In California, the Tesla Model 3 Is Now Cheaper Than a Toyota Camry

Now that the Tesla Model 3 is eligible for the full $7,500 electric vehicle tax credit, Californians can get it for less than the popular gas-powered Toyota Camry.

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

When the new regulations went into effect in April, only Tesla's $53,240 Model 3 Performance edition qualified for the credit. The $40,240 standard rear-wheel drive version and the $47,240 long-range edition were eligible for only half. 

But Tesla appears to have rejiggered its supply chain so that cars with batteries produced in China are headed to foreign markets, Reuters reported. Those bound for the US have Panasonic or LG Energy Solution batteries that qualify buyers for the entire credit.

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

Separately, California's Clean Vehicle Rebate Project also offers between $1,000 and $7,500 in tax credits for the purchase of certain new EVs. The Model 3 is eligible for the full $7,500, bringing the total amount of federal and state tax credits to $15,000.

The standard Model 3 is listed on the Tesla website as having a manufacturer's suggested retail price of $32,740 after the EV tax credit is applied. With the added state rebate, the list price drops down to $25,240.

The Camry starts at $26,320. 

Read more: Tesla Raised the Price on 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 top-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 No. 1 spot with 78,934 registrations in the state.

The Camry came in a distant second with 55,967 registrations, representing about 11% of the market.

Nationwide, it's a different story: In 2022, the Camry was ranked the fifth bestselling car in the US, according to CNBC, with 295,201 cars sold.

The Model 3 ranked 13th in sales last year, with 211,641 rolling off the lot.

Read more: Every Electric Vehicle That Qualifies for the $7,500 EV Credit