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Tesla plans a Model Y revamp at its Shanghai factory, according to reports

But don't expect the EV maker's refreshed Model Y on US shores just quite yet.

Rumors of a refreshed Tesla Model Y have been percolating for months, but electric vehicle buyers may finally have that option later next year.

According to Bloomberg, Tesla (TSLA) is prepping a “revamped” Model Y to be built from its Giga Shanghai plant. The preparations for the updated Model Y will require Giga Shanghai to suspend production for around a week during China's New Year holiday, which starts in late January, and then again later next year prior to mass production, which could occur as soon as mid-2024.

From a feature and design standpoint, the updated Model Y will have much more "obvious exterior and interior changes" than the most-recent China Model Y update in October, which added a new wheel design and ambient lighting, Bloomberg reported.

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Employees work at Tesla's Shanghai Gigafactory in east China's Shanghai, Dec. 22, 2023.
Employees work at Tesla's Shanghai Gigafactory in east China's Shanghai, Dec. 22, 2023. (Fang Zhe/Xinhua via Getty Images) (Xinhua News Agency via Getty Images)

The Model Y is a vastly important vehicle for Tesla, as it accounts for 75% of Tesla’s overall sales in China, per Bloomberg Intelligence, and likely a similar percentage in the US (Tesla does not officially break down sales across regions).

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Third-party data from JATO Dynamics also showed that the Tesla Model Y was the No. 1 selling vehicle globally in the first quarter of the year, marking the first time an EV was the top-selling vehicle. JATO said Tesla sold 267,200 Model Ys in Q1, up 69% from a year ago. The second-best-selling car was Toyota’s Corolla, with 256,400 vehicles sold globally.

A revamped Model Y is also necessary for Tesla to compete against stiff competition, especially in China, where rivals like BYD, Li Auto, and NIO have numerous offerings at or below the Model Y’s retail price.

The situation in the US and Europe is slightly different. Though there are competitors like Volkswagen’s (VWAGY) ID.4, Ford’s (F) Mustang Mach-E, and various crossovers from BMW (BMW.DE) and Audi, those automakers have been pulling back production in recent months as high prices and steep interest rates have kept buyers away. Model Y sales have been able to grow in markets like the US and Europe but at the expense of profit margins due to Tesla’s aggressive price cuts.

Nevertheless, a refreshed Model Y could help boost those margins, as Tesla may raise prices for that version of the Model Y due to increased demand.

People try Tesla's electric vehicle Model 3 at its booth during the China International Supply Chain Expo.
People try Tesla's electric vehicle Model 3 at its booth during the China International Supply Chain Expo (CISCE) in Beijing on December 1, 2023. (JADE GAO/AFP via Getty Images) (JADE GAO via Getty Images)

Interestingly, Tesla’s refreshed Model 3 sedan (dubbed Project Highland internally) has been on sale in markets like China and Europe for a few months. However, in Tesla’s home US market, the updated Model 3 is not available. Why? Likely because the refreshed Model 3 is built at Giga Shanghai and cannot be imported to the US without the imposition of tariffs.

If the refreshed Model Y will indeed be initially produced out of Giga Shanghai as well, US customers will again be out of luck with Tesla’s latest product updates until Tesla’s US plants in Fremont, Calif., and Austin, Texas, are revamped as well.

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

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