Tesla on Tuesday unveiled new versions of its Model Y sport utility vehicle and Model 3 sedan that the company said would sell for about $5,000 less than previous versions. The new cars, with starting prices of around $40,000 and $37,000, are aimed at propping up sales after a federal tax credit for electric vehicle purchases expired at the end of September.
The company’s lower-cost models could be an early sign of how manufacturers will change their products and prices after President Trump and Republicans in Congress killed a program that had reduced the price of qualified electric vehicles by $7,500. Tesla sells more electric vehicles in the United States than any other company and sets the tone for the industry, though its market share has fallen below 50 percent.
An increasing number of electric vehicles are available for $35,000 to $40,000, making them more competitive on price with vehicles that run on gasoline. Hyundai said last week that it would lower the price of 2026 Ioniq 5 electric vehicles by an average of more than $9,000. The list price for the least expensive version will be $35,000. The company’s gasoline-powered Santa Fe model that is roughly comparable to the Ioniq 5 has a similar starting price.
General Motors’ Chevrolet Equinox and the 2026 Nissan Leaf start at less than $35,000 and can travel 300 miles between charges, much farther than electric vehicles available a few years ago. Next year G.M. is expected to reintroduce the Chevy Bolt electric compact for $30,000 or less.
Last week Tesla reported record deliveries for the third quarter of 2025, but analysts attributed the surge to people rushing to buy before the end of the federal tax credit. Sales are expected to slump in months to come.
Tesla has faced criticism for failing to introduce new models and respond to increasing competition from traditional automakers like G.M., BMW and Volkswagen, as well as new challengers from China like BYD, that are offering a variety of electric vehicles.
Tesla’s newest vehicle, the Cybertruck, has sold poorly. This year Tesla began selling an updated version of the Model Y, its best-selling vehicle, but the new design has failed to stem a decline in the company’s share of the global electric vehicle market.
The automaker had planned to produce a budget-priced electric vehicle made in Mexico that was expected to sell for around $25,000. Elon Musk, Tesla’s chief executive, killed that project last year to focus the company’s resources on developing autonomous robotaxis and humanoid robots.
The models that Tesla unveiled Tuesday have the same basic body shapes as the existing Model Y and Model 3, but their roofs are made of metal rather than tinted glass. The cheaper Model has dual headlights rather than the continuous illuminated bar found on the more expensive versions.
Some investors expressed disappointment that Tesla did not introduce a completely new vehicle, such as a hatchback. A stripped-down Model Y and Model 3 would simply take sales from the more expensive versions, Gary Black, managing partner of the Future Fund, an investment firm, said on X. “The volume generated will be mainly cannibalization from higher priced trims,” he said.