Wed. Aug 17th, 2022

Tesla has already released its 2020 net income, and it has disappointed Wall Street to a great extent. After all, it has fallen short of expectations by a mile, but that’s a story of another day. Today, it is about how it makes the income because it is no secret that car sales are not the only thing that generates Tesla’s revenue. This other income-generating venture narrows down to the existing policies.

About 11 states have it that automakers have to sell a certain percentage of clean energy vehicles by the time the calendar clocks 2025. They include Vermont, Rhode Island, Oregon, Ney York, and New Jersey. The rest are Massachusetts, Maryland, Maine, Connecticut, Colorado, and California.

However, for various reasons, not all of them can beat the target, and that’s where Tesla comes in. It is the alternative to that since in the event that an automaker can’t reach the minimum percentage, it can alternatively buy regulatory credits from another automaker that has reached the target. The fact that Tesla only sells zero-emission vehicles couple up with its reputation means makes it meet the requirements hence be eligible for selling regulatory credits.

So far, Tesla has made up to $3.3 billion from this particular business. That’s a figure for over the last five years, but the exciting part is that it made almost half of it in 2020. After all, it made $1.6 billion from selling the regulatory credits in 2020. That’s not even the most surprising part but rather the fact that its annual income that year was way lower than that, standing at $721 million. One can only imagine the figures it would have registered if it weren’t for the regulatory credits. However, it is evident that the company could have reported a loss.

GLJ Research’s Gordon Johnson, who also has a significant connection with Tesla, commented on the matter. He acknowledged that credits would soon be a thing of the past. The company’s top executives are reading from the same script, saying that it is not something that Tesla can rely on to make money. According to Zachary Kirkhorn, its Financial Officer, the future of selling regulatory credits is hard to predict since it could go both ways. It would flourish or go down, which a company can’t afford to rely on at all. Gordon also said that the company is losing money from car sales and only making some from the regulatory credits. However, Tesla has other profitability measures. Therefore, I can say that it has a future even when the credit sales are long gone.

By Adam