President Joe Biden's administration confirmed Tuesday that after a rapid adjustment of its battery supply chain, the Tesla (NASDAQ:TSLA) Model 3 now qualifies for the full $7,500 tax credit, meaning that it has become more affordable than the Toyota (NYSE:TM) Camry in California.
New battery sourcing rules went into effect in April, lowering the credit of the Model 3 Standard Range RWD and Long Range AWD to $3,750. However, last week, the automaker changed the language on its Model 3 Design Studio to show that the vehicles once again qualified for the full credit. The government confirmed the change on its fueleconomy.gov website.
The increased tax credit, in combination with local incentives in certain areas such as California, is bridging the price gap between Tesla vehicles and gasoline-powered cars. In some instances, they’re even undercutting the cost of some of the most popular sedans on the market in California, such as the Toyota Camry.
A Model 3 starts at $40,240 and the price may fall to $25,240 when the $7,500 federal tax credit and another $7,500 from the California tax rebate kick in, depending on income and other requirements. Toyota's Camry is listed at $26,320 and higher.
Shares of TSLA and TM are up 1.16% and 1.22% respectively in afternoon trading on Tuesday.