American electric vehicle maker Tesla (TSLA) on Friday launched a lower-priced standard variant of its popular Model 3 electric sedan in Europe. However, the move by the EV maker to reverse its falling sales in the region and compete with cheaper alternatives from Chinese and European rivals faces several obstacles.
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New Variants Strip Features for Lower Price
The Model 3 Standard is being sold for over $44,000 in Germany, almost $48,000 in Sweden, and more than $32,000 in Norway. The base price of the new variant is about $3,500 lower than its predecessor.
The trick is to let go of several features in the older, more expensive versions, including rear screen, ambient lighting, front-seat ventilation, and leather trim. Tesla launched the new variant in October in the U.S.
Earlier in October, the EV maker also introduced a “standard” and more affordable version of its Model Y luxury sport utility vehicle (SUV) across several European markets. The version is about $11,600 cheaper in Germany, for instance, compared to its premium predecessor, with certain features in the premium version stripped off.
Tesla Switches Strategy in Europe
In recent times, Tesla has relied on releasing more expensive models with more premium features to boost its sales.
The EV maker’s launch of the upgraded version of the Model Y SUV earlier in August helped to briefly improve its sales in Europe in September. In China, the EV maker introduced the more premium six-seater Model Y L to Chinese buyers in August amid falling sales in the country. While Tesla’s China sales fell in October, they improved last month.
Avoidance and Failure Rate Could Haunt Model 3 Standard
But can relying on a cheaper version of the popular sedan help Tesla win back Europeans? One key obstacle is the high level of Tesla brand avoidance in Europe, especially in Germany and Norway, over CEO Elon Musk’s recent political involvement.
Another obstacle is that a newly released report in Germany, which is well-followed in the country and beyond, rated Tesla vehicles as the worst for reliability. The report indicated that while the Model 3 had one of the lowest failure rates of cars mechanically examined for the report, the Model Y’s failure rate was much worse. It came in at 17.3%, nearly three times higher than the standard failure rate.
Is Tesla a Buy or Sell?
Wall Street analysts remain cautious of Tesla’s shares and still have a Hold consensus rating on the stock. This is based on 13 Buys, 11 Holds, and 10 Sells recommended by 34 analysts over the past three months.
Moreover, at $383.04, the average TSLA price target indicates approximately 16% downside risk.
