Tesla Battling Automakers In California

According to a report from Automotive News, Tesla Motors is set to defend the mandate in California which says that approximately 15 percent of the cars sold in the state should be zero emission vehicles by 2025. Although the mandate is certainly good for Tesla, it may not prove easy for other automakers to comply with this requirement.

A number of other automakers are now asking for significant changes to the rule, including the permission to comply using plug-in hybrids instead of pure electric vehicles and fuel-cell cars. At the same time, Tesla wants to ensure that auto dealers such as Chrysler, Ford, GM, Honda, Nissan and Toyota don’t get their demands met.

Major automakers have asked regulators to amend the mandate with a new formula that would be based on miles traveled on electric power, or e-miles, which would allow them to sell more plug-in hybrids. However, Tesla is prepared to battle, and the company has challenged rivals publicly, thereby going against the standard practice of lobbying, in which companies talk about their interest without publicly criticizing the competition.

On May 23, Tesla made its position clear during a hearing of the California Air Resources Board. Tesla opposed the leniency plea from automakers that included Mazda, Subaru and Jaguar Land Rover, which argued that their size restricts them from coming up with pure electric vehicles.

Tesla could certainly benefit from the stricter mandate as the company reported $152 million in revenue in 2014 from sales of Zero Emission Vehicle (ZEV) credits, which represents 5 percent of its total revenue. However, CEO Elon Musk said in May that it is not a big deal, and Tesla vice president of business development, Diramund O’Connell, told Automotive News that although credit revenue was once a hot item for Tesla, this is no longer the case.

O’Connell describes the mandate as “weak,” and says pure electric cars, such as Tesla, were never imagined to be a successful entity, but that the company just nailed it. “The inconvenient truth is that our success has revealed the weakness of the mandate,” he said.

“Providing concessions despite the existence of reasonable and readily accessible regulatory flexibilities sends a signal to the rest of the industry that further concessions can be negotiated,” read a May 3 letter sent to Richard Corey, the executive officer of the California Air Resources Board (CARB), by James Chen, Tesla’s chief of regulatory affairs. “We believe this will cause automakers to slow down their investments in ZEV product lines, particularly in advance of the midterm review.”

California may be one of the major regions where Tesla can sell its Model S and other upcoming cars, so its battle over this issue in the state is definitely understandable and may be considered a very important fight by the innovative company.