Tesla Model Y testing in India Headwinds are expected ahead for Tesla with the upcoming discontinuation of federal tax credit and regulatory credits Tesla is grappling with challenges on multiple fronts, from weakening demand and significant policy shifts to intensifying competition. This has prompted the carmaker to deploy new strategies, one of which is to launch an affordable version of the Model Y. As of now, Model Y is Tesla’s top selling product, contributing around 2/3rd to total global deliveries. Cheaper Model Y – What to expect? Production of the affordable Tesla Model Y is planned to commence around August or September. Tesla has not provided any specific details about the new model. However, with cost reduction in mind, one can expect some changes in the configuration and equipment list. For example, a lower capacity battery with reduced range could be included. Some of the premium features such as active noise cancellation, rear 8-inch touchscreen, etc. could be axed. In terms of pricing, the affordable Tesla Model Y could be aiming at a price of around $30,000 or less. As of now, Tesla Model Y is priced at $37,490 for the long-range rear-wheel drive variant and $41,490 for the long-range all-wheel drive variant. These prices are inclusive of the $7,500 Federal Tax Credit that is currently available to customers in the United States. However, the Federal Tax Credit system will be ending on September 30, 2025. That will lead to a sharp increase in prices of Tesla cars. That’s where the affordable Tesla Model Y becomes relevant. Sales slump, regulatory credits discontinuation Another worry is the slowdown in demand, with Tesla reporting a drop in sales for the second consecutive quarter. Second quarter CY2025 earnings witnessed a 16% drop at $1.17 billion. This was largely due to a 13% drop in sales, led by factors like rising operating expenses and reduced earnings per unit sold. In the future, Tesla’s earnings from regulatory credits will also reduce. Also called carbon credits or zero-emission vehicle credits, these credits are purchased by ICE-based vehicle manufacturers who exceed their emission limits. EV manufacturers like Tesla have surplus credits, which are sold for 100% profit. This has been a significant source of revenue for Tesla and other EV-only manufacturers. But with the new One Big Beautiful Bill Act (OBBBA), traditional automakers won’t be fined for failing to meet CAFE standards in the United States. This in turn will reduce the incentive to buy credits from Tesla. In Q2, CY2025, Tesla reported a significant 51% drop in regulatory credit revenue. That amounts to a loss of $441 million, as compared to Q2 2024 figures. And $154 million of that decline occurred since the previous quarter (Q1 2025). Musk confident about future growth Elon Musk admitted that the company could face a few rough quarters. This resulted in the share prices tanking by 7%. However, Musk views these challenges as temporary setbacks rather than fundamental structural issues. Musk is expecting new revenue sources such as Tesla’s upcoming self-driving tech. It will be seen with the robotaxi service, which is currently being tested in Texas. The self-driving tech will also be used in vehicles such as the Cybercab. Tesla is also working on advanced humanoid robots, which can be a gamechanger and emerge as a major source of income. According to Musk, Tesla’s challenges will likely be resolved by the second half or by the end of next year. Facebook