Tesla Set to Price China-Built Model 3, Make Changes to California Assembly Line

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Electric vehicle maker Tesla Inc. (NASDAQ: TSLA) reportedly is overhauling its Fremont, California, assembly lines to prepare for production of the company’s new Model Y sport utility vehicle/crossover beginning later this year. According to a report from CNBC citing several current and former employees, Model Y production will force the company to combine production for the company’s Model S sedan and Model X crossover into one assembly line.

The Model Y will be available in both standard and performance versions, with prices beginning at $39,000 for the standard version and rising to $60,000 for the performance variant. The Model X SUV starts at $71,950, following a price drop earlier this month.

The other news out of the company is that it plans to begin taking orders from Chinese customers on Friday, May 31, for its Shanghai-built Model 3. The announcement was made on Tesla’s Weibo account.

Tesla has not yet announced pricing for the Chinese Model 3 but, as we noted in our coverage of electric vehicle maker Nio on Tuesday, Bloomberg sees a starting price of $43,400. Tesla also has not indicated if or how much cash a buyer will have to put up when an order is placed. The company has indicated that deliveries could begin later this year.

The advantage, to Tesla and its Chinese buyers, is that a Model 3 built in China avoids import tariffs that push the price of both the Model S and Model X well north of $100,000. The Shanghai-built vehicles also will be eligible for China’s local and state government incentives to electric vehicle purchasers.

The federal incentive for U.S. Tesla buyers was halved, from $7,500 to $3,750, on January 1 and will be halved again to $1,875 on July 1, before disappearing altogether on January 1, 2020. The company has responded by dropping its prices, but that can’t go on indefinitely.

That’s where the Model Y comes in. The SUV/crossover segment is currently the U.S. auto industry’s hottest, and Tesla needed a vehicle that cost less than $70,000 to grab a piece of the action. That should help the company overcome resistance to the higher price for electric vehicles but still leaves buyers concerned about the range of the vehicles. The standard version is set to have a range of 230 miles, while the performance version is said to have a range of 280 miles and a long-range version has targeted 300 miles.

Tesla shares traded up about 1.1% Wednesday morning, at $190.76 in a 52-week range of $185.04 to $387.46. The low was posted earlier in the day.

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