Tesla introduces affordably priced Model Y to counteract plummeting sales and income
Tesla to Launch More Affordable Model Y in Q4 2025
Tesla, the electric vehicle (EV) giant, is set to launch a cheaper variant of its popular Model Y SUV in the last quarter of 2025. Production for this new model has already begun in the first half of the year.
The new Model Y will be a stripped-down version of Tesla's best-seller, offering a more affordable option to consumers. According to reports, the cheaper Model Y is expected to be about 20% less expensive than the current Model Y Rear-Wheel Drive, which is priced at around $44,990. This suggests a price close to $35,990 before incentives, making it Tesla’s most affordable EV to date.
Although some speculation suggests an optimistic possibility of the price dropping closer to $29,990, this is considered unlikely before the next-generation model release.
The launch of the cheaper Model Y comes at a time when Tesla is facing financial challenges. The company's Q2 income dipped by 16% to $1.17 billion, and heavy losses were posted in the second quarter of 2025. Revenue from electric car credits, a significant source of revenue for the company, has decreased by 51% (or $441 million) since Q2 2024, with a $154 million decrease since the previous quarter.
These financial difficulties are partly due to a 13% drop in sales, a reduction in average model selling price, and an increase in operating expenses. The decline in electric car credit revenue is attributed to the winding down of electric car regulations in the US by President Donald Trump, which has caused car manufacturers to no longer need to buy credits.
The changes in electric car regulations are not expected to affect the production schedule for the cheaper Model Y variant, which is still scheduled to begin production in August or September. However, Elon Musk, Tesla's CEO, has warned that the trend of losses is set to continue, and the company "probably could have a few rough quarters" due to the changes in regulations.
The revocation of former President Joe Biden's legislation, which mandates that by 2030, 50% of all new cars sold in the US must be electric, is due to take effect in the coming months. This could further impact Tesla's sales in the US, as the US government's $7500 electric car grants are due to be stopped as part of the rollback of emission mandates.
Despite these challenges, Tesla hopes the new base model will especially help to incentivize sales in the US. It is currently unclear whether other affordable models, such as a new Model 3, are planned.
[1] Tesla to Launch Cheaper Model Y in Q4 2025, Reuters, 2025 [2] Tesla's Cheaper Model Y: What to Expect, Car and Driver, 2025 [4] Tesla's New Model Y: A More Affordable Option, Electrek, 2025 [5] Tesla's Model Y: A Closer Look at the Cheaper Variant, Green Car Reports, 2025
- The electric vehicle industry is set to witness a new addition with Tesla launching a more affordable variant of their popular Model Y SUV in the fourth quarter of 2025.
- This cheaper Model Y, expected to cost around $35,990 before incentives, will be Tesla's most affordable electric vehicle to date, aimed at offering a more budget-friendly option in the automotive sector.
- The transportation landscape is experiencing a shift as technology advancements in electric vehicles, like the new Model Y, promise to redefine lifestyle choices for consumers.
- As Tesla battles financial hurdles, with their Q2 income dipping by 16% and heavy losses in Q2 2025, they hope the launch of the affordable Model Y will help stimulate sales, particularly in the US business market.
