In an effort to promote greener cars, the State of California has created a system in which Tesla can make an extra $35,000 on each sale of its luxury Model S electric sports car. Within the system, Tesla qualifies for state environmental “Zero Emission Vehicle” credits that can be turned into profits. The credits work much like the cap and trade system for big industries: Tesla has the opportunity to sell the unused credits to other automakers that need them to satisfy tough California regulations. According to the parent article found here, the credits could add as much as $250 million to their profit this year. This company has well-known to be haggardly struggling since its beginning – politics and automakers have tried very hard to stub its growth over the years. This may be just what Tesla needs to begin to flourish as a car company for the average individual and spark more competition in the electric vehicle industry.
The Toyota Prius is the bestselling electric vehicle in California, and haven’t needed the subsidies in the past. But regulators believe that the only way to cleaner air and reducing emissions is through vehicles that produce absolutely no pollution at all, and a government-madated system in place to promote the zero-emissions vehicles is integral to California’s big switch. In the meantime, Ford Motor Company and General Motors are both attempting to build smaller and more affordable electric cars with even better fuel efficiency – and are experiencing the same criticism toward their higher-priced, limited-range vehicles that Tesla endures. Automakers are simply losing money in this business at the moment, according to analysts featured in the article.
Right now, there is some leeway to sell electric cars at a loss since so few of them are sold, and the overall market is relatively healthy. However, if the market recedes to what it was in 2008 through 2013, there could be big problems and big losses for greener cars. And California’s risk of not reducing its pollution by its 2013 deadline? Losing federal funds for highways, among other penalties. Automakers are doubtful they can even meet California’s ambitious goals without taking big losses or getting even bigger government subsidies.
Hopefully we will see an even bigger push for electric vehicles in the next few years by other government mandated programs – we also need a more complete system of charging stations, shorter recharging times, and longer battery times. The best way to start getting people to purchase is to lower the prices of the vehicles themselves – the rest will follow.