Inside Tesla's lucrative side hustle: Automaker has cashed in almost $9 billion selling EV credits to rivals that fail to meet emissions regulations
Tesla made almost $1.8 billion last year by taking advantage of rival car makers that failed to meet emissions regulations.
Etienne Note: Another example of how DARPA's boy Elon Musk makes money through "government" subsidies. Could Elon Musk be taking technology invented on the taxpayer dime and privitizing the profits for himself and "government" insiders?
Tesla made almost $1.8 billion last year by taking advantage of rival car makers that failed to meet emissions regulations.
Because it manufactures only electric cars, the company earns a surplus of regulatory credits in the US, Europe, and China which it can sell to other automakers that would otherwise be penalized for failing to make enough low-emissions cars.
Last year, the sale of those credits made it $1.79 billion, according to company filings published last week. That is more than in any other year since its incorporation.
In many regions, automakers are required to produce a certain number of zero-emission vehicles (ZEVs). The number they need to make depends on how many non-compliant gas-burning cars they sell in that region.
Automotive Regulatory Credits
'We earn tradable credits in the operation of our business under various regulations related to zero-emission vehicles (“ZEVs”), greenhouse gas, fuel economy and clean fuel. We sell these credits to other regulated entities who can use the credits to comply with emission standards and other regulatory requirements. Sales of these credits are recognized within automotive regulatory credits revenue in our consolidated statements of operations included elsewhere in this Annual Report on Form 10-K.'
Source: Tesla SEC filing
Since Tesla only makes battery EVs, it accumulates an excess of credits which it sells for profit to other automakers that are not manufacturing enough zero-emission vehicles to remain compliant with regulations.
California was one of the first regions to introduce a zero-emission vehicle policy back in 1990, according to the Pembina Institute.
Tesla's dependence on selling credits to generate revenue is often seen as a flaw in its business model and viewed by investors as a red flag.
Famous investor Michael Burry, who was featured in the Big Short, claimed in 2021 that he made a $534 million bet that Tesla's share price would fall and cited its reliance on regulatory credits.
As other companies start manufacturing more and more compliant cars, the demand for credits is expected to fall. There is no set price for a credit - instead, their value is determined by supply and demand.
The good news for Tesla investors is that its dependence on selling credits appears to be to be decreasing.
Ten years ago in 2013, it relied on them for almost 10 percent of its total revenue, old filings show.
But in 2023 their sale only made up around 1.8 percent of its overall $98 billion revenue. That is the smallest percentage in over a decade.
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Good thing he’s a conservative HERO…. Imagine the outrage
It's a testament to the public's docility that inventions that come from taxpayer funding get no royalties. If these inventions were funded by capitalists, they would get funding. The internet is another such example. Taxpayers funded it yet we have to bow to tech companies' absolutism and look how the banks thanked us after we bailed them out. So it's one rule for them and one rule for us and mostly everyone seems fine with that.