Now that the U.S. Securities and Exchange Commission requests voluntary information from electric truck startup Lordstown Motors, more details of the agreement between the company and one of its key backers, General Motors, are coming to light. A big deal advantage for GM was claiming the majority of future federal emissions credits from Lordstown Motors.
As part of Lordstown Motors SEC Filing for the Prior Fiscal Year, the company disclosed that sponsor General Motors retained the option to purchase the first three full years of emission credit allowances from start-up, with the credits discounted to be valued at 75 percent of the normal commercial market price. The detail and a clip of the presentation were highlighted by Sean O’Kane of The Verge on Twitter:
The US government has capped “allowable” emissions from automakers and created a emission rights or allowances trading program to allow automakers that exceed the limit to negotiate for loans with other companies with credit to spare. This allows high-emission automakers such as Jeep, Ford and Chevy to continue to produce large volumes of trucks well above their corporate emissions limits because they can buy credits from companies like Tesla, which does not use any of their emission credits vehicle emissions because it produces purely electric cars.
At the time of GM’s surprising decision to back Lordstown Motors, appeared to be an attempt to appease former President Trump’s administration by securing more US manufacturing in Lordstown, Ohio, assembly plant. And the deal also accelerated GM’s development of electric trucks. It was never clear what the motivation for the deal was for GM, but getting a large number of discounted emissions credits makes the deal clearer.
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If Lordstown’s initial plans to go into production by the end of 2021 were truly successful, obtaining the first three full years of emissions credits from GM would allow it to sell more V8s in trucks, SUVs and sports cars. Essentially, GM’s idea was to turn Lordstown into its own Tesla-like credit machine rather than having to buy them elsewhere.
The move is great on paper because in addition to having more room to play with V8s for a few more years, GM would also benefit from the EV trucks Lordstown sells for its investment. That also allows GM to rip off Lordstown’s technology and platform for its own vehicle brands.
The only problem now is that Lordstown Motors is in troubled waters with the SEC and under a cloud after an investigative firm claimed it had been falsifying orders and misleading everyone about its production capacity and schedule. GM won’t get any discounted credit if Lordstown never makes trucks, so we’ll just have to see if the investment is worth it.