Tesla unveils cheaper versions of its Model 3 and Model Y
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Tesla unveiled less expensive versions of its Model 3 and Model Y cars Tuesday, a week after American buyers lost access to a $7,500 tax credit for EV purchases. Alex Martin/AFP/Getty Images
Tesla has unveiled the long-promised cheaper versions of its two main cars, dubbed the Model 3 Standard and Model Y Standard, after the expiration of the $7,500 tax credit for American buyers of most of its cars.
Tesla said the new Model 3 Standard will cost $38,630, including destination and order fees, and would be available in December or January. Model Y Standard will have a starting price of $41,630, including destination and order fees, and would be available in November or December.
The Model 3 Standard is $5,500 less than the “Premium” version, which had previously been the least expensive model, while the Model Y Standard is $5,000 less than the Premium version. The new cars were unveiled on Tesla CEO Elon Musk’s social media platform, X.
Tesla just reported record sales in the third quarter from buyers rushing to complete a purchase while the $7,500 tax credit was still available. But the EV maker now faces a more competitive market in which its cars have become more expensive relative to gas-powered and hybrid vehicles.
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The Standard versions have fewer features than the “Premium” models. According to Tesla’s site, compared to the more expensive models, the Standard versions do not have the eight-inch second-row touchscreen, only seven speakers instead of 15 and a subwoofer speaker, and only cloth interior rather than a cloth and “microsuede” interior that Tesla advertises on the upper end models.
The Standard models also won’t go as far on a change as the two Premium versions of the two cars when fully charged, but it will go slightly farther than the top-end “Performance” model. The Standard models will also take longer to go from 0 to 60 mph than the more expensive model, and they’ll have “passive shock absorbers” instead of the “frequency dependent shock absorbers” found in the Premium models.
The Tesla Model 3 Standard, one of the two less expensive models unveiled by the company Tuesday. From Tesla
Shares of Tesla (TSLA), had been down only 1% ahead of the afternoon announcement. But they were down about 4% an hour after the unveiling as investors were apparently looking for more price competitive offerings.
Tuesday’s announcement comes after many promises that the company would make a more affordable model in the $30,000 range. During a call with investors in April, CFO Vaibhav Taneja again claimed the less-expensive model was close at hand and would be widely available in the fourth quarter of this year.
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“We started the production of the lower cost model as planned in the first half of 2025,” he said. “However, given our focus on building and delivering as many vehicles as possible before the EV credit expires and the additional complexity of ramping a new product, the ramp will happen (in the fourth) quarter, slower than initially expected.”
Other automakers are expected to come out with cheaper versions of their EV offerings for American buyers. Last week, Hyundai announced EVs as much as $9,800 below the price of the previous versions.
While Tesla had record global third-quarter sales, it reported a record drop in sales in the first two quarters of the year.
Tesla does not break down its sales figures by country, but its most recent annual report showed that 46% of its total revenue comes from US sales and 21% comes from China. Expectations of sharply lower sales in the US will likely create excess capacity at Tesla’s two US factories. Offering a lower-priced model is one way to make use of that excess.
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The company’s sales have taken a hit largely because of increasing competition in the EV space, particularly by Chinese automakers such as BYD, which is poised to pass Tesla to take the title of the world’s largest seller of electric vehicles when full-year numbers are reported in January. Tesla reportedly has plans to roll out a less expensive version of the Model Y in China next year.
The company has also faced backlash from CEO Elon Musk’s political activities. His role in the Trump administration’s Department of Government Efficiency and his support of some right-wing political candidates in Europe prompted widespread protests at Tesla dealerships in both the United States and Europe as well as acts of vandalism.
His subsequent split from President Donald Trump has not significantly lessened the backlash. In fact, it may have alienated Trump supporters who had been looking more favorably on Tesla cars before the split. Trump himself had urged Americans to go buy Tesla vehicles before the split occurred.
