Published by Global Banking and Finance Review
Posted on May 13, 2025
SAN FRANCISCO (Reuters) - Tesla investors had pinned their hopes on a refresh of the company's flagship compact SUV to reinvigorate sales. But rock-bottom financing deals for the Model Y and its easy availability suggest that this expectation is unrealistic.
The electric vehicle maker is offering financing deals as low as 0% on the spanking new version of the Model Y. While other automakers including Kia and General Motors are offering similar deals on some EV models, such offers within weeks of a model rolling out are rare.
Early signs of weak demand for the restyled Model Y- launched in January - come amid stiff competition and customer aversion to CEO Elon Musk's divisive politics.
"Why would you discount and have all these incentives and offers literally out of the gate?" asked Loren McDonald, chief analyst with EV data firm Paren. "That just doesn't make sense when your margins are already at multiyear lows. That suggests very strongly that there is a demand problem."
Global sales data on the refreshed Model Y is not yet available, leading analysts to pursue clues on how Tesla is marketing the vehicle and whether it appears to be in short supply.
Supplies are not tight. The refreshed version is available immediately in many parts of the world, with some units already available in Tesla's inventory. That is a far cry from the long wait times typically seen for the previous Model Y, which was the highest-selling car in the world last year.
In fact, overall Tesla sales in Europe continued to plunge in April across key countries, data showed this month. Sales in China dropped over 8% last month, data from the China Passenger Car Association showed on Sunday.
A slow kickoff - which Tesla has blamed on retooling needed at its factories for the revamp - piles fresh pressure on the company to launch its long-promised cheaper models.
After Tesla reported its first drop in annual deliveries last year, Musk pulled back his forecast of a 30% increase in vehicle sales this year and said simply that Tesla would return to growth. Last month, Tesla said it would revisit that forecast in three months in light of "shifting global trade policy." After a 13% drop in first-quarter vehicle sales, analysts expect Tesla deliveries to fall again this year.
Musk's embrace of far-right politics in Europe, and his work as U.S. President Donald Trump's ally, cutting federal jobs and humanitarian aid, have alienated Tesla's largely liberal customer base. It has also prompted global protests, and, according to data, a record number of trade-ins.
Musk himself holds there is no pullback in demand other than some caused by broader economic concerns. Tesla finance chief Vaibhav Taneja, however, said last month that "unwanted hostility towards our brand and our people had an impact in certain markets."
Tesla did not respond to an email seeking comment for this story.
NOT NEW
The revamped Model Y's most striking feature is a light bar that stretches across the front of the car, much like the Cybertruck, which too has failed to find many buyers. The car drives more smoothly and quietly than its predecessor, according to Tesla, and comes with a rear-seat touch screen and ambient lighting.
The new Model Y is selling at roughly the same price as the previous version, although Tesla regularly raises and lowers prices.
In the U.S., Tesla has Model Y promotions such as a 1.99% interest rate or zero down payment and is offering a $2,000 discount for existing Model Y customers. In some European countries, the company is offering the Model Y at 0% interest rate, with two years of free charging at its high-speed Superchargers.
In China, a key market for Tesla, where local competition has been denting sales, the company is promoting a five-year 0% interest rate before June 30.
Those offers are far lower than the competition.
The average U.S. interest rate on new vehicles in April was 7.1%, according to Jessica Caldwell, head of insights at Edmunds, a national vehicle research and shopping site. For EVs that are sold through dealerships it was 5.5%.
A 1.99% interest rate on the Model Y would save a customer anywhere from $4,500 to over $6,600, according to Edmunds' calculations.
The Model Y now has nearly 30 competitors in the U.S., according to Paren's McDonald.
"No one's looking at that vehicle thinking, 'Oh, that's totally different and new,' and I think that may be part of the issue," Caldwell said, referring to low demand.
Earlier this month, Tesla introduced a cheaper, rear-wheel drive option for the Model Y - a sign that signaled Tesla's efforts to find new consumers.
"If you're not going to have as much from a product story, at least you have something from a pricing story to talk about," Caldwell said.
(Reporting by Abhirup Roy in San Francisco; Additional reporting by Marie Mannes in Europe; Editing by Peter Henderson, Sayantani Ghosh and Matthew Lewis)
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