New Model 3 launch likely as Tesla cuts prices of some models

Tesla China on Monday announced a significant price reduction for certain models, sparking speculation about the potential launch of a new Model 3.

The price adjustment includes a decrease of 14,000 yuan (US$1,931) for the Model Y Long Range version, bringing its starting price down to 299,900 yuan. The Model Y Performance version also saw a reduction, with its price now standing at 349,900 yuan. These price cuts follow Tesla's common practice of offering discounts in the Chinese market throughout the year.

The announcement on lower prices comes as Tesla continues its efforts to attract more customers and increase sales. CEO Elon Musk has repeatedly emphasized the company's commitment to lowering prices, even at the expense of short-term profitability.

In the second quarter, Tesla's gross margin fell to 18.2 percent due to price reductions. Despite analysts' concerns about the sustainability of this strategy, Musk remains steadfast in his belief that prioritizing sales volume will ultimately benefit the company.

Prior to Tesla's recent price cut, a new round of price war had already begun in the automobile market. As reported by The Paper, within just over 10 days since the start of August, no fewer than 10 brands, including Zeekr, NIO, Leapmotor and Hozon Auto, have unveiled promotional activities.

The China Passenger Car Association (CPCA) has also predicted that promotional activities in the auto market will continue, with some car firms even intensifying their promotional efforts in a counter-cyclical manner.

In addition to the price reductions, Tesla is offering an 8,000-yuan limited-time insurance subsidy for the Model 3. This move further fuels speculation about the imminent launch of a new Model 3. While the current Model 3 price remains unchanged, the introduction of an insurance subsidy for in-stock vehicles suggests that Tesla may be preparing for a new version of the popular electric sedan.

During the second-quarter earnings call, Musk mentioned that production in the third quarter could decrease slightly due to factory upgrades, hinting at possible changes and improvements to the Model 3.

Multiple foreign media reports from the end of 2022 claimed that Tesla was working on a redesigned version of the Model 3, known as "Project Highland", with the aim to reduce costs and attract more customers by streamlining the number of components. Recently, Reuters reported that production of this new version is expected to begin at the Shanghai Gigafactory in the third quarter this year.

According to data from the CPCA, Tesla's sales in China for July reached 64,300 units. Of these, the Model Y accounted for 44,000 units, and the Model 3 20,300 vehicles. From January to July, Tesla's cumulative sales in China added up to 540,800 units, a year-on-year growth of 67.5 percent.