Will This Credit Rule Change Be a Game Changer for Tesla?
It has been a big summer for Tesla Motors (NASDAQ:TSLA), as the automaker continues to make headlines with its popular Model S sedan, government loan payments, and even bigger plans for the future. But unfortunately for South African CEO Elon Musk, the California Air Resources Board could present a significant setback for the electric car giant.
Much of Tesla’s success in posting its first-ever profit in 10 years can be attributed to its sale of zero emissions credits to other automakers struggling to meet clean air standards. However, Automotive News reports that California regulators are now considering eliminating the very rule that has afforded Tesla such lucrative sales, and the U.S. automaker might now have reason to worry.
The “fast-refueling” rule in question is that which awards extra credits for those vehicles with batteries that can be swapped quickly. It has garnered significant media support recently, especially after Musk demonstrated in June just how quickly new technology allowed these battery packs to be switched out. However, now that the agency is reevaluating the future of that rule, things could be changing — and Tesla may have to reconsider how it advertises its business.
This is a major problem for Tesla, as its first-quarter profit basically hinged on the sale of these ZEV credits. Automotive News reports that it made $11.2 million in profit, and this number was only possible thanks to the $67.9 million the automaker made in ZEV credits.
The company expects the California Air Resources Board to make a final decision over the battery-swap rule by October. When asked why the regulators were considering changing the ruling, spokesman David Clegern said, “We were worried an OEM might make the battery swappable, but not have any supporting locations or infrastructure available to the user.”
Tesla has yet to comment on the possibility of the rule’s elimination, and although Musk has maintained that emissions credits are likely to decline as more vehicles are sold internationally, many are still speculating what CARB’s verdict will mean for Tesla. If the rule does end up being eliminated, those who have already bought Tesla’s emissions credits won’t be affected, but the value of credits per car sold will be substantially less, according to the Automotive News report. In Tesla’s SEC filings, the company reported credits sold worth $67.9 million, but didn’t list the buyer of these credits, how many the automaker sold, or how many it still has to sell.
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