Tesla Sells Banked Vehicle Emissions Credits to Raise $13.8 Million
Many business start-ups fail within the first few years because they run out of cash. Fortunately for Tesla, the electric-car maker was able to sell banked vehicle emissions credits to other automakers and raise $13.8 million to help keep the young manufacturer alive.
Since setting up shop in 2003, Tesla has barely managed to turn a profit from selling its $130,000 Roadsters. About 1000 of the pure-electric Roadsters have been sold — primarily to big-shot actors, musicians, and electric-car fans — and Tesla is slowly inching towards its initial public offering, expected to generate at least $100 million. Before its IPO, however, the Palo Alto, California-based company must keep the doors open and payroll up-to-date, and that is where the emissions credit sales come into play. Tesla disclosed it sold credits to Honda and at least one other unidentified automaker in an initial IPO filing.
The emissions credit program is managed by the California Air Resources Board and allows automakers to score points with the notoriously stringent state. Recent California emissions-control regulation from 2008 mandated the largest automakers — Ford, General Motors, Honda, Nissan, and Toyota — must combine to sell at least 60,000 plug-in hybrid or pure-electric vehicles in the state over a three-year period. The credits, which are measured in grams per mile of non-methane organic gas (g/mile NMOG), are earned with each certified clean- or zero-emissions vehicle sold and stored within a state database. Companies with more-polluting vehicles can use the credits to offset the extra emissions.
“Having these credits gives us some flexibility for the future,” said Robert Bienenfeld, Honda’s U.S. senior manager for environment and energy strategy. “Whether we’ll need to purchase more, I can’t say.”
Without the credits, automakers are subject to state fines, fees, and potential sales restrictions in California, one of the largest auto markets in the United States.
To further strengthen its commitment to the Golden State, Tesla recently joined forces with Toyota to retool the former NUMMI plant in Fremont to build the entry-level Model S sedan.
Source: Automotive News (Subscription required)
By Benson Kong