Tesla launches new Model 3 in China with longer range By Reuters

SHANGHAI (Reuters) – Tesla (NASDAQ:) on Friday unveiled a restyled Model 3 with a longer driving range in China and other export markets for its Shanghai factory including Europe, putting pressure on rivals.

In China, the world’s largest auto market and Tesla’s second-largest after the United States, the refreshed version of the Model 3 came with a starting price 12% higher than the previous, base rear-wheel drive model.

At the same time, Tesla cut the prices in China and the United States for its premium Model S and Model X by between about 14% and 21%.

Raising the base price on the Model 3, Tesla’s best selling model after the Y, could help protect margins, but the price cuts for its higher-end models underscored the continued pressure EV makers face, especially in China where Tesla sparked a price war with its Chinese rivals earlier this year.

The updated version of the Model 3 was Tesla’s first change to its mass-market car line-up since it launched its global best-seller, the Model Y, in 2020.

It was also the first time Tesla had launched a new model in China ahead of the United States, its home market, and comes as it faces intensifying competition on price and features from rivals led by bestselling BYD (SZ:).

Tesla did not announce a launch date for the new Model 3 in the U.S. market, where it currently offers discounts of more than $5,000 on some of those vehicles in inventory. The company also makes the Model 3 at its plant in Fremont, California.

CHINA-FIRST DEBUT

Tesla said it would debut the new Model 3 at a trade fair in Beijing on Saturday and some of its new features, including a rear display for back-seat passengers, seemed aimed at Chinese car buyers.

Tesla said the new model for China also featured a better acoustic system, a more comfortable interior and additional airbags. Images of the exterior showed small changes that gave the sedan a sleeker front and new headlights.

The new Model 3 also promises a longer driving range. The standard version has a rated range of 606 km (377 miles) based on China’s testing standards. That’s about 9% higher than the base model it replaces in China.

Tesla said it would also show the new model at the Munich auto show. German automakers are expected to use that stage to announce a run of new EVs partly in response to China’s fast-shifting market. Those include a new version of the Volkswagen (ETR:) ID.7 and a new electric CLA model sedan from Mercedes.

PROJECT ‘HIGHLAND’

Reuters first reported last November that Tesla was developing a revamped Model 3 in a project codenamed “Highland”. People involved in the project said it was aimed at cutting production costs and boosting the model’s appeal.

Tesla did not give any details about the new Model 3’s battery, but a person with knowledge of the features said it was the same lithium-iron phosphate (LFP) battery from CATL for the base model.

The higher range is the result of taking weight out and improving the car’s profile so it faces less wind resistance, the person added. There was no immediate comment from Tesla about the battery.

In China, the Model 3 competes against BYD’s Seal, the Zeekr 001 from Geely, Nio (NYSE:)’s ET5 and Xpeng (NYSE:)’s P7i. Xpeng announced zero-interest loans and free upgrades to that model just as the new Tesla debuted.

Tesla’s China sales increased almost 49% in the first half, compared to a low base in 2022 when COVID lockdowns disrupted production and sales. Model Y sales were more than double sales for Model 3 in that period.

Tesla said it had started taking orders for the new Model 3 and would begin deliveries in China in the fourth quarter. It also began taking reservations for the new car in other markets where it exports from Shanghai, including the Middle East, Japan and Australia.

In China, the new Model 3 starts at 259,900 yuan ($35,807).

(This story has been corrected to change the name of the Xpeng model that competes with Model 3 to specify that it is ‘P7i’ not ‘P71’)