Tesla Model 3 is set to become more affordable than Toyota’s Camry in California thanks to federal tax credits and other incentives. The Biden administration has confirmed that all versions of the Model 3 now qualify for the full $7,500 electric vehicle consumer tax credits, making them more competitive in terms of pricing.
Tesla’s quick adjustment of its battery supply chain has enabled all Model 3 vehicles to meet the requirements for federal tax credits. Earlier this year, new battery rules came into effect, reducing the credit for certain versions of the Model 3. However, Tesla recently announced on its website that all versions of the Model 3 once again qualify for the full credit, and the government has confirmed this change.
With a starting price of $40,240, the Model 3 can potentially become more affordable, with the price dropping to $25,240 after considering the $7,500 federal tax credit and an additional $7,500 from the California tax rebate (subject to income and other requirements). In comparison, Toyota’s Camry is listed at $26,320 and higher, making the Model 3 a more attractive option for potential buyers.
Impact and Strategy
This subsidy change, combined with aggressive discounts, is expected to boost sales for Tesla’s Model 3. The demand for the vehicle has been affected by factors such as a recent major revamp, economic uncertainties, and increasing competition. By offering a more competitive price point, Tesla aims to regain market traction and maintain the popularity of its flagship electric vehicle.
Analysts suggest that Tesla may have made adjustments to its battery supply chain, ensuring compliance with both battery mineral and component requirements to qualify for the federal subsidy. It is speculated that Tesla may have switched from using CATL’s battery cells to Panasonic or LG Energy Solution for the U.S.-made Model 3 Rear Wheel Drive version, as the subsidy value outweighs the cost savings associated with using cheaper iron-based cells from CATL.
Tesla’s Model 3 is now positioned to be more affordable than Toyota’s Camry in California, thanks to federal tax credits and incentives. By securing the full $7,500 electric vehicle consumer tax credits for all versions of the Model 3, Tesla aims to stimulate sales and address the recent dip in demand. With its strategic adjustments to the battery supply chain, Tesla has optimized its eligibility for subsidies, potentially giving it an edge in the competitive electric vehicle market.