According to four people familiar with the work, Elon Musk’s Tesla is designing a revised version of its Model 3 in an effort to reduce production costs and increase the appeal of the five-year-old electric sedan.
A priority of the makeover, codenamed “Highland,” is to minimize the number of components and complexity in the Model 3’s interior while emphasizing aspects that Tesla customers love, like as the display, according to people who requested anonymity because the redesign has not yet been disclosed.
The previously unknown facelift arrives as the electric car faces greater competition from the likes of China’s BYD, Hyundai, and forthcoming models from other major manufacturers.
The redesign of the battery-powered sedan, which could possibly involve improvements to the Model 3’s exterior and powertrain performance, will enter production at Tesla’s factories in Shanghai and Fremont, California, according to two sources.
Tesla’s Shanghai Gigafactory will put the redesigned Model 3 into production in the third quarter of 2023, they said.
It was unclear when manufacturing would begin at the Fremont factory or how much cost savings Tesla would realize as a result of the redesign in collaboration with its suppliers.
The initiative highlights an approach to vehicle development pioneered by Tesla and now being replicated by other automakers, including Toyota Motor, which reduces production complexity and expense.
It is also an example of a significant Tesla project that has continued despite Musk’s attention in recent months on his controversial acquisition of Twitter, a source of anxiety for Tesla investors.
Tesla did not respond to a written request for comment from Reuters.
The change
The redesign of the Model 3 is a continuation of last year’s redesign of the Model S, Tesla’s premium EV sedan. This redesign replaced the traditional steering wheel with an airplane-style yoke and eliminated buttons and traditional air vents to create a minimalist interior with a 17-inch electronic display as the focal point.
The Model 3, Tesla’s least expensive electric vehicle with a starting price of just under $47,000 in the United States, had been the automaker’s best-seller, but the Model Y crossover is surpassing it. With only four models in production, styling changes to any portion of Tesla’s lineup have a disproportionately large impact compared to those of established automakers.
Ed Kim, president of AutoPacific Group, which monitors market trends and production, stated that the current Model 3 has already been updated from the version that first went on sale in 2017 due to Tesla’s software-based updates to battery performance, information, and entertainment options.
“Despite this, consumers continue to associate visual changes with novelty,” he said. “Tesla is aware that visually perceptible changes are necessary.”
“The upcoming changes that potential customers will be able to see and feel will be crucial in ensuring that Tesla remains at the forefront of EV customers’ minds as truly excellent alternatives to Tesla begin to flood the market,” he said.
Musk has pushed for a streamlined approach to design and production at Tesla, which the Highland project extends, according to individuals familiar with the development.
Tesla has been a pioneer in the use of massive casting machines known as Giga Press and built by IDRA Group in Italy to produce single, larger pieces of a vehicle during assembly, thereby reducing production costs and accelerating production. It has also created a structural battery pack that eliminates the need for more costly modules.
Musk has stated that Tesla aims to reduce costs through simplification and is developing a small-car platform that would cost half as much as the Model 3.
“Over and over again, we discovered unnecessary components. They were placed there as a precaution or by accident. Musk said in an interview at a Baron Funds conference earlier this month, “We eliminated so many useless components from a car.”
This strategy has helped Tesla become the most profitable electric vehicle manufacturer, while many competitors are still operating at a loss. During the third quarter, Tesla generated a profit of slightly more than $9,500 per vehicle sold, compared to approximately $1,300 for Toyota.
The redesign of the Model 3 occurs as sales in China, its second-largest market after the United States, are declining. China Passenger Car Association reports that sales of BYD’s Qin and Han electric sedans outsold the Model 3 in China during the first ten months of 2018 compared to the same period the previous year.
In China, Tesla reduced the prices of the Model 3 and Model Y by as much as 9 percent in October and offered additional rebates to customers who took immediate delivery.
Sam Fiorani, who monitors Tesla and industry-wide production for Auto Forecast Solutions, stated that the upcoming changes to the Model 3, which he believed were forthcoming, demonstrated the effectiveness of Tesla’s approach in removing complexity.
“They are always looking for ways to increase the profitability of EVs,” he said.