Is Tesla, which has never relied on price advantages, finally getting anxious?
According to “36 Kr Auto”, Tesla China is advancing two new car projects codenamed E41 and D50, which are the budget versions of the current Model Y and Model 3 respectively. The mass production is expected to start as early as the middle of next year.

Image source: Tesla official
Electric Vehicle Connect had previously reported on the “budget Model Y”. Now, Tesla is also planning a “budget Model 3”. Obviously, Tesla intends to use a low – price strategy to reach a wider range of price – sensitive consumers. However, Tesla China sold 71,000 vehicles in September, a month – on – month increase of 25%. In the third quarter, the cumulative sales were nearly 170,000 vehicles, a month – on – month increase of 31%.
If it were other new energy vehicle manufacturers, they would be happy with such sales. Why is Tesla’s product layout contrary to its achievements?
Before the news of the budget versions of Model 3 and Model Y in the Chinese market, Tesla had already implemented a low – configuration strategy in the North American market.
At the beginning of October, the North American budget Model 3 was officially launched, with a starting price of $36,990, which is $5,500 cheaper than the previous entry – level version (equivalent to about 39,200 yuan), a decrease of more than 10%. The streamlining of the configuration is particularly obvious, including but not limited to changing the adjustment of the exterior mirrors/steering wheel to manual, using a combination of fabric and artificial leather for the seat material, canceling the front seat ventilation/rear seat heating/electric seat adjustment/double – laminated glass, rear entertainment screen, ambient lighting and other functions and configurations.
Although the standard intelligent driving is equipped with HW4.0 autonomous driving hardware, only the basic traffic awareness cruise control is retained. You need to pay extra to experience FSD with automatic steering function.

Image source: Shot by Electric Vehicle Connect
Moreover, the “budget Model Y” has been listed on the official websites of markets such as Norway, Sweden, and Germany. The price is 5,000 euros lower than the current entry – level version, and it is expected to be launched successively by the end of this year. Coupled with the plan for the budget version in the Chinese market, it can be seen that Tesla’s layout of “budget models” in the world’s core markets has been fully rolled out.
To truly understand Tesla’s behavior of “continuing to promote budget models despite sales growth”, just look at its situation and goals.
If we take a broader view of Tesla’s sales this year, we will find that the so – called “good sales” are only limited to the third quarter. Data shows that in the first half of the year, Tesla’s global delivery volume decreased by 13.3% year – on – year, and the delivery volume in the Chinese market decreased by 5.4% year – on – year.
Even with the achievements of the third quarter, Tesla’s global sales in the first three quarters still decreased by about 4.5% year – on – year, and the sales in the Chinese market decreased by about 13.3%.

Image source: Tesla official
According to the UK’s “Financial Times”, Tesla’s board of directors has proposed a new 10 – year compensation plan for CEO Elon Musk. If Musk can drive Tesla to achieve a series of goals, including increasing the market value from the current $1.09 trillion to $8.5 trillion, increasing the profit to $400 billion, selling 12 million electric vehicles and 1 million artificial intelligence robots, and achieving 10 million autonomous driving subscription users, he will receive a compensation worth $1 trillion.
It is still unknown whether Musk will accept this “challenge”. However, Tesla’s launch of “budget models” in multiple core regions shows that Musk has noticed the decline of Tesla’s position in the automotive market and needs to actively seize the market to complete the task of “selling 12 million vehicles in ten years”.
On the bright side, Tesla’s move is to find a breakthrough to increase sales. But realistically speaking, it inevitably has the meaning of “grasping at straws”.
It should be noted that the North American capital market is not optimistic about the prospects of the “budget models”. After the release of the new cars, the stock price fell by about 4%. Moreover, there are more controversies among users. Although some netizens believe that the “budget models are worth buying”, the voices saying that “the configuration cuts are too drastic and the downgrading is excessive” clearly dominate.
You know, Tesla’s core competitiveness lies in “technological sense” and “intelligent experience”. The launch of “budget models” is essentially a price war that will damage the brand’s tonality.
Tesla dominates the pure – electric vehicle market in the United States. The sales of the Model Y and Model 3 far exceed those of pure – electric vehicles under brands such as Chevrolet, Ford, Hyundai, and Honda.
With absolute market dominance, Tesla’s offering of “budget models” will indeed damage its brand reputation. However, in the first week after the release of the budget Model 3, the order volume increased by 30% year – on – year. Its brand halo can still attract users who “want to benefit from the brand but have limited budgets”.

Image source: Tesla official
However, the environment of the Chinese pure – electric vehicle market is different. It has already entered a stage of fierce competition with many players vying for the market share.
Tesla’s brand halo is not that attractive. The Xiaomi SU7, which can directly compete with the Model 3, has already appeared. Now, only the Model Y still has a certain market dominance.
A set of official data can more intuitively confirm the fact of Tesla’s declining influence: According to the data released by the Passenger Car Association, in September, the year – on – year growth rate of the pure – electric vehicle market (wholesale) was 32.4%, and the year – on – year growth rates of plug – in hybrid and extended – range vehicles were 8.4% and 8.7% respectively. The structural ratio of pure – electric to extended – range vehicles among new – force brands has changed from 50%:50% last year to 70%:30%.
From the actual market sales, this trend is even more obvious. In addition to Xiaomi, new – force brands such as LeDao, Li Auto, IM Motors, Leapmotor, and XPeng have already established a firm foothold in the pure – electric vehicle market, and their market shares are continuously expanding. The “cake” belonging to Tesla is being continuously divided up.

Image source: Xiaomi Auto official
The Model Y and Model 3 in the North American market are $5,000 and $5,500 cheaper than the current entry – level models respectively, which are equivalent to about 35,700 yuan and 39,500 yuan respectively. If the domestic version also follows this price strategy, the domestic version of the budget Model 3 may very likely fall below 200,000 yuan.
It is worth noting that in September this year, Tesla China launched the Model Y L. The current delivery time has been scheduled until November, indicating a high market demand. This may give Tesla the confidence to launch the “budget models”.
However, the reason why the Model Y L was initially recognized is that it “has no lower configuration than the current Model Y” and also has more space, which can meet the needs of some users. But it may be the wrong way for the “budget models” to win the market by “cutting configuration and lowering prices”.
Xu Changming, a senior economist at the National Information Center, said that the average selling price of domestic passenger cars has dropped to 161,000 yuan in the first five months of this year, and it is expected to fall below 160,000 yuan for the whole year.
Electric Vehicle Connect admits that the emergence of the “budget models” does fit the fact of the gradual downgrading of consumption in the domestic automotive market. However, there is no shortage of new energy vehicles with “high – end configuration at low prices” in the domestic automotive market. If the domestic Tesla “budget models” follow the configuration – cutting idea of the North American version, the effect of stimulating brand sales will not be significant.
Take luxury brands as an example. Even now, the three brands of BBA still have many customers, but their entry – level products have always been the target of complaints from many users. For example, the Mercedes – Benz A – Class was discontinued in China last year because the small – displacement 1.3T engine and the relatively high guiding price formed a huge gap, and it had no configuration advantages after the rise of domestic brands.
The core of entry – level models is “entry – level without low – configuration”, not “lower price with configuration cuts”. Even with the brand halo, it is difficult to gain a foothold in the competition – this is the market experience that the Mercedes – Benz A – Class leaves for Tesla.
Currently, Tesla mainly relies on the Model Y and Model 3 in the Chinese market. The sales of the Xiaomi SU7 have gradually exceeded those of the Tesla Model 3, weakening Tesla’s competitiveness in the mid – to – high – end pure – electric sedan market.
In this situation, the Model Y is still Tesla’s sales base. It depends on whether the “budget Model Y” can meet the needs of the Chinese market.
After all, one of the core reasons why the Model Y has become a long – selling model in the domestic automotive market is that its space practicality highly matches the needs of family users. The launched Model Y L has attracted the recognition of many family users by “increasing space and configuration”, which is the best proof. For the “budget Model Y”, if it can maintain the core advantages of the Model Y, it will be the key to its popularity.
What’s more cruel is that new – force brands such as Xiaomi, Li Auto, and LeDao will not give Tesla much room for error. Once the “budget Model Y” is just a big – talk but – little – action product with “low price in name but actual configuration cuts”, it will be difficult to become one of Tesla’s main sales models in the future.
This article is from “Electric Vehicle Connect”, and is published by 36 Kr with authorization.
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