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Tesla Selling Emissions Credits

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I recently commented on Anton’s post about Tesla’s profitability, citing a conversation we had with one of the journalists from Automotive News.  He had mentioned that Tesla was gaining lots of revenue from selling emissions credits to competing automakers.  I decided to do more research on the subject.


Tesla sold $68 million in emissions credits to other auto companies, who are gearing down for 2025 when 15% of all car sales must be electric.  This $68 million comprised 12% of Tesla’s overall revenue in the first quarter.  Morgan Stanley analyst Adam Jonas commented, “I think they’re embarrassed how much money they’re making on this.”  While they may be embarrassed, it is in my opinion more economically relevant that they should be worried.  Other companies will eventually have to conform to the environmental regulation demand of 12% electric car sales, and when they do, this revenue source will decrease substantially.  Tesla needs to increase sales, because if they had not made such revenue from selling emissions credits this quarter, they would have experienced a significant net loss.


  1. Peter Wittwer
    Peter Wittwer

    If Tesla intends to increase their market share and not just remain a luxury car brand they will have to develop more affordable automobiles. This can be achieved by Tesla mass producing their batteries, which is considered one of the most expensive parts of production. In order to mass produce these batteries factories desperately need to increase their capacity.

    It’ll be interesting to see if the batteries needed to run Teslas are cheap enough for Tesla to start making a product on the sale of cheaper electric cars. Tesla may never become the huge car brand that Elon Musk wants it to be, but at the very least it could compete in the luxury car market.

    May 14, 2014
  2. Louis Ike
    Louis Ike

    I do find the 12% revenue coming from emissions sales frightening. However, I posted earlier this week regarding Tesla’s investment in new manufacturing facilities, which will allow it to lower its marginal cost through economies of scale. Further, Tesla is planning on rolling out cars with a price tag that will compete with cars in the 20k to 30k range, thus allowing it to capture more of the market than just high end luxury. Nonetheless, this will be an important factor to watch at Tesla progresses into the future.

    May 14, 2014
  3. Zachary Durkin
    Zachary Durkin

    Do you think that Tesla will be able to adapt to a competitive market in the future once the demand for their CAFE emissions credits goes down as other OEMs adapt to the new standards?

    May 14, 2014
  4. Peter Wittwer
    Peter Wittwer

    It will definitely be interesting to see if Tesla can make a profit off of cars in the 20k to 30k range due to the expensive nature of their production, at the moment I think it may not be bad for Tesla to make money off of emission sales. If the emissions sales are what puts them over the edge and allows them to make a profit, Tesla can continue to make emission sales to build up capital they can reinvest into the company and create factories with enough capacity to mass produce the batteries and thus cut marginal costs.

    May 14, 2014
  5. Jier Qiu
    Jier Qiu

    I think since Tesla is constructing their new plants and charging stations, it needs to raise a huge amount of funds. Although selling their emissions credits is not going to last for very long, it is extremely profitable. Eventually I think the government will propose a new bill regulating companies like Tesla that only produces electric cars but as it for now, Tesla is doing the right thing.

    May 14, 2014
  6. Kade Kenlon
    Kade Kenlon

    At this point in the car market it seems that companies who cannot meet the CAFE standards are using Tesla credits as their way out. As the CAFE standards become fiercer, other companies will begin to produce their own electric cars and rely less on Tesla for credits. If Tesla looks to sell a car for 20,000-30,000, I could see them increasing revenue big time. A car like this would be perfect for a middle-class worker that has a short drive to work.

    May 14, 2014

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