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Tesla (TSLA) on Tuesday added two more affordable versions of the Model 3 and Model Y to its lineup, in a bid to halt a major slip in demand for its vehicles upon the expiry of the federal tax credit on the purchase of electric vehicles.
With the addition of the standard version of the Model 3 and Model Y, each of the two mass-market vehicles now has four variants. This includes the cheapest standard variant, two premium variants, and the higher-end performance variant.
Both the standard variants are priced below $40,000. While the standard rear-wheel drive variant of the Model 3 starts at $36,990, the standard variant of the Model Y starts at $39,990.
Likewise, for every other variant, the Model Y variant is priced a few thousand dollars more than its respective Model 3 counterpart.
Tesla Model 3 and Y are the company’s best-selling vehicles. In the third quarter (Q3) through the end of September, the company sold 481,166 Model 3 and Model Y vehicles globally, and merely 15,933 units of its more premium offerings, including the stainless steel Cybertruck, the Model S sedan, and the Model X SUV. Interestingly, Tesla sells only two variants of each of its more premium vehicles.
Until the expiry of the federal EV tax credit, all available variants of the Model 3 and Model Y were also eligible for the incentive of $7,500, bringing down the end price for eligible customers and turning up the appeal factor.
While some, including Gene Munster of Deepwater Asset Management, are hopeful that the cheaper variants will help boost sales of the company in time, The Future Fund Managing Partner, Gary Black, believes that the lower-priced variants won’t move the needle on Tesla sales as they are still more expensive than from before the expiry of the tax credit.
“...these vehicles are not new form factors or new models that expand TAM in any sense; they are cheaper trims of the existing models with big sacrifices to range, performance, exterior aesthetics, and interior features (no glass sunroof, no rear display, cloth seats, no AM/FM radio, no ambient lighting, cheaper sound system),” Black said in a post on X. He also added that Tesla’s competition has already readied themselves for these lower priced vehicles by cutting prices on existing models.
Black now expects Tesla to slash prices further on these new, cheaper variants in the weeks and months ahead. The analyst also sees potential for Tesla to discontinue production of the variants after months, as it discontinued the lower-priced rear-wheel drive variant of the Cybertruck in September, owing to poor demand.
“...TSLA’s new more affordable trims announced yesterday are likely to become even more affordable,” he said.
TSLA stock is up by 8% this year and by about 79% over the past 12 months.
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