Tesla’s New Affordable Models Won’t Compete with China EVs

UPDATE: Tesla’s newly launched “affordable” models, the Model Y and Model 3, priced at $40,000 and $37,000 respectively, face critical scrutiny from industry experts. Former Nissan COO, Andy Palmer, known as the “godfather of EVs,” warns that these models will struggle to compete against formidable Chinese electric vehicle (EV) manufacturers.

Palmer, who pioneered the world’s first mass-market electric car, the Nissan Leaf, expressed his concerns to Business Insider just after Tesla unveiled these models last week. He stated, “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, which are stacked with features.”

The new Model Y and Model 3 Standard variants have been stripped of key features, including Autosteer and rear screens, leading to disappointment among investors and fans. This has resulted in a notable decline in Tesla’s share price following the announcement.

Palmer emphasized the urgent need for truly affordable electric vehicles in the U.S., stating, “The U.S. needs electric cars that are well-specified for less than $30,000.” As Tesla faces increased pressure from emerging Chinese brands like BYD and Geely, the demand for competitively priced EVs continues to grow.

Chinese automakers are gaining traction in global markets, including Europe and Latin America, even as they are not currently selling in the U.S. due to high tariffs. BYD’s lineup, featuring affordable electric and hybrid vehicles, has seen remarkable success in Europe, contrasting with Tesla’s declining sales.

Palmer warned, “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.” He criticized Tesla’s strategy of reducing vehicle features instead of enhancing them to attract buyers.

Chinese manufacturers are prioritizing high-tech features and competitive pricing, with advancements in autonomous driving technology and AI integration. For instance, BYD announced in February 2023 that it would incorporate advanced self-driving tech into all of its models, including the budget-friendly $8,000 Seagull. Additionally, Xiaomi’s $30,000 SU7 sedan allows voice control of home appliances from within the vehicle.

Palmer’s comments underscore a significant reality check for Western brands. He noted that simply relying on tariffs will not address the rising competition from China. “You have to address the issue rather than standing behind regulatory or tariff rules. They’ll insulate you for a while, but don’t make the problem go away,” he concluded.

As Tesla’s new models hit the market, the industry watches closely to see how they will navigate this increasingly competitive landscape. Will they adapt to the changing demands of consumers, or will they continue to lose ground to rivals that offer more for less? Expect updates on this developing story as it unfolds.