With the United States Securities and Exchange Commission now requesting voluntary information from electric truck startup Lordstown Motors, more details of the deal between the company and one of its main sponsors, General Motors, are coming to the fore. A big bonus to the deal for GM was the claim for most of Lordstown Motors’ future federal emissions credits.
As part of Lordstown Motors SEC filing for the previous fiscal year, the company revealed that the sponsor of General Motors maintained the option to purchase the first three full years of emission credit allowances from the beginning, with discounted credits being valued at 75 percent of the normal trading market price. The detail and a clip from the file were highlighted by Sean O’Kane of the Verge on Twitter:
The US government has set a limit on “allowed” emissions from automotive manufacturers and has created a emissions or permits trading program to allow automakers that exceed the limit to negotiate for credits with other companies with credits to spare. This allows automakers with heavy emissions, such as Jeep, Ford and Chevy, to continue producing large volumes of pickups far above their corporate emissions limits because they can buy credits from companies like Tesla, which does not use any of its emissions credits. of vehicles because it produces purely electric cars.
At the time of GM’s somewhat surprising decision to support Lordstown Motors, it appeared to be an attempt to appease former President Trump’s administration by securing more US manufacturing in Lordstown, Ohio, assembly workshop. And the deal also accelerated the development of GM’s EV truck. It was never clear what the business was motivating for GM, but winning a large bag of discounted emissions credits brings the business to a clearer focus.
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If Lordstown’s initial plans to go into production at the end of 2021 really succeed, GM’s warranty for the first three full years of emission credits would make it possible to sell more V8 engines in pickup trucks, SUVs and sports cars. Basically, GM’s idea was to turn Lordstown into its own Tesla-like credit machine, instead of having to buy them elsewhere.
The move is genius on paper because in addition to getting more space to play with V8 engines for a few more years, GM would also profit from the EV pickups that Lordstown sells thanks to its investment. It also allows GM to steal Lordstown’s technology and platform for its own vehicle brands.
The only problem now is that Lordstown Motors is struggling with the SEC, and is under a cloud after a research firm claimed it was falsifying orders and deceiving everyone about its production capacity and schedule. GM will not have any discounted credit if Lordstown never makes trucks, so we just have to see if the investment is worth it.