Tesla’s much-anticipated update to its top-selling Model Y SUV is off to a rocky start. Despite being the world’s best-selling car in 2024, the newly refreshed Model Y is now struggling to gain traction in the market—a surprise twist for investors and fans alike.
The revamped Model Y, which debuted earlier this year, is already being sold with aggressive financing deals, including interest rates as low as 0% in some markets. While discounts and promotions are common for older or underperforming models, it’s unusual for such deals to appear just weeks after a product launch—especially from a brand like Tesla.
Industry analysts see this as a clear signal of weak demand. “Why would you offer these deals right out of the gate if demand was strong?” said Loren McDonald, chief analyst at EV data firm Paren. “It suggests Tesla is having trouble moving inventory.”
Indeed, unlike the previous version of the Model Y—famous for its long wait times due to overwhelming demand—the refreshed model is widely available across multiple markets with virtually no delay. Some units are even sitting in Tesla’s inventory, ready for immediate purchase.
Tesla’s challenges don’t stop there. The EV giant is also facing fierce competition from established automakers like Kia and General Motors, as well as up-and-coming Chinese rivals. Meanwhile, Tesla’s declining sales in key markets like Europe and China are raising eyebrows. In April, European sales took a sharp dip, while Chinese sales dropped over 8%, according to the China Passenger Car Association.
Many experts also point to CEO Elon Musk’s controversial political affiliations as a possible reason for the brand’s fading popularity. Musk’s vocal support for far-right politics in Europe and his ties to former U.S. President Donald Trump have alienated large portions of Tesla’s customer base—many of whom lean liberal. This has led to protests, negative sentiment, and even a record number of Tesla trade-ins.
Tesla maintains that external factors, like global economic concerns and trade policies, are playing a bigger role in the slow start. However, their own finance chief, Vaibhav Taneja, recently acknowledged that “unwanted hostility” toward the brand has impacted sales in some regions.
In terms of design, the new Model Y isn’t radically different. Its most noticeable change is a front-facing light bar similar to the Cybertruck. Tesla says the car drives more smoothly and quietly, features ambient lighting, and offers a new rear-seat touchscreen. Still, these updates haven’t been enough to excite buyers.
Tesla is now trying to entice new customers through pricing. In the U.S., the company offers 1.99% financing or zero-down deals, plus a $2,000 loyalty discount for current Model Y owners. In Europe and China, buyers can get 0% interest and other incentives like two years of free Supercharging.
According to Edmunds, the average interest rate for new cars in April was 7.1%. For electric vehicles sold through dealers, the average was 5.5%. Tesla’s much lower rates could save buyers thousands of dollars—but even these steep discounts may not be enough.
With nearly 30 Model Y competitors in the U.S. alone, Tesla needs to either make the product stand out or win with pricing. Earlier this month, the company added a cheaper rear-wheel-drive version to appeal to budget-conscious buyers.
“Tesla doesn’t have a strong product story with the new Model Y,” said Jessica Caldwell of Edmunds. “So, they’re relying on a pricing story instead.”
