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Tesla Cars to Get Fewer Green Credits as California Tweaks Rules

April 4 (Bloomberg) -- Tesla Motors Inc., which had its first profitable quarter last year aided by sales of California environmental credits, is to receive fewer for each Model S sold as the state modifies its zero-emission vehicle program.

The Palo Alto, California-based carmaker, which sold ZEV credits worth $129.8 million last year to other automakers, will initially qualify for only four credits per car sold in California and states that follow its rules. That’s down from seven per Model S through 2013, according to California’s Air Resources Board, which posted the changes yesterday.

The credit rule change, deferred from October, comes after the board emphasized last year a need to ensure the state awarded credits based only on how advanced vehicles are actually used, rather than theoretical capabilities. Some automakers had said that Tesla was getting more credits than it deserved, since it failed to meet the rapid-refueling requirement, the board said last year.

Maximum credits per emission-free vehicle sold in California is rising to nine from seven previously, and go only to vehicles with long-driving driving ranges and that can be refueled within 15 minutes or less, the agency said. Hydrogen fuel-cell autos with a range of about 300 miles (483 kilometers) fulfill that requirement, while even Tesla’s Model S with its largest battery pack wouldn’t immediately qualify.

A final rule change will be set after a public review period, the board said.

Battery Stations

The 2014 version of the car is a Type III ZEV and earns four credits, Dave Clegern, a spokesman for the agency, said by e-mail.

“Right now it looks as though it will continue to be Type III ZEV until it demonstrates fast refueling,” he said.

While Tesla has proposed opening battery-swap stations to let its drivers exchange depleted packs with fully charged ones within a minute or two, none have opened. When they do, the proposed change also requires detailed documentation of how much they are used, in order to get the maximum credits.

“The apparent preference for fuel cell technology appears to call into question California’s commitment to a California company employing thousands of people making thousands of zero- emission vehicles today,” Diarmuid O’Connell, Tesla’s vice president of business development, said in a phone interview today.

Tesla is the top seller of California credits, according to the state’s annual tally. That helped the carmaker named for inventor Nikola Tesla post net income of $11.2 million in 2013’s first quarter.

ZEV Credit Sales

Elon Musk, the carmaker’s co-founder and chief executive officer, has said that ZEV credit sales will account for a smaller portion of its revenue as it increases exports of the California-built Model S -- priced from $71,000 -- to Europe, Asia and other global markets.

California’s board, which sets emissions rules for automakers that rival those of U.S. regulators, requires carmakers to sell a combined 1.4 million low-pollution plug-in hybrids, battery-powered autos and hydrogen fuel cell vehicles annually by the mid-2020s. That’s created demand for ZEV credits from Tesla, which currently is too small to be covered by the requirements.

Tesla fell 5.7 percent to $212.67 at 3:05 p.m. in New York. The shares had risen 50 percent this year through yesterday.

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