Tesla On CARB ZEV Mandate: “The Mandate Is Already Far Too Weak”


Tesla Expects Proceeds From ZEV Sales To Eventually Be Less Than GHG Credits

Projected Growth Of ZEV Fleet

List Of Credit Acquirers

List Of Credit Acquirers

In response to California laying out ZEV guidelines for smaller automakers, Tesla Motors basically says that the existing guidelines are already far too weak, so why make it even easier for automakers to comply.

Tesla’s response comes via Diarmuid O’Connell, vice president of business development:

“The mandate is already far too weak.I don’t think it was ever conceived that a pure-play electric car company like Tesla could exist, let alone thrive, but we have. The inconvenient truth is that our success has revealed the weakness of the mandate.”

“Credit revenue used to move the needle at Tesla. It doesn’t anymore, and it hasn’t for some time. What is a strategic driver of the company is to put as many EVs on the road as possible, whether they’re ours or whether they’re produced by other manufacturers.”

Tesla doesn’t seem too thrilled by a push from some automakers that would, if passed, replace ZEV mandates with an e-miles formula, thus allowing compliance for some automakers through sales of plug-in hybrids.

List Of Credit Sellers Over Last 12 Months

List Of Credit Sellers

As Automotive News reports:

“Those companies have “access to the same financial markets that enabled Tesla to raise all of the funding it needed to launch electric vehicles,” Ken Morgan, Tesla’s director of business development and government affairs, testified during the hearing.”

“The problem, Morgan said, is not that the rules are too strict but that they are too lenient, with too many ZEV credits being made available to automakers. He said all automakers could comply from now until 2022 without changing their product mix at all, simply by using their existing credits — and until 2023 if they bought credits from Tesla to supplement their stockpiles.”

Next year, California will fully reviews its ZEV guidelines.  The prediction is that the state won’t weaken its laws:

“I don’t think California is going to roll back the standards,” said Simon Mui, an environmental advocate who runs the California vehicle program at the Natural Resources Defense Council. “Now that we have leaders within the industry with a competitive advantage in EVs, it’s a very different game than it was 10 years ago.”

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27 Comments on "Tesla On CARB ZEV Mandate: “The Mandate Is Already Far Too Weak”"

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Dont move a needle at Tesla?

60 Mio in ZEV Sales, that would double the Non-GAAP loss in Q1 2015.

Look at all the used Tesla cars for sale, they are not really getting driven a lot.

Imo having 5x times the number of PHEV with 40 Mile range would do environment much better favor then 1 Tesla driven 500-1000 Miles a month

… Where did You learned Your math?

1 Tesla -> 110k $ (avg. price tag)
5 PHEVS = 1 Tesla = 110k $


Also note that computing green house gas emission Tesla have better MPGe then any PHEV on the market so 1 Tesla is always > then 1 PHEV, sometimes 1 Tesla is > 2 PHEVs.

Tesla Zealots shoot on sight!

I ment the value earned in Credits not the MSRP of the cars!

A Tesla is awarded same value as ca. 5 PHEV in $ Terms of the Credit Market Value (Maybe its 4 PHEV there is no precise prices unfortunetly)

Well getting 5 people vs 1 person showing and promoting electric driving is a better thing. Imagine the greater influence to friends, family, co-workers, etc.

Not all BEVs need be Tesla’s there are many under $30,000 options. Even under $15,000 when considering the 2-year old used-LEAF market.

A LEAF, i3, eGolf, 500e, etc driving 100% electric miles has a bigger impact on reducing GHG and partial polutaiants than a PHEV capable of 10-40 EV miles. If credits are base on lower number of EV miles, then the drivers should be getting credit and incentivized for the EV miles driven!

It’s still less than 5% of revenue, it used to be 10+% (over $100 million).

And what Tesla is saying is that automakers don’t even have to change their product mix until 2022, with Tesla’s credits moving that to 2023. That is very lenient to say the least. Basically they can sit doing nothing for 7-8 years.

5% of the revenue is a bad stats.

As those credits are PURE PROFIT so that is straight into its profit margin.

Since Tesla are building EVs regardless, any additional sales of ZEV credits goes into it profit margin directly which is much more effective than % revenue…

Analysts use ZEV credit numbers as a percentage of revenue. The Tesla doubters like to use as a percentage of margin or loss because that inflates the significance of it.

Revenue is the proper one to use as it doesn’t introduce other independent variables like fluctuations in R&D and administrative spending.

If you must, you can also take a look on gross margin impact, which was 2-7% for the previous 3 quarters (Q1 2014/Q2 2014 had insignificant ZEV credit sales so I didn’t bother to calculate for those):

Q3 2014 Q4 2014 Q1 2015
GAAP gross margin 29.6% 27.4% 27.7%
non-GAAP gross margin 29.4% 26.7% 28.2%
GAAP auto exc ZEV 22.6% 22.0% 25.0%
non-GAAP auto exc ZEV 23.0% 22.0% 26.0%
GAAP percent impact 7.0% 5.4% 2.7%
non-GAAP percent impact 6.4% 4.7% 2.2%
ZEV Credit Sales (mil) 76 66 51

So you can see pretty clearly the significance of ZEV Credit sales is continuing to shrink.

If Tesla truly cares so much about making auto OEM produce more EV then why do they participate in selling credits to them? Furthermore, why do they point out mid-rant that they have credits for sale?

The fact is Tesla is expecting their future sales and production to drastically increase. Without a need for CARB credits themselves, they need a larger market for selling those credits to Chrysler, Honda, and Toyota.

Actually, it is their preference to get other automakers to build EVs and the point that Tesla is making here is that letting them stockpile a bunch of credits to comply won’t compel them to do much of anything.

They probably think the market it too saturated with credits and I agree. I never was a fan of emissions credits, even when I did work at ARB.

They were making a point on how weak the regulations were. When they said that automakers can be in compliance up to 2022 with their own credits and up to 2023 buying Tesla’s credits, they are saying “the regulations are so weak that automakers don’t even have to add any new plug-in models at all and they would still comply with the regulations.”

What matters is how many ZEVs are built, not whoever builds them. That Tesla participates in the ZEV market doesn’t change the total requirement. The main issue here is that the total requirement is way too low.

Given the ultimate stated mission of Tesla is to make BEVs viable in the mainstream as quickly as possible, allowing PHEVs to replace and delay them does not satisfy that goal. PHEVs were advertised and sold to CARB as a stepping stone to BEVs. If it is used instead to delay BEVs as much as possible, then that runs counter to the goal.

Regarding “the total requirement is way too low”. This impacts an auto manufacture that want to scale EV production (eg: Nissan and Tesla) more than an auto manufacture keeping the same mix.

This is because more credits than demand lowers value to sellers, which means buyers are able to purchase at lower cost.

The CARB Credit System is broken and needs to be fixed.

For California, 2014 EV sales volume has already pass that CARB has set standard for in 2017/18 (140,000+ EVs in CA as of Jan 2015). This is a fact that shows the the number of credits in circulation exceeds those needed to met CARB requirements. CARB needs to set requirements based on market realities, or better reward the high volume EV manufactures.

The ZEV mandate is weak. And one thing they should do to strenghten it is to make the change that no vehicle can get more than one credit.

The credits should also not be sellable/transferable from one manufacturer to another, or even from one brand to another.

They should also have a fairly short expiration date, maybe 2-3 years.

The goals should also need to be achieved in every CARB state, and maybe come with a collective punishment from all CARB states if they don’t achieve the goal in one (or more) of the states.

The goals today are better than nothing, but way to lenient.

It they’re not sellable or transferable, why would car makers make more than the minimum (besides trying to save the world)? Being able to sell and transfer them is a reward to car makers who are “all in” with regards to ZEVs that increases their profits, while at the same time increases the expenses (lowers the profits) of car makers who shun making ZEVs. JMHO.

It’s rather the other way around. If transferable/sellable then you would reach absolute bare minimium since you could always fill the gap with credits from other manufacturers. Having extra credits for sale is worthless if you have no-one to sell them to and no one would buy credits if they have reached their quota of sold EVs.

On the other hand if they are only for you then you need to produce above bare minimum to keep a healthy buffert assuming some year wouldn’t work out as you wanted, and then there isn’t some cheap credits from other manufacturers to bail you out.

And all-in manufacturers like Tesla totally disturbs the credit market since they make sure that a lot of manufacturers won’t even have to reach their bare minimum levels since there are fairly cheap credits to buy from companies like that who have a massive excess.

So take away the possibility to transfer/sell credits and put an expiration date on credits and we would see a lot higher EV sales in CARB states.

The main goal of the auto-petro cartel is to delay as much as possible and by any means including manipulating legislations, the inevitable death of the ICE.

I agree the ZEV formula already gives Tesla more credits than it deserves. While Tesla gets more credits when it sells a Model S than Nissan gets for selling a Leaf, the Model S won’t rack up many more electric miles than the Leaf. For that matter the Model S likely doesn’t give you many more electric miles than what you’d get from a Chevy Volt.

CARB should simply move to giving credits based on expected electric miles rather than on electric range.

Or actual electric miles driven, which could be determined and recorded during vehicle’s annual safety/emissions inspection.

If on the average Volt the percentage of miles done in EV mode is about 65% (not far off IIRC), then assuming that a Model S could have covered all of those miles, an average Model S would have 50% more EV miles than an average Volt. You also have to consider that a Model S has more utility for families who might otherwise “need” a gas-guzzling minivan or SUV.

What you guys propose is impossible under current California law and under the conditions of EPA’s waiver for California under the Clean Air Act. The laws stipulate that ARB is only allowed to regulate the emissions of vehicles that are “introduced for sale” in California. ARBs authority ends after the vehicle has been sold. The SMOG program is something different and is managed by the Bureau of Automotive Repair.

Now, having said all of that, I would very much like to see a program implemented that requires inspection of all registered vehicles (not just to check emissions, but a full vehicle inspection) on a bi-annual basis (which would include logging annual miles) similar to something like what Australia does. But I’m not holding my breath for that.

Coming from a country with annual mandatory (full) vehicle inspection I feel a bit surprised that you would want a biannual inspection.
Once a year is enough.

And as far as I know there are plenty of clunkers out there in the US, so what is the time between mandatory inspections now?

My state used to have annual safety inspections. They were eliminated many years ago. No inspections are required at all.


Seriously? That seems like one dangerous path to go.

If Tesla wants to force other carmakers to produce more plug-ins, then they should stop selling their credits – at least until the price gets high enough to be painful for the other carmakers.


Since Nissan and Telsa are claiming that they are fully embrace the ZEV cars, then they should lobby the CARB to NOT allow the sales of credits/transfer of the credits and mandate the actual cars sold.

That way, all automakers will be forced to produce “competitve” PEVs competing against Nissan and Tesla which will end up benefiting the buyers…