Tesla launches new Model 3 in China with longer range, higher price tag By Reuters

SHANGHAI (Reuters) -Tesla shares fell more than 4% on Friday after the electric automaker unveiled a restyled, China-made Model 3 with a longer driving range and a higher price.

The company also slashed the U.S. price of its “Full Self Driving” (FSD) driver assistant software by 20% to $12,000, while cutting prices of its premium models Model X and Model S.

The launch of the new Model 3 sedan marks the first time the automaker has rolled out a vehicle in China ahead of the U.S., underscoring its growing reliance on the country where it is in a race for market share with BYD (SZ:).

The vehicle is being built at Tesla (NASDAQ:)’s Shanghai plant and comes with a starting price that is 12% higher than the previous, base model in China. It will also be exported to other markets in Asia, Europe and the Middle East.

Tesla cut the prices for its premium Model S and Model X by between about 14% and 21%, in China and the U.S. – its two biggest markets.

Raising the base price on the Model 3, Tesla’s top-selling model after the Y, could help protect margins. But the price cuts for its more premium cars highlight the intense competition EV makers face, especially in China.

To bolster its market share, the automaker led by Elon Musk has started a price war this year that has boosted deliveries but sent its industry-leading margins to a four-year low.

Tesla’s much-touted FSD, whose technology has been in the crosshairs of regulators over safety concerns, will now cost $12,000.

CHINA-FIRST DEBUT

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

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 Model 3 is also assembled in Fremont, California.

Tesla plans to debut the latest 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 car also has 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 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 had started taking orders and would begin deliveries in China in the fourth quarter. It is also taking orders in other markets where it exports from Shanghai, including Germany, Japan, Malaysia, Australia and New Zealand.

The new Model 3 should sell well outside China where there is less competition in EVs, said Yale Zhang, managing director at Shanghai-based consultancy Automotive Foresight.

“But in China, we have already seen plenty of new models rolling out since the (Shanghai) auto show in April with similar and even better features and lower prices,” he added.

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 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 has just announced zero-interest loans and free upgrades for that car.

Tesla said it would also show the new model at the Munich auto show, potentially stealing thunder from German automakers such as Volkswagen (ETR:) and Mercedes. They are expected to announce a slew of new EVs, partly in response to China’s fast-shifting market.

In China, the new Model 3 starts at 259,900 yuan ($35,807). In Germany, it starts at 42,990 euros ($46,670). Tesla said it would begin deliveries in Europe in late October.

($1 = 7.2582 , $1 = 0.9211 euros)