As the U.S. Securities and Exchange Commission is seeking voluntary information from electric pickup startup Lordstown Motors, more details are emerging about the deal between the company and one of its main funders, General Motors. A big bonus in the deal for GM was a claim to most of Lordstown Motors’ future federal emission credits.
As part of Lordstown Motors’ SEC filing for the previous fiscal year, the company revealed that financier General Motors retained the option to purchase the first full three years of emission credit rights from scratch, discounting the credits to be valued at 75 percent of the normal trading market price. The detail and excerpt from the submission were highlighted throughout Sean O’Kane of the Verge on Twitter
The US government has set a limit on the “allowed” emissions of car manufacturers and a emission allowance or emission trading program to allow car manufacturers that exceed the limit to trade for credits with other companies that have left over credits. This allows high emission carmakers such as Jeep, Ford and Chevy to continue to produce large volumes of pickup trucks well above their operating emission limits as they can buy credits from companies like Tesla, which does not use any of its vehicle emission credits because it produces purely electric cars .
At the time of GM’s somewhat surprising decision to back Lordstown Motors, it was appeared to be an attempt to appease the former president’s administration by securing more American production in Lordstown, Ohio, assembly plant. And the deal also accelerated development of GM’s EV truck. It was never clear what the motivation for the deal was for GM, but getting a huge bag of reduced emissions credits puts the deal into the picture more clearly.
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Should Lordstown’s initial plans to go into production by the end of 2021 actually succeed, GM’s obtaining of emissions credits for the first full three years would allow it to sell more V8s in pickup trucks, SUVs. and sports cars. In fact, the idea for GM was to turn Lordstown into its own Tesla-esque credit machine instead of having to buy them elsewhere.
The move is a genius on paper, as GM would not only have a few more years to play with V8s, but would also benefit from the EV pickups Lordstown is selling thanks to its investment. That also allows GM to market Lordstown’s technology and platform for its own brands of vehicles.
The only problem now is that Lordstown Motors is in rough water with the SEC, and under a cloud after an investigation firm claimed it falsified orders and misled everyone about its production capacity and timetable. GM won’t get a credit discount if Lordstown never makes trucks, so we’ll just have to see if the investment pays off.