Prototypes of the revamped Model 3 are currently being tested on the road at Tesla's Shanghai factory over weekends, with the production line doing further refinement work, according to local media.

(Image: Screenshot from a Tesla China video.)

At Tesla's (NASDAQ: TSLA) Shanghai plant, the Model 3's production workshop is currently under a high level of secrecy, but production line tuning is almost complete, local media Jiemian said today, citing an employee of a third-party supplier working at the plant.

Prototypes of the revamped Model 3 are currently being tested on the plant's roads over weekends, with the production line doing further refinement work, the employee said.

Tesla is planning to launch an updated Model 3 to compete more favorably with local Chinese car companies, the report said.

One of Tesla CEO Elon Musk's key trips to China previously was to visit Tesla's Shanghai factory to inspect the new Model 3, the report said.

Musk visited China in late May and toured the Tesla Shanghai factory, which is Tesla's largest factory in the world, producing the Model 3 and Model Y with a current annual capacity of more than 1 million vehicles.

On March 1, Reuters reported that Tesla was working to retool its Shanghai assembly plant for a revamped version of the Model 3, a project codenamed Highland by Tesla.

The Highland version of the Model 3 is expected to go into production in Shanghai in September, the Reuters report said, citing a person familiar with the matter.

With Highland, Tesla aims to cut production costs and boost the appeal of the electric sedan, which debuts in 2017, people involved in the project said, according to the previous Reuters report.

On May 16, Bloomberg reported, citing people familiar with the matter, that Tesla was nearing the final stages before starting trial production of its revamped Model 3 sedan in Shanghai.

The revamped Model 3 is slightly longer, sportier and has a sleeker interior design than earlier versions, those people said, according to the report.

Earlier today, Bloomberg reported that Tesla is laying off some battery production workers at its Shanghai plant, amid steep discounts on cars from all manufacturers.

Earlier this week, Tesla began notifying some employees on the battery assembly line at the first phase of its plant in Shanghai about the layoffs, the report said.

Jiemian's report today said two Tesla factory floor employees in Shanghai confirmed the information, but they were not sure of the percentage of layoffs.

Yesterday, local media outlet Shifang Zhixing reported that the layoffs on Tesla's battery assembly line in phase 1 would exceed 50 percent.

The layoffs are partly due to the US government's ban on subsidies for batteries imported from China, requiring local car companies to use US-made batteries, the report said, citing an insider.

Jiemian's report today cited a person familiar with the matter as saying that the batteries made at Tesla's Shanghai plant are for domestic models and not for North America.

Tesla sells 93,680 China-made vehicles in Jun