Tesla on Tuesday unveiled new versions of its two most popular models that will sell for around $5,000 less than previous versions.
The new Model Y will sell for $40,000, and the Model 3 will cost $37,000. The cheaper versions are aimed at propping up sales after a federal tax credit for electric vehicle purchases expired at the end of September.
The company’s new models could be an early sign of how manufacturers will change their products and prices after President Donald Trump and Republicans in Congress killed a program that had reduced the price of qualified electric vehicles by $7,500. Tesla sells more electric vehicles in the United States than any other company and sets the tone for the industry, though its market share has fallen below 50%.
An increasing number of electric vehicles are available for $35,000 to $40,000, making them less expensive upfront than luxury gasoline cars from BMW or Mercedes-Benz, though still more expensive than hybrid or gasoline vehicles from manufacturers like Toyota or Honda.
For many people, electric vehicles may be less costly in the long run because charging at home is usually cheaper than gasoline, and electric cars need less maintenance than combustion engine models.
Hyundai said last week that it would lower the price of 2026 Ioniq 5 electric vehicles by an average of more than $9,000. The list price for the least expensive version will be $35,000. The company’s gasoline-powered Santa Fe model, which is roughly comparable to the Ioniq 5, has a similar starting price.
General Motors’ Chevrolet Equinox and the 2026 Nissan Leaf start at less than $35,000 and can travel 300 miles between charges, much farther than electric vehicles available a few years ago. Next year, GM is expected to reintroduce the Chevy Bolt electric compact for $30,000 or less.
The new versions of the Tesla Model 3 and Model Y will still be more expensive than their predecessors were without the tax credit. But the tax credits were not available to individuals who earned more than $150,000 per year, or married couples filing jointly with combined annual incomes exceeding $300,000.
Last week, Tesla reported record deliveries for the third quarter, but analysts attributed the surge to people rushing to buy before the end of the federal tax credit. Sales are expected to slump in the months to come.
Some analysts and investors have criticized Tesla for not introducing new models in response to increasing competition from traditional automakers like GM, BMW, and Volkswagen, as well as new challengers from China like BYD, which are offering a variety of electric vehicles. BYD has overtaken Tesla as the largest maker of electric vehicles globally.
Tesla’s newest vehicle, the Cybertruck, has sold poorly. This year, Tesla began selling an updated version of the Model Y, its bestselling vehicle, but the new design has failed to stem a decline in the company’s share of the global electric vehicle market.
The automaker had planned to produce a budget-priced electric vehicle made in Mexico that was expected to sell for around $25,000. Elon Musk, Tesla’s CEO, killed that project last year to focus the company’s resources on developing autonomous taxis and humanoid robots.
The models that Tesla unveiled Tuesday have the same basic body shapes as the existing Model Y and Model 3, but have cloth interiors, fewer speakers, and less soundproofing.
The cheaper Model Y has dual headlights rather than the continuous illuminated bar found on the more expensive versions, and the glass roof is covered on the inside by fabric, according to a video posted by Sawyer Merritt, who comments frequently about Tesla on the social platform X and was given an advanced look at the cars.
Both vehicles can travel 320 miles between charges, according to Tesla, somewhat less than costlier versions.
Some investors expressed disappointment that Tesla did not introduce a completely new vehicle, such as a hatchback. A stripped-down Model Y and Model 3 would simply take sales from the more expensive versions, Gary Black, managing partner of the Future Fund, an investment firm, said on X. “The volume generated will be mainly cannibalization from higher-priced trims,” he said.
Tesla had posted videos on X on Monday signaling that a new product was coming, prompting feverish speculation online that the company might unveil a long-promised two-door sports car called the Roadster or even a flying car. Investors appeared to be let down by the less glamorous products unveiled on Tuesday. Tesla shares closed down more than 4%.
This article originally appeared in The New York Times.
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