Tesla launches low-cost models in Europe amid plummeting sales

Tesla (NYSE: TSLA) has intensified its strategy to counter a significant slump in European demand by launching a new, more affordable version of its Model 3 sedan across key markets. This move, which follows the introduction of a lower-priced Model Y variant in October, aims to defend the company’s market share against rising competition from both established European automakers and aggressive Chinese rivals like BYD

The new entry-level vehicle, dubbed the Model 3 Standard, is priced to aggressively undercut key competitors, often falling below the €37,000 mark in several countries. For example, it is listed at €37,970 in Germany and €36,990 in France. Deliveries are expected to begin in the first quarter of 2026.

Tesla launches low-cost models in Europe

To achieve this lower price point and maintain core battery range (rated over 500 km WLTP), Tesla has had to “de-content” the vehicle by removing several premium features standard in its higher trims. These compromises include:

• Interior Changes: Replacing the full synthetic leather seats with partially textile seats, removing the 8-inch rear-seat touchscreen, and eliminating heated rear seats
• Acoustics & Comfort: Downgrading the audio system from nine to seven speakers and removing power adjustment for the steering wheel
• Exterior: Replacing alloy wheels with steel wheels featuring plastic aero covers, a visible cost-saving measure

While the new trim is designed to appeal to budget-conscious buyers and is priced below key rivals like the BYD Atto 3, analysts suggest the stripped-down features, particularly on the Model Y equivalent, could make the value proposition challenging.

TSLA’s sales in Europe have plummeted

Tesla’s proactive pricing strategy comes at a critical time, as its sales in Europe have been significantly weak in recent months, pointing to a deepening demand crisis across the continent. New registration data for November 2025 illustrates a sharp decline in major markets, including France and Germany.

The only significant exception to this downward trend was Norway, where sales surged by over 175%. However, this anomaly is largely attributed to a rush by consumers to purchase EVs before impending tax-incentive changes take effect in 2026, essentially pulling future demand forward. Excluding Norway, Tesla’s sales across the rest of Europe dropped by approximately 36% in November, mirroring the year-long trend.

The European EV market is witnessing a significant shift in dynamics, with Chinese automaker BYD increasingly challenging the long-standing dominance of Tesla. Recent sales data indicate that BYD is not just catching up, but in certain months and periods, has surpassed Tesla in new registrations across the European Union, signaling a potential turning point in the continent’s EV landscape.

BYD has been outselling Tesla in Europe

BYD has, on several occasions, outsold Tesla in monthly registrations in the European Union. For example, in August and September 2025, BYD registered more passenger cars than Tesla in the EU.

As Tesla’s market share has shrunk, BYD’s has grown, moving from a marginal player to a significant competitor with a noticeable increase in its overall EU market penetration. Unlike Tesla, which relies heavily on the Model 3 and Model Y, BYD offers a more extensive lineup that includes pure electric (BEV) and popular Plug-in Hybrid Electric Vehicles (PHEV). This diversity appeals to buyers in regions where charging infrastructure is still developing or where consumers prefer the flexibility of a hybrid.

Notably, while the Elon Musk-run company has been in Europe for quite some time now and also has one of its Gigafactories in Berlin, BYD entered the region only in late 2022. Moreover, BYD cars face tariffs in the EU, while the cars built by Tesla at its Germany Gigafactory are exempt from these tariffs.

Chinese EV companies are expanding in Europe

Other Chinese EV companies are also expanding in Europe, and Xpeng Motors has partnered with Magna Steyr for local production of its G6 and G9 electric SUVs in Austria. Local production would help Chinese EV companies avoid the tariffs they are otherwise subject to in the EU on vehicles imported from China.

Meanwhile, despite the recent Highland refresh for the Model 3 and updates for the Model Y, Tesla’s core lineup is considered by some to be aging compared to the influx of new models. Surveys suggest that CEO Elon Musk’s political polarization and controversial public statements are actively driving away a portion of the core EV-buying demographic in Western European markets, contributing to the severe sales declines in those regions.

Tesla is facing a backlash in Europe

Tesla is facing a backlash in Europe, and 10 drivers in Paris filed a lawsuit against the company, alleging that the perception of its cars becoming political symbols “prevents them from fully enjoying their car.”

Patrick Klugman, one of the lawyers working on the case, told Agence France-Presse, “The situation is both unexpected and impossible for French Tesla owners.” He added, “We believe that Mr Musk owes these buyers the peaceful possession of the thing sold.”

Many institutions have also been wary of investing in Tesla, and in June, Swedish pension fund AP7 blacklisted Tesla and sold all its shares, citing labour rights violations by the company in the US. The fund joins an increasing number of institutions that have shunned Tesla in recent months.

Some funds have boycotted Tesla

Several funds and institutional investors have either stopped investing in Tesla or have significantly reduced their holdings for reasons mostly due to Musk’s public behavior and political involvement. The company’s financial performance, intense competition in the electric vehicle market, and issues related to union rights have been among the other reasons why some institutions have shunned Tesla shares.

In March, Danish pension company Akademikir Pension announced it would sell its stake in Tesla amid concerns about the company’s labour rights, lax corporate governance, and Musk’s behaviour.

Later in April, Swedish insurer Folksam also divested its $160 million stake in Tesla. “Unfortunately, no improvement has been seen, and a decision has therefore been made to divest the holding,” said Marcus Blomberg, Folksam’s head of asset management and sustainability.