Nissan Starts Selling Green Credits, Puts Pressure On Tesla Profits And EV Industry Itself

4 years ago by Jay Cole 26

Nissan Gets Into The Business Of Selling ZEV Credits

Nissan Gets Into The Business Of Selling ZEV Credits

In order to be able to sell traditional cars and trucks in California (and 14 other states following CARB standards) free from EV compliance fees, very large automakers have a minimum threshold of all-electric vehicles to sell each year.  After 2014 the net widens to more manufacturers and the minimum level of compliance rises.

Each Nissan LEAF Sold Could Generate 3 ZEV Credits For Another Automaker

Each Nissan LEAF Sold Could Generate 3 ZEV Credits For Another Automaker

Fortunately (or unfortunately depending on your prospective) these minimum levels are expressed by the accumulation of ZEV, or Zero Emission Vehicle credits – a tangible thing that can be traded and sold between automakers

Outside of Nissan, Tesla has been the only automaker with an excess of these (given they only make electric vehicles), and have been selling them to other carmakers (most notably Honda) that require ‘help’ in meeting CARB compliance.  In fact, all of Tesla’s profit in 2013 ($41+ million – ex-items) can be attributed to selling green credits.

Now Nissan is in the game.  And unlike any other major OEM, they have credits to burn in a big way.

“We’ve got carbon credits to sell, and we’re selling them. California ZEV  credits,” Executive Vice President Andy Palmer told reporters and Automotive News in Irvine, California this  week.

Only needing a few thousand LEAFs sold (@ 3 ZEV credits a pop) to comply with base regulation by the end of 2014, Nissan has now sold 29,212 all-electric LEAFs to date in the US, more than 2/3rds in compliance states.

So, while the other major automakers are struggling to come up with generating just the few thousand credits to comply, Nissan is knocking that number out monthly with the new 2013 LEAF,  which now consistently sells 2,000+ units per month.

Nissan’s decision to now sell credits is bad news for Tesla (and probably the EV industry in general), and the drop in Tesla’s green revenue can already be seen in the California company’s quarterly results.

Tesla Q14,900 Model S sales ~ $68 million in credit revenue ($13,877 per car)
Tesla Q2 5,150 Model S sales ~ $51 million in credit revenue ($9,903 per car)

Tesla CEO Elon Musk Says Green Credit Revenue Not Necessary To Achieve 25% Profit Margin On Model S By End Of 2013

Tesla CEO Elon Musk Says Green Credit Revenue Not Necessary To Achieve 25% Profit Margin On Model S By End Of 2013

CEO Elon Musk has noted that future green credit revenue will “decline significantly in future quarters,” as half of future Model S production heads outside the US, and as more downward pressure is applied to the value of the credits over time.

While both Tesla and Nissan are now selling credits, they are both looking at the transaction from completely different angles, and are selling those credits for different reasons.

Tesla would like to see the credit continue to stay high in value and to help their bottom line, whereas Nissan may actually be led to sell the credits in the future at a discount not caring at all about the money, but the greater effect of selling those credits has on the industry in general.

As of now, Nissan can fund the ZEV credit demand for the entire industry, so if Nissan offers the credits to their potential competitors (the likes of Honda, Toyota, Ford, Chrysler, etc.) at a discount, they essentially put an incentive out to the other automakers to NOT make electric vehicles that they DON’T WANT to build.

Essentially, any automaker Nissan does sell their credits to, will NOT  be competing with the Japanese company’s electric vehicle offerings in any meaningful way – or at the very least, the easy availability of credits would curtail the other OEMs from selling their EVs cheaper/at a loss to make their numbers and eroding the perceived value of EVs to the general public, if they (other OEMs) know Nissan has credits on the table and ready to go.

Nissan did not disclose the amount of credits they had already sold, or to whom.

Automotive News – hat tip to Alan

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26 responses to "Nissan Starts Selling Green Credits, Puts Pressure On Tesla Profits And EV Industry Itself"

  1. Dr. Kenneth Noisewater says:

    CARB standards don’t apply to forced-induction vehicles?

    1. Jay Cole says:

      I see where this is going, lol. Going to change that to “traditional” cars and trucks right now, (=

      1. Dr. Kenneth Noisewater says:

        😉

  2. Tesla knew this was coming. I’m actually surprised Nissan held back so long. Nissan alone can dictate the price the others pay because they have so many available to sell. I don’t think they’ll sell them at much of a discount in an effort to keep the competition from developing competition though. They will eventually all have to build alternative fuel vehicles on their own and even with all the kicking and screaming, I bet they all have secret programs developing plug in vehicles now that we’ll see in the next 4 to 5 years or so, even if their heart really isn’t in it.

    1. pjwood says:

      True. For all the difference they’ve made, Tesla has not projected earnings with any assumption of ZEV revenue in the mix.

      Wasn’t Toyota in a similar position with different federal emissions credits, when they went along with a rule change that ultimately required all manufacturers comply with even more strict guidelines? That’s what is likely to come of this, especially considering California/CARB’s disposition on ZEVs, in general.

    2. Brian says:

      They all have programs, and they aren’t that secret. All of the mentioned automakers already have compliance cars. And their hearts definitely aren’t in them.

      I don’t know whether Nissan could float the entire industry for very long. Don’t the requirements tighten up pretty quickly? The best they could do is delay the competition and expand their own lead. Come to think of it, this could help their side of the QC standards war. If they delay everyone else for 1-2 years, at the same time expanding CHAdeMO, SAE CCS won’t have a prayer (if it has one today)…

      1. Jay Cole says:

        While not getting into it too much, the minimum base level of compliance doubles starting in 2015, and expands out to include not just the very large OEMs.

        Doing napkin back math (please don’t quote me as there is a lot of moving pieces to getting to a future number estimate), I think that will work out a need for around 60,000 credits per year starting 2015 for the industry as a whole.

        1. Brian says:

          Thanks. Most of what I know about CARB requirements I have learned from InsideEVs 😉

          So 60,000 credits would be 20,000 Leafs, right? Well, I guess that’s reasonable for 2015. But how long until it tightens up again?

          1. Jay Cole says:

            The next phase runs 2015-2017…then it gets tough, and the number of credits per car (on average) is reduced.

            Then again, there is going to be some OEMs selling a lot of EVs by 2018 if the federal credit system doesn’t get an overhaul by then (which is probably will)

            1. The only credit reduction is an across the board 3 credit cap per car, starting 2018 model year.

              That means all those hydrogen fast refueling 300 mile range cars that Toyota and Honda will produce for 2015-2017 won’t get 7 credits each. Battery swapping is also in jeopardy of losing the “fast refueling” status.

              Also, there is a $5000 penalty PER CREDIT for pure ZEV cars not produced.

  3. Bloggin says:

    Clearly Ford won’t need to buy any ZEV credits from Nissan.

    CA ZEV Credits are earned through the sale of various types of electrified vehicles.
    ZEV = Zero Emission Vehicle
    NEV = Neighborhood Electric Vehicle
    NMOG = Non-Methane Organic Gases
    TZEV = Transitional Zero Emission Vehicle
    AT PZEV = Advanced Technology Partial Zero Emission Vehicle
    PZEV = Partial Zero Emission Vehicle

    As of Oct 2012, the last CA reporting, Nissan ended with the following credits:

    ZEV: 660
    NEV: 0
    TZEV: 0
    ATPZEV: 0
    PZEV: 1,507
    TOTAL: 2,167

    Which included the sale of just over 5k Leafs where many were sold in CA for Nissan to receive credits.

    Ford on the other hand, offering more than just 1 EV accumulated more credits

    ZEV: 215
    NEV: 999
    TZEV:0
    ATPZEV: 573
    PZEV: 846
    TOTAL: 2,633

    Then as we calculate total qualifying electrified vehicle sales through July 2013, Ford has sold 56,071 units(not including CNG commercial vehicles that qualify) to Nissan at 21,522.

    So it seems by offering a wider range of electrified powertrains from full EVs, plug-in hybrids, hybrids and CNG vehicles, along with a wider and expanding range of vehicles with these powertrains that Californians want is the key.

    1. Steve T says:

      There is a minimum # of cars sold that have to be pure electric zev. so the other ones don’t apply. Ford could sell a million c-max energis and still need zevs, that is why GM is selling the spark in californai now even though they also have the volt

      1. The minimum for pure ZEV is 0.79% for 2012-2014, and 3% for 2015-2017, and it jumps again in 2018.

        This is probably the single biggest reason for hydrogen cars… 7 credits each (assuming 300 mile range) through 2017, when all cars become capped at a max of 3 credits each starting 2018.

        I can’t wait to see what these companies will do for 2018!!!!

  4. Rick Danger says:

    Nissan *does* need to use some of their credits, since they also sell many gas cars in CA, while Tesla does not.
    Interesting angle, though, about Nissan selling credits at a discount to widen their lead. Why not? Some of the other OEMs are just stupid and short-sighted enough to buy into it.
    Wouldn’t it be something if CA decided to change the rules again, and double, or quadruple the numbers of ZEVs required in the future?

    1. Brian says:

      Maybe the other OEMs are still hoping that CARB will back down once again. Or that fuel cells will magically save them in 2015.

    2. Rick says:

      Yes, it would be something if CA decided to change the rules again, and not all that surprising if they did. CA is always trying to legislate the laws of economics.

      1. Brian says:

        “CA is always trying to legislate the laws of economics.”

        One of the biggest problems in free-market economics is that it cannot consider externalities (such as air pollution). CA is trying to pass legislation that causes these externalities to have a direct financial impact. It is a noble goal. Whether their approach is working, well that’s a different question. I think it is helping more than hurting.

        1. David Stone says:

          Actually, free-market economics does factor in all costs, including externalities.

          What we have is not a free-market economy, but a poor image of one.

          1. Trace says:

            There is no such thing as a “Free Market” in the real world. Governments issue stable currency, provide legal frameworks and court systems to ensure “the sanctity of the contract”, and provide for diplomatic and military support of the economic system.

            “Free Market” is just a prettied up euphemism for feudalism.

  5. Credits have little value unless you do not have enough!

    The “Travel Provision” with California’s ARB (Air Resource Board) ZEV (Zero Emmission Vehicle) Program allows ZEV Credits for Section 177 states to count in CA as well as state where vehicle was sold. This already effectively halves the value of credits (a single vehicle sale counts both in CA & a 177 state). After MY 2015 when CARB ZEV requires each 177 state to individually meet ZEV fleet percentages; new revisions to CARB accounting rules ease Travel Provision to lower restrictions on transferring credits between 177 states, and open up transfers between east-west state pools. Open access to ZEV credits lowers value to those over complying and lowers price to those manufactures needing to meet minimum ZEV requirements.

    Additional modifications to CARB ZEV program reduce advanced credits for achieving high range and fast fueling goals (but excludes fuel cell vehicles). http://www.arb.ca.gov/msprog/zevprog/2013zevreg/proposedregchanges052013.pdf
    For Tesla these modifications mean a drop from max. 5 credits to 2-3 credits for Model S. Extra credits for go 250+ miles & 10 miles capacity range) also gets similar credit. This makes it much easier for manufactures to satisfy ZEV credits with TPEV sales. ie: A lowered incentive to market 100-150 mile range BEVs.

    The good news is consumers have gotten a taste of what real BEVs deliver in terms of performance & experience (Nissan Leaf & Tesla S) that sales have now exceeded CARB ZEV program requirements. eg: BEV sales in California have now passed 1% of sales for 2012. US sales of PEVs in August reached 125,000 (half BEVs being purchased the in past 9 months; ie: very strong growth). In 2014 the number of BEVs will exceed 100,000. Tesla is positioned to be a major disruptor in 2014 with a network of SuperChargers providing coverage for over 80% of US population.

  6. Lensman says:

    “…and eroding the perceived value of EVs to the general public, if they know Nissan has credits on the table and ready to go.”

    I guess I’m missing something. For someone looking to buy a new car, why will the presence or absence of excess carb credits at Nissan affect whether he perceives the value of an EV to be less than or greater than a gas guzzler? Why should he care, and why would it affect his buying decision?

    1. Jay Cole says:

      I think maybe the ‘they’ meaning the OEMs in that portion of the statement is throwing you (and perhaps other readers) off…I’ll add a little note in there in the original story. We didn’t mean if the general public knew about cheap credits being available, but other automakers.

      Here is the full quote (with the added OEM descriptor)

      “…the easy availability of credits would curtail the other OEMs from selling their EVs cheaper/at a loss to make their numbers and eroding the perceived value of EVs to the general public, if they (other OEMs) know Nissan has credits on the table and ready to go.”

      The jist is that other automakers are far less likely to produce a compliance EV, then sell them cheap and quick at a loss to make their numbers if they know someone has a ZEV credit pile that can be had on the cheap

      ie) Fiat 500e being sold at a 10k loss at $199/month, or the Honda Fit EV at $259/month with nothing down and unlimited lease mileage

      I think Nissan would rather discount away some credits and put money in their pocket than see either of these on the market now (or others in the future)…and it will only get worse with future offerings and as they all start competing with each other and more and more ZEVs are required

      1. Rick Danger says:

        Good point Jay. When the pricing was announced on the Chevy Spark, the 1st thing that came to my mind was, there’s no way they will sell them in any other states for anywhere near that price.
        It’s not fair to the few automakers who *have* made the decision and the financial commitment to manufacture and sell EVs to the whole country, to have people hear about unrealistic low prices, even though those prices are only attainable in CA. The general public knows little enough of EVs, and even less of the vagarities of CARB credits.

  7. Spec says:

    Good for Nissan! They deserve to make some extra money for being a pioneer in the EV space!

  8. TSLA says:

    leaf is so ugly if it wasnt electric no one would buy that hideous thing

    1. David Stone says:

      Yes they would.

      The leaf is ugly, but there are even uglier cars on the road, and not all are evs.