Tesla considers less expensive vehicle in response to revenue slump, marking a decline worse than in over a decade.
In a move aimed at expanding its market reach and countering recent sales challenges, Tesla has initiated the production of more affordable electric vehicle models. The initial builds were completed in June 2025, with plans to ramp up volume production in the second half of the year, and availability expected starting in Q4 2025.
These new models are stripped-down versions of the existing Model 3 and Model Y, using fewer features and less expensive materials to bring costs down. The target price point is around $35,000, making electric vehicles more accessible to a broader group of consumers who previously found Tesla's lineup financially out of reach.
The production strategy leverages existing Model 3 and Model Y platforms and production lines, which helps streamline manufacturing costs and accelerate the rollout of these cheaper variants. Tesla has not yet announced the exact launch date for orders or full specifications but expects high demand given the success of its entry-level vehicles in the past.
The introduction of these more affordable models is expected to broaden Tesla's market base and potentially boost demand in a competitive EV market. In the second quarter of 2025, Tesla reported a 12% drop in revenues and a 13.5% decline in vehicle deliveries compared to the previous year.
This production and pricing plan marks Tesla’s most significant push to date into the affordable EV segment since the original Model 3 launch. The move could help Tesla regain its footing in the market and attract cost-sensitive buyers in 2025 and beyond.
| Aspect | Details | |----------------------------|----------------------------------------------| | Production status | Initial builds completed June 2025 | | Volume production timeline | Planned for 2H 2025, availability from Q4 | | Model design | Stripped-down Model 3/Y variant | | Expected price | Around $35,000 | | Impact on demand | Expected high demand, broadening market base | | Production benefits | Uses existing production lines for cost-efficiency |
Despite these developments, Tesla's shares are almost 18% down over the year to date, with the drag in Tesla's shares mainly explained by the 2025 sales slowdown and Tesla's exposure to the president's trade war. The company's profitability is also threatened by the potential loss of billions of dollars in government subsidies.
Furthermore, Tesla has faced backlash against Elon Musk's former political alignment with President Trump, as well as interference by Musk in national elections, particularly in Germany, which has put off some customers. Stiff competition from cheaper alternatives to Tesla's electric car ranges has also impacted sales.
Recent analysis shows that the company's profitability is threatened by the potential loss of billions of dollars in government subsidies. Videos of the supervised self-driving Robotaxi trial in Texas have shown evident driving mistakes, and there has been no update on whether regulatory approvals have been filed for the Robotaxi service to expand to the San Francisco Bay area.
The president has threatened sanctions against Tesla due to the loss of government subsidies, and the beef between Elon Musk and the president has left Tesla exposed to potential retaliation from the White House.
[1] Tesla's Affordable EV Strategy: What You Need to Know (TechCrunch, 2025) [2] Tesla Starts Production of Affordable EV Models (Bloomberg, 2025) [3] Tesla's Q2 2025 Earnings Report: What You Need to Know (CNBC, 2025) [4] Tesla's Affordable EV Strategy: Implications for the Future (Motley Fool, 2025)
- As the investment in more affordable electric vehicles progresses, Tesla aims to leverage technology and finance to counter the recent sales challenges and expand its market reach, especially attracting cost-sensitive buyers.
- With the production of these entry-level EV models, Tesla strategically incorporates technological advancements in streamlined manufacturing, aiming to boost its presence in the competitive EV industry and potentially regain its market footing.
