Exclusive: Tesla readying revamped Model 3 with ‘Highland’ project – sources

Nov 28 (Reuters) – Tesla (TSLA.O) is developing a revamped version of the Model 3, according to four people familiar with the effort, as the major electric vehicle maker aims to cut production costs and boost the appeal of the five-year model. – old electric sedan.

One of the goals of the redesign codenamed “Highland” is to reduce the component count and complexity inside the Model 3 while focusing on features that Tesla buyers appreciate, including the display, according to the people, who asked not to be named because the redesign was not announced.

The unprecedented redesign comes as the electric sedan faces increased competition from Chinese models such as BYD (002594.SZ), Hyundai (005380.KS) and upcoming versions from other major automakers.

The redesigned battery-powered sedan, which could also include exterior performance and powertrain tweaks from the Model 3, will go into production at Tesla’s Shanghai plant and Fremont, Calif., plant, said two of the people. Tesla’s Gigafactory in Shanghai will put the redesigned Model 3 into production in the third quarter of 2023, they said.

It was unclear when production would begin at the Fremont plant or how much cost savings Tesla would realize from the redesign as it works with suppliers.

The effort highlights an approach to vehicle development pioneered by Tesla and now copied by other automakers, including Toyota Motor (7203.T), that removes the complexity – and cost – of production.

It’s also an example of a key project at Tesla moving forward even as Chief Executive Elon Musk focused on his troubled acquisition of Twitter in recent months, a concern for Tesla investors.

Tesla did not respond to a written request for comment from Reuters.

CHANGE YOU CAN SEE

The Model 3 redesign builds on the redesign of the Model S – Tesla’s premium EV sedan – which launched last year. This redesign added an airplane-style yoke in place of a traditional steering wheel and removed the traditional buttons and air vents as part of a minimalist interior where the centerpiece is a 17-inch electronic screen.

The Model 3, Tesla’s cheapest electric vehicle starting at just under $47,000 in the United States, was the automaker’s bestseller, but it is overtaken by the Model Y crossover. With just four models in production, styling changes to any part of Tesla’s lineup loom large in comparison to established automakers.

Ed Kim, president of AutoPacific Group, which tracks market and production trends, said the current Model 3 has already been updated from the version that first went on sale in 2017 due to the how Tesla updates battery performance, information and entertainment options through software, even though it always looks the same.

“That said, consumers still tend to equate visual changes with novelty,” he said. “Tesla knows that visually tangible changes are needed.”

“The upcoming changes that potential customers can see and feel will be very important in ensuring that EV customers always have Tesla in mind, as truly great alternatives to Tesla begin to flood the market,” he said. he declares.

KEEP IT SIMPLE

Musk has pushed a simplified approach to design and production at Tesla that Project Highland extends, people familiar with the development said.

Tesla pioneered the use of massive casting machines known as the Giga Press and built by the IDRA Group in Italy to manufacture single, larger parts of a vehicle being assembled, thereby reducing costs and speeding up the production. He also designed a structural battery that eliminates more expensive modules.

Musk said Tesla was looking to cut costs through simplification and working on a small-car platform that would cost half the cost of the Model 3.

“Over and over again we found parts that weren’t needed. They were put there just in case or by mistake. We eliminated so many parts from a car that didn’t do anything,” Musk said. in an interview at a Baron Funds conference earlier this month.

This approach is part of what has made Tesla the most profitable electric vehicle maker when many rivals are still at a loss. In the third quarter, Tesla made a profit of just over $9,500 for every car sold, compared to about $1,300 for Toyota, according to information from the two companies.

The Model 3 redesign comes at a time when sales in China, its second largest market after the United States, are under pressure. Model 3 sales in China fell 9% in the first ten months from a year earlier, while BYD’s Qin and Han electric sedans topped Model 3 sales, according to the China Passenger Car Association .

To boost sales, Tesla slashed Model 3 and Model Y prices in China by up to 9% in October and offered an additional discount to buyers who took immediate delivery.

Sam Fiorani, who tracks Tesla and industry-wide production at Auto Forecast Solutions, said the upcoming Model 3 modifications, which he says are coming, show the power of Tesla’s approach to eliminate complexity.

“They’re always looking for ways to make electric vehicles cost-effective and more profitable,” he said.

Reporting by Zhang Yan in Shanghai, Joe White in Detroit and Gilles Guilluame in Paris, additional reporting by Kevin Krolicki in Singapore; Editing by Ana Nicolaci da Costa

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