Ever wondered how car companies make money fast? Sexy electric sports car creators Tesla motors have figured it out: sell off its excess zero-emission vehicle credits for much-needed hard cash to Honda, the only mainstream automaker to not yet fully commit to making an EV.
In 2008, a revised version of the Californian zero-emissions mandate came into force, requiring any major auto manufacturer wishing to sell vehicles within the state to make some form of plug-in vehicle, or face strict penalties.
While Toyota, GM, Nissan and Ford have all worked to some extent on plug in hybrid and pure electric vehicles, Honda has turned its attention to hydrogen fuel cell technology, leasing its FCX Clarity in select locations in California.
Tesla Roadster SportEnlarge Photo
However, Honda are able to purchase credits for making plug-in cars they didn't actually make. How? Under the zero-emission vehicle credit scheme, carmakers who do build zero-emission and plug-in vehicles receive credits for doing so.
Only a certain threshold of vehicles from any manufacturer need be plug-in, but Californian startup Tesla only make electric vehicles and can sell any spare credits on.
Enter Honda, keen to buy up enough credits to satisfy Californian law. In court papers released as part of Tesla's up-coming IPO, Honda are the only named automaker buying zero-emission vehicle credits from Tesla, but Tesla have sold zero-emission vehicle credits to at least one other non-disclosed automaker.
So far, Honda has purchased enough zero-emissions credits equivalent to the credits awarded for the manufacture of 655 zero-emissions EVs.
2009 Tesla RoadstserEnlarge Photo
Many activists argue that the zero-emission vehicle credit trading scheme is an automotive equivalent of cap and trade and does not encourage the lowering of carbon emissions or the building of zero emissions vehicles, since those with enough money can buy credits in in order to escape hefty fines for non-compliance.
For Tesla however, the importance of the trade is a little extra cash to help steady the company coffers -- which continue to haemorrhage cash in preparation for the company's $100 million IPO.