Elon Musk and Tesla (NASDAQ:TSLA) Have Made 100’s of Millions from California’s EV Mandate
The Trump Administration proposed rolling back Hussein Obama-era fuel economy standards, including withdrawing California’s authority to regulate carbon dioxide emissions from cars and mandate EVs
The decision not only sets up the White House for another legal battle with California, it also pits The Administration against Elon Musk and Tesla (NASDAQ:TSLA), his EV company that hass made hundreds of millions of dollars off California’s electric car mandate.
The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) released a proposal Thursday that included eliminating California’s Zero Emissions Vehicle (ZEV) mandate.
Tesla is a major beneficiary of California’s ZEV program because it generates millions of regulatory credits through manufacturing all-electric cars that can be sold to other auto companies forced to comply with state law. It’s basically a subsidy for EV makers.
In Q-1 of Y 2018, Tesla made $50-M from ZEV credit sales, Tesla made about $280-M in ZEV sales in Y 2017.
EPA’s successful repeal of auto regulations that were finalized by the Hussein Obama Administration in Y 2012 could add to Tesla’s financial woes. While the company’s revenues increased, it posted its largest quarterly loss ever of $430-M Wednesday.
The company’s stock did not tumble, and in fact went up after Musk apologized for erratic behavior in recent months, including calling a diver who helped rescue Thai boys stuck in an underground cave a “pedo”, aka for pedophile.
Tesla sold $610-M worth of ZEV credits between Y’s 2013 and 2016. Sales vary widely based on how much other manufacturers, like GM (NYSE:GM) or Ford (NYSE:F), need to meet state law.
Tesla did not respond to our request for comment.
Administration officials argue California’s policies to fight global warming through tailpipe regulations and EV mandates violate the Energy Policy and Conservation Act (EPCA), which preempts states from regulating fuel economy.
Environmentalists argue that federal courts have 2X ruled that EPCA did not preempt California’s global warming regulations for cars since the rules were aimed at emissions, meaning fuel economy improvements were secondary.
EPA and NHTSA argue regulating greenhouse gas emissions coming from tailpipes are “de facto fuel economy standards,” and said revoking California’s waiver authority on the matter would produce economic benefits.
“Further, elimination of California’s ZEV program will allow automakers to develop such vehicles in response to consumer demand instead of regulatory mandate,” reads the EPA and NHTSA proposal.
“This regulatory mandate has required automakers to spend tens of billions of dollars to develop products that a significant majority of consumers have not adopted, and consequently to sell such products at a loss,” the proposal reads. “All of this is paid for through cross subsidization by increasing prices of other vehicles not just in California and other States that have adopted California’s ZEV mandate, but throughout the country.”
California Gov. Jerry Brown (D) vows to fight The Trump Administration’s coming rule change in court. Other states and environmentalists will likely join any legal action against EPA.
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