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ZEV credits

Discussion in 'TSLA Investor Discussions' started by Nicu.Mihalache, Apr 26, 2013.

  1. Nicu.Mihalache

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    Let's try to make an concerted effort to understand ZEV credits. I will start with a link and a few comments about California only. Please leave emotions at the door and try to provide links and reason instead. Thanks in advance.

    Here is what I found
    http://www.arb.ca.gov/msprog/zevprog/factsheets/zev_tutorial.pdf

    The document is called tutorial but it is quite long and I fail to find proper definitions. Some help to better understand this would be much appreciated.

    What I understand:

    1. Pages 46, 66 -> Model S gets 5 credits (both 85 kWh and 60 kWh)
    2. Page 38 -> For a large car seller (> 60k / y), it needs 12% of the number of cars as credits in 2013, 2014
    3. Pages 50, 51 -> Only 0.93% x sales have to be credits from ZEV (other 11.07% may come from hybrids etc.)
    4. Pages 93, 94 -> $5000 penalty per credit not produced.

    Questions:

    Q1. Page 69 - does that mean that they get a 50% reduction until 2015?

    Partial conclusions: in the best of worlds, Tesla will get $25k ZEV credit for each Model S sold in California (a bit less for the rare 40 kWh version). But this is a theoretical maximum and as in any market, prices vary. If for example, manufacturers know that by the end of the year more credits than necessary will be produced, they will not pay a high price even in January.

    Now we have see how many manufacturers sell more than 60k cars / year in the state and what is the total.
     
  2. Nicu.Mihalache

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    Thanks to this post, we can see that fast refueling definition is stronger than what Model S can do. So it get only 4 credits instead of 5. This caps max ZEV credit per car to $20k.

    Fast Refueling. The “fast refueling capability” requirement for a 2009 and subsequent model-year Type III, IV, or V ZEV in section C.4.4.(a) will be considered met if the Type III ZEV has the capability to accumulate at least 95 miles of UDDS range in 10 minutes or less and the Type IV or V ZEV has the capability to accumulate at least 190 or 285 miles, respectively, in 15 minutes or less. For ZEVs that utilize more than one ZEV fuel, such as plug- in fuel cell vehicles, the Executive Officer may choose to waive these section C.4.4.(b) fast fueling requirements and base the amount of credit earned on UDDS ZEV range, as specified in section C.4.4.(a).

    - - - Updated - - -

    doing exactly that in the same time ;)
    thanks for the info
     
  3. ElSupreme

    ElSupreme Model S 03182

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    I would think the 40kWh cars would be the same as the 60kWh car for the credits. Because the car is actually going to ship with 60kWh worth of physical batteries now.
     
  4. Nicu.Mihalache

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    The rules seem to go by range. it needs 200 miles. If there are details I have missed in this direction, please point to them. Thanks.
     
  5. Nicu.Mihalache

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    That's why I prefer the metric of dollars returned / $1 invested in the tech, but nobody seems interested in that one. There is no better correlation to the market success of the product and therefore of the stock you are considering.

    - - - Updated - - -

    See above, this correlates quite well to return on investment.

    There is a fine point about micro-hybrids. There is no need for consumer interest. This is a low hanging fruit of around 5% mpg improvement for a few hundreds bucks. They are of course additive to any other saving coming from engine improvements (downsizing, turbocharged) or other design tweaks like aerodynamics, low resistance tires etc.

    CAFE regulations and EU GHG regulations are becoming stricter every year. When the fine / bonus will go above $100 / 1% fuel economy (that would be the equivalent of $10k per EV instead of the $20k ZEV + $7.5k tax credit + GHG credits + other like $2.5k in California - just to have an order of magnitude comparison, not to start debating those !!!), micro-hybrids will be installed in most cars, without customer input. That will instantly make huge volumes, after the initial hurdle of proving the tech in the real world.
     
  6. Nicu.Mihalache

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    When I said I was not aware of better info, it was very specifically related to this article, and more precisely to the total number of ZEV credits that will be traded this year in the US. I still haven't seen other estimates around. Just a link with an infinite document about the rules.

    EDIT: does anyone have estimates for ZEV credits for Tesla for Q1 and Q2, others may be interesting too, but maybe too uncertain yet. Please do not simply multiply the 2012 revenue / car by those sold in Q1 and Q2, this would be useless.
     
  7. CapitalistOppressor

    CapitalistOppressor Active Member

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    Ok. Fair enough. To answer your question I first skimmed JP's article to see what he had actually written so I know what I am comparing against when I am discussing "better info."

    LOL... he is basing his article on a 2010 estimate produced by NRDC. I have that article in my research from last year with a sticky note on it labeled "old data".

    Here is a key quote from JP's article -

    Translated, that means - "if I'm underestimating the ZEV requirements as a result of attempting to use ancient projections, then this entire article is bogus."

    Here is the document he links in case you folks don't want to click JP's link -

    http://docs.nrdc.org/energy/files/ene_10070701a.pdf

    The key thing to understand is that it was written in 2010, which was basically the worst automotive sales environment in decades. All of the graphs that JP is relying on are based on the notion that auto sales would gradually rise from ~10 million in 2010 to ~15 million in 2015. There were 14.5 million sales in 2012 and we are on pace to sell 15.2 million cars in 2013 -

    April 2013 US Auto Sales Forecast: Down About 10% From March, But Up About 11% From April 2012

    As a result, the model that JP is relying on is severely underestimating the number of ZEV credits that need to be sold because there are many more gas powered cars being sold than predicted. So his "eyeball estimate" of a graph that doesn't represent reality likely isn't providing a good estimate of the current market for ZEV credits. Since we are already selling cars at rates consistent with the 2015 mark on his graph, my eyeball estimate (based on his graph showing requirements for 2015) is that the actual requirement is closer to 100,000 than the 50,000 that his eyeball is seeing.


    I do.

    I agree.

    P.S. For the record, I am not endorsing any estimate on the size of the ZEV market made by looking at the graph JP provided.
     
  8. stopcrazypp

    stopcrazypp Well-Known Member

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    Warning to mods, this post may be more appropriate in the ZEV credit thread, but here goes:

    I don't know why everyone goes in such a convoluted route to try to guess at ZEV credit numbers when it's right there on the CARB website.

    Between October 1, 2011 and September 30, 2012 there were 31.605 g/mi NMOG credits traded out by Tesla. The g/mi NMOG multiplier for that year was 0.035 g/mi, which means that's equivalent to 903 credits transferred out for Tesla.
    Zero Emission Vehicle Credits

    Anyways for Tesla, the transfers out are:
    10/1/2010-9/30/2011: 657 credits (all to Honda)
    10/1/2011-9/30/2012: 903 credits (all to Honda; Honda also got all the credits from Think)

    Given both numbers are multiples of 3 but not 4, that implies they are all either Type II ZEVs (3 credits) or a mix with Type III ZEVs(4 credits) but definitely not all type III. Tesla only produced 350 Model S for Q3 2012, so it won't be contributing much (even if you assume all were delivered to CA). The next report should be out in October 2013. Before then it'll be hard to guess at the numbers unless you have CA-only sales figures for the Model S (unlikely to be available esp. given Tesla doesn't sell through dealers).

    Tesla's annual SEC filings gives data on annual ZEV credit sales:
    Tesla Motors - Annual Report
    Tesla Motors - Annual Report
    Revenue from ZEV credits:
    1/1/2008-12/31/2008: $3.5 million
    1/1/2009-12/31/2009: $8.2 million
    1/1/2010-12/31/2010: $2.8 million
    1/1/2011-12/31/2011: $2.7 million
    1/1/2012-12/31/2012: $40.5 million (includes GHG credit sales for 2013/2014 production, plus ZEV credit for 2013)

    Now to work out how much money they got per vehicle:
    Tesla sold credits to an unknown manufacturer for the 2008 year, but no mention of vehicle numbers.
    Tesla sold credits to a different manufacturer for 340 "vehicles" under agreement for the time period 1/1/2009 to 12/31/2009.
    http://www.sec.gov/Archives/edgar/data/1318605/000119312510017054/ds1.htm
    By June 30, 2010 Tesla sold 400 vehicles worth of credits to Honda, saying they have been in an agreement since 2009. You can work out from the clues that the manufacturer mentioned previously for 2009 was Honda.
    Tesla Motors - Quarterly Report

    That means for Honda (taken from 10-Q filings for 2010 to Q1/2011, there's no more granular data in later 10-Qs):
    01/1/2009-12/31/2009: 340 vehicles
    01/1/2010-06/30/2010: 60 vehicles (400 total)
    07/1/2010-09/30/2010: 46 vehicles (446 total)
    10/1/2010-12/31/2010: 45 vehicles (491 total)
    01/1/2011-03/31/2011: 30 vehicles (521 total, with agreement for up to 135 more vehicles)

    Granular Honda ZEV credit revenue:
    01/1/2009-03/31/2009: $1.3 million
    04/1/2009-06/30/2009: $4.3 million
    07/1/2009-09/30/2009: $2.0 million
    10/1/2009-12/31/2009: $0.6 million
    01/1/2010-03/31/2010: $0.5 million
    04/1/2010-06/30/2010: $0.6 million
    07/1/2010-09/30/2010: $0.9 million
    10/1/2010-12/31/2010: $0.8 million
    01/1/2011-03/31/2011: $0.6 million

    From those numbers, you can work out Tesla got about $24000 per car for 2009, $18500 per car for 2010.

    The claim that Tesla is dependent on ZEV credit revenue has been there since the Roadster days (here's an article and rebuttal from 2 years ago):
    Tesla Subsidy Vanishing Amid Electric Vehicle Boom | Autopia | Wired.com
    Tesla: Report Of Our ZEV Credits Was Greatly Exaggerated | Autopia | Wired.com
     
  9. Zythryn

    Zythryn MS 70D, MX 90D

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    Nicu, you asked for information on ZEV credits. Immediately above your latest post is a very detailed bit of data and reasoning on Tesla's ZEV credits with reference links as well.
    I would be interested in your thoughts on this.
     
  10. Nicu.Mihalache

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    #11 Nicu.Mihalache, Apr 29, 2013
    Last edited: Apr 29, 2013
    Could you please repost here?
    ZEV credits

    This way we can continue discussing without interference from other subjects debated here and no danger of being considered off topic and messages moved who knows where. Thanks.
     
  11. Nicu.Mihalache

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    #12 Nicu.Mihalache, Apr 29, 2013
    Last edited: Apr 29, 2013
    Before I start, let me make two things clear:
    1. From what I see, we have data here only for CA, which is of course representative in some way, but would not give us the real numbers.
    2. I strongly believe Tesla will be profitable long term without any of those. But my main concern is about Q2-Q4 profit / losses w.r.t. expectations of investors. That is because prices depend more on guidance / future than past achievements (Q1 profit is already expected / baked into TSLA).

    Therefore my reading of the rules was erroneous (it seems they get 4 credits if range is >= 200 miles, irrespective of the fast refuel condition). Or maybe the range certification was not out yet?

    The way I read that is that they got the money only for credits corresponding to cars delivered (or produced?) by the end of 2012. They have deals in place for those future sales, but who would pay 1-2 years in advance for those credits before the cars even entered the production line?

    The real problem, except the fact that rules may have evolved a bit since 2009, it's that it seems this year will be the first time that more credits are produced than needed. This means that one credit will sell much lower than the $5000 max, which is capped by the fine. Tesla could choose not to sell the extra credits produced not to depress the market and then they will depend on how many Leafs, Volts, Rav 4 etc. are sold. I do not think this is the real strategy, it would be a kind of worst case scenario.

    Unfortunately, I do not know the details like when should the other manufacturers present those credits, how many credit are not covered by hybrids and therefore extend the pool of needed credits from pure EVs etc. There might be a way to navigate all the rules, sales figures etc. but it seems a lot of work and a high probability of getting that wrong if you miss several important details. That's why I was asking if some experts could help, either with their opinion or links.
     
  12. blakegallagher

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    I feel like you may have not fully understood what CapitalistOppressor posted about the 2009 article. With the higher Number of Auto Sales the number of ZEV credits required by the auto manufactures has almost doubled. That would mean that this year they would not sell out. I also though I heard Elon mention that their credits were sold out through the end of the year. Anyone remember him saying that?
     
  13. nikwest

    nikwest Member

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    Does one get more ZEV credits for battery swapping?
     
  14. Johan

    Johan Took a TSLA bear test. Came back negative.

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    They are already getting full ZEV credits for the 85kWh model. The swap concept was demonstrated in 2009, I believe. (With a group of technicians). There are documents published from the state of New Jersey that showed that the 85kWh was classified as getting full credits.
     
  15. brianman

    brianman Burrito Founder

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    Where did they get the underlined assertion from? I've never heard that even suggested as desirable, much less as an intent/goal of the company:
     
  16. Mario Kadastik

    Mario Kadastik Active Member

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    Well you could infer it from the Tesla master plan where they plan to mass market EV's (making it the biggest) and their goal of 25% margin (the most profitable) :)
     
  17. brianman

    brianman Burrito Founder

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    As I understand it, the master plan is that Tesla's (the company's) role is to "help" the automotive industry makes its way to EVs (at all and more quickly) not for Tesla to be the largest biggest seller.

    It's kind of like the difference between "building something people want (and making money doing it)" and "attempting to make money (and accidentally building something people want)". Intent and priorities are different between the two cases.

    A more specific example w/r/t Tesla:
    TESLIVE 2013 General Session with Elon Musk (unedited) - YouTube
    Around 1hr 19min...
    The goal is to show what can be done, by doing it -- not to be the biggest or richest but nudge the rest to get on board via leading by example.
     
  18. Mario Kadastik

    Mario Kadastik Active Member

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    I wasn't saying disagreeing with you :) I was just saying where they could have possibly gotten it :) It's journalists afterall, most don't deserve the name and the few who do still make mistakes in inferring meaning from plans :)
     

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