Tesla Model 3 Highland testing on factory roads as Giga Shanghai battery production faces layoffs

Tesla has started laying off workers at the battery assembly line over at its largest Gigafactory in Shanghai, reports local media, citing one of the workshop builders there. While the exact scope of the layoffs isn't announced, the first phase of Tesla's battery workshop at Giga Shanghai could lose up to half of its employees, report insiders.

Meanwhile, Tesla is preparing to hand over some pack assembly to the battery manufacturers that make the actual cells as one more way to cut the production cost of the upcoming Model 3 Highland facelift, claims another report. A lot of Chinese manufacturers have already done so, and recently Tesla signed a pledge to avoid future price wars with local automakers, as it faces increased competition from the likes of BYD which makes its own EV batteries.

The Model 3 Highland production costs may be down significantly by utilizing gigacasted parts and structural cell-to-pack battery tech as a dress rehearsal for the mass market Model 2. It remains to be seen whether that will result in a lower MSRP price, too, as the current Model 3 in China is more expensive that its direct competitors like the BYD Seal.

Moreover, Tesla has to work on overhauling its battery supply chain, so that the electric vehicles sold in the US come with battery components and assembly that qualify them for the full US$7,500 federal subsidy amount. It somehow managed to wiggle the base Model 3 with CATL LFP cells as eligible not long ago. Next year, however, the share of materials sourced from the US or its fair trade countries that the government asks for against its tax credit help rises to 50%, and even more after that, so Tesla has to react accordingly, as most of its bestselling vehicles come with China-made cells.

The battery assembly workshop at Giga Shanghai, however, mainly produces packs for cars sold at the local market, so others are suggesting that the layoffs are due to the increased competition by local brands. Granted, Tesla registered a record number of deliveries in China last quarter, more than half of its global sales, yet BYD and the other local competitors may have sold more cars than foreign brands for the first time then, too.

Alternatively, the layoffs in the first phase of the battery plant could be due to further process automation, but the equipment for that is said to be still in its testing and assembly phases. Tesla only has a production week worth of orders right now in China, though, so it may be worried about rising inventory again and putting the brakes on battery pack production as only the workshop's second phase is currently making 3400 packs on two shifts, more than enough to satisfy demand at the moment.

In order to spruce up said demand, Tesla is preparing to release said mid-cycle Model 3 refresh, dubbed Project Highland and Elon Musk reportedly inspected its prototypes at Giga Shanghai during its recent visit to China. The Model 3 Highland is expected to be larger, with more comfortable vented seats, more aggressive headlights, bigger 66 kWh M3P battery by CATL, plus a Hardware 4.0 FSD computer and camera set on board.

The Highland's assembly line has already finished testing and debugging, according to a third-party construction employee who allegedly takes part in the QA phase of the production line. "We are now testing the modified Model 3 prototypes on the road at the factory on weekends, and the production line is also doing follow-up improvement work," they added, reiterating that we might indeed see a Tesla Model 3 Highland release in the fall, if history is any indication.

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