*

Tesla's car business relies heavily on the aging models 3

and Y

*

Industry experts warn of risks from lack of new models

*

Chinese EV makers are cranking out new models much faster

By Chris Kirkham

Oct 23 (Reuters) - Tesla's groundbreaking 2017 Model 3

electric sedan, followed by a taller Model Y variant, ushered in

the era of mass-market electric cars, made Tesla the

world's most valuable automaker and CEO Elon Musk the world's

richest man.

But years later, Tesla's stalling car business remains

almost entirely dependent on that one breakthrough - and it may

continue to be for years to come.

The automaker's only model since then, the Cybertruck,

flopped. Tesla now has next to nothing in the product pipeline

for human drivers as Musk refocuses the company on self-driving

technology and humanoid robots.

A new Roadster supercar, unveiled in 2017 as a prototype,

has yet to arrive and would serve only a super-wealthy niche.

The automaker last year killed a project to make a $25,000 EV

and instead, earlier this month, introduced stripped-down

versions of the Model 3 and Model Y costing $37,000 and $40,000,

respectively.

And that's it - Musk has promised no other new or redesigned

human-driven vehicles. Tesla's apparent neglect of its core car

business poses major risks for investors and will test whether

the U.S. electric-vehicle pioneer can sustain growth without

regular new-model launches, analysts say.

Tesla did not respond to requests for comment.

Tesla has not fully redesigned any model in two decades in

an industry where models often have short shelf lives - and

where Tesla's leading EV rivals in China are launching new

vehicles at a dizzying pace in every conceivable segment.

Instead, Tesla continues to treat its models much like

iPhones that need only incremental improvements delivered in

software updates to stay competitive.

Some industry observers see no reason why that cannot work.

While traditional automakers spend heavily on regular

hardware and styling overhauls, Tesla has succeeded in

delivering a "high-margin product with no frills" serving

customers who care more about its updatable technology than its

appearance, said Adrian Balfour, founder of Envorso, a

technology consulting firm that works with the automotive

industry.

"I don't think they have to do a ton of redesign-type work"

to vehicles like its best-selling Model Y, he said.

'LIKE ANY OTHER BRAND'

Others argue that Tesla cannot indefinitely defy the

automotive industry's law of gravity - that sales fall as models

age.

Tom Libby, an S&P Global Mobility analyst, said Tesla's

customer loyalty rate plunged last year and improved only after

Tesla doubled its average spending on product incentives.

"The data show that Tesla is like any other brand," Libby

said. "Over the long term, there's going to have to be some

major product actions or the brand will keep going down."

Tesla vehicle sales fell 6% through the first three quarters

of this year. Now it faces steep challenges from U.S. President

Donald Trump's sweeping rollback of government support for EVs,

including a $7,500-per-vehicle tax credit for consumers that

expired last month.

The pending tax-credit expiration boosted Tesla vehicle

sales in the third quarter as customers hurried purchases to get

the subsidy. That boosted revenue in quarterly financial results

the company released on Wednesday.

But profit nonetheless fell by 37% because of higher costs

from Trump's tariffs, increased research-and-development

spending and falling revenue from the sale of government

regulatory credits to other automakers.

Musk and other Tesla executives said little during the

earnings call about its current automotive business, which

accounted for 88% of its third-quarter revenue, and focused

instead on future plans for self-driving robotaxis and humanoid

robots.

When Tesla recently made cosmetic updates to the models 3

and Y - a "refresh" in industry parlance - the subtle changes

were not enough to generate the sales bumps often gained by

traditional automakers after major redesigns of models from the

ground up, Libby said.

On average, automakers in the United States overhaul their

models every eight years, according to S&P Global Mobility data,

a time frame that has shortened over the last decade. Many

mass-market models are redesigned more frequently; trucks and

luxury vehicles are overhauled less often.

Redevelopment cycles globally could get radically shorter

soon as traditional automakers respond to intense competitive

pressure from China's heavily subsidized electric vehicle

industry.

Chinese EV makers led by BYD, Tesla's leading

global rival, have slashed model development times to two years

or less.

The fast iteration has allowed Chinese EV makers to "keep up

with trends, keep up with what consumer products are doing,"

said Dan Hearsch, co-leader of the automotive and industrial

practice at consultancy AlixPartners. "It's half the time, and

it's also half the fixed costs."

BYD, for example, launched at least 17 SUV models from 2020

through 2025, about double the number of new or redesigned Ford

SUVs launched in that period.

Tesla, by comparison, has released only the triangular,

stainless-steel Cybertruck since the Model Y began production in

early 2020.

It has launched just six vehicles since 2008, including the

Model S sedan, Model X sport-utility vehicle and its first car,

the short-lived Roadster two-seater. Only the models 3 and Y,

which share the same platform and most components, have sold in

high volumes.

Musk predicted Tesla would sell hundreds of thousands of

Cybertrucks annually. So far this year, through September, Tesla

sold about 16,000 of them, according to research firm Cox

Automotive.

A successful pickup would have given Tesla a foothold in one

of the best-selling U.S. auto segments.

Libby said the automaker's unusually small lineup also

leaves Tesla out of other huge-selling segments, such as

mass-market three-row SUVs, which account for 13% of U.S.

vehicle sales, according to S&P Global Mobility data. (The Model

X offers a tight, optional third row in the luxury segment.)

The Model 3 is in a smaller, declining segment - compact

cars. The bigger problem for the models 3 and Y may be their

advancing age, said Garrett Nelson, an analyst at CFRA Research

who tracks Tesla.

"You can't have a portfolio that's that stale," he said.

"They will be paying a price."