In a strategic move to bolster its position in China and other global markets, Tesla recently launched an upgraded version of its Model 3 sedan. The revamped model features a longer driving range and has been manufactured at Tesla's Shanghai factory for export to various markets, including Europe.
Priced 12% higher than its predecessor, the refreshed Model 3 aims to compete in China—the world's largest automotive market and Tesla's second biggest market after the United States. Meanwhile, Tesla also slashed prices for its luxury Model S and Model X vehicles by approximately 14% to 21% in both the Chinese and U.S. markets.
The price hike for Tesla's most popular vehicle, the Model 3, could potentially boost profit margins. However, the reduction in prices for the higher-end models highlights the competitive pressures the electric vehicle (EV) industry faces, notably in China where Tesla previously ignited a price war.
The new Model 3 variant marks Tesla's first update to its mainstream automotive lineup since the launch of its global bestseller, the Model Y, in 2020. Interestingly, it is also the first time that Tesla has debuted a model in China before launching it in the U.S. This shift is seen as a response to increased competition from major Chinese automakers like BYD.
While Tesla has not yet confirmed the U.S. release date for the upgraded Model 3, it continues to offer significant discounts on existing inventory. The electric car is also produced at Tesla’s Fremont facility in California.
Set to Make Its Debut in Beijing
Tesla announced that the enhanced Model 3 will make its first public appearance at a Beijing trade fair this weekend. The model includes new features specifically designed for the Chinese market, such as rear displays for back-seat passengers, enhanced acoustic systems, additional airbags, and a more comfortable interior. The exterior also sports minor modifications for a sleeker appearance, including new headlights.
Improved Driving Range
According to Chinese testing standards, the new Model 3 will offer a driving range of 606 km (approximately 377 miles), which is around 9% greater than the outgoing model. The car will also be showcased at the upcoming Munich auto show, where German competitors are expected to unveil a slew of new EVs.
Last November, Reuters reported that Tesla was working on an improved Model 3 under the project codenamed "Highland." The project focused on cost-cutting measures and enhancing the vehicle’s allure. While Tesla hasn't provided details on the battery technology for the new model, insiders suggest that it uses the same lithium-iron phosphate (LFP) battery from CATL.
Market Competition and Future Plans
The updated Model 3 will compete with several Chinese brands including BYD's Seal, Geely's Zeekr 001, Nio’s ET5, and Xpeng’s P71. In an immediate response to Tesla's new offering, Xpeng introduced zero-interest loans and free upgrades.
Tesla saw a nearly 49% surge in its China sales in the first half of 2023, recovering from a COVID-19 impacted 2022. The new Model 3 is now available for order, with deliveries in China scheduled to begin in the fourth quarter. The car is also open for reservations in other export markets, including the Middle East, Japan, and Australia.
The starting price for the new Model 3 in China is set at 259,900 yuan (approximately $35,807).
Exchange Rate: $1 = 7.2582 Chinese yuan