Tesla California registrations slide as incentives fade, industry body says

* California's overall EV market shrinks, with zero-emission sales down 40%

* Loss of federal tax credits and high costs erode consumer confidence, industry body says

* Tesla's Model Y and Model 3 remain top zero-emission sellers despite overall decline (Adds details, background throughout)

April 21 (Reuters) - Tesla vehicle registrations in California dropped 24.3% in the first quarter, marking the steepest decline in the state, according to a report released on Tuesday by the California New Car Dealers Association.

The drop comes as California's broader electric vehicle market shrinks, highlighting a loss of momentum for the sector in its most critical U.S. region. Tesla is set to report quarterly results on Wednesday after markets close. The Elon Musk-led company missed analysts' estimates for global vehicle deliveries in the first quarter. The expiry of the $7,500 federal tax credit in the U.S. at the end of September dealt a blow to U.S. electric vehicle demand, stripping away a key incentive for the purchase of an EV. The company has already reported two straight years of falling deliveries. Analysts expect modest growth this year, though some have forecast a third straight year of declines. Overall zero-emission vehicle sales in the state slumped40% to 57,111 in the quarter from 95,520 a year earlier, the report said. Indicators suggest the new vehicle market is set to weaken, as persistently high financing costs, near-record vehicle prices, tariffs, EV tax credit phase-outs and geopolitical risks continue to erode consumer confidence, the body said. Tesla's aging lineup has further weighed on its appeal in a market that has historically been its stronghold. Despite the decline, the Model Y and Model 3 remained among the best-selling zero-emission vehicles in the state during the quarter, spotlighting the company's dominance. Lower car sales and falling revenue from regulatory credits mean Tesla has to increasingly lean on its energy division to bring in the high-margin sales needed to fund Musk's expensive bets in humanoid robots, robotaxis and other ventures.

(Reporting by Akash Sriram in Bengaluru; Editing by Shilpi Majumdar and Devika Syamnath)