Tesla Generates Fortune from Manufacturers Failing to Sell Enough EVs!

Tesla, the Manufacturer Profiting from Others' Inability to Sell Sufficient EVsTesla continues to increase its profit margin despite the declining dem...

Tesla, the Manufacturer Profiting from Others' Inability to Sell Sufficient EVs

Tesla continues to increase its profit margin despite the declining demand for electric vehicles. The manufacturer has managed to generate a revenue of $1.79 billion last year alone, thanks to its collaborations with brands that struggle to achieve satisfactory EV sales.

According to Automotive News Europe, the American EV manufacturer has made a staggering $9 billion in revenue from these partnerships since 2009. But how does Tesla accomplish this?

What Are "Regulatory Credits"?

Translating this term into Turkish accurately is challenging. However, it can be considered as the "credit score" given to automakers by governments. We can say it is a byproduct of the battle against emissions fought in recent years.

Leading manufacturers in countries like the United States, Europe, and China obtain certain credit scores based on their fleet emission data. In order to avoid falling below a certain threshold and receiving penalties, the automakers are compelled to increase the production of zero-emission vehicles.

Alternatively, they can purchase these credits from manufacturers who possess an excess amount.

For Tesla, which exclusively produces electric vehicles, this situation is not a problem. As a manufacturer with a completely zero-emission fleet, Tesla has enough credits to satisfy other automakers. Since 2009, they have turned this situation into a real source of income.

Tesla Cybertruck

Various manufacturers such as Volkswagen, General Motors, Honda, and Jaguar Land Rover have purchased credits from Tesla to access "regulatory credits." It is known that Stellantis alone bought $2 billion worth of credits from Tesla between 2019 and 2021.

In other words, the manufacturers that fail to produce enough EVs turn to Tesla.

The Other Side of the Coin

While new emission restrictions have greatly benefitted Tesla, they have also started to pose a challenge. Famous investor Michael Burry, whose life was depicted in a motion picture, termed Tesla's plans as a "warning flag" years ago. The gradual electrification of fleets by other manufacturers not only reduces Tesla's "regulatory credit" revenues but also cuts into their profits.

For instance, although Tesla achieved sales of only $1.58 billion this year, they generated 7% more revenue in 2021.

Read also: Model 3 Performance Caught Testing! Tesla's entry-level model coming in mid-2025!

In a 2020 interview, Tesla CFO Zachary Kirkhorn emphasized that the company's revenue and business model are not solely reliant on these "credit" revenues and that such profits are not "sustainable."

Nevertheless, Tesla can prevent its ship from taking on water in an industry that is becoming increasingly turbulent, thanks to these sales.

Sources: Automotive News Europe, CNBC

16 Şub 2024 - 15:37 - Luxury

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