Updated from Thursday, Oct. 24
NEW YORK (TheStreet) -- Tesla (TSLA) could see decreasing profitability if its zero-emission credits are limited by the California Air Resources Board (CARB). The government body met in Sacramento on Thursday and will regroup on Friday to discuss Tesla's incentive eligibility.
Tesla currently receives seven credits for every Model S model produced. This could soon be cut to four, according to Bloomberg's Cory Johnson, on the issue of whether the battery pack can be easily removed for fast refueling.
Credits are currently a substantial portion of the company's revenue. In 2012, for example, of the $385.7 million in revenue, around $119 million was generated from CARB credits, said Johnson.
"Tesla, as always, is supportive of anything that will enhance or strengthen zero-emissions mandates," said Diarmuid O'Connell, vice president of Business Development, on the meeting.
CARB also announced governors from eight states -- California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island and Vermont -- had committed to an initiative to have 3.3 million zero-emission vehicles in use by 2025.
"We applaud the effort of the California Air Resources Board for their leadership and the individual states that have signed onto this initiative," said O'Connell.
Shares closed 5.3% higher to $173.15. The stock was rising 0.97% in premarket trading on Friday.
TheStreet Ratings team rates Tesla Motors Inc as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about its recommendation:
"We rate Tesla Motors Inc (TSLA) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been poor profit margins."