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As most expected and I documented in this article and this article, Tesla had a record 3rd quarter for vehicle sales. Tesla’s press release announcing the numbers stated: “In the third quarter, we produced over 447,000 vehicles, delivered over 497,000 vehicles and deployed 12.5 GWh of energy storage products — a record for both deliveries and deployments.”
In the US, the end of the tax credit pulled forward sales from the 4th quarter to the 3rd quarter. Musk’s involvement in politics lessened and sales of the Model 3 and Y soared. The Model S, X, and Cybertruck all continued to disappoint.
In China, even with very high competition, the Tesla Model 3, Y, and YL all sold well, although down 9% from last year. Purchase incentives go down by about $5,000 per car in the first quarter of 2026, so significant demand may be pulled into the 4th quarter.
In Europe and the rest of the world, it was a real mixed bag. Countries like Norway, South Korea, and Australia showed strong growth, while Canada and Germany showed steep declines.
Best-selling electric compact SUVs of 2025 in USA and starting MSRP
Of course, I don’t like to act like electric cars are a separate market from the gasoline market, but just part of the overall car market. You can see from the chart below that now that cars above don’t have the $7,500 tax credit, they cost a fair bit more than the competition, where in the 3rd quarter, they were only a little more from a purchase price and of course way less on a cost of ownership basis.
Best-selling compact SUVs of 2025 in USA and starting MSRP
Why the $7500 Tax Credit Expiring in the US Won’t Hurt Sales as Much as You Think
In most states, you paid sales tax on the car before they applied the tax credit, so the net effect of not getting the credit is $600 less (assuming 8% tax times $7,500).
Companies can use more foreign components in their batteries (subject to tariffs of course), since they don’t have to worry about qualifying for the tax credit.
Companies can import the whole car, since the tariffs might not be as significant as the $7,500 tax credit was.
Companies don’t need to apply for the point of sale credit and wait for it to be paid by the government.
Most auto companies will lower their prices a few thousand dollars to offset some amount of the credit.
Prices of comparable gas cars are expected to go up by about 3% or $1,000.
New Models Expected Soon
A more affordable Model Y is highly anticipated, as I discussed in this article from 5 months ago.
I now expect it to have a 3-year warranty instead of the 4-year warranty on all existing Tesla models, saving about $700 at retail prices.
We now expect up to 4 trims of the affordable Model Y — Standard Range RWD, Standard Range AWD, Long Range RWD, and Long Range AWD. I expect the price of the Long Range AWD to be about $9,000 less than the existing Long Range AWD and $5,000 less than the Long Range RWD at $39,900 in the US. The Standard Range RWD should be below $35,000. In China, I expect pricing down from $36,000 today to below $30,000.
A more affordable Model 3 might be released at a price as low as $29,990.
The Model Y Performance with all of its expected features, plus the surprise of Vehicle to Load (V2L) and Vehicle to Grid (V2G), should add up to 50,000 sales due to some pent up demand.
The Model YL is a big hit, and if it would be released worldwide, it would easily sell 100,000 units in the 4th quarter. Elon has said it won’t be made in the US until next year, but it could be imported from Europe.
Nissan’s Leaf as I wrote about here and Kyle Field wrote about here after his first drive of the model will be significant, starting at $25,360 for the standard range model.
The 2027 Chevy Bolt is coming soon and expected to start under $30,000, but won’t be available this year.
Full Self Driving (FSD) V14 and Robotaxi Expansion
I expect Tesla Full Self Driving (FSD) V14 to be much improved over V13, but to be a disappointment to me. Why? Because great self-driving software that still needs to be supervised doesn’t add much value except as a toy. Now, if I’m wrong and they are able to release Unsupervised (even in limited places), it is a BIG deal. Likewise, if Robotaxi continues its expansion at a slow pace and while keeping safety monitors in either the driver’s seat or the passenger’s seat, it will be a big disappointment. Yet another year where Level 4 (Unsupervised) was promised and not delivered.
That being said, I do think they will get to Level 4 next year. It is just taking longer than promised. I test FSD every day and even see progress in my 5-year-old hardware 3 car, and more progress in my daughter’s 1-year-old hardware 4 car, but not nearly as much progress as promised.
Will V14’s release drive a lot of car sales or dramatically increase the take rate of FSD? I predict no, until it is Unsupervised, then it will increase both dramatically. So, I’m predicting minimal 4th quarter impact, but big 2026 impact.
Conclusion
Contrary to what you hear in the media, Tesla has a chance to have a very strong 4th quarter of sales. It really depends on two factors. Most important is if the affordable models are priced aggressively (starting below $35,000 in the US and below $30,000 in China). This will significantly expand the addressable market and create demand. The other point is that demand doesn’t do anything for you if you can’t produce the product. The ramp of the affordable models, Model YL, and Performance model all matter to 4th quarter sales, since the first quarter is traditionally lower in many countries and expected to be particularly soft in China this year with incentives being significantly lowered.
The best case would be Tesla expanding to upwards of 3 million sales over the next year if the affordable models are a hit. If they flop like the affordable Cybertruck, they will have little impact. Of course, the Cybertruck offered $10,000 off an $80,000 vehicle, not really making it affordable. But taking $10,000 off a $45,000 vehicle, bringing it to $35,000 (far below the average price of a new car in the US), should do a lot more. But we shall know soon, as I expect it to be announced this month!
If you want to take advantage of my Tesla referral link to get up to $1000 off a new Tesla vehicle, here’s the link: https://ts.la/paul92237 — but as I have said before, if another owner helped you more, please use their link instead of mine.
Disclosure: I am a shareholder in Tesla [TSLA], BYD [BYDDY], XPeng [XPEV], and several ARK ETFs. But I offer no investment advice of any sort here.
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