Tag archives for zev credits

Tesla to earn $250 million from sales of California environmental credits

Tesla Model S



Tesla Motors is expected to release quarterly earnings figures within the next few days, and the Silicon Valley automaker is thought to have attained profitability for the first time ever. As it turns out, a good bit of that profit will reportedly come from the State of California.



According to an article from the LA Times, Tesla, which is reportedly on pace to sell 20,000 vehicles in 2013, receives as much as $35,000 in environmental credits from California for each Model S it sells. These credits can then be sold to other automakers that do business in the state but don’t sell zero-emission vehicles of their own. Some experts believe Tesla could earn up to $250 million from such ZEV credits.



While profits from ZEV credits equals good news for Tesla, some experts and rival automakers aren’t very pleased with California’s strong-arm tactics when it comes to the sales of electric vehicles. “At the end of the day, other carmakers are subsidizing Tesla,” said Thilo Koslowski, an analyst at Gartner Inc.



Mary Nichols, chairwoman of the California Air Resources Board, counters by saying, “We are in the air pollution business, not the car business… There is some jealously of Tesla going on here.” Check out the entire article from the LA Times here, it’s an interesting look into the inner-workings of the business side of the eco-friendly automotive marketplace.

Related GalleryTesla Model S

Tesla Model Stesla model sTesla Model STesla Model STesla Model STesla Model STesla Model STesla Model S

By Jeremy Korzeniewski

Tesla posts first quarterly profit; Model S becomes best-selling plug-in car in US (probably)





Julie Christie, the rumors are true. After plenty of hint-dropping over the past few months, Tesla officially released 2013 first quarter (Q1) financial details today, and it was the first quarter in which the ten-year-old company was actually profitable. CEO Elon Musk, speaking on a conference call to investors today, made it clear that the numbers are good, but behind-the-scenes factors make them even better.



Take, for example, Tesla’s capital expenditures. The automaker was profitable in Q1 despite spending a lot of money on things like new stores and Supercharger stations, things that won’t require as much money moving forward. Tesla says it plans to spend about $200 million on capital expenditures in 2013. Or how about the Tesla’s gross margin, which grew from eight percent to 17 percent from Q4 2012 to Q1 2013. That’s the average for the whole quarter, Musk said, and “the gross margin at the end of Q1 was much better than at the beginning.”



The call wasn’t all about money-rolling-in news. We knew Tesla would make money selling zero emission vehicle (ZEV) credits to other automakers, and it did, to the tune of approximately $68 million (12 percent of revenues). Musk said Tesla expects ZEV credit revenue to decline throughout the year, going to zero in Q4. The shareholder letter reads, “We expect this to decline significantly in future quarters, as ZEV credits will only apply to about 1/6 of worldwide deliveries, versus roughly half of US deliveries, and the price per credit has declined.” Some estimates put Tesla’s annual ZEV credit income at $250 million.



More numbers and tidbits from the announcement can be seen below.

Related GalleryTesla Motors, Inc. – First Quarter 2013 Shareholder Letter

Tesla Motors, Inc. – First Quarter 2013 Shareholder LetterTesla Motors, Inc. – First Quarter 2013 Shareholder LetterTesla Motors, Inc. – First Quarter 2013 Shareholder LetterTesla Motors, Inc. – First Quarter 2013 Shareholder LetterTesla Motors, Inc. – First Quarter 2013 Shareholder LetterTesla Motors, Inc. – First Quarter 2013 Shareholder LetterTesla Motors, Inc. – First Quarter 2013 Shareholder LetterTesla Motors, Inc. – First Quarter 2013 Shareholder Letter

  • Tesla had record sales of $562 million, which was up 83 percent from last quarter and resulted in a profit of $15 million (GAAP profit: $11 million).
  • 4,900 Model S EVs were delivered in North America last quarter. This was higher than expected, and likely beat both the Chevy Volt and Nissan Leaf, which has Q1 sales of 4,244 and 3,539, respectively, in the US.
  • Tesla now expects US to exceed 15,000 Model S EVs a year, with global demand probably more than 30,000 a year. This breaks down to least 10,000 Model S sales in Europe and 5,000 in Asia (but it could be more, since China is a wild card, Musk said).
  • Over a million people visit Tesla stores every quarter. Only a small number actually buy a car, of course, but, “There are lots of people who buy T-shirts,” Musk said. “We actually have millions of dollars in apparel sales, without really trying.”
  • Musk said, “We are thinking of reducing the initial [Model S] deposit number, because we don’t really need the cash at this point.” The number is currently at $5,000 but it could be dropped to “some lower number.”
  • Production rate for the Model S – currently around 400 a week – could increase. “We haven’t really started to push volume really hard yet, because you need to make sure your house is in order and the car is being made as efficiently as it can be made before you push volume,” Musk said, adding that we could see a “fairly significant increase in volume” next year.
  • Musk remains confident that financing the Model S is the way to go. “If our car was exclusively available for purchase and not by financing, it would be available for roughly one million US households. With the right financing, it’s probably available to the top ten million households.” The deal is even better in Europe, where the gas prices are so much higher.

Looking further down the road, Musk said the company is “certainly making progress on the Model X” and will finalize the design of that vehicle in the second quarter. The company’s focus remains on Model S production and service but the X “will become our top focus towards the end of this year” in the lead up to the start of production towards the end of 2014.



TSLA stock jumped way up (over $70 a share as of this writing) in after-hours trading. It closed at $55.79. Musk stands to benefit hugely if all this good news continues, thanks to the 2012 CEO Grant, which you can read about here. You can see Tesla’s shareholder letter in the gallery and find SEC information about Tesla’s June 4, 2013 Annual Meeting here. But get ready for less glowing numbers at the next Tesla quarterly call. Tesla’s letter includes this bit of cold water:

The lease accounting treatment for cars sold through our new financing plan will have no impact on our cash flows, and we expect to be roughly breakeven on cash flow from operations in Q2, despite launch costs in Europe and a huge increase in service centers, stores and Supercharger stations. However, the deferred revenue recognition required by GAAP for lease accounting will lead to a net loss on paper in Q2.

By Sebastian Blanco