September 27, 2023

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Tesla launches updated Model 3 with longer driving range in China

Tesla launches updated Model 3 with longer driving range in China

SHANGHAI/SAN FRANCISCO (Sept. 1) (Reuters) – Shares of Tesla Inc (TSLA.O) fell nearly 6% on Friday after the electric automaker unveiled a redesigned, Chinese-made Model 3 at a higher price, while slashing the prices and prices of its luxury cars. Full Self Driving (FSD) programme.

The launch of the new Model 3 sedan marks the first time the automaker has launched a vehicle in China before the United States, underlining its growing dependence on the country as it competes for market share with BYD (002594.SZ).

The car is built at Tesla’s factory in Shanghai and comes with a starting price that’s 12 percent higher than the outgoing base model in China. It will also be exported to other markets in Asia, Europe and the Middle East.

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 luxury cars highlight the stiff competition electric car makers face, especially in China.

The Elon Musk-led automaker launched a price war this year that boosted deliveries but sent its industry-leading margins to a four-year low.

Sam Abu Samad, an analyst at Guidehouse Insights, said the updated Model 3’s exterior design doesn’t look significantly different from the previous one.

He added that “the market believes that this may not be enough” to revive sales in the face of falling demand and rising competition.

Tesla shares were trading down 5.8% at $243.06 by late afternoon, compared to the broader semi-stable market (.SPX).

Reduce FSD rates

Tesla has cut prices of its premium Model S and Model X cars by between 14% and 21% in China and the United States, its two largest markets.

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By lowering the starting price of the Model X to $79,990 in the US, Tesla made the SUV eligible for federal tax credits of up to $7,500.

Tesla’s much-touted FSD, a technology that has been in the crosshairs of regulators over safety concerns, now costs $12,000, down 20% and far less than the $15,000 Musk said in July would be a low price.

Aboul Samid, who expects further discounts, said the FSD price cut was an indication that consumers are “not convinced,” despite Musk’s argument that the value of a car increases dramatically if it is self-driving.

“It’s not close to the point where the driver can set it,” Abu Samad said.

First appearance in China

The new Model 3 is Tesla’s first change to its mass-market lineup since it launched the global best-selling Model Y in 2020.

Tesla has not announced when the new Model 3 will be launched in the US as it is currently offering discounts of over $5,000 on some of those vehicles that are in stock. The Model 3 is also assembled in Fremont, California.

Tesla plans to debut its latest Model 3 at a trade show in Beijing on Saturday, and some of its new features, including a rear-seat passenger display, appear to be aimed at Chinese car buyers. It said it would also show the new model at the Munich Motor Show.

Pictures of the exterior design showed small changes that gave the sedan a more elegant front and new headlights.

The new Model 3 also promises a longer driving range of 606 km (377 miles) for the standard version based on Chinese testing standards, which is about 9% higher than the base model it replaces in China.

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Tesla said it has started taking orders in China, where it will begin deliveries in the fourth quarter, and in other markets where it exports from Shanghai, including Germany, Japan, Malaysia, Australia and New Zealand.

Yil Zhang, managing director of Shanghai-based Automotive Foresight consultancy, said the new Model 3 should sell well outside China, where there is less competition in electric vehicles.

“But in China, we have already seen a lot of new models launched since the (Shanghai) Auto Show in April with similar, better features and lower prices,” he added.

Project “Highland”

Reuters first reported last November that Tesla was developing a facelifted Model 3 in a project codenamed “Highland.” People involved in the project said it aims to reduce production costs and enhance the model’s appeal.

Tesla didn’t provide any details about the new Model 3’s battery, but a person familiar with the features said it’s the same CATL (300750.SZ) lithium-iron-phosphate battery as the base model.

The person added that the higher range is the result of reducing weight and improving the look of the car so it encounters less wind resistance. Tesla did not respond to a request for comment on the battery.

In China, the Model 3 competes with BYD’s Seal, Geely’s Zeekr 001 (0175.HK), Nio’s (9866.HK) ET5 and Xpeng’s (9868.HK) P7i. Xpeng just announced interest free loans and free upgrades for that vehicle.

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

(Reporting by Zhang Yan in Beijing, Hyunju Jin in San Francisco, Daniel Lusink in Tokyo and Brenda Goh in Shanghai; Editing by Meral Fahmy, Edwina Gibbs, Kirsten Donovan

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Our standards: Principles of Trust for Thomson Reuters.

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