Tesla launches budget model, challenging Hyundai and Kia

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Tesla launches budget model, challenging Hyundai and Kia

Published: 09 Oct. 2025, 10:50 Updated: 09 Oct. 2025, 17:20

Audio report: written by reporters, read by AI

Tesla unveils the Model Y Standard in the U.S. market on Oct. 7. [TESLA]

Tesla has reignited a price war in the U.S. electric vehicle (EV) market with the launch of new budget models, posing a fresh challenge for Hyundai Motor and Kia, which had positioned themselves as affordable EV options. The move comes on top of the 25-percent tariff burden already facing Korean carmakers exporting to the U.S. market.

Tesla unveiled new “Standard” trims for its Model Y electric SUV and Model 3 sedan on Tuesday. The Model Y Standard is priced at $39,990, $5,000 less than the existing Model Y Long Range rear-wheel-drive version. The new trim features a 10 percent smaller battery pack, reducing the EPA-rated driving range from 575 kilometers (357 miles) to 516 kilometers (321 miles).

While the vehicle's overall size and cabin space remain unchanged, many interior and exterior features have been stripped down to reduce costs. Leather seats have been replaced with fabric, ventilated seating has been removed, and wheel size has been downgraded from 19 inches to 18.

The rear-row touch screen has been eliminated, and both the steering wheel and side mirrors are manually adjusted. Frequency-sensitive shock absorbers have also been removed, reducing ride comfort. The Model 3 Standard starts at $36,990, $5,500 cheaper than the premium variant.

Tesla’s strategy appears aimed at easing the financial burden on U.S. car buyers following the expiration of a $7,500 EV tax credit on Sept. 30, which many experts warned could dampen demand. Automotive News noted that the move could enhance Tesla’s competitiveness in a price-sensitive new car market.

Despite the announcement, Tesla shares fell 4.45 percent in New York trading Tuesday. Analysts said the market was underwhelmed because the budget models turned out to be downgraded versions of existing vehicles. The stock had climbed 5 percent the previous day on anticipation.

Still, Tesla’s new pricing could spell trouble for Hyundai and Kia, who now face direct price competition amid weakening EV demand. Bloomberg estimates U.S. EV sales will plunge 33 percent in the fourth quarter to 331,500 units from 499,000 units in the third quarter.

The Model Y Standard's fabric seats, unveiled by Tesla on Oct. 7. [TESLA]

Hyundai and Kia now face a pricing disadvantage. Kia’s EV6, previously cheaper than Tesla’s Model Y, is priced at $42,900 — now more expensive than the new Model Y Standard. In response, Hyundai has introduced aggressive discounting, offering up to $9,800 off its Ioniq 5.

“This is a margin-squeezing tactic to maintain market share, but in the long run, it could hurt profitability,” said Lee Hang-koo, an adviser at the Korea Automotive Technology Institute. “Hyundai and Kia will likely move quickly to launch their own budget EVs in the U.S. to counter Tesla’s strategy.”

Meanwhile, The Wall Street Journal reported Tuesday that Hyundai Motor Group’s extensive investment campaign in the U.S. has failed to win favor with U.S. President Donald Trump.

In a story titled “Hyundai Gets Cold Shoulder From Trump Despite Charm Offensive,” the WSJ said Hyundai Motor Group Executive Chair Euisun Chung had hoped that charm offensives would win over the Trump administration, but this now appears to have been a “painful miscalculation.”

The article cited a recent raid by U.S. Immigration and Customs Enforcement on Hyundai’s battery plant in Georgia as evidence that the carmaker’s efforts yielded little. According to the WSJ, following the incident, Hyundai reaffirmed its $26 billion investment in the United States but faced backlash from the Korean government.

Hyundai Motor Group Executive Chair Euisun Chung delivers remarks as U.S. President Donald Trump, second from right, House Speaker Mike Johnson, R-La., left, and Louisiana Gov. Jeff Landry stand in the Roosevelt Room at the White House in Washington on March 24. [AP/YONHAP]

The newspaper quoted sources as saying that Seoul feared Hyundai’s eagerness to strike a quick trade deal on tariffs could undermine Korea’s overall negotiating position with the Trump administration.

The WSJ cited John Krafcik, a former CEO of Hyundai Motor America, reporting that he “recalled an evening karaoke session in Seoul more than a decade ago, when Chung grabbed a mic and belted out” rock band Queen’s 1984 hit “Radio Ga Ga.”

Krafcik then said that Chung, who was vice chairman of Hyundai Motor at the time, “brought out his drum kit and played a few more songs,” adding that Chung has “never been afraid to show a real human side.”

During Georgia Gov. Brian Kemp’s visit to Korea in June 2024, Chung lent his private jet for the Seoul leg of the trip, flying commercial himself — a gesture underscoring Hyundai’s strategic commitment to Georgia, where its next-generation EV plant is being built.

The report concluded that with Hyundai’s market share in China now under 1 percent and operations in Russia suspended due to the war in Ukraine, the United States remains an indispensable market for the Korean automaker.

Euisun Chung, executive chair of Hyundai Motor Group, appears on stage at a completion ceremony for the Hyundai Motor Group Metaplant America in the city of Savannah, Georgia in this photo provided by the group on March 27. [YONHAP]

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM HYO-SEONG [[email protected]]