The new Tesla Model 3 is highly anticipated, and Tesla is also preparing its production capacity for the upcoming sales boom.
Tesla’s new Model 3 will begin centralized deliveries at the end of September. In order to ensure production capacity, the Battery Phase 1 production line at the Shanghai factory, which had previously been shut down, is also planned to resume production in September.
In early July, Tesla had temporarily suspended the production line of Battery Phase 1 at its Shanghai Gigafactory. The reason behind this was the battery pack upgrade, which resulted in increased self-production costs due to the adoption of new technology. Tesla plans to outsource a portion of the battery packs to other battery factories, hence choosing to halt production at the older Battery Phase 1 facility.
But the sales expectations for the new Model 3 and the increase in orders due to price reductions have clearly prompted Tesla to quickly adjust this measure and decide to increase battery supply.
The new Model 3 has undergone comprehensive upgrades in both its exterior and interior, and it may eliminate all radar systems. The exterior is equipped with a new style front bumper, featuring a smoother body design. It also comes with features such as streaming rearview mirrors and multi-spoke aluminum alloy wheels. The interior adopts a more simplified configuration, for example, integrating the turn signal operation into the steering wheel and using the central control screen to switch gears.
However, there is a slight regret that some media reports have revealed that the driving assistance hardware system of the new model is HW 3.5 instead of HW 4.0. Nevertheless, the long-rumored new Model 3 has already raised consumers’ expectations to the maximum. According to Tesla sales personnel, “Our main task now is to sell the discounted Model 3 and Model Y, but there are still many customers who insist on waiting for the new model, even if it’s more expensive.”
Furthermore, with the recent price reduction of up to ＄2,747(￥20,000) for the Model Y, the expected increase in orders has put immense pressure on Tesla’s battery factory to ensure supply.
In the Tesla Gigafactory in Lingang, Shanghai, there are three battery factories: Phase 1, Phase 2, and Phase 2.2. Phase 1 was built earliest but has a relatively small production capacity and lower level of automation. Phase 2 is the main production facility. The construction of Phase 2.2 battery factory took just over half a year and by the end of last year, Tesla’s two major battery suppliers – CATL (Contemporary Amperex Technology Co., Ltd.) and LG began operating there, gradually increasing production capacity.
According to the weekly production capacity, Phase 1 factory can produce around 3000-4000 battery packs, while Phase 2 factory and Phase 2.2 factory can each produce approximately 10,000 battery packs. At full production capacity, these three factories can supply nearly 100,000 battery packs per month.
Previously, Tesla’s Phase 1 battery factory had briefly halted production and laid off workers. According to sources close to Tesla, the reason for the shutdown of Phase 1 factory was because it was the earliest built factory with the lowest level of automation. “Now that demand has risen, Phase 1 factory is preparing to reopen again.”
In the fiercely competitive first half of 2023, Tesla, which has undergone multiple price reductions, achieved a domestic sales volume of 477,000 vehicles, representing a year-on-year growth of 61.7%. Clearly, with the new Model 3, Tesla will once again boost its sales. This poses additional pressure in the current highly contested automotive market. Judging from the extent of cost-cutting measures on Tesla’s new models, it is highly likely that the selling price will further decrease or leave ample room for discounts.
Under the powerful price reduction ability of Tesla, a price war has swept through the automotive industry, and cost reduction has become almost the sole task for companies in the industrial chain. It is understood that even CATL, which never lowered prices before, has started to compromise by providing more detailed material lists to car manufacturers during business negotiations.
The level of competition in the automotive industry is intensifying. How to survive will become a question that every car company needs to consider.