Why The Tesla Model 3 Performance Ultra Red Color Is Really A $9,500 Option

Due to restrictions in the Inflation Reduction Act, new electric vehicles must fall under a certain price in order to qualify for the $7,500 federal tax credit. Very few vehicles can claim the credit after the latest IRA regulations were passed, and some vehicles like the recently-revealed 2024 Tesla Model 3 Performance are treacherously close to the price caps. The hotly-anticipated Model 3 Performance facelift was first revealed with a $52,990 starting MSRP, but Tesla has already increased the price by $1,000 to $53,990.

Because the IRA imposes a price cap of $55,000 for sedans/hatchbacks and $80,000 for trucks/SUVs, the Model 3 Performance qualifies, but only just. This has some interesting implications given that the cheaper Model 3 Rear-Wheel Drive and Long Range All-Wheel Drive models do not qualify (due to battery sourcing requirements), and because a single option such as color can easily push the EV out of tax credit consideration.

According to the EPA, the price consideration for eligibility is based on MSRP, and not dealer-adjusted markups. The description reads:

The MSRP is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges, the cost of optional items added by the dealer, or taxes and fees. In addition, manufacturer/dealer incentives and trade-ins do not affect MSRP.

Don’t Get Ultra Red

The Model 3 Performance is close to that $55,000 price threshold, meaning simply choosing the wrong color combination can push it over and effectively eliminate it from getting a $7,500 tax credit. Ultra Red is the most expensive paint color at $2,000, instantly pushing the car above the $55,000 cap. In other words, you have to pay $2,000 and lose the $7,500 credit, meaning the color really costs $9,500. If you want to retain the credit, the only exterior options that will keep the price under $55,000 are Stealth Grey (no-cost), or any of the $1,000 paints: Pearl White Multi-Coat, Solid Black, and Deep Blue Metallic.

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You need to be mindful of more than only exterior colors when ordering a Model 3 Performance. The all-black interior is a no-cost option, but opting for the Black and White interior adds $1,000 to the price. That means you can only get this interior combination with Stealth Grey, as any other color will push the car over $55,000. Full Self-Driving Capability is also a no-go as it’s an $8,000 option that pushes the Model 3 Performance way over the limit. The Tesla Model 3 Performance is not the only car guilty of this, however.

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Other EV Models To Be Wary Of

Tesla Model X

Starting at $77,990, the Tesla Model X doesn’t have a lot of breathing room to reach the $80,000 price cap. Because the X is larger than the 3, Tesla charges $2,500 for Ultra Red paint instead of $2,000. That means, just like the Model 3, a single paint color can push the Model X over the price limit. The other colors are priced at $1,500, so all of them are compatible with the tax credit.

Other options that can push the Model X over $80,000 include 22-inch turbine wheels ($5,500), the seven-seat ($3,500) or six-seat ($6,500) layout, and Full Self-Driving Capability ($8,000). If you want to claim the credit on a Model X, avoid these options.

Ford F-150 Lightning

Though Tesla’s Ultra Red paint is the most egregious example of an option pushing an EV out of tax credit consideration with an exterior paint color, it’s not the only example where something like this can happen. Every eligible EV or PHEV is calculated via the base model, but higher trims can exceed the threshold of $55,000 or $80,000. The Ford F-150 Lightning is a perfect example. The XLT and Flash come in well under $80,000, but the Lariat costs $79,090 including destination charges. If you add Rapid Red Metallic, the price increases to $79,585. Adding the Max Trailer Package, or even something as simple as a Mobile Power Cord takes it over $80k.

Jeep Grand Cherokee & Wrangler 4xe

The Jeep Grand Cherokee 4xe starts at $60,490, but some trim levels can approach or exceed $80,000. The Summit Reserve 4xe trim is dangerously close at $79,150, meaning any of the $595 paint options plus another option will make it lose the credit. To retain the $7,500 incentive, avoid the Bright Side Steps by Mopar ($975), Luxury Tech Group V ($905), High Altitude Package ($2,025), and Advanced ProTech Group IV ($2,865). If you add all of these options plus a color to the Summit 4xe, it can also exceed $80,000.

It’s possible to push a Wrangler 4xe above $80,000, but it requires a lot of pricey options that we can’t imagine many owners combining in one vehicle. Starting with the Rubicon X 4xe ($70,990), losing the credit would mean selecting an optional color ($595), Dual Door Group with Premium Uppers ($5,395), Sky One-Touch Power-Top ($3,995), a Warn Winch ($1,995), and one or two cosmetic enhancements.

Rivian R1T & R1S

The Rivian R1T starts at $69,900 for the Dual Motor configuration with a standard battery. Opting for the Standard+ ($3,100) or Large ($9,100) battery packs keeps it in range for a partial $3,750 credit, but the Max ($19,100) pack with the 410-mile range pushes it well out of contention. On the powertrain side, you must stick with the base 533-hp Dual Motor AWD configuration because the Performance Dual Motor AWD costs $5,000 and requires the Large battery pack for $9,100, pushing the price to $84,000. The Quad-Motor AWD setup also requires the Large battery, bringing the price to $87,000.

Since the R1S is more expensive, starting at $74,900, there are fewer ways to upgrade it without losing the tax credit. You can opt for the Standard+ battery, taking the range from 270 to 315 miles, but any of the wheel/tire options or non-black interior combinations will take it over $80,000.

When ordering an EV or PHEV, it’s important to be careful when selecting options to be mindful of the $55,000 and $80,000 price caps. Just because a vehicle can qualify for a credit, doesn’t mean your particular example will. Aside from getting a color you may not want, leasing is the perfect loophole to claim the tax credit. At the time of writing, leasing an EV or PHEV, even one that doesn’t qualify for the credit under the IRA, will have it factored into the lease payment. This may not be an option for some, but it should reduce your research while shopping.