Elon musk told investors last week how excited fans are for Tesla’s Cybertruck, a “futuristic armored personnel carrier.” But there’s one thing the pickup won’t bring in: the extra income from emission credits, an advantage for the manufacture of fully electric vehicles without emissions. It is just too heavy for these government incentives.
California, and 10 states that follow their zero emission vehicle rules, mandate that a portion of automakers’ annual sales not produce tailpipes, creating an opportunity for Tesla to sell credits it does not need to large automakers that fall short. It also sells credits to manufacturers who do not meet federal requirements for the company’s average fuel economy. The proceeds from those sales were very useful in 2019, helping Tesla better forecast analysts (who never know exactly when it will release them). by Tesla a surprise profit of $ 143 million in the third quarter last October, which skyrocketed the title, was grumbled by $ 134 million in credits. His $ 105 million in fourth quarter net income achieved an increase in credit sales of $ 133 million.
“Every once in a while an analyst tells you ‘Oh, this is some kind of scam.’ It is not a scam. They generate ZEV credits and emissions credits that they can sell to other companies because they don’t make internal combustion cars, ”said Joe Osha, equity analyst for JMP Securities with a performance rating of. Tesla stock market. Forbes. “There is nothing wrong with that.”
Separately, Tesla rose nearly 20% on Monday to hit another record high, surging $ 129.43 to close at $ 780 and pushing its market cap to $ 140.5 billion. Musk is the company’s largest shareholder and Forbes estimates that the gain in the stock price pushed his net worth to $ 39.3 billion.
The current California rules for Zero emission vehicles, which generate the credits, only cover lighter cars and trucks i.e. Cybertruck (apparently weighing over 8,500 pounds), will not produce the same green bonus that Tesla enjoys Model 3 and S sedans and X and Y crossovers for at least six years. It’s because new rules for medium-duty vehicles, those weighing more than 8,500 pounds, exclude pickup trucks up to model year 2027 (typically, model years begin in the second half of a calendar year). by Tesla Website says Cybertruck could arrive in 2022, suggesting that it could be a 2023 model year vehicle.
Tesla has asked California regulators to revise its timeline and speed up the start of new ZEV rules for medium and heavyweights pickup trucks to model year 2024 in a letter to the state’s Air Resources Board, arguing that in terms of technological readiness, there is no need to delay the program for another three years. California has not changed its plan yet. Tesla did not respond to a Forbes request for comment.
Tesla’s credit income “tends to quite reliably track between 2% and 2.5% of their auto sales,” Osha explains. “The details have been very slim (about Cybertruck) but it looks like they are being crushed by the absurd weight.”
While the business is less dependent on them than in its shaky beginnings, the credits generated $ 594.2 million in additional revenue last year, with an enviable 100% profit margin. Tesla has reserved $ 2.3 billion in ZEV and U.S. emissions credits from 2008 to 2019, more than half of which in the past three years, based on company data compiled by Forbes. No automaker comes close as a net credit generator.
Tesla is thriving in pickup trucks for a simple reason: They are the best-selling vehicle in the United States, led by Ford’s F-150, the perennial volume leader, and have average transaction prices over $ 40,000. With its heavy steel and aluminum frame and chassis, and its battery weighing well over a ton, Cybertruck weighs about twice the curb weight of the F-150, which ranges from 4,069 to 5,697 pounds. Even Ford’s beefiest F-250 and F-350 models, with bigger engines and more towing capacity, weigh less than 8,000 pounds.
Cybertruck polarized criticism when Tesla showed the piece of metal with blocky geometry out of the computer game Minecraft. Although his debut in november was wasted when metal balls cracked windows that Musk had described as nearly indestructible, “demand has been incredible” since then, he said last week.
“We will sell as many as possible. It’s going to be pretty crazy. The product is better than people even think, they don’t have enough information to realize how great it is, ”he said on the call. Production could start in 2022 and it costs only $ 100 to reserve a Cybertruck. Tesla says more than 250,000 people have done so. Musk did not provide an updated figure last week.
If California, the premier market for ZEV credits, is not open to Cybetruck until 2027, can Tesla turn to companies that need credits to meet federal heavy vehicle emissions requirements? The United States has adopted stricter energy efficiency and greenhouse gas rules for trucks in 2016, but manufacturers can probably satisfy them without needing electrical transmissions for a while, says Margo Oge, a distinguished fellow of the Washington-based Climate Works Foundation and a former EPA career official who helped write the U.S. rules. on fuel economy.
Federal Credit Outlook
“I don’t expect Tesla to be able to sell (Cybertruck) credits” until 2027, says Oge Forbes. “The standards will be met by implementing existing technologies,” such as making vehicles that are lighter, more aerodynamic or using more efficient transmissions and engines, she says. “The only way Tesla can sell credits in this market is for CARB to successfully implement EV standards for commercial trucks. ”
Julie Domike, a lawyer with Washington-based law firm Babst Calland that works with manufacturers on compliance with federal regulations, agrees Cybertruck credits won’t be a hot commodity in the short term, but that could change. “It’s hard to predict how viable this market is and where it will be even two or three years from now, but I firmly believe there will be a very real market for these credits.”
If there is a demand for middleweight pickup credits, Cybertruck may be the only game in town for a while. Fast moving, the highly funded Rivian start-up, backed by Amazon, aims to start shipping its R1T pickup and R1S crossover at the end of this year. Rivian tells Forbes these models will be classified as light vehicles and qualify for existing California and federal pollution programs. Ford and General Motors, which have their own electric pickup plans, have not released curb weights or technical specifications.
In the end, to generate significant credits, Cybertruck must sell in high volume. And despite Musk’s optimism, JMP’s Osha has doubts. “Cybertruck is not going to be a very high volume product,” he says. “Does anyone really believe they’re going to have the Cybertruck running at tens of thousands of units per quarter?” It’s a bit moot, to be honest.