Tesla’s New Budget Models Fail to Compete with Chinese Rivals

URGENT UPDATE: Tesla has just unveiled its long-anticipated “affordable” versions of the Model Y and Model 3, priced at $40,000 and $37,000, respectively. However, industry experts warn these new models may not be enough to fend off fierce competition from Chinese electric vehicle (EV) manufacturers.

Ex-Nissan COO Andy Palmer, known as the “godfather of EVs,” expressed skepticism in an interview with Business Insider. He claims that while Tesla’s new Standard models aim to capture a more budget-conscious segment, they lack essential features that make them competitive against China’s rapidly advancing EV market.

“If you take out the features — and Tesla has taken out an awful lot of features — then that creates a new price point, but that new price point doesn’t make it competitive with the Chinese competition,” Palmer stated. He emphasized that Tesla’s stripped-down models do not meet the demand for truly affordable EVs in the U.S.

The new Model 3 and Model Y standard versions, launched last week, come without key features like Autosteer, rear screens, and radios, leaving investors and fans underwhelmed. Following the announcement, Tesla’s share price experienced a notable decline. Palmer stresses that the U.S. market needs electric vehicles priced below $30,000 with full specifications to truly compete.

Despite Tesla’s efforts to provide more budget-friendly options, the company faces increasing pressure from Chinese manufacturers like BYD and Geely. Although these brands do not currently sell their cars in the U.S. due to tariffs, they are gaining significant market share in Europe and other regions such as Brazil and Mexico. BYD, for instance, has seen a surge in sales of its affordable electric and hybrid vehicles, even as Tesla’s sales have dropped.

“It isn’t such a big problem in the U.S., but elsewhere you have Chinese models that are coming in with lots of features at a very good price point,” Palmer noted, highlighting the competitive edge of Chinese automakers. He added, “Stripping back a car doesn’t help you.”

Chinese manufacturers have prioritized high-tech features, including autonomous driving and AI assistants, to attract customers. BYD revealed plans in February to integrate advanced self-driving tech into all its vehicles, including its budget model, the $8,000 Seagull. Meanwhile, Xiaomi’s $30,000 SU7 sedan allows drivers to control home appliances directly from the car.

Palmer, speaking from China, warned Western brands to wake up to the rising dominance of Chinese automakers. He urged them to develop strategies to compete rather than relying solely on tariffs for protection. “You have to address the issue rather than standing behind regulatory or tariff rules,” he said. “They’ll insulate you for a while, but don’t make the problem go away.”

As Tesla rolls out these new models, all eyes are on how the market will respond and what steps the company will take to strengthen its position against an increasingly aggressive Chinese EV sector. The heightened competition raises questions about the future of electric vehicles and affordability in the U.S. market.

Stay tuned for more updates as this story develops.