YES, you have to make new models for at least LOD 3.
To be clear, LOD 1 of course is the default model......but the interesting fact about it is that LOD 1 is used ONLY if something on your screen is closer to you than a range of 3.5........that's right, 3.5. Thta's REALLY close. That means for the VAST majority of the time, the computer will be using LOD 2 to represent the thingies on your screen.
This is what I recommend for a quick LOD 2.......use LOD 1, but be sure to run it through the poly-reducer program in Max if you haven't already done that, and simply delete strcutures that you don't think can really be discerned at beyond range 3.5, like antennae, or tiny dark-colored stalks or winglets. If you have saucers or cylinders, you can safely reduce the cylinders to only 12-sided ones, and if you have saucers or discs you can safely reduce them to 12 or 20-sided ones. But here's the most importnt thing........you can safely reduce your textures from 512 (or 1024) to a meager 128. That's right, 128 by 128. The game really can't resolve beyond that at a range of greater than 3.5.
So, as it turns out, LOD 2 is seen more than LOD 1 in game, so you should make it reasonably good in mesh, but of courdse not as high as LOD 1, and the textures can be 128.
For LOD 3, if you decide to make one, can be as low poly as you want. A TMP warp engine, for example, can be a mere rectangle. This LOD is used for when the ship is reallly really really far away.