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.