Tesla Model 3 refresh reportedly near trial production in China

New reporting today suggests Tesla’s (TSLA) long-awaited Model 3 refresh is almost here, at least in China.

According to Bloomberg, Tesla is nearing the final stages before the start of trial production of the revamped Model 3 at Giga Shanghai, according to people familiar with the matter.

The updated Model 3, codenamed project “Highland” internally, “is slightly longer than the earlier version, is sportier and has a sleeker interior design,” according to Bloomberg’s sources.

Furthermore, workers at Giga Shanghai working on the project have been reportedly told to lock away their mobile phones in special lockers to prevent photo leaks of the production lines. Part of Giga Shanghai may be shut down for a few days at the end of month, the sources said, for adjustments.

Late last year Reuters reported Tesla was in the process of updating its Model 3 sedan, which first came out back in 2017. With project “Highland,” Tesla is aiming to cut production costs for the Model 3 and increase the appeal of the sedan by revamping the car's exterior, powertrain, and interior components, such as its massive center-console display. Tesla would reduce costs by reducing complexity overall.

Though the Model 3 has been periodically updated with under-the-skin enhancements to mechanical components and battery materials, this would be the first major revamp of the car, if it does go through. Premium Tesla models like the Model S and Model Y have been revamped with exterior styling, new touchscreen tablets, and yoke steering wheels.

Per Reuters, the redesigned Model 3 would go into production in Q3 2023 first at Tesla’s Giga Shanghai factory, then eventually at its main US plant in Fremont, California.

Tesla is expected to address topics like demand and new product initiatives at its annual Shareholder meeting which begins Tuesday night at 4 p.m. ET. It is possible Tesla may show investors initial specs or even pictures of the updated Model 3, as unverified pictures have been floating around Tesla blogs and message boards.

Tesla’s sales of the Model 3 and especially the Model Y SUV have been climbing overall recently as price cuts, and the inclusion of the IRA federal tax credits in the US, have boosted demand.

“Ongoing price cuts and the latest federal tax credit rules are making Tesla’s intended mass-market vehicles (Model 3 and Model Y) far more attainable for more Americans—and given the limited number of affordable EVs on the market, these [pricing] actions certainly help in the short term to increase sales volume and fend off the growing number of competitors,” Edmunds’ executive director of insights Jessica Caldwell said in a note in mid-April. “In the long term, however, Tesla is walking a razor’s edge between maintaining its brand prestige while simultaneously attempting to grow volume.”

It is possible revamping the Model 3 in China and then globally, will help Tesla raise the Model 3’s image, and possibly profits, as the company may raise prices when it eventually goes on sale.

Bloomberg reports pricing for the new Model 3 remains “highly confidential” at the moment, and it’s unclear how rising raw materials costs will influence final prices in China and elsewhere.

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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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