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One of the most opaque segments of Tesla business has become a little more transparent. Bloomberg announced Monday that GM and Fiat Chrysler had purchased zero-emission vehicle credits from Tesla.
Tesla's ZEV Credit Program is no secret. The company has generated nearly $ 2 billion in revenue since 2010, when it began selling regulatory credits to automakers to offset sales of polluting vehicles in the United States. It's a revenue stream that has been hailed or criticized for years as analysts and media debate if it helps or hurts Tesla's bottom line.
But until now, little was known about who was buying and why – beyond the supposed reason to offset the sales of vehicles producing exhaust emissions.
Bloomberg has discovered recent filings in Delaware that reveal a little more about Tesla's ZEV customers. GM and FCA In Delaware, both parties have indicated in separate documents that they have entered into federal greenhouse gas purchase agreements, also known as Tesla's ZEV credits. FCA has published four separate documents in which it was agreed to acquire Tesla credits in 2016, 2018 and again this year.
Tesla declined to comment.
In the meantime, GM's first and only purchase of credits has been newer and aims at a specific mission. GM already manufactures a 100% electric vehicle, the Chevy Bolt, and until recently manufactured a plug-in hybrid, the Chevy Volt. These sales would seem largely sufficient to offset the sales of its vehicles emitting exhaust gases.
And it has been. GM says it's an insurance policy against future regulatory uncertainties.
"We do not need compliance credits today, but the purchase of credits is allowed by regulation and serves as an insurance policy against future regulatory uncertainties," he said. a spokesman for GM in a comment sent by email. "The deposit is a routine procedure used to protect the interests in the performance of contractual obligations."
As a general rule, ZEV credits were purchased to comply with California's (and some other states') stricter emission regulations. GM's comments appear to be aimed at protecting against federal regulations, despite the Trump administration's efforts to lower fuel efficiency and clean air standards that would likely be more favorable to automakers.
But as Zachary Kirkhorn, Chief Financial Officer of Bloomberg and even Tesla, notes, these ZEV credits should become a bigger part of Tesla's business. A recent report from the EPA revealed that most major automakers were using bank loans, as well as technological improvements, to stay in compliance with the 2017 model year. Three major automakers complied with the emissions performance of their vehicles without using additional bank credits, according to the EPA. The graph below, taken from the EPA report, shows the compliance of automakers.
However, the EPA notes, 92% of these credits will expire at the end of 2021 if they are not used. The EPA added that more than half of the current balance is held by three manufacturers and that the availability of these or future credits is inherently uncertain, suggesting future use of ZEV credits.
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