How Tesla Makes Billions of Dollars Without Selling a Single Car

© Unsplash/prometheus

Do you know the “Automotive regulatory credits” (which can be translated as surplus zero-emission credits). Thanks to this process, Tesla generated $1.79 billion in 2023, and $9 billion since 2009, without selling a single vehicle, according to information from the Securities and Exchange Commission (SEC), the watchdog of the American stock market.

Tesla's Good Lode

Comment ? Under laws implemented in the United States, in the Union European, and in China, manufacturers are required to sell a certain number of electric cars each year. If they do not reach their quota, they must then buy back these credits which will be sold to them by companies which have respected their objectives.

Tesla, which only sells electric cars, has become accustomed to generating juicy profits through this process. A few years ago, Elon Musk's firm nevertheless anticipated that this source of income would soon dry up.

Thus, Zachary Kirkhorn, financial director of the company in 2020, explained to shareholders:

We do not run the business assuming that zero-emission credits will contribute significantly in the future. This will continue for a while, but eventually this flow will decrease.

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And that’s not what happened, as those sales continued to increase. Indeed, companies like Volkswagen, Jaguar, and Honda have failed to achieve their objectives. Some manufacturers like General Motors and Ford have even decided to postpone certain investments in electricity recently, which should not help matters.

Competition is raging< /h2>

According to Bloomberg, this practice also enrages Tesla's rivals. Quoted by our colleagues in 2017, Mary Nichols, former president of the California Air Resources Board, underlined as follows: “It really makes them angry that Tesla benefited from… such a boost by being the only pure electric car manufacturer on the market. In fact, they helped fund this fledgling business that now has all the glamour.”

The rivals of Elon Musk's company will, however, have to get used to it, unless they manage to respect these environmental rules in the years to come.

This takeaway:

• Tesla makes a lot of money from excess zero-emission credits
• Revenues earned through this approach are approaching 2 billion dollars per year, and 9 billion since 2009
• This enrages the manufacturer's competitors who believe they have financed the development of Elon Musk's company

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