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Tesla drives California environmental credits to the bank

Zero Emission Vehicle credits could give the automaker as much as $250 million this year, highlighting the state’s effort to promote the electric car.

The state’s Air Resources Board has mandated that zero-emission vehicles comprise 15% of new-car sales by 2025 — up from less than 1% now. Above, Tesla employees work on a Model S electric car at the company’s factory in Fremont, Calif. (David Paul Morris, Bloomberg / May 6, 2013)

When Tesla Motors reports its first-ever profit Wednesday, much of the money will come courtesy of the state of California.

In its zeal to push electric cars into the market, the state has created a system in which Tesla can make as much as $35,000 extra on each sale of its luxury Model S electric sports sedans. That’s because the Palo Alto company qualifies for coveted state environmental credits that it can turn into cash.

These Zero Emission Vehicle credits could put as much as $250 million in Tesla’s coffers this year, according to one Wall Street analyst, and they are a key reason the 10-year-old automaker has survived this long. Tesla gets to sell the credits to other automakers that need them to satisfy tough California regulations.

Tesla’s windfall highlights just how far California regulators have gone to promote the electric car — with a system that promotes the sale of trendy $100,000 sports sedans.

“At the end of the day, other carmakers are subsidizing Tesla,” said Thilo Koslowski, an analyst at Gartner Inc
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