Yesterday, Tesla attempted to rock everyone’s world with the advent of the lower-cost Model Y and Model 3. For months now—even years, if you go back far enough—Tesla has promised "more affordable" EVs coming this year that might solve its sales challenges and put some badly needed excitement into this troubled brand.
But what we got were existing cars with some puzzling omissions from the already-barren features list. And it's hard to find anyone who's cheering for these debuts.
Welcome back to Critical Materials, the one-stop shop for the biggest stories in the EV world. Today, I’m focusing on the post-mortem after Tesla’s launch of its so-called reasonably priced entry-level electric cars. No matter whether you’re a Tesla Superfan, a media pundit, a big-name investor, or just someone who passively keeps tabs on the EV industry, no one seems to be impressed by Tesla’s new models.
Let’s hop to it, folks.
30%: The Stock Price Didn’t Do A Damn Thing
For a while there, it seemed like Tesla’s stock price could do no wrong. Whether it’s the less-than-stellar sales of the Cybertruck or Musk’s several attempts at reclaiming his title of the World’s Richest Man via some of the largest corporate pay package deals and stock transfers in human history, the price of $TSLA has not faltered.
Yet Tesla’s facing a real sales slump, especially in Europe, where Chinese EV manufacturers like BYD have started to make real inroads to steal customers away from their Model 3s. Whatever Tesla was set to announce, it was assumed to be good for a quick stock bump.
Not this time. Tesla stock closed down yesterday by about 4%. This morning, the stock only rose slightly, so at best, the announcement was a wash when it comes to stock price. Why? According to Barrons and noted Tesla bull Dan Ives from Wedbush, the Model Y and Model 3 just don’t go far enough. Here's Ives:
"The much-anticipated lower cost models, which started production in North America in June 2025, are expected to hit the market in FY4Q25 with an increased focus on reducing complexities with its manufacturing supply chain before launch to ensure a smooth rollout despite being slower than initial expectations but this price point is still relatively high versus other vehicles on the market.”
And it’s true. At one point in time, the Model 3 and Model Y were kind of unbeatable deals on paper when it came to range and charging for the price. When these cars launched, not much could touch them, which is part of the reason why the brand has had such a chokehold on the EV market.
Today, it’s not hard to find a 300-mile range EV that matches the Model Y or Model 3’s specifications on paper, for cheaper even. The Chevrolet Equinox EV and Hyundai Ioniq 5 are just two examples. More are coming.
Most importantly for Tesla’s stock price, though, is that investors may not be convinced that the cheap Model Y and Model 3 are cheap enough to get as many customers in the door. Consumers are squeezed, and there’s a real need for truly cheap cars. The brand cancelling its $25,000 entry-level car won’t help it get back to its 500,000 unit quarterly goal, Ives said.
I think it's silly to think that the Model 3 and Model Y Standard won’t bring in some new customers, but I think this is a clear sign that Tesla’s stock price really isn’t based on its car lineup anymore. I’m not sure if it ever will be again if Tesla doesn’t figure out how to make a new model.
60%: So Tesla isn’t A Car Company?
If you’ve been paying any attention to the rising cost of living, you’re probably familiar with the term “Shrinkflation”. It's when a brand repackages the same product you’ve come to know and love, but with alterations to the size or content to make it cheaper to make, without it necessarily being cheaper to buy. Same (or bigger) price, worse product.
Well, just like a family-sized box of your favorite cereal getting more than a little bit narrower this week compared to last, the Model Y Standard seems to be a good example of the phenomenon. Yahoo Finance thinks the Model Y isn’t a great idea, especially in the face of what they think is an assured plan to introduce a fleet of self-driving cars and go all-in on AI:
Sure, there is a business case to offer products at lower price points, especially now, to make up for the disappearance of the $7,500 EV subsidy from the government. And with that math essentially canceling itself out, we are back to a slightly less premium car for the same amount of money. Call it "car price shrinkflation.”
But it looks odd, or perhaps even ominous, to tweak what will soon be outdated technology and product lines when you are also heralding a world-changing event. My "Tesla is not a car company" T-shirt has people asking a lot of questions already answered by my shirt.
The author compared the introduction of the Tesla Standard trim models to a big tech company introducing a VCR when everyone’s making a streaming service.
Although the jury is out on whether or not Tesla’s AI efforts or if AI as a whole are as viable or will ever be solvent, the low-effort, slightly cynical new Tesla models only further convince me that Tesla no longer considers itself a car company. But the slow and kind of sloppy introduction of the not-so-cheap new models does give us pause if Tesla and Elon Musk can actually hit their goals with AI.
I mean, it certainly wouldn’t be the first time either party has reneged on a promise.
90%: Not Enough For Europe, Either
The U.S. EV market has had one big goal since its inception: affordability. Charging infrastructure and concerns about the product may also ring in consumers’ minds, but arguably, it’s all secondary when it comes time to pay for the car. And the price of EVs here has gone down over time.
But Europeans have far more affordable electric choices right now. Blame the market’s openness to cars from China, the efforts of companies like Renault and Volkswagen to keep up, as well as a general preference toward smaller and cheaper models.
This means that while the Model 3 and Model Y could stand out a bit in the U.S., they are unlikely to do so in Europe. And if you’re Tesla, you’re seeking to reverse a trend of slumping sales. Reuters paints a picture of just how much the new Standard Model 3 and Model Y won’t move the needle.
Schmidt Automotive analyst Matthias Schmidt said the cheaper Teslas should "add more momentum" from next year, but warned that Europe's EV market is about to get much more crowded.
AutoForecast Solutions projects more than 25 new EVs launching in Europe next year, with roughly a dozen more by 2027.
Fiorani forecast the Model Y Standard could sustain Tesla's European sales based on current pricing information.
But "it isn't going to break the market open in a way that a 30,000 euro vehicle would," he said.
It's clear that Tesla’s going to need more than just a Model Y with no FM tuner to regain market share.
100%: Is the Model Y or Model 3 Standard Enough For You?
What analysts say the market wants isn’t always what you personally would want in your driveway. On one hand, I think the lack of an FM tuner and the boarded-up window effect on the glass roof is almost disrespectful.
Yet the general concept of a more basic EV that still feels technologically advanced isn’t a bad idea. I love the fact that the turn signal stalk is back. I don’t mind the cloth seats or the manually adjustable steering wheel column. I am perfectly okay with the lack of rear screen in the second row of seats.
How about you? Would you buy a Standard-trim Tesla? Should automakers follow this trend and release more stripped-down versions of their cars?
