The electric car manufacturer’s new model came as part of an effort to combat poor sales.
Published October 7, 2025
Tesla has announced more affordable versions of the bestselling SUV Model Y and the sedan Model 3 for $39,990 and $36,990, as electric vehicle manufacturers try to reverse sales and market share declines due to increased competition.
The EV maker announced a new model on Tuesday.
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CEO Elon Musk has been committed to developing mass-sale vehicles for many years, but last year he halted plans to build a completely new $25,000 EV.
Late last year, Musk said the car would be priced below the “important standard” of $30,000, including the US EV tax credit.
In the US, prices effectively rose by $7,500 at the end of last month, when the EV tax credit ended. This has broken records for geese quarterly sales, but is expected to slow the rest of the year unless affordable cars help.
“There’s a huge desire to buy cars. (I just don’t have enough money in my bank accounts to buy cars,” Musk said at Tesla’s second-quarter financial statements press conference in July. “So, if you can build cars at a more affordable price, you can build better cars.”
Tesla posted two clips on X over the weekend, sparking excitement among fans. One video shows headlights peeking out of the darkness, while the other video shows the wheels appearing to rotate for a few seconds, followed by “10/7” (US format representing October 7th).
Musk initially promised that production of the vehicle would begin by the end of June. However, Tesla said in July it only produced what it called the “first production” of the car, adding that it would be offered to customers during the last three months of the year.
Slow sales
Tesla is already tackling a sluggish sales of its aging lineup, especially in China and Europe, as competition is rapidly intensifying, and Musk’s far-right political views have also undermined brand loyalty.
Earlier this year, Tesla released a refreshed version of the Model Y with new light bars and a back touchscreen.
Musk is focusing on robot taxis and humanoid robots, and has focused on the company towards artificial intelligence. Tesla said it would introduce more affordable vehicles into its lineup, but did not provide details.
Officials told Reuters that the company plans to release a simplified version of the mid-sized sedan Model 3.
Affordable cars are key to Tesla’s delivery of 20 million vehicles over the next decade. This is one of several business operations and valuation milestones set by the company’s board as part of the proposed $1 trillion compensation package for Musk.
Market responses are not good for new products, and analysts blame the price.
“We believe that the launch of the low-cost model will be the first step towards bringing the quarterly delivery run rate back to about 500,000, which is important in stimulating demand for its own vehicles, due to the EV tax credit that expires at the end of September, but we are relatively disappointed with this launch as the price range is only $5,000 lower than the previous Model 3 and Model Y.”
On Wall Street, Tesla’s stock price fell nearly 4% as of 3:15pm New York (7:15pm Japan time).
