SHANGHAI/SAN FRANCISCO, September 1 (Reuters) – Tesla (TSLA.O) shares fell nearly 6% on Friday after the electric automaker unveiled a restyled, China-made Model 3 with a higher price tag, while cutting prices on its premium vehicles and “Full” software. Self-Driving” (FSD).

The launch of the new Model 3 sedan marks the first time the automaker has rolled out a vehicle in China before the United States, underscoring its growing dependence on the country where it is in a race for market share with BYD . (002594.SZ).

The vehicle is built at Tesla’s Shanghai factory and comes with a starting price 12% higher than the previous base model in China. It will also be exported to other markets in Asia, Europe and the Middle East.

Raising the base price of the Model 3, Tesla’s best-selling model after the Y, could help protect margins. But price cuts for its most premium cars highlight the intense competition electric vehicle makers face, particularly in China.

The Elon Musk-led automaker launched a price war this year that boosted its deliveries but sent its margins, among the best in the sector, to their lowest level in four years.

The refreshed Model 3’s exterior design doesn’t look dramatically different from the previous one, said Sam Abuelsamid, an analyst at Guidehouse Insights.

“The market thinks this may not be enough” to revive sales in the face of falling demand and growing competition, he added.

Tesla shares were trading down 5.8% at $243.06 in late afternoon trading, compared with the broader market nearly flat. (.SPX).

FSD PRICE DROP

Tesla has cut prices for its top-of-the-line Model S and Model X by about 14% to 21%, in China and the United States, its two largest markets.

By lowering the Model

Tesla’s vaunted FSD software, a technology that has been in the crosshairs regulators on safety issuesnow costs $12,000, down 20% and well below the $15,000 Musk said in July was a low price.

Abuelsamid, who expects further reductions, said the FSD price drop was an indicator that consumers are “not convinced”, despite Musk’s argument that the value of a car increases significantly if she is autonomous.

“We’re nowhere near the point where the driver can disconnect,” Abuelsamid said.

FIRST DEBUT IN CHINA

The new Model 3 is Tesla’s first change to its consumer car lineup since the launch of its global best-seller, the Model Y, in 2020.

Tesla has not announced a launch date for the new Model 3 in the United States, where it is currently offering discounts of more than $5,000 on some of these vehicles in inventory. The Model 3 is also assembled in Fremont, California.

Tesla plans to introduce the latest Model 3 at a show in Beijing on Saturday and some of its new features, including a rear screen for rear-seat passengers, appeared aimed at Chinese car buyers. It said it would also present the new model at the Munich Motor Show.

Images of the exterior showed small changes that gave the sedan a sleeker front end and new headlights.

The new Model 3 also promises a longer range of 606 km (377 miles) for the standard version based on Chinese testing standards, about 9% more than the base model it replaces in China.

Tesla said it had started taking orders in China, where it would begin deliveries in the fourth quarter, as well as other markets to which it exports from Shanghai, including Germany, Japan, Malaysia, Australia and New Zealand.

The new Model 3 is expected to sell well outside China, where there is less competition in the electric vehicle sector, said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.

“But in China, we have already seen many new models released since the (Shanghai) auto show in April, with similar or even better specifications and lower prices,” he added.

‘HIGHLAND’ PROJECT

Reuters first reported last November that Tesla was developing a revamped Model 3 as part of a project code name “Highland”. Those involved in the project said it was aimed at reducing production costs and boosting the model’s appeal.

Tesla didn’t give any details about the new Model 3’s battery, but a person with knowledge of its specifications said it was the same lithium-iron-phosphate battery from CATL. (300750.SZ) for the basic model.

The higher range is the result of reducing weight and improving the profile of the car so that it faces less wind resistance, the person added. Tesla did not respond to a request for comment on the battery.

In China, the Model 3 competes with BYD’s Seal, Geely’s Zeekr 001 (0175.HK)that of Nio (9866.HK) ET5 and Xpeng (9868.HK) P7i. Xpeng just announced zero interest loans and free upgrades for this car.

$1 = 7.2582 Chinese yuan, $1 = 0.9211 euros)

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