Tesla Model 3 "Project Highland": Everything We Know Before It Hits the Road

People are talking a lot about the Model Y these days, as it is on track to becoming the most-sold vehicle on the planet this year. It outshone the Model 3, capitalizing on people's love for SUVs and crossovers. Still, without the Model 3, Tesla wouldn't have been where it is now, and the Model Y would've not existed. Tesla's electric sedan put a lasting mark on the car market and industry, being crowned the best-selling electric vehicle in 2018, 2019, and 2020.

Still, few people know that the Tesla Model 3 was also extremely close to derailing Tesla's entire vehicle program and possibly its future. Elon Musk admitted in 2020 that the Model 3 production ramp-up wasn't easy, describing it as "production and logistics hell." Musk confessed that Tesla was a month away from going bankrupt in 2019. Thankfully, Tesla raised billions after promoting self-driving efforts during Autonomy Day in April 2019. We're still waiting for Tesla's robotaxis, but the money saved the company and turned it into a success story.

The Tesla Model 3 is an integral part of that story, especially after Giga Shanghai started production in 2019. The Chinese gigafactory contributed to Tesla's success just as much as the Model 3, thanks to massive efficiency improvements compared to Tesla Fremont. It's telling that Tesla will start the refreshed Model 3 production in Shanghai before starting producing the new model in the US. Known as "Project Highland," the revamped Model 3 is Tesla's best effort to appease the customers with new, exciting features while at the same time optimizing costs.

Based on the information I got, the refreshed Tesla Model 3 will offer many new features that customers love without breaking the bank while cutting costs in less important or obvious areas. And because people tend to associate a new model with a fresh design, Project Highland will receive striking, albeit cosmetic, changes while keeping the body panels mostly unchanged. Make no mistake, though, the refreshed Model 3 will be the most significant model overhaul Tesla has ever attempted, so expect to make a lasting impression when it arrives later this year.

Cosmetics first: what to expect at the design level

Although we've seen many prototypes of the refreshed Tesla Model 3 testing toward the end of 2022, they looked like regular cars with front and rear cladding, or bras, as people call them. Only this spring did we notice the first change to the car's body. It was minor, affecting the repeater camera, but a change nonetheless. By then, it was also apparent that the front bumper was less prominent than the production model.

The best picture of Project Highland's new design leaked on the internet in April, surprising everyone. Although it was unlikely to have been the final design, it revealed that Tesla was aiming for a more radical change than it went with the Model S and Model X refresh. It was an instant hit, despite the picture showing no obvious ultrasonic sensors or additional cameras, as it was rumored before that. Rumors still claim that the refreshed Model 3 will feature a front camera in the bumper's lower section, although ultrasonic sensors are history.

The leaked picture shows that the front bumper is more streamlined, while the headlights are the most significant change design-wise. These are matrix-LED headlights, and the only question that remains is whether they will be adaptive or fixed. Although all current headlights on Tesla models are adaptive-capable, the feature is not enabled in the software. Hopefully, people buying the new electric sedans will not have to wait forever before the projectors can modulate light to offer curved lighting and glare-free high beams.

Sadly, a similar picture leak with the Tesla Model 3 rear never surfaced. However, some lucky carparazzi managed to snap pictures of Project Highland prototypes with more revealing camouflage at the rear. The photos revealed that the turn-signal light is now vertical, matching the rendering floating on social media. The same images showed a new rear diffuser, although I don't know whether this is standard equipment or exclusive to the Performance variant.

The cabin sees more radical changes

This is where the Tesla Model 3 owners spend most of their time, so it's vital that Tesla gives it a massive makeover. It's also where Tesla's cost-cutting measures are the most obvious, although the EV maker will compensate with new features. Probably the one that will make the biggest impression on people is the ambient lighting, which fans and customers have requested for years. It also requires minimal effort on Tesla's part, being cheap and easy to integrate into the cabin.

There are also more significant changes, and I'd start with those that will be most welcome. Chief among them are the new ventilated seats, another highly-requested feature. A leaked picture from June shows the new seats reportedly in a supplier warehouse. They were wrapped in perforated vegan leather and featured a blower. This will surely add to the production costs, so expect Tesla to save money in other areas, which will be less pleasant.

More prototype pictures revealed that Tesla would have a redesigned dashboard, which the test drivers covered with black fabric. Despite that, it became evident that Tesla opted for a stalkless design similar to the Model S/Model X. A drone video confirmed this, as it recorded the driver swapping the finger on the center display to put the car in reverse. The same video shows a flat-bottomed steering wheel with fewer buttons, hinting at an airbag horn instead of the touch-sensitive switch.

Earlier this week, fresh leaks from China revealed a new dashboard with an integrated instrument panel cover and trims. The move unites three separate parts into a single-piece dashboard, a cost-cutting measure that would not affect the overall impression. The integrated trim shows a metallic pattern, replacing the wood decorations of the current model. This has been rumored for a long time and is now confirmed. Another leaked picture shows the door panel now has a cheaper fabric trim instead of Alcantara.

The Tesla Model 3 "Project Highland": what's beneath the surface

This is an area where guessology reigns supreme, as nobody has ever seen a Project Highland body in white. The security measures at Giga Shanghai appear to be air-tight, and the employees working in the Project Highland area are prohibited from entering with smartphones. Still, we can infer from the Model Y changes that the same optimizations will be implemented in the Tesla Model 3 production. This undoubtedly means the use of megacastings and a structural battery pack.

When Tesla introduced the megacastings in the Model Y production, it allowed it to cut costs significantly. The megacastings eliminate the need to bond or weld hundreds of body parts together, cutting down the manufacturing time. They also eliminate many steps from the assembly process, including time-consuming thermal treatment. Tesla said the production line is also shorter and requires fewer assembly robots and workers. As you can see, megacastings might offer the most important cost-reduction benefit.

A structural battery pack is also in store for the refreshed model. We don't know yet what form factor Tesla will use for the Model Highland, especially as rumors indicate that it will outsource the production to third-party suppliers. Since 4680-cell production does not have significant yields to cover Cybertruck needs and still be enough for other models, it will likely be another form factor. The LFP cells used in the current Model 3 RWD are prismatic. However, CATL, Tesla's main battery supplier at Giga Shanghai, also produces cylindrical cells.

What new technologies will the revamped Tesla Model 3 feature?

Since we're already talking about the Tesla Model 3's battery, there is solid evidence that CATL will supply Tesla with its latest technology. This means replacing the lithium-iron-phosphate battery cells used for the Model 3 RWD base model with the M3P cells the battery giant announced earlier this year. The name gives away chemistry, which consists of three metal elements (M3) plus phosphorus (P). The three metals are manganese, zinc, and aluminum, which makes the M3P still a ternary battery but of the phosphate system.

The improved chemistry is enough to increase energy density, raising the battery capacity level to 66 kWh. This represents a 10% improvement over current LFP packs of the Model 3 RWD, which have a 60-kWh capacity. This makes us confident that the base-version Tesla Model 3 Highland will increase the range to 300 miles/480 km. If Tesla also improves aerodynamics and drivetrain efficiency, it could offer more than that.

We already know that the EV maker will transition to a new generation of electric motors using very few or no rare-earth materials. These materials are crucial to producing powerful permanent magnets used in electric motors. Experts are still puzzled how Tesla would manage to ditch rare earths like neodymium without affecting the motor's performance, but I'm sure we'll soon find out. Before launching the Model 3, Tesla used exclusively induction motors which don't have permanent magnets, hence no rare-earth materials. Later, it started using DC permanent magnet motors, and based on a slide from this year's Investor Day, it will continue to use them.

Elon Musk is convinced Tesla will crack vehicle autonomy soon, so expect the refreshed Model 3 to adopt the recent Hardware 4 Autopilot computer and sensor suite. People talking to Tesla employees are adamant that the upcoming electric sedan will feature an additional front camera. However, I've seen no evidence of that in leaked pictures of the prototypes caught testing. Since the removal of ultrasonic sensors, the enormous blind spot in front of the hood is an issue for the park assist system, so it would be wise for Tesla to put a camera there.

Other than that, I wouldn't hold my breath on the radar sensor. Although the Model S and Model X do come with such a sensor, it is not supported in software at this time. I have seen no evidence that the Model Y fitted with Hardware 4 sensor suite has a radar, and it's unlikely that the Tesla Model 3 will have one. Even more far-fetched is the steer-by-wire system rumored recently. If it's not on the Cybertruck, it won't be on the Model 3, that's for sure.

Tesla will cut down on vertical integration with more outsourcing

As volumes grow, Tesla is less and less inclined to make everything in-house, something that made it famous and allowed it to control every aspect of the manufacturing process. Vertical integration is what made Tesla so cost-efficient, but it also added logistic headaches. That's why the EV maker is trying to outsource more, a massive strategy change that will allow suppliers more leeway.

The first thing that Tesla is rumored to abandon is producing the seats for the Model 3. The seats have been widely appreciated for their comfort and are considered one of the best features of Tesla cars. The change might have already started, though, as some Tesla Model 3s were recently delivered with different headrests. Based on owners' comments on social media, they don't feel different, so hopefully, this change will not affect quality.

Most importantly, Giga Shanghai insiders claim that Tesla is also outsourcing battery pack production to its partners. Previously, it bought battery cells from suppliers (or even produced them itself) and assembled them into packs at the gigafactory. Now, at least for CATL's battery packs that go into the Model 3 RWD, Tesla will buy the packs complete with the thermal and battery management system. The move became obvious after Tesla laid off half the employees working at the Phase 1 battery line at Giga Shanghai.

The Tesla Model 3 Highland will start Price War 2.0

All these cost-reduction measures will save a lot of money in the manufacturing process. Thanks to recent upgrades, Giga Shanghai will become even more efficient than it already was. This is why rumors from China indicate that Tesla aims for a massive price reduction for its base model. This could amount to about 15% of the current price, which starts at 232,000 yuan ($32,255). This would put the base version Tesla Model 3 RWD at below 200,000 yuan (less than $28,000), undercutting even the cheaper EVs on the Chinese market, such as the BYD Seal and BYD Han.

The refreshed Model 3 was rumored to have already started trial production at Giga Shanghai. The most recent information indicates that production of the current model will end on August 14, while the volume production of the new model is expected to start in September. The first deliveries are scheduled in October, in line with current delivery estimates for the Model 3 in Europe (October-November). The Tesla Model 3 sold in Europe is supplied exclusively from Giga Shanghai.