Tesla's low-priced Model Y enters Europe, "bloody battle in the Red Sea," with more than a dozen low-priced competitors on standby

According to the Zhitong Finance APP, Tesla (TSLA.US) has launched lower-priced versions of its main models, the Model Y SUV and the Model 3 sedan. However, this new vehicle will face tough competition in the European market, which is precisely the region where the company needs to make breakthroughs. The Model Y standard version is priced at $39,990, while the Model 3 is priced at $36,990. The European market that these two new cars will enter is already crowded with budget electric vehicles (EVs): both local European and Chinese brands have launched more than ten models priced below $30,000, and more competing products are expected to enter the market in the future.

This situation contrasts sharply with the U.S. market—currently, the only electric vehicle priced below $30,000 in the U.S. market is the Nissan Leaf.

"The competition in this market has entered a heated stage," said Sam Fiorani, vice president of research firm AutoForecast Solutions. He added that several electric vehicles priced lower than Tesla's low-priced Model Y and Model 3 in the European market may affect the market prospects for these two new cars.

Less competition in the U.S. market, but limited growth opportunities

Tesla previously stated that its models are sometimes priced higher due to superior product quality and configuration. However, since 2023 (when the Model Y was the best-selling model in Europe), the company's market share in Europe has nearly halved, currently standing at about 1.5%.

Analysts believe that part of the decline in market share is due to Tesla's lagging product line updates and aging models. Additionally, Musk's support for far-right politicians has caused some consumer backlash, impacting the brand.

According to financial data platform Visible Alpha, Tesla's global delivery volume is expected to decline for the first time in 2024, with a further drop of 10% expected this year. Tesla hopes to revive sales by launching lower-priced models.

In the U.S. market, the Model Y standard version's price below $40,000 may be on par with or lower than competitors such as Hyundai's Ioniq 5 SUV, General Motors (GM.US) Chevrolet Blazer, and Volkswagen (VWAGY.US) ID.4.

Nevertheless, as the long-standing "get a $7,500 tax credit when buying a car" policy in the U.S. expires on September 30, the electric vehicle market is expected to shrink in the coming quarters. Musk previously stated that even if Tesla's low-priced models can regain some market share, if overall demand in the U.S. market stagnates as expected, the company may still face "a few tough quarters."

In the Chinese market, the prices of Tesla's new low-priced models are still much higher than local competitors like BYD's Yuan PLUS and SAIC-GM-Wuling's mini electric vehicle—these Chinese brands have already dominated the world's largest electric vehicle market Dozens of Electric Vehicles Flood into European Showrooms

In the European market, Tesla will face numerous low-priced competitors: for example, the starting price of BYD Dolphin Surf is €23,000 (approximately $26,830), Dacia Spring is €16,800, and Citroen e-C3 SUV is €23,300, with more new cars set to be launched in the future.

Last month, Volkswagen announced plans to launch the ID.Polo compact hatchback electric vehicle next year, with a price below €25,000.

However, Pedro Pacheco, Vice President of Research at Gartner, pointed out that the pricing of the Model Y standard version may be lower than that of BYD's best-selling Seal plug-in hybrid SUV.

Previously, Tesla upgraded the interior and exterior of the Model Y, which helped the model stop the decline in sales in some European markets in September and contributed to Tesla's record global delivery performance in the third quarter.

But analysts still indicate that Tesla's product line is relatively limited and updates are slow: the Model Y, launched in 2020, remains the company's last new model aimed at the mass market.

Low-Priced Model Y "Struggles to Open Up the European Market on Its Own"

Matthias Schmidt, an analyst at Schmidt Automotive, believes that Tesla's low-priced models are expected to "inject more growth momentum into the brand" starting next year, but he also warns that competition in the European electric vehicle market will become increasingly fierce in the future.

AutoForecast Solutions predicts that over 25 new electric vehicles will be launched in the European market next year, with about 12 more to be added by 2027.

Fiorani speculates based on current pricing that the Model Y standard version may help Tesla maintain its sales levels in Europe. However, he stated, "This car cannot open up the European market on its own like a model priced at €30,000."