The shift is on. Sales (registrations) in California of the Tesla Model Y crossover increased 46.4 percent in Q1 2023 versus Q1 2022, while sales of the Tesla Model 3 sedan declined 17.6 percent.

In Q1 2022, California registrations of the Tesla Model Y and Model 3 were only 300 units apart and the two BEVs were the #1- and #2-selling vehicles in the state. They were still the top two-selling vehicles in California in Q1 2023, but sales of the popular EVs went in very different directions.

Model Y sales increased to nearly 31,940 units, an increase of 46.4 percent from 21,812 units. At the same time, sales of the Model 3 declined 17.6% to 17,715 units from 21,506 in Q1 2022.

The Model 3, which became available in 2017, quickly became the first high-volume selling EV in the US. But with US consumers preferring crossovers, SUVs, and trucks to sedans, many people purchased the Model 3 not because they wanted a sedan, but because it was the most compelling EV on the market. Many of those buyers were hoping and waiting for an all-electric crossover or SUV and when the Model Y became widely available, the true market demand became apparent.

It also didn’t hurt that in Q1 2023, Tesla had several price reductions on the Model Y. And the availability of the $7,500 federal tax credit on the Model Y versus only $3,750 on the Model 3 will certainly contribute to the growing consumer preference for the Model Y.

Adding further to the diverging sales trends is that the Model Y is produced in both the Fremont and Austin factories, with scale and pricing decisions by Tesla further reducing the price difference between the two models. If the current trends play out the rest of 2023, the Model Y will likely outsell the Model 3 in California by two to one.