Tesla Inc (NASDAQ:TSLA) has introduced cheaper versions of its two most popular electric vehicles, aiming to make electric cars more accessible following the expiration of the $7,500 US federal EV tax credit.
The new Model 3 Standard starts at $34,990, making it the most affordable Tesla currently available, while the Model Y Standard, a budget-friendly version of the Model Y SUV, begins at $39,990.
Both models are priced approximately $5,000 lower than their previous "Premium" versions.
The Model Y Standard features a rear-wheel-drive configuration with an estimated 321-mile range and comes with simplified interior materials, fewer comfort and tech amenities, and limited exterior and interior customization options.
The Model 3 Standard is expected to be available around December or January, with the Model Y Standard arriving in November or December.
Wedbush analysts noted that the launch of more affordable Model 3 and Model Y variants aims to tackle "a major issue with EV affordability," citing that the new Model 3 carries an average selling price of around $37,000, while the Model Y Standard is near $40,000.
"These lower-cost vehicles started production in North America in June 2025 and are expected to hit the market in Q4 2025," Wedbush wrote in a note, adding that Tesla has focused on reducing supply chain complexities to ensure a smooth rollout.
However, Wedbush also expressed tempered expectations, noting that the price points remain relatively high compared with other EV options.
"We are relatively disappointed with this launch as the price point is only $5,000 lower than prior Model 3s and Ys," the firm wrote.
They see the vehicles representing "the first step to getting back to an approximately 500,000 quarterly delivery run-rate," which will be important following the expiration of the federal EV tax credit.
Beyond pricing, Tesla also announced the release of Full Self-Driving (FSD) 14.1, the company’s first major software update in nearly a year.
The update introduces new autonomous capabilities, including smarter lane changes, emergency vehicle and zone detection, and improved navigation around obstacles.
Wedbush highlighted that Tesla’s advances in AI and autonomy "represent the golden goose for [CEO Elon] Musk & Co.," and that further releases through 2025 are expected to unlock significant value in the company’s autonomous roadmap.
“We believe Tesla could reach a $2 trillion market cap early 2026 in a bull case scenario and $3 trillion by the end of 2026 as full-scale volume production begins of the autonomous and robotics roadmap,” they wrote.
Despite some investor anticipation for more dramatic price reductions or new models such as the Roadster, Wedbush sees the launch of the Model Y Standard as a positive step.
“While some might have been hoping for the Roadster announcement or a lower price point, we believe this is a step in the right direction and any knee-jerk reaction should present a buying opportunity to get into Tesla's autonomous path forward,” they wrote.
The firm maintained its ‘Outperform’ rating and a $600 price target.
Shares of Tesla traded down 4% following the announcement at about $435.