With incentives, the Tesla Model 3 now costs less than a Toyota Camry in California

The Treasury Department has confirmed that the Tesla Model 3 qualifies for the full $7,500 electric vehicle tax credit. In the state of California, that makes it cheaper than the gas-powered Toyota Camry, one of the nation’s most popular passenger cars.

The Inflation Reduction Act of 2022 overhauled the lucrative tax breaks, requiring vehicles to have battery components and important minerals made in the US. (Chinese companies currently produce more than half of all EV batteries.)

When the new regulations went into effect in April, only the $53,240 Model 3 Performance variant qualified for the full credit. The standard rear-wheel drive version at $40,240 and the long-distance version at $47,240 were only eligible for half the credit.

But Tesla appears to have changed its supply chain so that battery-powered vehicles made in China are directed to foreign markets, Reuters reported. Those traveling to the US are fitted with Panasonic or LG Energy Solution batteries that qualify buyers for the full credit.

FuelEconomy.gov, the Department of Energy website that lists all eligible vehicles, has been updated to show that all versions of the Model 3 qualify.

The standard Model 3 is listed on Tesla’s website as having a manufacturer’s suggested retail price of $32,740 after applying the EV tax credit.

Separately, the California Clean Vehicle Rebate Project also offers between $1,000 and $7,500 in tax credits for the purchase of certain new electric vehicles. The Model 3 qualifies for the full $7,500, bringing the total of federal and state tax credits to $15,000 – and the list price to $25,240.

The Camry starts at $26,320.

Read on: Tesla has raised the price of all its vehicles except the Model 3

Even before the change in EV tax credit eligibility, Automotive News reported in February that the Tesla Model 3 was the best-selling car in California in 2022, based on new vehicle registrations.
According to data from the California New Car Dealers Association, the Model 3 raced to the top spot with 78,934 registrations in the state.

The Camry is in second place with 55,967 registrations, or 11% of the market.

Nationally, it’s a different story: In 2022, the Camry ranked as the fifth best-selling car in the U.S., according to CNBC, with 295,201 cars sold.

The Model 3 ranked 13th in sales last year with 211,641 units.

Read on: Any electric vehicle that qualifies for the $7,500 EV credit