Nissan, Not Tesla, Made Most From California ZEV Credit Sales Last Year

Under current Californian law, any mid or large-volume automaker who wants to operate within the Golden State must obtain a specific number of Zero Emission Vehicle credits equating to a set percentage of its total vehicular output. But while each manufacturer must obtain a specific percentage of ZEV credits, it can choose to either earn them — by making its own zero emission vehicles and selling them to Californian customers — or to buy them from other companies who have excess credits.

Nissan's high LEAF sales volume in California last year meant that it earned excess ZEV credits -- which it then sold off.

Nissan’s high LEAF sales volume in California last year meant that it earned excess ZEV credits — which it then sold off.

Consequentially, there’s an active automotive market for ZEV credits every year, with automakers who produce large numbers of zero emissions vehicles selling off excess credits for often large, undisclosed fees to companies who need those credits in order to operate in the state. The more electric and zero emission cars made, the more credits are earned. Since the number of credits required for each automaker is a tiny percentage of its total volume output, companies like Tesla Motors [NASDAQ:TSLA] have been able to cash in on the ZEV market by selling excess credits to other automakers for a massive profit.

It was these sales of credits in 2012 and 2013 which helped Tesla fare so well in its yearly accounts, but as recently-released figures from the Californian Air Resources Board show, it wasn’t Tesla which benefited most between October last year and September this  from selling ZEV credits: It was Japanese automaker Nissan.

As data from CARB (via GreenCarCongress) shows, Nissan sold a massive 663.6 credits to other automakers between October 1, 2013 and September 30, 2014, just ahead of Tesla’s 650.195 sold credits.

Despite this, Nissan finished the year with a ZEV credit balance of 1,382.889, well ahead of Tesla’s balance of 221.550 credits and just ahead of Honda’s ZEV credit balance of 1,076.696.

Looking at the transfer of credits in and out of account, it’s worth noting that while we’re not able to see where Nissan’s 663.6 credits went, Mercedes-Benz acquired the same number of credits as Nissan sold during the period, suggesting that perhaps the German automaker relied on Nissan’s high volume of LEAF sales to help it meet regulatory requirements.

Tesla sold a few less credits than Nissan during 2013/14.

Tesla sold a few less credits than Nissan during 2013/14.

Meanwhile, Honda purchased a massive 542.5 credits during the year, highlighting its lack of production zero emission vehicle and end of its own limited-production ‘compliance car,’ the 2014 Honda Fit EV. Despite selling its Accord plug-in hybrid during the accounting period used by CARB, those vehicles weren’t enough to earn it the total credits it needed to comply with ZEV mandates.

It’s worth noting too that Volkswagen, which is set to launch the e-Golf in the U.S. early next month, also purchased ZEV credits last year, as did Jaguar Land Rover, Chrysler, Subaru and interestingly, General Motors.

Why did GM end up having to purchase credits? The reason lies in the simple fact that while GM produces the Chevrolet Volt and Cadillac ELR extended range electric cars, their internal combustion engines mean that GM doesn’t earn as many credits as an automaker producing large numbers of all-electric cars. While GM did produce and sell its Chevrolet Spark EV during 2013/14, it still didn’t earn enough credits to offset its mainstream vehicle production.

Unfortunately, there are many intricacies of the ZEV credit system that only CARB truly understands, but it’s worth noting that the regulations might change later today as a regulatory meeting could make ie easier for certain automakers to earn ZEV credits. And that, we presume, would drop the monetary value of ZEV credits being traded on the open market.

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  • It’ll be regrettable if the ZEV Credit program is relaxed. It is good that manufacturers like Nissan and Tesla get rewarded handsomely for delivering zero emission vehicles in volume. It’s the same rules for them all, if two manufacturers can meet the quotas they all should be able to do so.

    • Israel Navas Duran

      No, it is not. If the EV technology is really mature enough to become an alternative to ICE, it should be able to compete in the market without unfair advantages. All those requirements to ICE manufacturers what is really hiding is the externalities of EVs, which derives from a larger carbon footprint.

      • From a purely technical perspective you are right, the better technology should win through on its own merits. A more strategic perspective gives us other goals and priorities.nnDoes the U.S. want to be a leader in this technology or a follower? A laissez-faire approach to the global market will cede the market to countries like Japan, China and Germany. If we lose the lead we currently have then when EV’s become mainstream then we simply trade oil imports for vehicle and battery imports. This is a golden opportunity to free ourselves from foreign oil dependency which comes with financial and national security risks; but instead rely on our own sources of electricity and batteries domestically. These types of opportunities are few and far between. The stakes are huge.nnChina has announced a plan to invest $16 billion in EV infrastructure while the U.S. spent $100 million. We are in danger of falling behind globally, doing nothing to foster this fledgling industry will hand the market to our global competition.n