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Tesla Unveils Pricier China-Made Model 3 Amidst Fierce Competition

Tesla has recently launched a revamped Model 3 in China with a higher price tag, while also reducing the prices of its premium vehicles and Full Self-Driving (FSD) software, indicating the competitive nature of the electric vehicle (EV) market, particularly in China.

Tesla Model 3
Tesla Model 3 

Price Hike and Competition

The restyled Model 3, manufactured at Tesla's Shanghai plant, comes with a 12% higher starting price than its predecessor. This increase aims to protect margins amidst the growing competition with local rivals like BYD. While Tesla has initiated a price war that boosted deliveries, it also led to a four-year low in its industry-leading margins. Analysts suggest that the minimal changes in the exterior design of the refreshed Model 3 might not be sufficient to revive sales amidst rising competition and slacking demand.

FSD Price Cut

Simultaneously, Tesla has reduced the prices of its premium Model S and Model X vehicles by about 14% to 21% in both China and the U.S., its two largest markets. Moreover, the FSD software price has been cut by 20% to $12,000, well below the $15,000 that Elon Musk previously indicated as a low price. Analysts believe this price cut signals that consumers are not entirely convinced about the value addition of autonomy, as the technology is still not at a point where drivers can entirely tune out.

China-First Debut

The new Model 3 marks the first time Tesla has released a vehicle in China before the United States, highlighting its growing reliance on the Chinese market. The updated Model 3, set to debut at a trade fair in Beijing, features a rear display for back-seat passengers, a sleeker front, new headlights, and a 9% longer driving range of 606 km (377 miles) based on China's testing standards. Despite the enhancements, experts believe the Model 3 may face challenges in China due to the plethora of new models with similar or better features and lower prices.

Project 'Highland'

The revamped Model 3 is part of a project codenamed "Highland," aimed at reducing production costs and enhancing the model's appeal. Although Tesla did not disclose details about the new Model 3's battery, sources indicate it uses the same lithium-iron-phosphate battery from CATL for the base model, with a higher range resulting from weight reduction and improved aerodynamics. The Model 3 faces stiff competition in China from local rivals such as BYD's Seal, Geely's Zeekr 001, Nio's ET5, and Xpeng's P7i.

Tesla's decision to launch the revamped Model 3 in China before the United States underscores its growing reliance on the Chinese market. However, the higher price tag, coupled with intense local competition and minimal design changes, might pose challenges to the electric automaker in reviving sales and maintaining its market share.