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Tesla Model 3 Outprices Toyota Camry in California After Federal Tax Credit Boost

Thanks to Tesla Inc's rapid battery supply chain adjustments, Model 3 vehicles have become a more cost-effective choice than Toyota's Camry for California buyers following the introduction of federal tax credits and other benefits.

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Battery Supply Chain Adaptations and Federal Credits

Tesla Inc. has quickly adapted its battery supply chain, allowing all it's Model 3 vehicles to be eligible for federal U.S. credits. These and other tax breaks could make the Model 3 more affordable than a Toyota Camry. On Tuesday, the Biden administration affirmed that all Tesla Model 3 variants now qualify for $7,500 electric vehicle consumer tax credits. Previously, only two of the three versions were eligible for half the credits.

New Battery Rules and Full Credit Reinstatement

In April, new battery regulations were implemented that decreased the credit for the Model 3 Standard Range Rear Wheel Drive and Long Range All-Wheel Drive to $3,750. However, last week, Tesla announced on its website that all Model 3 versions are once again eligible for the full credit, a change confirmed by the government on its website.

Model 3 Versus Toyota Camry: A Price Comparison

Starting at $40,240, a Model 3's price could drop to $25,240 when considering the $7,500 federal tax credit and another $7,500 from the California tax rebate, depending on income and other requirements. Comparatively, Toyota's Camry starts at $26,320. The subsidy modification, coupled with aggressive discounts, is expected to bolster the sales of Tesla's flagship Model 3, which have been impacted by this year's major redesign, economic volatility, and escalating competition.

Behind Tesla's Battery Supply Chain Adjustments

Industry experts suggested that Tesla adjust its battery supply chain to satisfy battery mineral and component prerequisites for a federal subsidy. Analyst Caspar Rawles from Benchmark Mineral Intelligence (BMI) hinted that Tesla may have swapped CATL for Panasonic or LG Energy Solution for the U.S.-made Model 3 Rear Wheel Drive, its most affordable version. The increased subsidy value would significantly exceed the savings from using cheaper iron-based cells from CATL.

Battery Supplier Changes and Production Ramp-Up

The speculation points towards Panasonic as the likely supplier, although there may be concerns regarding cell availability for all U.S. Model 3 units. Previously, Tesla used CATL's LFP battery cells for its Model 3 Rear Wheel Drive and nickel-based cells from LG Energy Solution for its Model 3 Long Range. In response to inquiries about a possible change in Tesla's supply arrangements to North America, CATL affirmed that their strategic partnership with the company remains unchanged and will continue to deepen and improve.

In a recent development, Panasonic Holdings announced plans to boost production of electric vehicle batteries at a Nevada factory, co-operated with Tesla, by 10% within the next three years. This aligns with Tesla's initiative to start delivering China-made Model 3s and Model Ys to Canada, thus freeing up capacity for U.S.-made models.