Tesla Inc. managed to amass $1.79 billion in revenue last year from the sale of regulatory credits to car manufacturers failing to meet emissions standards. This marks another successful year for the EV leader, with total earnings from credit sales surpassing $9 billion since 2009.
The sale of regulatory credits has proven highly lucrative for Tesla, allowing the company to achieve a 100% profit margin on these transactions. In the U.S., various states, including California, mandate automakers to produce a specific number of zero-emission vehicles, rewarding them with credits based on vehicle type, range, and other criteria.
Tesla consistently accumulates surplus credits and readily sells them to automakers exceeding emissions standards. Beyond the U.S., similar credit programs operate in China and the European Union, further enhancing Tesla's revenue streams, as reported by Auto News.
However, Tesla acknowledges the finite nature of this revenue stream as competitors increase sales of their zero-emission vehicle models. In late 2020, Tesla's chief financial officer, Zachary Kirkhorn, indicated that while credit sales remained strong, they would not be a substantial part of the company's long-term strategy.
Kirkhorn stated, “What I've said before is that in the long-term regulatory credit sales will not be a material part of the business and we don't plan the business around that.” He added that the strength of credit sales might persist for a few additional quarters or diminish altogether.
Despite Kirkhorn's comments, Tesla has consistently reaped significant profits from credit sales, exceeding previous expectations. While credit sales declined by 7% in 2021 compared to 2020, Tesla still achieved over $1.7 billion in credit sales in 2022, as noted by Auto News.