Model S Could Earn Tesla up to $250 Million in CARB ZEV Credits

4 years ago by Eric Loveday 12

Tesla Model S a ZEV Credit Earning Machine

Tesla Model S a ZEV Credit Earning Machine

On Wednesday, Tesla Motors will, for the first time ever, report a profit when it discloses its 2013 quarter-one financial results.

Tesla Motors Logo

Tesla Motors Logo

Part of the reason for Tesla’s profit though is beyond direct control of the automaker.

In California, Tesla racks up ZEV (zero-emissions vehicle) credits at a breakneck rate.  It’s believed that Tesla earns approximately $35,000 in ZEV credits from CARB for each Model S sold in the state of California.  We say “believed” because details of the ZEV credits earned are not necessarily disclosed by automakers.  Furthermore, Tesla does not have to report the price at which it sells credits to other automakers.  So, it’s a guessing game here.

Regardless, at least one Wall Street analyst says Tesla will add in some $250 million into its bank account this year from ZEV credits alone.  The analyst further suggests that this is one of the main reasons that Tesla Motors is still around today.

But Tesla isn’t gaming the system.  Any automaker interested in taking advantage of California’s ZEV credit system can do so by simply selling electric vehicles there.

Still, there are opponents out there like Thilo Koslowski, an analyst at Gartner, who says:

“At the end of the day, other carmakers are subsidizing Tesla.”

True, but those “other carmakers” certainly have the option of developing and selling electric vehicles in California, but rather than do that, they opt to take the easy approach of buying ZEV credits from Tesla.

By 2025, CARB mandates that electric vehicles make up 15% of some automakers new vehicle sales in California.  For Tesla, that figure stands at 100% today.

Via LA Times

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12 responses to "Model S Could Earn Tesla up to $250 Million in CARB ZEV Credits"

  1. David Murray says:

    Well, certainly Tesla can’t build a business model on this, as it is only a matter of time before most manufacturers will be selling enough of their own so that they don’t have to buy credits from Tesla. But I’m sure it is a nice boost to their bottom line right now.

  2. MTN Ranger says:

    The ZEV credits will help Tesla until they are able to roll out the lower priced (and more mainstream) Bluestar. Once they reach that point, the ZEV credits will be icing on the cake for them.

  3. Anderlan says:

    This is free market capitalism, where the industrious and capable prosper at the expense of the lazy and incompetent. We need an economy-wide rising carbon price, so this can happen everywhere in every sector!

    1. JIMMY DELL says:

      That sir, is a completely wrong headed idea as is the ZEV credit plan.

  4. Josh says:

    Does Tesla get credits for vehicles sold outside of California/Oregon? The credits could start to dry up once they prioritize shipping vehicles to EU. Nissan is probably racking up a good amount of credits too. They could sell them off cheap to hurt the value of Tesla’s credits.

    I don’t remember the rules off hand, but at one point I heard the credits are basically by kWh of the pack and Tesla got something like 4 credits per 85 kWh pack sold. Anyone know the details of the ZEV credit scheme?

    1. Jay Cole says:

      I do, but I am afraid to say anything for fear I have gotten some persnickety factoid wrong, and will be summarily flamed to death, lol.

      AFAIK, Tesla receives 5 ZEV credit for every 85 kWh vehicle sold as a Type IV, and 4 credits on all 60 kWh vehicles as a Type III….and because they are all at least type III ZEVs, credits can also be earned by selling into other ARB participating states (Cali +10).

      For reference a Type IV credit is earned if the rating range is greater than 200 miles (with FR), the 40 kWh (if it had been produced…and maybe another reason why it wasn’t) would have been a type II (100+ mile without fast charge), good for 3 credits.

      To the ‘big brains’ out there I know the type IV and V are supposed to almost fully recharge in XX minutes, which the Model S can’t quite do…doesn’t matter, it qualifies.

      The non-compliance fee is $5,000 per lacking credit, so that sets a ceiling if you will on the credit, but there are some other factors in the value of these and selling each Model S. ie) obligation thresholds, GHG credits on sales, etc.

      I know I am not smart enough to know the value of each credit, it is really a moving target, so unless Tesla comes out and says what they are selling them for per unit we can’t really know…we can only guess, as they dole them out at their discretion.

      I’m not a “Wall Street Analyst” but I would say they are netting around $17,000 per car, which would work out to around $165 million if they were able to monetize the credits the moment they are earned.

      1. Josh says:

        Thanks for the explanation.

        Glad to see CARB kept it simple. Seriously, what is the point in all the categories. My vote would be been one “credit” for each kWh of battery sold, then let the market sort out what cars they want to drive.

        Additionally, were these rules written for Tesla. Nobody else has a vehicle in the works that could hit the Type III, IV, or V. The LE might just scrape in at type III. I am looking for a link to the official documentation now…

        1. Josh says:

          Ok, found the document, http://www.arb.ca.gov/msprog/levprog/cleandoc/clean_2009_my_hev_tps_12-09.pdf.

          Page C-12 is the table.

          Looks like the LE would only be a type II at best. The type IV and type V categories will most likely not exist by 2017 before their credit values drop down. The grid connection required for a EV that met those specs would be insane, type IV ~250kW and type V ~350 kW. Maybe those rules were intended for FCVs (Honda) that have never made it to fruition.

          1. Jay Cole says:

            Oh lord, you have dug one of ‘them’ up, lol. We have now entered the Matrix. They actually have changed/adjusted those thresholds on the charging, but no one on the market would still qualify regardless.

            That being said, the 85 kWh Tesla Model S is a Type 4 – 5 credit car. The 60 kWh Model S is a Type 3 – 4 credit car. The LEAF/LE/whatever are all type II – 2 credit. If I had to try to explain why/how, the world would implode.

            1. Josh says:

              Figures I would find an outdated document. I will quit doing my own research and take the word of Jay as gospel.

              1. Jay Cole says:

                Definitely do not do that, lol. Nailing down/figuring out CARB ZEV credits/reqs is like nailing Jello to the wall is all I meant, (=

  5. GreenDay says:

    Chrysler must be a big ZEV credits customer of Tesla……lol