In last week’s note on Tesla’s better-than-expected deliveries, we shared that observed activity at Fremont and Austin showed no slowdown, despite an expected air pocket in demand following the expiration of the $7500 tax credit in September. We described that as “unexpected and curious.” Well, now we have an answer; yesterday, Tesla announced lower-priced models for the Model-Y ($39,900) and -3 ($36,990), which are about 12% lower than the prior entry-level trims (not including the $7500 tax credit), and $5K less than the next level up in trim. While the “hardware” price may not strike one as “irrefuttably compelling,” Tesla has suggested that software/full self driving (FSD) is a more meaningful drivers of its future growth than new vehicle hardware. To this end, Tesla released a software upgrade (V14) on Monday, and FSD costs an additional $8K for both models.