Tesla's Model 3 is Reportedly Getting a Redesign to Make it More Appealing as Competition in the EV Segment Grows
If you bought a Tesla Model 3 sedan when it launched in July 2017, your electric sedan is pretty much the same as someone who bought a 2022 Model 3. That's because the exterior and core components of the Model 3 haven't changed much since its launch over five years ago, with the exception of software updates, battery performance and incremental improvements in driving range. But five years is a long time in the auto industry.
But now the Tesla Model 3 is getting a big update aimed at cutting production costs, as well as making it more appealing to car shoppers, Reuters reports, citing people with knowledge of Tesla's plans. The people asked to remain unnamed since no official announcement has been made yet by Tesla.
The Model 3 redesign project is codenamed "Highland."
With project Highland, Tesla is also aiming to improve performance and reduce the number of components and complexity in the interior of the Model 3 while focusing on features that EV buyers value, such as the infotainment system and the dashboard touchscreen display, according to the people that spoke with Reuters. But the Model 3 redesign will also help Tesla to fend off competition in the growing EV segment.
The redesigned Model 3 will be produced at Tesla's Fremont, California factory as well as in Shanghai, according to the sources that spoke with Reuters. Tesla is aiming to put the new Model 3 in production by the third quarter of 2023 in China, so it will likely launch as a 2024 model. However, its not clear when the revamped Model 3 will enter production at Tesla's California factory.
In today's auto industry, new models frequently get updated styling and minor mechanical upgrades every few years to make them more appealing to car buyers. An example of this is vehicles on the market from Hyundai and its brand Kia. Both Kia and Hyundai's model lineup looks vastly different then it did five years ago, although many of the underlying mechanical components have largely stayed the same.
But Hyundai has some new EVs hitting the market over the next several years, including the futuristic-looking IONIQ 6 sedan, which is poised to lure some buyers away from Tesla both in the U.S. and globally.
The IONIQ 6 will come with a 77.4 kWh battery and travel up to 610 km (380 miles) on a single charge, which is almost as much as Tesla's Flagship Model S which has a range of 405 miles. Its built on Hyundai's new Electric-Global Modular Platform (E-GMP) with an 800-V system architecture that delivers ultra-fast charging times from 10 to 80% in just 18 minutes with a 350-kW charger.
Competition is also growing for Tesla in China, which is the world's largest auto market. A revamped Model 3 may help Tesla to better compete with China's new EV brands. Some of Tesla biggest competitors in China are electric automakers NIO, XPeng, BYD and newcomer Zeekr, which is the new electric sub brand of Chinese automaker Geely.
Automakers around the world are investing billions to launch new EVs, but making them profitable has been a bigger challenge. As a pioneer in the EV segment, Tesla makes a big profit on every vehicle it sells and a less complex Model 3 can boost its margins even further.
In the third quarter of 2022, Tesla reported a profit of just over $9,754 for every car sold. Meanwhile Japan's Toyota makes just $1,300 for every vehicle it sells, although the company builds many more vehicles than Tesla.
Tesla's U.S. rival Ford Motor Co doesn't make any EV profits right now due to inflation and rising commodity costs, including raw materials for batteries. In June, Ford CFO John Lawler said that these rising costs have erased all of the profits from Ford's first mass market EV, the Mustang Mach E SUV.
The Mach E competes with Tesla's more popular Model Y crossover, but if Ford cannot make the electric SUV profitable, it really doesn't matter how many the automaker sells.
Tesla Chief Executive Elon Musk has long promised that the Model 3 would cost $35,000 in the U.S. But that goal was never reached due to rising material costs eating away at Tesla's margins. The rear-wheel-drive Model 3 now costs $46,990 in the U.S. This version replaced the Standard Range Plus trim, which was priced at $38,690 before being discontinued last year.
A revamped and less complex Model 3 with lowered production costs could allow Tesla to sell it Model 3 for less, which in turn could further boost demand. In addition, since the more popular Model Y shares many of its components with the Model 3, a redesigned Model Y crossover could happen as well.
Tesla is facing the most competition its ever faced in the EV segment in its history, but making the Model 3 more appealing to buyers around the world could help Tesla retain its crown as the world's EV leader.
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