Tesla (TSLA) finally announced lower-cost Model Ys and Model 3s on Tuesday and released a new update for its FSD software. The market was disappointed, and the stock fell over 4% but this may have been a sell the news event as the shares had risen over 30% in September.

Investors have been looking for cheaper, “entry-level” EV models from Tesla for years as adoption remains inaccessible to many consumers. The move attempts to counter the U.S. spiking the $7,500 EV credit, creating another hit to demand. Tesla also needs to claw back market share as rivals like BYD flood the market.

The new Model Y will reportedly sell for $40K and the Model 3 is priced at $37K. Well-established rivals have already offered lower-cost models, usually around $35K-$40K. Tesla killed a project to make a $25K car last year to focus more on humanoid robotics.

Therein lies the issue: Elon Musk has been priming investors for self-driving abilities or humanoid robotics. Tesla has always billed itself as a company of the future, and that’s what the optimism and valuation rest on. If Tesla is just an electric car company – even a well-run car company - the first-mover edge that used to drive excitement is starting to wane.

Tesla needs to continue to be a successful car company for the revenue to invest in robotics projects. Though it reported record deliveries of 497K in 3Q, analysts attribute that to pulled-forward demand before the tax credit expired. The Cybertruck, its newest offering, has seen slowing sales and the relaunched Model Y earlier this year also did not buoy sales like expected.

In fact, some Tesla watchers expect the new models to just take sales from the higher-priced original Model Y and Model 3.

Tesla's focus appears divided between robotics and its traditional automotive business, which has lacked innovation in recent years. This has, along with a history of missed deadlines and broken promises—including the long-awaited $25,000 car—contributed to market uncertainty about the company's valuation. The stock is still up over 75% from this time last year and many investors remain diverged on its outlook.

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