Tesla says cheaper cars are coming – but will that be enough?

Tesla says it’s gearing up to launch cheaper electric cars, hoping to spark a comeback as sales slump. With Chinese alternatives gaining ground and Elon Musk making the headlines for all the wrong reasons, the company’s betting that lower prices and new features can help it stay in the game. But will that be enough?

The company started building the new lower-cost model based on its existing Model 3/Y vehicle platform in June, according to CEO Musk, who’s betting that cheaper options and self-driving software will help boost sales. But there’s no doubt Tesla’s been going through a tough time lately.

Deliveries are down, profits are shrinking, and the company’s revenue just dropped 12% – its biggest dip in over 10 years. To make things worse, US tariffs and the end of some EV tax credits have taken a toll. Tesla says just the tariffs alone cost it $300m (£220m) last quarter.

Meanwhile, competition from cheaper Chinese EVs is heating up, and Musk’s political moves haven’t exactly helped. His outspoken support for US President Donald Trump and talk of starting a new political party have made some investors nervous, and Tesla’s stock has dropped about 30% since last year’s peak.

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Musk remains optimistic, but critics say otherwise

The billionaire says there’s a big opportunity ahead, especially in Europe. He’s hoping Tesla’s Full Self-Driving (FSD) software gets approved here soon, starting with the Netherlands.

He thinks once people get access to Tesla’s self-driving features, sales will rise. “Autonomy is the story,” Musk said on a recent investor call. “That’s what really makes Tesla valuable.”

Still, Tesla’s once-huge profit margins have taken a hit. And while a cheaper car might help, experts say it’s not a silver bullet. “The market’s caught up,” said branding expert Daniel Binns. “It’s going to take more than just another car to stand out now.”

Then there’s the Musk factor, and even longtime Tesla fans are raising eyebrows.
Earlier this month, Tesla investor and Trump supporter James Fishback asked the board to figure out if Musk’s political plans fit with his job as CEO. Even analyst Dan Ives, an outspoken Tesla fan, told the board they should set some limits – leading Musk to fire back on social media with a quick “Shut up, Dan.”

Could a cheaper Tesla save the brand?

If Tesla follows through on its plans to launch cheaper models, it could mark a major turning point for Musk’s prized EV brand. For months, the company has been teasing new “more affordable” models which are rumoured to be stripped-down versions of the Model Y and Model 3.

An affordable Tesla – something closer to £25,000 – could be a game-changer, especially here in the UK where electric car buyers are crying out for budget-friendly options with decent range. This move could also mean stepping up to compete with Chinese EV makers such as BYD, who are really gaining ground in UK sales.

But until those new models arrive, Tesla faces some tough challenges: declining sales, political distractions, and a rapidly evolving EV market. Its next move could play a key role in shaping the company’s future.

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