Tesla Thrives with $1.8 Billion from Selling Regulatory Credits

Feb 12, 2024 09:30 PM EST

PERSON HOLDING A BLACK CARD TESLA — (Photo : PEXELS/SCREEN POST)

Tesla generated $1.8 billion by selling regulatory credits in the previous year. These credits are sold to automakers that fall short of meeting emission regulations for electric vehicles (EVs). The company has earned $9 billion from this strategy since 2009, as per Bloomberg.

Side Hustle: Tesla Earned $1.8 Billion from Selling Regulatory Credits

Elon Musk's Tesla capitalized on competitors' inability to sell sufficient EVs to comply with emission standards, bringing in $1.8 billion through regulatory-credit sales last year. Business Insider notes that Tesla acquires these credits by manufacturing and selling electric vehicles. Subsequently offering them to automakers facing challenges in meeting emission rules set by regulators in the US, Europe, and China.

This business has proven significant for Tesla, and the beneficiaries of the credits remain undisclosed. Bloomberg, the first to cover the filing, estimated that the company has garnered nearly $9 billion through the sale of regulatory credits since 2009.

This revelation might be equally surprising to Tesla as it is to others. The company anticipated a decline in revenue from regulatory credits as rival automakers increased their electric vehicle (EV) production. During a 2020 earnings call, Zachary Kirkhorn, then the company's chief financial officer, cautioned about such a scenario.

Kirkhorn communicated to investors, as reported by Bloomberg, that the company does not operate under the assumption that regulatory credits will play a substantial role in the future. He stated it will continue for some period of time, but eventually this stream of regulatory credits will reduce.

Nevertheless, the reported revealed that its expected outcome has not materialized significantly, as Tesla's revenue from the sale of regulatory credits has only seen a slight increase compared to the previous year's earnings of $1.776 billion.

Furthermore, the Business Insider's report stated Tesla, under Musk's leadership, maintains dominance in the US electric-vehicle market despite increasing competition. However, some major competitors are scaling back their ambitious EV plans, such as Ford postponing a $12 billion investment and General Motors reintroducing hybrids.

Tesla faces a significant challenge from China, where BYD surpassed it as the world's leading seller of electric vehicles at the beginning of the year. As of now, Tesla has not provided a comment in response to inquiries made outside regular working hours.

Layoff Plans is on the Table

Despite Tesla's dominance in the EV market and sales from selling regulatory credits , news about layoff plans is circulating . According to Investors News report,Tesla may be considering layoffs as CEO Elon Musk inquires about essential roles within the electric vehicle (EV) company, according to insider reports. Managers and staff have reportedly been questioned about positions vital to Tesla's operations, sparking concerns about potential layoffs. Should Tesla decide to implement job cuts, it would align with a trend observed across various companies. Numerous firms have been downsizing their workforce after a period of hiring during the pandemic. Some are taking such measures to address challenges posed by rising inflation and interest rates.

Furthermore, the report shared all signs indicate that more announcements about layoffs are expected in 2024, as additional companies aim to trim operating expenses to withstand the challenging economic conditions.