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Tesla Model 3 Now Affordable and Superior to Camry, with Project Highland on the Horizon

Exciting news has emerged from California as the Tesla Model 3 achieves a milestone by offering a lower purchase price compared to the Toyota Camry.

This significant development comes as Tesla officially confirms that each trim level of its all-electric sedan is now eligible for the full $7,500 tax credit. Along with the state rebate in California, the benefit becomes double for Tesla Model 3 buyers.

But how did that happen? Is there anything new brewing in Elon’s mind about the Project Highland roll-out or is it only about a bigger-better Tesla Model 3 California rebate?

Towards the end of last week, Tesla made an important update to its Model 3 Design Studio. The changes involved the tax credit qualifications, and now all three versions of the sedan after the Tesla Model 3 price California 2023 are eligible for the full tax credit amount.

Let’s find out more!

Tesla Model 3 Project Highland

Tesla Model 3 Now Cheaper Than A Camry?

Yes. In California.

Until recently, only the Model 3 Performance variant qualified for the full federal tax credit, while the entry-level Standard Range and Long Range versions were eligible for a partial credit of $3,750. However, the situation has now changed.

The entry-level Model 3 Standard Range comes for about $40,240(MSRP) and with all federal tax benefits accounts to $32,740. Further adding California’s $7,500 Clean Car Rebate, the purchase price is further reduced to an impressive $25,240.

This makes the Model 3 more affordable than an entry-level Toyota Camry, which starts at $26,320. The competitive pricing of the Model 3, especially when considering the available incentives, is positioning it as an appealing option for environmentally conscious consumers.

It seems that Tesla has made modifications to its supply chain, resulting in all versions of the Model 3 in the US becoming eligible for the full $7,500 IRA tax credit.

This adjustment has made the Standard Range Model 3 more affordable than an entry-level Toyota Camry, particularly in California.

New Tesla Model 3 Prices

Exciting news for car buyers in California! Tesla’s Model 3 vehicle has become more affordable than the Toyota Camry, all thanks to a generous $7,500 tax cut provided by Elon Musk’s company. With a starting price of $40,240, this all-electric sedan becomes even more enticing when you factor in the tax rebate.

Moreover, eligible buyers in California can benefit from an extra tax rebate of $7,500 based on income and other criteria, which brings the final cost down to an impressive $25,240.

In comparison, the Japanese-made Camry is listed at $26,320 or higher, making the Model 3 a highly competitive option in terms of both price and specs. At least in theory.

In specific regions of California, customers can now purchase a brand-new base Model 3 for an astonishingly low price of $19,830, which is less than half of its manufacturer’s suggested retail price (MSRP) of $40,240.

This remarkable reduction in cost marks a significant milestone for Tesla, as it fulfills its goal of bringing an accessible and budget-friendly EV to the market.

When considering the various incentives available including state rebates and local incentives along with tax benefits, the effective price of the Model 3 can be as low as $19,830.

It is worth noting that these credits are not limited to the Model 3 alone but extend to several other electric vehicles (EVs) as well. Some examples of EVs eligible for these incentives include the Ford Mustang Mach-E, Chevrolet Bolt EV, and Ford F-150 Lightning, among many others.

Federal Tax Credit

It is important to remember that the federal tax credit for electric vehicles does not apply universally to all individuals and car models.

To be eligible, the vehicle must be manufactured in the United States, Mexico, or Canada, and it must meet certain battery requirements. Moreover, the availability of the tax credit is subject to predetermined income brackets, meaning that individuals falling within those brackets may benefit from it according to the guidelines.

On the other hand, the California Vehicle Rebate Program (CVRP) has its own set of qualifications. To qualify for CVRP, one must either be based in California or have a business registered there.

Moreover, specific income eligibility requirements must be met. Higher-income brackets may be eligible for a $2,000 rebate, while lower- and middle-income individuals can enjoy an increased rebate amounting to $7,500.

The IRA EV tax credit program consists of two components. To qualify for a $3,750 credit, an electric vehicle (EV) must have at least 50% of the value of its battery components produced or assembled in North America.

Furthermore, if 40% of the value of critical minerals used in the vehicle is sourced from the United States or a Free Trade Agreement (FTA) country, the EV qualifies for the full $7,500 credit.

Previously, the batteries used in the Standard Range and Long Range versions of the Tesla Model 3 did not meet the requirements for the second part of the EV tax credit. However, according to a market update paper by Morgan Stanley, it is likely that Tesla has made adjustments to its supply chain to comply with both criteria.

The report suggests that Tesla may have modified its battery production process, switching from using full Lithium Iron Phosphate (LFP) packs from Giga Shanghai in its Fremont factory to manufacturing those battery packs in the United States while still utilizing Chinese cells.

As a result of this change, Model 3 vehicles destined for the Canadian market are now being sourced from Tesla’s Shanghai factory, as noted by Morgan Stanley.

In April, the Biden administration introduced stringent battery sourcing rules, resulting in Tesla’s Model 3 Standard Range Rear Wheel Drive and Long Range All-Wheel Drive models being eligible for only half of the available tax credit, equating to a savings of $3,750 per vehicle.

This change prompted Tesla to explore new partnerships and avenues for battery production.

Tesla made significant updates to its website in light of recent developments, specifically regarding the tax cut and electric vehicle consumer tax credits. The Biden administration has confirmed that all Tesla Model 3 vehicles now qualify for these tax credits, which is a notable change from the previous eligibility of only two out of the three models.

Analysts with expertise in lithium-ion battery raw materials markets suggest that Tesla may have had to make adjustments to their battery mineral sourcing and components to comply with the subsidy requirements.

How The New Prices Will Affect Tesla Competitors?

The new pricing of the Tesla Model 3 is likely to have a significant impact on its competitor automakers in the electric vehicle segment. Tesla has been known for its aggressive pricing strategy and the ability to offer competitive prices due to its vertically integrated business model.

With the recent updates to the Model 3 pricing in California, which now includes tax credit eligibility for all models, Tesla has further enhanced its affordability and attractiveness to potential buyers.

The lower prices of the Model 3 could put pressure on other automakers producing electric vehicles in the similar EV segment.

Tesla’s brand recognition and loyal customer base, coupled with its extensive charging infrastructure network, might just add to its competitive edge. As a result, competing electric vehicle manufacturers may need to reassess their pricing strategies to remain competitive.

Furthermore, the price reduction of the Model 3 may accelerate the overall adoption of electric vehicles.

The increased affordability could push more and more consumers to choose electric vehicles over traditional popular gas cars. This shift in consumer preference may prompt other automakers to invest more heavily in electric vehicle development and production to keep pace with the growing demand.

What To Expect In The Future?

In the past, Tesla had relied on lithium iron phosphate (LFP) battery cells from Contemporary Amperex Technology Co. Ltd. (CATL) for its Model 3 Rear Wheel Drive variant, while using nickel-based cells from an undisclosed supplier for the Model 3 Long Range version.

However, a recent analysis from Caspar Rawles, an analyst at Benchmark Mineral Intelligence (BMI), suggests that Tesla may have made a shift in battery sourcing for its US-produced Model 3 Rear Wheel Drive, which serves as the company’s more affordable option and potential price cuts.

In addition to California, several other states now provide generous incentives for electric vehicles (EVs). For instance, Colorado offers a notable $5,000 off at the point of sale as a substantial incentive.

Tesla is reportedly making concerted efforts to clear its inventory of Model 3 vehicles before introducing a refreshed version to the market later this year.

Project Highland. Ring a bell?

We are constantly covering Tesla’s footprint to launch the new revamped version of Model 3. We did cover the latest updates in our another post mentioning the sightings around the California Fremont factory.

2023 Tesla Model 3 Production Set for June With New Headlights, 4.0 FSD Kit, and No Stalk Steering Wheel

Yes, we too are waiting on the revamped tweaked Tesla Model 3, eagerly!


Tesla has swiftly adapted its battery supply chain, resulting in a significant development for its Model 3 vehicles. As a result of these adjustments, all Model 3 trims now come with tax benefits that make them more affordable than the Toyota Camry in California.

The current configuration of the Rear-Wheel-Drive trim level of the Model 3 comes with a price tag of $40,240. However, when taking into account the combined benefits of the federal tax credit and California tax rebate, the cost is significantly reduced to an impressive $25,240. This price point makes the Model 3 more affordable than the entry-level configuration of the Toyota Camry, which is listed at $26,320.

With the Model 3 now more accessible than ever, there is a compelling reason to act without delay. So you can hop on to buy the Tesla Model 3 or maybe it is also worth considering whether waiting for the upcoming Project Highland revamped model is the right choice.

Purnima Rathi
Purnima Rathi
Purnima has a strong love for EVs. Whether it's classic cars or modern performance vehicles, she likes to write about anything with four wheels, especially if there's a cool story behind it.


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