Even Tesla's biggest fan on Wall Street isn't impressed with Elon Musk's cheaper new car

Elon Musk finally built the affordable Tesla he’s been promising since 2006 — he just forgot to make it affordable. The new “Standard” Model Y and Model 3 trims are set to debut at nearly $40,000 apiece, stripped of plenty of features but not of hubris, and even Tesla’s most loyal Wall Street evangelist, Dan Ives, says the discount is too small to matter.

“We [at Wedbush] believe the launch of a lower cost model represents the first step to getting back to a ~500k quarterly delivery run-rate which will be important to stimulate demand for its fleet with the EV tax credit expiring at the end of September,” Ives wrote in a Tuesday note, “but we are relatively disappointed with this launch as the price point is only $5k lower than prior Model 3’s and Y’s.”

The lower-cost car announcement was supposed to reenergize Tesla’s sales pipeline after a bruising year of softening demand, lost subsidies, and political blowback. Instead, it’s being met with a shrug. As Ives noted, the “cheaper” versions cost about $5,000 less than the next trims up, but they arrive just a week after the federal EV tax credit expired — effectively wiping out the savings before anyone could feel them. For most buyers, these models don’t expand Tesla’s reach so much as rearrange its price tags.

Wall Street didn’t buy the announcement, either. Tesla’s stock dipped about 4% after the launch, erasing gains from the weekend teaser videos that had briefly stirred fan excitement.

The content of the cars tells the story better than the sticker. Tesla didn’t invent another model; it edited one already in circulation. 

Gone are the leather seats, the heated back row, the power-adjust steering wheel, the LED light bar, and the second-row entertainment screen. The Model Y loses its panoramic glass roof; the Model 3 keeps it. Both shed about 20 miles of range and their most popular driver-assist feature, Autosteer. Both keep roughly the same range and shape but feel, in essence, like déjà vu with manual mirrors. Musk’s promise of a cheaper “mass-market Tesla” is still only being fulfilled in used-car listings.

Internally, Tesla had already abandoned plans for an all-new $25,000 model, redirecting resources toward robotaxis and AI. The “Standard” trims are then, all in all, a eulogy for a promise Musk made nearly two decades ago.

The discount that isn’t

The timing was convenient. The end of the $7,500 federal tax credit that effectively raised sticker prices across the industry hit just as Tesla’s leases got more expensive and its deliveries started to flatten. A modest price drop helps blunt the pain and the headline shock — but not the math. Buyers still pay more than they would have with the subsidy in place. 

The company just reported record deliveries for the quarter, a surge widely attributed to customers rushing to beat the subsidy’s expiration — demand borrowed from the future, not created from scratch.

This model announcement is a psychological fix, not an economic one. The cheaper models are still more expensive than last quarter’s premium trims once the subsidy is factored in, which is why analysts like Ives, typically Musk’s loudest defenders, sound underwhelmed. Ives called it “a step in the right direction” that still leaves affordability “similar to when these vehicles had the tax credit applied.” That’s analyst code for: nice try.

Tesla’s problem right now isn’t just that it priced “affordable” too high; it’s that it’s run out of magic tricks. The company that once sold every quarter as a new frontier is now leaning on accounting choreography. Lower-content versions keep assembly lines busy and help hit delivery targets without retooling for an all-new model. This is a short-term fix for a long-term demand question — the kind of tactical move companies make when their next act isn’t quite ready for the curtain to come up.

AI dreams, human incentives

Musk’s next act is, officially, artificial intelligence. The same day Tesla rolled out the “Standard” EVs, it also released FSD 14.1, the first major Full Self-Driving update in a year, promising smarter detours, better emergency-vehicle detection, and fewer driver interventions. Ives argues AI is where the company’s real valuation lives.

“The AI valuation will start to get unlocked in the Tesla story and we believe the march to an AI driven valuation for TSLA over the next 6-9 months has now begun in our view with FSD and autonomous penetration of Tesla's installed base and the acceleration of Cybercab in the U.S. representing the golden goose for Musk & Co,” Ives wrote.

His note projects Tesla’s market cap could hit $2 trillion by in 2026 “in a bull case scenario” — and $3 trillion by the end of 2026 — robotaxis and humanoid robots enter production. The “affordable” cars, in that logic, are filler — a bridge until the AI story pays off.

But that bridge also leads directly to Musk’s wallet. In less than a month, shareholders will vote again on his proposed $1 trillion pay package, a compensation plan pegged to operational milestones such as vehicle deliveries and the rollout of autonomous systems — a plan that shareholders are pushing back against. Since that vote went public, Tesla has issued a drumbeat of good news: a $1 billion share purchase by Musk himself, early FSD releases, and now a “mass-market” launch that sounds good in headlines even if it adds little in substance. All of that represents the sort of narrative management that keeps sentiment — and the stock price — stable heading into a major payday.

Meanwhile, Tesla’s grip on its home turf is loosening. The company still dominates the U.S. EV market, but in Europe and China, it’s losing ground fast. BYD’s small cars start around $8,000, and its $25,000 Seagull and Xiaomi’s $35,000 YU7 make the $40,000 “Standard” Tesla look downright premium — and not in the good way. And European buyers have cooled on Musk himself after his overt flirtations with far-right politics. 

At home, GM and Ford are rolling out $30,000-range EVs that nibble directly at Tesla’s supposed affordability lane. Against that backdrop, “Standard” doesn’t just seem to be the name of the trim; it’s a summary of Tesla’s ambition.

A cheaper car for an expensive problem

This is why Ives’ ambivalence matters. He’s not a skeptic; he’s a believer. Wedbush still rates Tesla “Outperform” and keeps a $600 price target, anchored on the idea that its AI-driven future — from FSD adoption to the coming “Cybercab” network — will unlock the next trillion dollars of value. But even he concedes that the so-called affordable launch “will be a hurdle,” with a price point that “remains relatively high versus other vehicles on the market.” In other words, the dream of mass-market EVs just got postponed — again.

What might make this moment sting even more for investors is just how un-Tesla it feels. This is a company that once defined progress by addition — more range, more features, more swagger. Now it’s selling subtraction as a strategy. Musk’s own language has shifted from disruption to endurance: keep use up, keep investors patient, keep faith in the AI future. But the symbolism of launching a cheaper, older car while pitching a robotaxi revolution is impossible to miss. It’s like a tech giant bragging about a discounted flip phone on the eve of inventing telepathy.

For all the talk of smarter neural networks and Cybercabs, FSD still functions as Tesla’s perennial mirage — progress that excites investors but doesn’t yet drive profit.

The generous interpretation of the model release is that Tesla is shoring up volume until the next leap arrives. The less generous one — the one even Ives half-implies — is that Tesla has become a company managing its narrative more than its innovation. It’s holding the line, not moving it. In that sense, Tesla’s new trims don’t just mark a cooling of its own ambition — they capture where the whole EV market finds itself: competing on price, not possibility.

If this is Tesla’s first step toward reigniting demand, it’s a small one. Musk can still talk about robotaxis and trillion-dollar roadmaps, but the story on the ground is simpler: The company that once sold the future is now selling a slightly cheaper version of the past. And even its biggest fan on Wall Street isn’t pretending that’s progress.