It's not just the weather that attracts start-up manufacturers of alternative-fuel vehicles to California.
The state's Zero Emission Vehicle program has created a marketplace for credits earned by selling electric and other low-emission vehicles. That means a potential source of income for small electric-vehicle makers that earn the credits but don't need them.
Indeed, part of the business plan of some small companies trying to break into the electric-car business involves selling credits to larger manufacturers. So far the only known transaction has been American Honda Motor Co.'s acquisition of credits from electric-vehicle maker Tesla Motors.
Tesla reported recently that it earned $12.2 million through March from the sale of credits earned through the sale of its $109,000 electric two-seat Roadster. The figure was included in a Securities and Exchange Commission filing for the company's planned initial public offering. The first Roadster was delivered in 2008, and Tesla has sold more than 1,000 units worldwide.
The California Air Resources Board requires manufacturers that sell more than 10,000 units in the state to accumulate ZEV credits. Individual targets are based on each carmaker's volume and market share in the state. Companies that don't comply face fines and potential restrictions on sales in California.
Credits earned through each sale are based on how far the vehicle can travel on a zero-emission fuel source. A vehicle with a range of more than 300 miles earns seven credits. One that travels more than 200 miles on a charge gets five. The Tesla Roadster brings four credits per sale … Read more