General Motors and Lordstown motors have entered an agreement that will allow the American automaker to purchase emissions credits from the company at a discounted price.
In August of last year, Lordstown Motors entered an agreement with GM that would allow the Detroit-based automaker to purchase emissions credits from it at a purchase price equal to 75 percent of their fair market value. This would allow GM to profit off the sale of these credits, as it could then turn around and sell the credits to another automaker at full market value.
This agreement was first discovered by Verge journalist Sean O’Kane, who dug up details from the Form 10K that Lordstown Motors filed with the U.S. Securities and Exchange Commission last year.
Interesting: GM has the option to buy all of @LordstownMotors’ emissions credits for the first three full years of production at 75% market value. A little ZEV credit arbitrage in exchange for backing the startup. $RIDE pic.twitter.com/2bzXaranc2
— Sean O’Kane (@sokane1) March 25, 2021
The agreement indicates that Lordstown Motors expects its first three production model years to be 2022, 2023 and 2024, however the agreement could extend beyond these model years if Lordstown Motors experiences any setbacks in its production schedule.
Automakers that make electric vehicles only can sell emissions credits issued to them to another manufacturer in order to help that company comply with federal emissions regulations. In 2020, Tesla generated more than $1.58 billion in emissions credit sales – helping the electric vehicle start-up post its first annual net profit in the company’s history.
Fiat Chrysler Automobiles (now Stellantis) was the industry’s biggest spending on regulatory credits last year. The company spent $362 million on emissions credits in Europe in 2020, the vast majority of which were purchased from Tesla.
While this agreement with Lordstown Motors could eventually result in a decent payout for GM, it hinges entirely on Lordstown Motors actually producing vehicles. Lordstown Motors is currently facing an inquiry from the U.S. Securities and Exchange Commission (SEC) over accusations made by a short-seller that the startup lied about receiving 100,000 pre-orders for its Endurance electric pickup truck. The company also has requested a loan from the U.S. Department of Energy and sought additional backing from outside investors to gather funds to produce the Endurance.
As of right now, the Lordstown Endurance is still expected to enter production for the 2022 model year at the former GM Lordstown Assembly plant in Ohio.