Archives for July 12th, 2013
2013 Tesla Model S
Tomorrow at 5 pm Eastern, Tesla will hold what may be its most eagerly awaited conference call to date.
The Silicon Valley startup automaker will discuss its first-quarter financial results–which will give the first clue to its financial viability as an operating automaker.
But Tesla Motors [NSDQ:TSLA] will have raked in revenue not only from selling electric cars, but also by selling those cars’ zero-emission vehicle credits to other automakers.
Tesla sold “more than 4,750″ Model S electric sport sedans last quarter, the company said on April 1 (no, it wasn’t an April Fool’s joke), and another 2,650 last year.
Selling credits since 2009
Now, as the Los Angeles Times reports, we learn that one analyst estimates Tesla could take in as much as $35,000 more from each Model S by selling its ZEV credits.
This is hardly new; the company has been doing so at least since 2009, when it sold ZEV credits to Honda and one other unnamed automaker.
Thilo Koslowski, an auto-industry analyst at Gartner Group, told the LA Times that the company might take in as much as $250 million this year from selling the credits.
Tesla communications director Shanna Hendriks declined to comment on the article, noting tomorrow’s earnings call. (SEC regulations discourage companies from commenting close to release of important financial information, including earnings.)
How much per car?
The math’s a bit unclear, since if Tesla sells 20,000 Model S cars this year, that would work out to $12,500 per car.
Nonetheless, as the article notes, Tesla’s ability to garner additional revenue beyond the sales price of its cars “highlights just how far California regulators have gone to promote the electric car.”
More properly, that should be “promote zero-emission vehicles,” since hydrogen fuel-cell vehicles also qualify for the same credits.
ZEV rules —> compliance cars
California’s ZEV sales requirement has produced the phenomenon of so-called compliance cars, which will be built and sold by five automakers in just enough volume to keep themselves within the law and avoid fines.
Those cars are the Chevrolet Spark EV, Fiat 500e, Ford Focus Electric, Honda Fit EV, and Toyota RAV4 EV.
On balance, most of them are quite good electric cars.
And they give those companies experience with developing all-electric vehicles that they’ll need in the latter half of this decade, as carmakers must start to sell higher volumes of plug-in cars to meet increasingly stringent national fuel efficiency standards.
2013 Fiat 500e electric car, Los Angeles drive event, April 2013
Losing money on electrics
But to the degree that it’s cheaper for an automaker to buy ZEV credits from Tesla than to sell more of its own electric cars at a loss, they may well do so as a matter of financial expediency.
Chrysler-Fiat CEO Sergio Marchionne, for instance, has famously and repeatedly griped that his company will lose $10,000 on every electric Fiat 500 it must sell in the state.
His vehicle engineers, meanwhile, are remarkably proud of the 2013 Fiat 500e–which we found to be surprising good–and its marketers speak vaguely of plans to roll it out beyond California.
ZEV Credits still a sideshow
Tomorrow evening, financial analysts will be poring over Tesla’s financials to tease out information on how much money the company really makes on its core business: building and selling electric cars.
Certainly California’s ZEV regulations give Tesla a financial boost.
Years from now, we may be able to look back and decide whether that incremental revenue was crucial to Tesla’s fate (whatever it turns out to be) and its first-quarter profit.
Over the long term, analysts expect the value of ZEV credits to vary, but say it will likely fall over the long term as the cost of building plug-in electric cars continues to fall.
But let’s be clear about one thing.
Over the long term, if Tesla Motors can’t design, develop, build, and sell electric cars in sufficient volumes to make enough profit to fund its future operations, then all the ZEV credits in the world are irrelevant.
Which isn’t to say, mind you, that they don’t look very attractive to Tesla’s CFO on the eve of its first quarter operating as a profitable automaker.
CAPTIONS ON | OFF
After the announcement that Tesla had repaid its $456 million loan in full earlier this week, and proclaimed themselves “the only American car company to have fully repaid the government,” the old guard stepped up and took offense. Chrysler soon posted a blogthat called Tesla “unmistakably incorrect” and said that Chrysler has repaid their government loan in full two whole years earlier.
It would have been a great rebuttal. Except it isn’t true.
The bitterness and resentment is understandable. It has been a long and difficult road to recovery for Chrysler, who have had to watch the media and customers fawn over the new EV darling and their stellar Tesla Model S. While things have been looking up for Chrysler lately, with improved sales and significantly better products, Tesla has emerged as an unqualified success and even won over doubters with their loan repayment.
Chrysler saw an opportunity to put the up-start in their place, but Ranieri’s claim is way off base for a number of reasons.
First off, Chrysler isn’t exactly an American company anymore. As Tesla CEO Elon Musk noted in a Tweet yesterday, Chrysler is now a subsidiary of the Italian giant Fiat, after buying the company following their 2009 bankruptcy.
Second, while Chrysler paid off all $11.2 billion that the U.S. government expected from them (Fiat paid it, actually) six years earlier than necessary, that still left $1.3 billion that will never be recouped. For those keeping score at home, the Tesla loan brought taxpayers a $12 million profit, and the Chrysler loan brought them a $1.3 billion loss.
The auto industry bailout saved thousands of jobs, several iconic American brands and perhaps even the economy itself. Chrysler should be confident with the fact that they’ve used that money wisely and paid off what they could. But they tried to pick on Junior and instead opened up an ugly can of worms. Next time, tell us less about your shaky financial past and much more about what has come out of it. We’re going to go back and read our review of the 2013 SRT Viper now.
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The Tesla Model S can go almost 300 miles on a full change, but is that enough to make the drive from Los Angeles, California to Las Vegas, Nevada in relative comfort? Frank Markus and Jessi Lang found out in this episode of Wide Open Throttle.
The EPA has rated the Model S at a range of 265 miles when equipped with the largest, 85-kWh battery. For those of you keeping count, the drive from L.A. to Vegas is 280 miles, one way. If that wasn’t already a bit of a headache, when MT tested the full range of the Model S, it found that the luxury hatchback came up 27 miles shy of its EPA rating.
As Markus mentions in the video, the road-tripping duo may have cheated a little bit: they started out from eastern edge of the L.A. basin, some 65 miles closer to their destination than downtown L.A.; however, the 215-mile trip still loomed dangerously close to the Model S’ range limit. To help get every possible mile of range out of the battery pack, Lang and Markus opted to keep the air conditioning off for most of the trip.
Even with the air off, it didn’t keep the intrepid duo from rocking out to some MC Hammer and playing some of the usual road trip games. Did the Tesla make it to The Strip on one charge? Check out the video below to find out. (Hammer pants and poker chips not required.)