Tesla has added another major car maker to its lucrative “carbon pool”, after Honda reported lacklustre sales of its first mass market electric vehicle, the retro-inspired Honda e.
Honda will now join FCA which is accessing Tesla’s open CO2 pool to help meet tight new vehicle emissions reduction targets that will tighten in 2021 to an average 95 grams of carbon dioxide per kilometre per vehicle sold.
Most major car makers are struggling to make this threshold so they are buying “carbon credits” from the likes of Tesla, which sells only EVs and so has credits in abundance.
In the third quarter of 2020, Tesla reported a windfall of $US397 million ($A547 million) in revenue from selling such credits to rival car makers, further boosting the the results of its fifth consecutive profitable quarter. It will make nearly $A2 billion from the carbon credit scheme this financial year.
Honda’s decision to join FCA in accessing Tesla’s open pool is a direct result of its poor Honda e sales in Western Europe, according to European electric vehicle market analyst Matthias Schmidt (no relation).
The Honda e, which was borne out of the Japanese car maker’s “Urban EV” concept and in Europe costs around €30,000 ($A49,000 converted), was always going to appeal to a niche market.
With its funky, retro design it is packed with tech and aimed at drivers after something with a difference at a (relatively) affordable price.
But it has not hit the mark in Europe. With just 1,000 registrations according to the latest European Electric Car Report published by Schmidt, it would now appear that Honda is looking to buy CO2 credits to avoid having to pay fines if it doesn’t meet the EU CO2 limits.
But Tesla’s opportunity to further shore up profits using sales of credits could be squandered if it does not increase, or at least maintain, sales volume in Europe.
Although Tesla played a small part in electrified vehicles outselling diesel vehicles in Europe in September (this was to a greater extent due to Toyota hybrid sales), its sales volumes in Europe over the last 12 months have declined by 12 per cent, although we note that is at least partly due to a drop after an initial push in early 2019 after the Model 3 was introduced, as we have seen in Australia.
Tesla sold 63,000 vehicles in Western Europe from January to September 2021 compared to Volkswagen Group’s 87,000 and Renault/Nissan’s 83,000, bringing its market share to just 13.3% compared to 2019’s third quarter 33.8%.
“In terms of 12-months rolling totals, Tesla’s volumes hit a concrete wall at the end of last year and have fallen back to below 100,000 units since the second half of this year, with the 12-month period up to September achieving the lowest volumes since November 2019 with 97,600 units,” writes Schmidt.
Schmidt points out that Tesla’s recent move to begin importing China-made Model 3s to boost availability, and use credits from increased sales to continue to bolster profits.
“One train of thought is that Tesla may be planning on flooding the European market with increased volumes in the final quarter of the year to try and benefit from a windfall potentially on offer as those manufacturers that are worried about missing their 2020 CO2 obligations with second lock-downs on the horizon, scramble to join open pools to avoid larger fines,” says Schmidt.
But as traditional OEMs introduce more electric models in Europe, Tesla will face mounting competition – which it has always insisted it wants to foster but which could whittle away profits unless more drivers embrace the shift to electric transport.
And some legacy OEMs are already gaining traction with the introduction of new electric models.
Volkswagen in particular has seen the introduction of its ID.3 electric hatch embraced particularly in Norway where it was the top-selling EV in September. Volkswagen is now the leading electric vehicle maker in Europe and will also now sell CO2 credits to Chinese car maker MG/SAIC.
Bridie Schmidt is lead reporter for The Driven, sister site of Renew Economy. She has been writing about electric vehicles since 2018, and has a keen interest in the role that zero-emissions transport has to play in sustainability. She has participated in podcasts such as Download This Show with Marc Fennell and Shirtloads of Science with Karl Kruszelnicki and is co-organiser of the Northern Rivers Electric Vehicle Forum. Bridie also owns a Tesla Model 3 and has it available for hire on evee.com.au.