Elon Musk’s off-the-cuff confirmation that Tesla’s long-promised lower-priced electric vehicle will closely resemble a stripped-down Model Y has done little to rekindle excitement around the brand.
The remark came during Tesla’s post-earnings call earlier this week, contradicting another executive’s attempt to avoid revealing design specifics.
While speculation about a cheaper Model Y has been around for months, Musk’s casual comment—“let the cat out of the bag”—marks the first strong indication of what the new vehicle might look like.
Yet analysts remain skeptical that such a move can meaningfully reverse Tesla’s sliding sales and waning consumer interest.
“It’s been over five years now since Tesla made its first Model Y delivery, and the only new model the company has brought to market in that time has been the Cybertruck,” said Garrett Nelson, equity analyst at CFRA in a MarketWatch report.
“Tesla needs actual new vehicle models, not just updates to existing ones to get people excited about the brand again,” he said.
Tesla’s second-quarter deliveries fell to 384,122 vehicles, down from 444,000 in the same period last year.
Even the refreshed Model Y, which launched earlier this year, failed to halt the decline.
Robotaxis, not new models, dominate Tesla’s vision
Despite the long-awaited promise of affordable Teslas, the company’s leadership barely touched on its vehicle lineup during the earnings call.
The spotlight was instead on the company’s self-driving ambitions and artificial intelligence initiatives.
Musk predicted that Tesla’s robotaxi service will be available to “roughly half the U.S. population” by the end of the year.
The company is also pinning high hopes on Optimus, its humanoid robot in development.
Stephen Gengaro of Stifel noted that Wall Street’s primary focus has shifted from vehicle sales to Tesla’s autonomous vehicle technology.
The “overwhelming key to the Tesla story over the next year is the success of its Unsupervised FSD technology and robotaxi traction,” Stephen Gengaro at Stifel said in a note Friday.
He added that a successful expansion of robotaxi operations in Austin, Texas, and a few other US cities could be a major catalyst for the stock.
Falling demand, political distractions weigh on brand
Even if a cheaper Model Y reaches volume production later this year, industry analysts warn that broader market dynamics are not in Tesla’s favour.
US consumers have shown growing interest in hybrids, while EV growth has stagnated in the face of higher prices and reduced government support.
To make matters worse, Tesla’s brand image has suffered from Musk’s increasingly political posture.
After previously aligning with conservative positions, the CEO is now feuding publicly with Donald Trump and threatening to launch a third political party in the US, potentially alienating both sides of the political divide.
Some view lower-priced cars as entry points into a brand, but with consumers facing mounting pressure from rising prices and interest rates, brand loyalty has weakened considerably.
Tesla’s lower-priced vehicle will also be heavily reliant on sales of the Full Self Driving (Supervised) package, which starts at $8,000 or a $99 monthly subscription.
But many potential buyers may be reluctant to pay the additional cost.
Wall Street trims expectations as tax credits end
The clock is ticking for EV makers, with federal tax credits for electric vehicles expected to lapse in September.
Several investment banks have recently revised their Tesla sales forecasts downward in response.
Morgan Stanley, for instance, adjusted its 2026 sales estimate to 1.85 million units, down from 1.89 million.
FactSet consensus now expects just 1.65 million Tesla deliveries in 2025, compared to 1.79 million in 2024 and 1.81 million in 2023.
Analysts say the limited boost expected from a cheaper Model Y is unlikely to offset the drag from expiring incentives and growing competition.
General Motors, for example, has announced plans to raise prices in North America by up to 1%, further pressuring the average car price, which now hovers around $48,000—nearly $10,000 higher than in 2020.
Expansion of robotaxi in other markets likely catalyst for TSLA stock
Tesla shares have lost about 21% of their value this year, including an 8% drop following the recent earnings report.
This contrasts sharply with the S&P 500 index, which is up about 9% in 2025.
The “overwhelming key to the Tesla story over the next year is the success of its Unsupervised FSD technology and robotaxi traction,” Gengaro said.
A successful expansion of robotaxis in Austin, Texas, plus a potential rollout in a few other markets “is likely a catalyst for the shares,” he added.
While the notion of a more affordable Tesla may still hold consumer appeal, it appears that for investors, the future lies elsewhere—likely behind the wheel of a self-driving robotaxi rather than a cheaper Model Y.
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