
