Tesla has made changes to its battery supply chain that bring some of its vehicles within the guidelines qualifying them for federal U.S. credits.
Tesla's Model 3 vehicles now qualify which could lower its price to less than that of 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 of the three versions were eligible for half the credits.
New battery 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.
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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.
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In March, the Treasury Department outlined the sourcing requirements for critical minerals and battery components automakers must use in EV batteries to ensure eligibility for the full $7,500 credit.
The Inflation Reduction Act President Biden signed into law in August was crafted to bolster domestic EV battery supply chains and reduce reliance on hostile nations like China.
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Tesla may have dropped CATL in favor of Panasonic or LG Energy Solution for U.S.-made Model 3 Rear-Wheel Drive, the cheapest version, Benchmark Mineral Intelligence (BMI) analyst Caspar Rawles said.
Reuters contributed to this report.
