Tesla just launched new, lower-cost variants of two of its most popular vehicles on American soil. With this change, they wanted to increase sales and win new customers. That announcement comes right after the expiration of the biggest U.S. electric vehicle tax credit. All this combined has forced the company to resort to desperate measures to maintain its stranglehold on the government market.
The new additions include a more basic version of the Model Y mid-sized sport utility vehicle, which recently started at $39,990. Plus, you can purchase a cheaper Model 3 sedan for only $36,990. On the downside, these models are $5,000 less expensive than their predecessors. This pricing is in line with CEO Elon Musk’s promise to provide more affordable alternatives for consumers. That’s not the direction Musk was going last year when project development for a budget car was frozen. Instead, he became focused on developing robotaxis and humanoid robots.
And yet, even with these new vehicles hitting the market, Tesla’s quarterly sales figures in the past few months have left many worried. In Q2 this year, the company brought in $22.4 billion in revenue. This is a 12% decrease, the biggest reduction we’ve experienced in at least a decade. On top of all that, Tesla’s deliveries dropped by 14% over that same period. In light of the ongoing depression, analysts are reconsidering the new pricing model. Others question whether it’s enough to really stop the bleeding of cratering sales.
Tesla’s decision to introduce lower-cost vehicles appears to be a direct reaction to ongoing competition from Chinese automakers and growing consumer dissatisfaction with Musk’s political engagements, particularly his ties to the Trump administration. As Tesla faces potential cuts to government support for electric vehicles, the company is under increasing pressure to innovate while maintaining profitability.
Despite record high electric car sales the last three months, investors were downtrodden by the news of nothing but new models. The robust sales were not enough to allay their worries. In reaction to the news, Tesla’s stock plummeted about 4%, a sign that investor confidence might be starting to shake. Investor sentiment is quickly changing as concerns about Tesla’s long-term viability are starting to boil over. This change happens amid growing competitive pressures and changing regulatory environments.