Tesla unveils lower-cost Models Y, 3 in drive to reignite sales

Tesla unveils more affordable versions of its best-selling Model Y SUV and its Model 3 sedan on Tuesday.

To be priced at $39,990 and $36,990, respectively, the electric-vehicle maker seeks to reverse falling sales and waning market share amid rising competition.

Tesla shares were down 2.8% in afternoon trading.

Both versions, called Standard, offer 321 miles (516 km) of range and less powerful acceleration than the current higher trims called Premium.

The Standard versions do not come with Autosteer, Tesla's driver assistance system, or touchscreens for rear passengers. Tesla has also removed the LED lightbar in the cheaper Model Y.

Both come with textile seats, with vegan leather available for the Model 3, and manually adjusted side-view mirrors.

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Chief Executive Elon Musk has for years promised mass-market vehicles, though last year he canceled plans to build an all-new $25,000 EV, Reuters first reported.

Late last year, Musk said the vehicle would be priced below the "key threshold" of $30,000 including U.S. EV tax credits.

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In the United States, prices effectively rose by $7,500 at the end of last month, when the credit ended. That helped goose quarterly sales to a record, but expectations are that they will slow down for the rest of the year, unless the affordable car comes to the rescue.

"The desire to buy the car is very high. (It's) just (that) people don't have enough money in the bank account to buy it," Musk said in July during Tesla's second-quarter earnings call. "So the more affordable we can make the car, the better."

Crucial to $1 trillion pay plan

Musk initially promised that production of the vehicle would start by the end of June. But Tesla only made what it called "first builds" of the car, it said in July, adding that it would be available for customers sometime in the last three months of the year.

Tesla has already been grappling with slowing sales of its aging lineup as competition has grown rapidly, especially in China and Europe, where Musk's far-right political views have also undermined brand loyalty.

Earlier this year, Tesla launched a refreshed version of the Model Y with improvements including new light bars and a rear touchscreen.

Musk has been pivoting the company toward artificial intelligence, focusing on robotaxis and humanoid robots. Tesla has said it will launch more affordable vehicles in its lineup but has not provided details.

Sources have told Reuters the EV maker also plans to roll out a stripped-down version of its Model 3 midsize sedan.

Affordable cars will also be key to Tesla delivering 20 million vehicles over the next decade - one of the several operational and valuation milestones set by the company's board as part of its proposed $1 trillion pay package for Musk.