Fisker U.S. Sales Are Set to Begin. That Means Cash From Government Programs.

Regulatory credits are environmental emissions programs used to financially incentivize automakers to reduce emissions.

Late Tuesday, Fisker announced it would begin shipping its Ocean SUV to the U.S. this month. Shares gained about a nickel late in the day after the release and closed at $5.84. Shares are up 0.2% in premarket trading Thursday while

S&P 500
and

Nasdaq Composite
futures are flat.

Starting deliveries in the U.S. is a big deal. Shares, however, aren’t up more because it’s the second time in recent days Fisker has said the Ocean was coming to America in June. There was something new in the news release for investors though. Fisker detailed its plan to get some regulatory benefits from selling its EV even though its EVs don’t qualify for purchase tax credits passed as part of the Inflation Reduction Act.

Car buyers can get $7,500 back from the federal government when buying an EV if specific qualifications are met. One of the qualifications relates to where cars are manufactured. They have to be assembled in North America. The Fisker Ocean is assembled in Europe by

Magna International

(MGA).

But there are other government-sponsored benefits for EV makers, including zero-emission credits. Car makers, in certain states, are required to sell a certain number of zero-emission vehicles. If they don’t sell enough, they have to buy zero-emission credits or face a fine of up to $5,000 per missing zero-emission vehicle.

Tesla

(TSLA) is the best example of the opportunity. Because it only sells zero-emission vehicles it has always made more than its fair share of zero-emission vehicles. The company generated $564 million in revenue selling credits in the first quarter of 2023 and about $5 billion in sales over the past three years.

The Fisker Ocean Extreme, one model trim the company is selling, will generate four credits per sale, according to the company.

The Ocean will also generate credits related to Federal fuel economy standards. Auto makers get a credit for every one-tenth of a mile per gallon better than the standard.

EVs get an equivalent miles-per-gallon rating from the  Environmental Protection Agency. The Ocean should get a label of about 130 miles per gallon, even though there is no gasoline. That will generate about 395 credits. The penalty for missing fuel economy standards is about $15 per credit. Or about $15 per tenth of a mile per gallon per car sold.

There are other benefits from selling EVs, but those are two of the big ones. Fisker says it has already entered into agreements to sell credits to auto makers. The company didn’t immediately respond to a request for comment about revenue generated from the sales.

Those credits, for the most part, benefit the company. While Ocean doesn’t qualify for EV purchase tax credit there is one way Fisker buyers can still get a benefit. Commercial buyers–such as leasing companies-get the tax credit so car leasers can pass the benefit on to customers in the form of lower monthly payments. Said another way, the car price used to calculate monthly payments can be about $7,500 less than the sticker price of the car. It’s the lease loophole.

Write to Al Root at [email protected]