Seeking Alpha

Tesla Motors could lose some zero-emission credit revenue

  • Tesla Motors (TSLA +1.8%) could lose a source of revenue if the California Air Resources Board tightens rules that allow EV manufacturers to earn zero-emission credits.
  • In Q1, Tesla earned $67.9M in ZEV credits and another $17.1M in "other regulatory credits."
  • The automaker has warned previously that changes to rules on ZEV credit was a profit risk in the short term.
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Comments (40)
  • maekuz
    , contributor
    Comments (17) | Send Message
     
    Some frantic efforts prior the Q2 results, huh?

     

    This is old news: http://aol.it/1858JDN
    5 Aug 2013, 09:57 AM Reply Like
  • ursf
    , contributor
    Comments (179) | Send Message
     
    funny, maekuz! $150 by Thursday!
    5 Aug 2013, 10:00 AM Reply Like
  • Agnes59
    , contributor
    Comments (438) | Send Message
     
    @maekuz: Ditto on that..Any effort to make the stock comes down before the Q2 announcement Wednesday.
    5 Aug 2013, 10:24 AM Reply Like
  • joenjensen
    , contributor
    Comments (708) | Send Message
     
    I guess nobody believes your posted story, the stock is way up today over $140.00 because of a report that came out, that said they will sell over 200 thousand cars. Bad news for shorters.
    5 Aug 2013, 10:28 AM Reply Like
  • Sal Demir
    , contributor
    Comments (777) | Send Message
     
    CARB decision will be made in October so the change in rule will be enacted by Q1 2014 earliest. If Tesla can reach its guidance of ~25% gross margin (excluding credits) by the end of Q4 2013 (I believe it will, also according to my calculations), ZEV credits will not have a significant impact on its earnings from then on.
    5 Aug 2013, 10:03 AM Reply Like
  • Chriscalhoun
    , contributor
    Comments (62) | Send Message
     
    @sal demir

     

    please show your calculations. as fixed costs are a relatively small percentage of total costs, i dont see how a 25 pct gross margin is remotely possible as there is not a tremendous amount of operating leverage in their earnings model. on a different note, while musk is pointing to a 4q gross margin target of 25 pct, that ignores the likliehood that other costs will go up sharply when comparing 4q with 1q. net, net, i do not believe that tesla will make much of a profit (ex emission credits) eeven in the 4q.
    5 Aug 2013, 10:32 AM Reply Like
  • Alexander-the-Great
    , contributor
    Comments (36) | Send Message
     
    Sal, you need to reference your previous article, http://seekingalpha.co... so that the skeptics are informed.

     

    That analysis was excellent by the way.

     

    This news is actually old news another effort by the.....shorters to bring down the price. I can use another word for them but that would not be nice.
    5 Aug 2013, 12:44 PM Reply Like
  • Sal Demir
    , contributor
    Comments (777) | Send Message
     
    @ Chris

     

    Please refer to my article w/pricing model Alexander posted below. And please don't ask for further details as I am not allowed to share.

     

    @ Alexander

     

    Thanks, glad it was useful.
    5 Aug 2013, 02:36 PM Reply Like
  • Chriscalhoun
    , contributor
    Comments (62) | Send Message
     
    @sal demir
    @alexander-the-great

     

    Your previous article does not address the question of fixed vs variable costs and the resulting relatively small degree of operating leverage. You have taken great pain in your previous articles to lay out much detail. Your refusal/inability to answer my question forces me to conclude that you don't have an answer. We are not talking about inside information here, just a simple earnings model. The question I raise is one of the two most crucial issues facing Tesla.
    5 Aug 2013, 03:41 PM Reply Like
  • Sal Demir
    , contributor
    Comments (777) | Send Message
     
    "Your refusal/inability to answer my question forces me to conclude that you don't have an answer"

     

    Great reasoning, good luck!
    5 Aug 2013, 04:01 PM Reply Like
  • Chriscalhoun
    , contributor
    Comments (62) | Send Message
     
    @sal demir

     

    We are merely talking about an earnings model, not inside information! Your excuse makes no sense!
    5 Aug 2013, 06:27 PM Reply Like
  • Chriscalhoun
    , contributor
    Comments (62) | Send Message
     
    @Sal Demir

     

    "And please don't ask for mean details as I am not allowed to share."

     

    You mean you can't explain your earnings model? Hmmm....
    5 Aug 2013, 07:33 PM Reply Like
  • Alexander-the-Great
    , contributor
    Comments (36) | Send Message
     
    Sal and Chris, getting into a little catfight? A few years back I used to work at Walgreens and two managers who did not like each other were bickering. One was of German origin the other of Polish origin. I would say "Germany and Poland at it again?" or "Can't we all get along?"
    5 Aug 2013, 10:58 PM Reply Like
  • David G.
    , contributor
    Comments (189) | Send Message
     
    All I got from the reading of this "issue" in the past week is that it may be modified wording, or worth less potentially. Not eliminated completely

     

    The article is here:

     

    http://bit.ly/12UzJI6

     

    The thing is Elon Musk said last quarter on the conference call that he expected zero revs from these rebates by Q4. So there is no "gotcha".

     

    Now what IS interesting is the 45 day comment period. Gee, I wonder how many Tesla folk/electric car lobby/environmentalist... will comment on CARB proposed changes.

     

    I'm following Elon Musk saying they'll disappear in Q4...however if they don't disappear? Potential upside move on that alone.

     

    Stock higher again today. Silly Wabbits...tricks are for kids!
    5 Aug 2013, 10:11 AM Reply Like
  • wrynot
    , contributor
    Comments (305) | Send Message
     
    ...I keep waiting for the TSLA bulls to say what is the -right- valuation for this stock (other than higher and higher, la-la-laaaa).
    Great car, yes. Forward thinking company, yes. But worthy of trading at 1/3rd the market cap of GM -today- based upon its -future- potential? Ummm...no.
    5 Aug 2013, 10:20 AM Reply Like
  • joenjensen
    , contributor
    Comments (708) | Send Message
     
    You won't have to wait to long wrynot, tsla is UP ($3.20) again this morning to $141.30 even though the market is down. What that says is that folks don't want to get caught with their paints down, when the stock goes way up on Thursday morning, so they are buying, buying, buying, not shorting, shorting, shorting, this morning ....LOL....
    5 Aug 2013, 10:38 AM Reply Like
  • wrynot
    , contributor
    Comments (305) | Send Message
     
    I can see the price going up (and I'm long puts, but not silly enough to be short), but that still begs the question of what price a TSLA bull feels is high enough to sell. If the answer is "none" than any bull is risking letting their enthusiasm for the product and concept trump any rational investing rules. I can remember how FSLR was going to change the world back in '07. Look at that price chart...from $48 to $312...before it dropped back below $100. Is solar power a game changer? Sure, sort of...but that didn't stop the stock from losing 2/3rds of its value once the market realized that every man, woman and child was not going to retrofit their homes with solar panels. Or maybe, buy an electric car.
    5 Aug 2013, 10:47 AM Reply Like
  • Haeze
    , contributor
    Comments (91) | Send Message
     
    I am a TSLA bull, and my honest opinion is that based strictly on the present, the value should only be set about $85. The thing is, everyone is looking to the future with this stock, much like the company is doing for electric vehicles.

     

    Every offering the "big guys" come out with that is a major disappointment in range, styling, and performance, is more evidence that Tesla is way ahead of the competition, with little chance of being overtaken.

     

    Their battery management is even starting to look like it will be used in many other places, such as solar battery systems, opening a whole new industry for Tesla.

     

    Everyone is baking their future valuation ideas into the current value, and as long as Tesla continues to execute, there is no reason to doubt it. If and when they finally stumble, you will see a drop, but there is no sign of stumbling for quite a while. Pricing for what the company will be worth in 3-5 years, I would say $200 is easily a fair value.
    5 Aug 2013, 11:06 AM Reply Like
  • joenjensen
    , contributor
    Comments (708) | Send Message
     
    Wrong, I'd bet you never thought it would be over $140.00 today, but it is and if the report comes out like the longs are thinking on Wednesday this week, it most likely be $200 next week, it's not that far off to believe it.

     

    Like Sargent Schultz used to say on TV------ "Very Interesting", Thursday morning should prove to be Very Interesting!
    5 Aug 2013, 12:35 PM Reply Like
  • ursf
    , contributor
    Comments (179) | Send Message
     
    Answer from a TSLA bull: I think it will take a long breather once it reaches $169.50. It will then fluctuated in the range of $140 - $170 until the end of this year. I will further reveal that somewhere in that range I will sell 30% of the shares I bought. Why? Because that is the number of shares I will need to part with to get the cash to buy a nicely loaded T-S-85! I didn't have the (disposable) money to buy the car so I bought the share to get to the same goal. Also, I seem to become a victim of the 25% statistic: 25% of people who test drive a Tesla M end up buying one. Think about that.
    5 Aug 2013, 03:13 PM Reply Like
  • Joe E Coyotee
    , contributor
    Comments (257) | Send Message
     
    I want to do the same, I would like to buy a P85 with the tsla stock I have also but have two years left on my Leaf blower lease form Nissan thinking of taking the early buy out to sell it and not wait 2 years for model X or what ever Tesla might have then and just do a Model S in the mean time
    6 Aug 2013, 10:56 AM Reply Like
  • ursf
    , contributor
    Comments (179) | Send Message
     
    good luck with that. Funny, Leaf Blower, never heard that one.
    6 Aug 2013, 06:55 PM Reply Like
  • gen3
    , contributor
    Comments (296) | Send Message
     
    TESLA needs to get into making batteries so they can upscale production and reduce the size of the car and the price sooner. Furthermore if they made batteries they could sell batteries and other kit to conversion people who tend to be locked out by people like Panasonic. The conversion sector is essential and the world's resource of existing cars is the ultimate recycling project.
    5 Aug 2013, 10:30 AM Reply Like
  • ursf
    , contributor
    Comments (179) | Send Message
     
    I agree and AXPW may be a viable target to be taken over by Tesla. This company has sold its batteries to one of Warren B.'s rail companies for locomotives and BMW has knocked on their doors more than once with the idea that AXPW could become one of the battery/components provider for BMW providers.
    5 Aug 2013, 02:31 PM Reply Like
  • Sal Demir
    , contributor
    Comments (777) | Send Message
     
    There's no need for Tesla to get into battery production business.

     

    Unlike GM, Nissan, etc. using batteries built custom for them by EV battery manufacturers, Tesla's "battery management system" uses 7,000+ commoditized cells (Currently Panasonic NCR18650, can be used in laptops, cameras, etc.) and can switch to any other producer (recently in talks w/Samsung) offering a lower price, higher density or a combination of both, basically a better deal.

     

    You see my friend, Tesla started the game 1-0 :)

     

    They start the "EV Game" up 1 with this
    5 Aug 2013, 02:53 PM Reply Like
  • JRP3
    , contributor
    Comments (8857) | Send Message
     
    AXPW has nothing at all that Tesla would want since they are useless for EV's, plus they are hanging on by a thread.
    5 Aug 2013, 10:23 PM Reply Like
  • Cassina Tarsia
    , contributor
    Comments (666) | Send Message
     
    Elon Musk has already said that Tesla would be profitable without ZEV credits ... so what's the big deal? The stock is already above 140 and heading higher ... guess that it didn't have much influence, did it!
    5 Aug 2013, 10:33 AM Reply Like
  • mfsjss
    , contributor
    Comments (42) | Send Message
     
    For a number of reasons, Tesla is the only 'game in town' for many institutions who are prepared to hold long. Here are just two reasons: 1) Gen III will be a Tsunami that will roll over the 30-40K market and 2) Apple or Google will pay a premium (whatever the price is) to add Tesla to their holdings as Musk moves on to other conquests.
    5 Aug 2013, 10:35 AM Reply Like
  • HMGD
    , contributor
    Comments (175) | Send Message
     
    Old news, obviously zero impact.

     

    Elon said it is not counting on ZEV credits.

     

    Waiting Tesla Q2 report....
    5 Aug 2013, 10:45 AM Reply Like
  • MtSmalls
    , contributor
    Comments (26) | Send Message
     
    I read the extended article on Automotive news, but no where in the article did it explain why CARB would change the wording of the rules. Does anyone know? There is nothing inherent in the battery swap process that would be an air pollutant. Is it just the next step in the phase out that eventually will allow the credits just on range? At the end of the day, I don't think it changes Tesla's outlook for the positive or negative, but, I'm still curious about the why's of the change...
    5 Aug 2013, 10:46 AM Reply Like
  • Joeviocoe
    , contributor
    Comments (2) | Send Message
     
    Hydrogen lobbyists don't want to lose their planned advantage before 2015.
    5 Aug 2013, 01:01 PM Reply Like
  • Jon P
    , contributor
    Comments (56) | Send Message
     
    Huh. I never understood why TM bothered with the battery-swap, since it's pretty much a non-issue for most owners. If TM qualifies for the top-tier ZEV credits due to the addition of swapping ability, that will be a bonus to earnings above and beyond earlier guidance, which had written off any credits.
    Now I get it.
    5 Aug 2013, 01:00 PM Reply Like
  • Joeviocoe
    , contributor
    Comments (2) | Send Message
     
    http://bit.ly/15A9DKL
    page C-12
    "Type IV or V ZEV has the capability to accumulate at least 190 or 285 miles,
    respectively, in 15 minutes or less".

     

    This rule was written for Hydrogen Fuel Cell Vehicles to have a distinct advantage over Battery Electric Vehicles. CARB rules have long been written by the Hydrogen Lobbyists.
    At the time, 2008-2009, THERE WAS NO MODEL S... only the Roadster, which could neither swap nor fast charge. CARB did not anticipate that any battery swapping scheme would work. But they knew that Hydrogen fill ups would take less than 15 minutes.. and even the fastest charger could not refill a battery that quickly.

     

    The language was written specifically to give Hydrogen an advantage.
    Tesla did NOT have a hand in writing these CARB rules.

     

    And now that Tesla's swapping scheme qualifies for 7 ZEV credits instead of 3... the Hydrogen Lobbyists have to convince CARB to attempt a change.

     

    The credits were set to become equal by Model Year 2018 anyway... which is why Major Automakers were planning to build many FCVs starting in 2015. Tesla threatens their plan to have a 4 credit advantage on each vehicle for several years
    5 Aug 2013, 01:00 PM Reply Like
  • Agnes59
    , contributor
    Comments (438) | Send Message
     
    @joev..One wonders whose behind this shinanegans. You just answered it. Thanks.
    5 Aug 2013, 03:30 PM Reply Like
  • uscpaul
    , contributor
    Comments (41) | Send Message
     
    EM said a long time ago that the ZEV's would be gone this year. As stated before.... old news.
    5 Aug 2013, 01:45 PM Reply Like
  • ursf
    , contributor
    Comments (179) | Send Message
     
    - Gas prices in Europe are double those the US.
    - Distances driven in Europe are typically shorter than in the US.
    - Cars are typically a bit more expensive in Europe (making T-S look less expensive, comparatively).
    --> Tesla is about to start selling in Europe.

     

    - In Hong Kong EV are freed from an excise tax of typically 100% for cars priced at the level of Tesla and its direct competitors. This will make T-S a bargain (half price) compared to its gasoline peers.
    - Distances driven in Hong Kong are very low.
    --> Tesla is about to start selling cars in Hong Kong

     

    - China....... (I am not an expert and much was written about it in these columns.
    --> Tesla will soon start to sell cars in China

     

    nuf said. (other than "looking forward to 2Q earnings call in two days")
    5 Aug 2013, 02:43 PM Reply Like
  • Agnes59
    , contributor
    Comments (438) | Send Message
     
    @ursf: Two quaters profits is when he's announcing hyperloop. Well, he's announcing it next week... what's that tells you?.
    5 Aug 2013, 03:34 PM Reply Like
  • ursf
    , contributor
    Comments (179) | Send Message
     
    Agnes59. Not sure what you mean. Please elaborate. I am familiar with EM's plans to talk about hyperloop but at this time I don't expect more than some conceptual thoughts, up for feedback by the "rocket scientists" in the US and around the world. Not a business plan at this point and independent from Tesla. 2Q13 earnings call scheduled for Wednesday after markets close. This is independent from hyperloop concept thoughts. Please elaborate, maybe I am missing something?
    5 Aug 2013, 03:46 PM Reply Like
  • JRP3
    , contributor
    Comments (8857) | Send Message
     
    He's saying that since Elon is announcing his hyperloop plans that must mean that Tesla has been profitable for two quarters, since he initially said he'd announce hyperloop plans after Tesla had two profitable quarters.
    5 Aug 2013, 10:32 PM Reply Like
  • ursf
    , contributor
    Comments (179) | Send Message
     
    @JRP3. I see. Thanks for the clarification. And I hope Agnes59's interpretation is correct.
    6 Aug 2013, 09:09 AM Reply Like
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