Tesla CEO Elon Musk said that it is wrong to think that the elimination of measures that benefit the environment and zero-emission vehicles will hurt Tesla. The disinterest shown by Trump towards a green industry has raised concerns in a great part of the society, but it seems Tesla decided not to let it affect them.

The United States and the world are still shocked about the presidential results of the past November 8. Particularly, the electric vehicle industry is wondering whether the zero-emission vehicles (ZEV) credits will be eliminated. However, Elon Musk said it would be a “fundamental misunderstanding” to think that the climate policy under Trump’s administration will hurt Tesla’s auto business and its competitiveness. These statements were made during a question-and-answer session held Thursday.

Elon Musk thinks Donald J. Trump is not the right person to be president of the US. Image Credit: Market Watch.

What will happen with electric cars under Trump’s Administration? 

Electric cars such as the Chevrolet Bolt EV or the new Tesla Model 3 will probably face a new regulatory framework as Trump prepares to take control of the White House. Let’s remember that Trump has in different opportunities denied the existence of climate change, even saying it was a hoax from China to make U.S. manufacturing non-competitive. He has praised and promise support for the U.S Coal and oil industry.

Even United Nations Secretary General has asked Trump to continue US commitment with climate change initiatives and especially with the Paris Agreement on Climate Change.

Therefore, the prospects for the electric vehicle industry are not that becoming. As well, to the Trump’s climate denial we must add the fact that the oil prices are not that high anymore.

Certainly, nobody is sure about what policies will be established next year. But many believe that Trump will pressure states such as California to eliminate the ZEV credits. Just two days after the elections, the Alliance of Automobile Manufacturers urged Trump’s staff to check the Obama’s autonomous vehicle standards.

“The short answer is that we don’t know what will happen with the Trump Administration and electric vehicles”, said Dave Reichmuth, senior engineer for the Union of concerned scientist clean vehicles program. “It might be a while before we understand the policy priorities for the new administration” he added.

Image credit: @Teslamotors.

What does the ZEV credits mean for the electric vehicles companies?

The Zero-emission vehicles credits mandate has been implemented by the California Air Resources Board (CARB) requiring automakers to sell a minimum number of zero-emissions vehicles, or they will face a fine. Other nine states have also included this mandate into their legislation say Maryland and Maine.

If automakers fail to earn enough ZEV credits, they can buy them from other companies who’ve sold more than the required ZEV. Naturally, as Tesla production is about electric cars, it always exceeds its ZEV credits and makes a profit by selling them to other companies. Tesla made $139 million by selling these credits.

However, given the way the program was established, there’s an oversupply of ZEV credits flooding the market, which makes it harder for Tesla to turn the ZEV credits into a profit.

“The California Air Resources Board is being incredibly weak in its application of ZEV credits,” said Musk. “The standards are pathetically low. They need to be increased…. It’s a crying shame that they haven’t. And as a result, you can barely sell the ZEV credits for pennies on the dollar.”

Elon Musk at SolarCity's Inside Energy Summit in Manhattan, New York October 2, 2015. Image Credit: Reuters
Elon Musk at SolarCity’s Inside Energy Summit in Manhattan, New York October 2, 2015. Image Credit: Reuters

Tesla won’t be affected by Trump’s policies on ZEV credits

Due to the critics made by musk to the ZEV credits mandate is exactly why Tesla won’t be affected by the possible suppression of these credits under Trump’s administration. He said the incentives were disadvantageous. Musk even said that eliminating ZEV credits, if that ever happens to occur, would improve Tesla’s competitive position in the market. This was said during a conference where shareholders also voted in favor of Tesla’s acquisition of SolarCity.

However, even if Tesla is not happy with the way the ZEV credits work and though they are not a big part of Tesla’s incomes; its abolition would be anyhow the elimination of a source of income that wouldn’t be good to lose, especially now, when Tesla’s Model 3 is about to get to the markets.

According to CFRA Reseach Analyst Efraim Levy, if you are interested in buying Tesla stock, you shouldn’t consider ZEV credits in your equation. He said if anyone wants to buy Tesla it would be because they want to invest in something that is changing the world and market patterns, or because you are expecting Tesla to become very profitable once they bring out their Model 3.

“We do believe there should be incentives and government incentives for electric vehicles, but we believe they should be there for the good of the industry and to accelerate the advent of sustainable transport,” said Musk.

Source: Business Insider UK