California Air Resources Board may drop fast-refueling rule, challenge Tesla profits

Article by Anita Panait, on August 7, 2013

The California Air Resources Board is evaluating whether to eliminate the "fast-refueling" rule that enables electric vehicles with quick-swap batteries to gain bonus credits under the agency’s regulations. This possible rule change could effectively limit Tesla Motors' ability to gain revenues by zero-emissions (ZEV) credits, which was a vital element in its first-quarter profit.

Those zero-emissions credits could translate to big money on the open market, as they are in high demand for carmakers that can't comply with clean-air regulations due to the nature of their offerings.

Tesla posted its first-ever quarterly profit in the first three months of 2013, boosted mainly from sales of its ZEV credits. Tesla logged $11.2 million in profits in the first quarter of 2013, thanks to $67.9 million in ZEV credits and $17.1 million in "other regulatory credits." Tesla posted $73.8 million in losses from operations if the first three months of 2013, compared with $89.9 million in the same period in 2012.

During the carmaker’s first-quarter earnings call, Tesla chief executive Elon Musk remarked that ZEVs would decline during the year as they sell more vehicles overseas.

He vowed to make Tesla profitable by the fourth quarter purely on automotive operations. CARB commenced holding discussions in May to eliminate the battery-swap rule, with a decision due at its October meeting, according to Analisa Bevan, chief of CARB's of sustainable transportation technology branch.

To earn the top level of ZEV credits, an EV must achieve a city-only range of 300 miles and must be able to refill 95 percent capacity in just 15 minutes. Although the Tesla Model S is still short of achieving the requirement with its Supercharger plug-in network, it earns the top credit level by changing batteries.

Bevan told Automotive News in an interview she won’t “presuppose” the outcome of eliminating the "fast-refueling" rule. She remarked that Tesla's emissions credits would not be nullified retroactively.

Topics: california, tesla, profit

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