Tesla has cut prices on its bestselling models to compete with Chinese rivals that have been giving it a run for its money.
On October 7, the company reduced the sticker prices of Model Y and Model 3 by $5,000 each, aiming to offset the $7,500 federal tax credit for new electric-vehicle purchases that expired on September 30. The cheaper models first unveiled in the U.S. won’t include some premium features, including autosteer, touchscreens, and heated rear seats.
The price reduction — also slated for Europe this year and China the next — comes as Tesla tries to claw back market share outside the U.S. from China’s BYDBYDBYD Auto is a Chinese carmaker that became the world’s leading EV manufacturer in 2023, competing with Tesla for market share and global attention.READ MORE, which has outsold it globally since the final quarter of last year.
Even at the new price point, however, BYD’s mass-market vehicles remain more than $10,000 cheaper than Tesla in several markets, according to industry analysts.
“Lowering costs is one of the levers that Tesla can pull in order to stimulate growth in vehicle sales, particularly amid the backdrop of the company’s poor performance so far this year,” Sammy Chan, manager of automotive sales forecasts at GlobalData, told Rest of World. “Each region has its own dynamics at play, but what is clear is that Tesla is not keeping up with the overall growth in the BEV market for passenger vehicle sales.”
Long-time Tesla investor Ross Gerber said another price drop is imminent, and suggested opting for a used Tesla in the meantime.
BYD, which started off as a battery maker three decades ago, now sells in more than 80 countries. It aims to almost double its international sales to 800,000 units from 417,204 last year.
Last year, Tesla dropped its goal of delivering 20 million EVs by 2030 from public purview. The company’s Model Y, however, remains the best-selling electric car in the world. The lower price point is likely to make it even more attractive.
“Elon and investors are looking at the share price and know that to keep [it] that high, they have to show some results along with their promises of an autonomous and robotic future,” Tu Le, founder and managing director of Detroit-based Sino Auto Insights, told Rest of World.
Winning on price alone, if Tesla can pull it off at all, will prove short-lived as China controls the global EV supply chain, industry experts said.
“Chinese EV manufacturers not only frequently release a variety of new models but also employ a sub-brand strategy, targeting distinct consumer segments with greater specificity,” Dmitriy Pozdnyakov, analyst at Freedom Capital Markets, told Rest of World.
Traditionally, ‘lower priced luxury’ has never worked.”
Besides pricing, Tesla is trying to innovate and compete on design. In August, it introduced a China-exclusive six-seater Model Y L, which became an instant hit despite being priced 30% higher than Model Y. Given that affordability is the biggest concern for potential buyers, these pricier vehicles won’t crack mass adoption.
Musk scrapped plans for an all-new $25,000 EV in early 2024 and turned to budget-friendly variants for existing models.
“We’ll be running with the more affordable models available for everyone in Q4,” Musk said during Tesla’s July 2025 earnings call.
While the stripped-down models may attract some buyers, the gains will be modest, Vivek Dahiya, a partner covering mobility at consultancy Frost & Sullivan, told Rest of World.
“Traditionally, ‘lower priced luxury’ has never worked,” he said.
