Tesla’s Model 3 is now more affordable in California than a Toyota Camry thanks to the Elon Musk-owned company confirming the sedan is eligible for a $7,500 tax break.
After deducting the tax credit, the all-electric Model 3’s starting price of $40,240 has decreased even further. The cost of the Model 3 drops to $25,240 when combined with a second California tax credit of up to $7,500, subject to eligibility and other conditions. The starting price of the Japanese-built Camry is $26,320 or more.
Tesla updated its website to reflect the tax cut, and the Biden administration confirmed that all Tesla Model 3 vehicles now qualify for electric vehicle consumer tax credits. Previously, only two out of the three Model 3 models were eligible for half the credits.
According to analysts, Tesla may have had to make changes to its battery mineral sourcing and components to qualify for the subsidy. When the Biden administration’s new battery sourcing rules were enacted in April, Tesla’s Model 3 Standard Range Rear Wheel Drive and Long Range All-Wheel Drive only qualified for half the credit, saving buyers $3,750 each.
In its efforts to gain energy independence and spur wider adoption of electric vehicles within the US, the Biden administration introduced new rules that imposed North American assembly and new mineral requirements on vehicles for EV credits. This impacted Tesla’s talks with China’s dominant electric-vehicle battery manufacturer, CATL, for a new battery plant in the US.
Tesla may have switched to manufacturing battery packs in the US while still using Chinese cells, according to analysts. However, a spokesperson for CATL stated that the partnership between CATL, Tesla, and EV consumers remains unchanged.
Only 11 models, including plug-in hybrid vehicles, currently qualify for the full $7,500 tax credit, while buyers of the remaining seven models are only eligible for $3,750. Most of these qualifying automobiles are produced by General Motors, Tesla, and Ford Motor Company.
Because their parts are not sourced from North America or nations with US free-trade agreements, the tax credits do not apply to used cars or vehicles made by Volkswagen, Hyundai, Nissan, BMW, Volvo, or Rivian Automotive.
Tesla’s Model 3 has become a more alluring option for California purchasers thanks to the hefty tax decrease, further confirming its place as a top pick in the electric vehicle market.