Tesla to get fewer ZEV credits under modified California program

Article by Andrew Christian, on April 7, 2014

Tesla Motors Inc. will receive fewer California environmental credits for each Model S sold as the state overhauls its zero-emission vehicle program. Tesla sold $129.8 million in ZEV credits to other carmakers in 2013. Under the new program, Tesla will initially receive only four credits per car sold in California and states following its rules – down seven per unit sold in 2013, according to California’s Air Resources Board.

The credit rule change, which was deferred from October and posted on April 3, comes after the board underscored in 2013 the need to ensure the state grant ZEV credits according to only on how advanced vehicles are actually used, instead of their theoretical capabilities.

Some carmakers had remarked that Tesla was receiving more credits than it deserved as it failed to comply with the rapid-refueling requirement, the board said last year. The board said that maximum credits per emission-free vehicle sold in the state surged to from seven to nine and will only be granted only to vehicles with long driving ranges and with refueling time of 15 minutes or less.

Hydrogen fuel-cell vehicles having a range of around 300 miles (483 kilometers) meet the requirement, while a Model S fitted with the largest available battery pack wouldn’t immediately qualify. Tesla is the top seller of California ZEV credits, according to an annual tally, helping the carmaker log $11.2 million in net income in the first quarter of 2013.

Tesla earned $194.4 million from selling ZEV and US Corporate Average Fuel Efficiency credits in 2013, accounting for around 9.7 percent of the annual revenue, the carmaker said in a regulatory filing in February. California’s board said that a final rule change will be set following a public review period.

The 2014 version of the Model S is a Type III ZEV that earns four credits, according to agency spokesman Dave Clegern. He told Bloombergin an e-mail that the Model S would continue to be Type III ZEV until it demonstrates fast refueling. Tesla has proposed to open battery-swap stations to allow drivers to exchange depleted battery packs with fully charged ones within a minute or two.

The plan, however, has yet to be realized. But if the plan pushes through, the proposed rule change also requires detailed documentation of how much they are used, to get the maximum credits. 

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