Budget Tesla Model Y And Model 3 Land With A Thud
When Tesla introduced the more affordable Model Y and Model 3 Standard variants in October, the goal was clear: revive weak U.S. sales and generate cash to fund ambitious robotaxi and AI initiatives. So far, the plan hasn’t paid off.
Welcome to Critical Materials, your daily briefing on news and events shaping the world of electric vehicles and related technologies.
Today’s headlines also include Ford and battery maker SK On ending their joint venture to build U.S. EV batteries, and automakers warning that Chinese government-backed companies and investments in battery production could pose national-security risks to the U.S. market. Let’s dive in.
30%: Tesla’s Cheaper Models Struggle to Gain Traction
2026 Tesla Model 3 Standard
Photo by Tesla
Both the Model Y Standard and Model 3 Standard sit roughly $5,000 below their Premium counterparts. The Model 3 Standard starts at about $38,630 once destination and order fees are included, while the Model Y Standard hovers around $41,630. In a bid to cut costs, Tesla has removed several features from these trims in the name of affordability.
But more than two months after landing in U.S. showrooms, these budget Teslas haven’t delivered the hoped-for sales boost. In fact, November proved to be Tesla’s weakest U.S. sales month in four years, according to Reuters, which cited Cox Automotive data.
Here are key points from that report:
- Demand for the Standard versions was expected to lift November sales, yet total volume fell nearly 23% to 39,800 vehicles from 51,513 a year earlier, marking the industry's lowest level since January 2022.
- Stephanie Valdez Streaty, Cox’s director of industry insights, told Reuters that there isn’t enough demand for the Standard variants to compensate for the tax-credit expiry, and that Standard models are cannibalizing sales of Premium versions, especially the Model 3.
To be fair, Tesla isn’t the only automaker facing EV headwinds. The $7,500 tax credit has expired, fuel-economy rules have loosened, and under a Trump administration’s EPA, emissions standards could ease further, nudging automakers back toward combustion vehicles.
Overall EV sales fell 41% in November, but Tesla’s market share actually rose to 56.7% from 43.1%. Still, that uptick is partly a byproduct of buyers rushing to capture the recently expired tax credit as the quarter closed.
Industry leaders and auto executives say the true level of post-credit EV demand won’t be clear until the second quarter of next year. Against this backdrop, the underwhelming Standard variants aren’t igniting the market.
The Model 3 Standard remains a reasonable proposition, starting in the low $30,000s. The nearly $42,000 Model Y Standard, however, is a different story. It forgoes lane-centering (Autosteer), omits the horizontal light bars at both ends, and drops FM/AM radio entirely.
It also swaps the higher-end dampers for basic passive ones. The most curious change is Tesla’s decision to cover the glass roof with a fabric liner, with engineers noting that adding a real metal roof would have been more expensive.
From Cox’s Streaty: Tesla faces a real challenge next year as other automakers plan to roll out cheaper, feature-rich vehicles. The implied takeaway: Tesla likely needs a brand-new model at a competitive price point, or a dramatic leap forward in Full-Self Driving (FSD) to unlock robotaxi revenue or significantly higher FSD subscriptions.
Absent such developments, it’s unclear how Tesla will sustain AI and robotaxi ambitions, given that traditional vehicle sales remain a core revenue stream.
60%: Automakers Fear Chinese Battery Investment In America
CATL Shenxing Plus LFP battery
The Alliance For Automotive Innovation, which represents General Motors, Ford, Toyota, and Stellantis, urged the Trump administration to prevent Chinese-government-backed automakers and battery firms from establishing U.S. operations.
Reuters reports that the group framed China as a clear, present threat to the U.S. auto industry, arguing that no amount of domestic investment can counter a China supported by subsidies that leads to global oversupply and potential dumping. They also cited national-security concerns about the possibility of Chinese-made software or components being used to disable vehicles in a future war scenario.
China has surged ahead in EV software and technology. The Biden administration has proposed strict limits on Chinese automotive software and hardware in the U.S. to prevent misuse, and U.S. tariffs effectively keep Chinese-made EVs out of the market.
90%: Ford And SK On Part Ways
SK On Battery Plant In The U.S.
In 2022, Ford and Korean battery giant SK On, the battery arm of SK Innovation, committed over $11 billion to build two U.S. battery plants for electric vehicles—one in Tennessee and one in Kentucky.
Now, with EV demand softening, the two firms are ending their joint venture. SK On will take full control of the Tennessee plant, while Ford assumes full ownership of the Kentucky facility. SK will pivot more toward energy-storage systems (ESS), following the path of peers like LG Energy Solution and Samsung SDI as the market shifts away from EVs toward storage solutions.
100%: How Can Elon Musk Turn The Tide For Tesla?
With competitors preparing cheaper, better-equipped EVs, how long can Tesla coast without launching another model? Can the company monetize robotaxi and AI ventures in the near term? Share your thoughts in the comments.
Have a tip? Contact the author: suvrat.kothari@insideevs.com
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