New Model Y and Model 3 variants released by Tesla Inc. (NASDAQ:TSLA) may not be cheap enough or offer enough features to catch initial demand, according to an analyst.
The Tesla Analyst: Goldman Sachs analyst Mark Delaney maintained a Neutral rating on Tesla with a $425 price target.
The Analyst Takeaways: New Standard variants of the Model 3 and Model Y have features like a panoramic roof, ambient lighting, and a second-row screen display removed to cut costs. The vehicles also come with a lower starting price.
Delaney said the changes are more drastic than originally expected.
"While we think the broader 3/Y lineup offers good value in general (based on features like acceleration and safety), the degree of differentiation on price and features/form factor for the Standard trims is more limited than we had initially expected for Tesla's lower cost models," Delaney said.
The analyst stated that at one point, Tesla had planned to introduce a new model that would cost 50% less than the Model 3 and Model Y; however, instead, consumers are getting variants. Delaney said the new, lower-cost models promised were a key item from Tesla's 2023 investor day.
Tesla's focus on new variants of the popular Model 3 and Model Y results in more cost savings for the company and quicker time to market.
The new Standard variants have starting prices of $36,990 for the Model 3 and $39,990 for the Model Y.
"The Standard variants are less unique in terms of price and features/design than we believe investors had historically been expecting."
The analyst said Tesla's Model Y L, which was launched in China, could be more important to the company's growth than the new Standard variants. The vehicle would help tackle the popular three-row SUV market in the United States.
"We currently assume Tesla will offer the Y L on a global basis next year," Delaney said.
He added that key risks for Tesla include increased competition in the electric vehicle market, potential price cuts, slower EV demand, larger-than-expected tariff impacts, delays in products like FSD, and operational risks associated with the company's vertical integration.
TSLA Price Action: Tesla stock traded at $433.21 on Wednesday, within a 52-week trading range of $212.11 to $488.54. Tesla stock is up 14.2% year-to-date in 2025.
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