Tesla Model 3
Tesla Model 3 vehicles are shown for sale at a Tesla facility in Long Beach. REUTERS/Mike Blake

Tesla‘s rapid adjustment of its battery supply chain means all of its Model 3 vehicles qualify for federal credits that, along with other tax breaks, could lower its price to less than a Toyota Camry.

The Biden administration on Tuesday confirmed that all Tesla Model 3 vehicles now qualify for $7,500 electric vehicle consumer tax credits after two versions were eligible for half the credits.

New battery sourcing rules went into effect in April that lowered the credit of the Model 3 Standard Range Rear Wheel Drive and Long Range All-Wheel Drive to $3,750. Tesla last week on its website said that all versions of the Model 3 again qualify for the full credit. The government confirmed the change on its fueleconomy.gov website.

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.

Supply Chain Tweaks

Analysts said Tesla may have tweaked its battery supply chain to meet both battery mineral and battery component requirements for federal subsidy.

Tesla may have dropped China-based CATL in favor of Panasonic for U.S.-made Model 3 Rear Wheel Drive, the cheapest version, Benchmark Mineral Intelligence analyst Caspar Rawles said.

The subsidy value would by far outpace the saving of using cheaper iron-based cells used by CATL, he said.

Panasonic has a battery cell factory in Nevada, meeting federal requirements on local battery components. CATL and other suppliers like LG Energy Solution do not have factories to make Tesla cells in the United States.