Tesla on track to dislodge Toyota as king of California

Tesla's Model 3 is sometimes referred to jokingly as the "California Camry" for its ubiquitous presence in the nation's biggest car market, where the Toyota sedan has been the top seller.

But that Tesla reference is no longer a joke.

Model 3 registrations in the Golden State in 2022 surpassed those of the Camry — along with every other passenger car, according to the California New Car Dealers Association. In 2021, the Camry was the best-selling car.

There's more evidence that Toyota's No. 1 sales spot in the state is threatened by No. 2 Tesla: The EV maker's Model Y crossover was the top light truck in California new-vehicle registrations last year, beating Toyota's RAV4 for a second year in a row.

To be sure, the Toyota brand is still strong in California with a 17 percent share last year with 289,304 registrations. Tesla had 11 percent with 186,711 registrations.

But the sales trend is moving in Tesla's direction as it nearly doubled its market share from 2021 to 2022, according to data from the CNCDA association, while the Toyota brand and its Lexus division lost market share.

"Tesla buyers today are the historical Honda and Toyota buyers of the past," said Loren McDonald, CEO of the analysis and consulting firm EVAdoption. "They're switching over to Model 3s and Model Ys."

Tesla's California trajectory — and the brand's recent price cuts — suggest it will overtake Toyota in a year or two, McDonald said, marking a milestone with national implications. Tesla has already become the No. 1 luxury-segment automaker in the U.S.

Recent research from S&P Global Mobility said Toyota and Honda are losing buyers to Tesla and other EV leaders. And 2022 Experian data from California suggests why: Toyota had just 622 registrations for its only EV, the bZ4X, while Tesla had 187,280 across four models. Honda doesn't sell an EV.

"While vehicle pricing was a major concern in 2022, sales of pure EVs increased by over 50 percent from 2021," the dealers association said. "California is clearly doing its part to increase EV sales."

Toyota still has loyal buyers of its gasoline and hybrid vehicles, the dealers association data showed.

But Toyota's 2022 registrations fell 14 percent in the state last year while Tesla's rose 54 percent.

Toyota Research Institute CEO Gil Pratt recently chided competing automakers as EV-only extremists for pushing that technology over hybrid vehicles that still use gasoline. But California is already selling more EVs than hybrids.

Full-EV share was 17 percent of the market, compared to 14 percent for hybrids last year. And EV share is growing rapidly while hybrids were flat.

Pratt called for a mix of green powertrain technologies, while Tesla CEO Elon Musk has pushed full EV as the better solution and mocked automakers such as Toyota that are investing in hydrogen fuel-cell technology.

"Time will show that our point of view is actually the correct one," Pratt said last month. "One way or the other, there will be a diversity of powertrains used throughout the world."

California is a unique market that's quick to adopt new technologies — and often the first to develop them.

Tesla's total U.S. market share last year was just 3.5 percent, the CNCDA said, vs. about 13 percent for Toyota.

But California's changing tastes have implications for the U.S., analysts say.

Decades ago, California was the first state to embrace the Toyota and Honda import brands, which later became mainstream players in the U.S. And Bloomberg data puts California as the fourth-largest economy in the world — no small prize for any automaker.

Tesla is also making significant moves to reduce its luxury-level pricing to capture mainstream buyers.

Tesla recently cut its sticker prices and it newly qualifies for the new federal tax credit of up to $7,500 per vehicle for buyers of the Model 3 and Model Y. Tesla had lost access to the previous EV credit in 2020 because it had reached the quota of 200,000 vehicles under the old rules.

The effective price of a Model Y has fallen from the mid-$60,000 range last year to under $50,000 this year, including the tax credit. The base Model 3's effective price, with the tax incentive, is under $40,000.

Tesla plans to make more product announcements March 1, possibly including an entry-level, mainstream vehicle.

According to the CNCDA data, the Model 3 had 78,934 registrations in the state in 2022 for a 15 percent market share among passenger cars, with the Camry second at 55,967 for a 11 percent share. The Toyota Corolla was in third place.

The Model Y had 87,257 registrations to the RAV4's 59,794 in the light-truck category. Ford F-Series pickups were No. 3 with 40,232 registrations, the dealers association said.

Association Chairman Tony Toohey said California buyers are embracing new zero-emission vehicles as quickly as they are introduced to the market, which bodes well for automakers with EV portfolios.

"With ZEV product announcements every day, we're seeing the latest and greatest in technology and innovation in new-car makes and models by the major automakers," said Toohey, owner of Auburn Toyota. "California drivers want these cars now."