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Over 40% Of Tesla's Profit Comes From Selling Regulatory Credits
Elon Musk spent around USD200 million to help elect Trump. It was a surprising pairing, as Trump has long criticized electric vehicles, the primary thing Tesla makes. Trump has promised to get rid of the federal clean vehicle incentive for consumers, which Musk says will ultimately help Tesla. But if Trump delivers on another promise - rolling back emissions standards for other automakers - it may hurt another key Tesla revenue stream.
Tesla earned USD2.1 billion by selling regulatory credits to other automakers in the first three quarters of 2024, according to reporting from The New York Times based on the company's regulatory filings. That accounts for 43% of the automaker's - er... "A.I. company's" - profit.
These credits have long been a big part of Tesla's business. U.S. and other government standards require automakers to hit fleet-wide emissions targets. Companies that are above those targets must buy credits to bring down their average. They buy credits from companies like Tesla, which only makes zero-emissions vehicles, and other brands that are more efficient than required by law. This incentivizes companies to beat their targets, as it opens up a valuable revenue stream, while still providing leeway for those that can't or don't want to sell more efficient vehicles.
The credit-selling business was even more crucial to Tesla earlier on. Back when other automakers were struggling to get their EV programs off the ground, and Tesla was losing money on most cars it made, profit from regulatory credits was a lifeline. Many have argued it would have never survived without them.
But in hitching his wagon to Trump's, Musk has gambled that Tesla no longer needs government incentives for consumer purchases, or for its EV and battery factories or to drive its regulatory credit business. Musk has long said that Tesla is not a car company, and that its future ambitions lie in autonomy and A.I. For those who like Tesla for the cars, however, the CEO's increasing focus on A.I. and politics is disconcerting. After all, Tesla is a company that primarily builds cars, and one that would not exist today without a series of manufacturing incentives, consumer incentives and regulatory schemes that all helped it cross "the valley of death" that dooms many start-ups.
Despite supposedly being in it for the altruistic purpose of transitioning the whole world to sustainable energy, it sure looks like Musk is trying to pull up the ladder behind him. That's not a great look. But when you haven't stepped off the ladder yourself, it could be quite dangerous, too.
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Trump 2.0 Era: How will global markets evolve?
🎙️Discussion: 1. How will tariff policies affect the movement of key assets such as U.S. stocks, gold, and Bitcoin? 2. Given this context,
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MonkeyGee : the other 40% is from China.
bullrider_21 OP MonkeyGee : If Trump raise the tariff on China EVs, Tesla may be banned from China. So its China net profit will be gone.
MonkeyGee bullrider_21 OP : I think the second time around will be different. Trump with Elon is not going to repeat something that produced no results. The fun thing is that I think China might be happy that Trump is back. It all about the art of making the deal!.
102168145 bullrider_21 OP : 谷歌和三星退出中国，不影响他们的世界霸主地位
73372627 : Do you believe NYT???? is same as some China fake propaganda. Do not worry, Tesla has very close parteneria with Chianese companies. The EV tariff are normal to be placed in order to equalize the market place and also to take out the status of the most favorisated nation because do make sense this. The second bigger Economy in the world to have this and poor countries strugle to have bread.
Read the last report. Elon is not for banned China made EV's.
bullrider_21 OP 73372627 : When the tariff on Chinese EVs is high, this is effectively banning them.
73372627 bullrider_21 OP : Not really, and this because the Chinese EV allways could be chiper then N. Americans or European cars. The tariff will make the prices in the most equal pattern. China has the power to build those cars more chipper then the others from any point of view, but the tarrifs will ban them to overfload the market. Is not more is not less.
Look : Years I exported in China and I had tarrifs which made my export to be more expensive then aprox similar Chinese products. I considered that is fair because each country must protect theirs own economy and also look for GDP.
Look, I live in Canada, canadian. In Italy I have productions which is imported in Canada. BUT: The primary sell to brokers is very high vs what me I am able to sell making 80% profit rapported to productions cost. This is due to tarrifs to protect internal industry.
Simplify: No country is for sell, but to protect internaly allmost economic. As investor, to blame x or y country for this???, mean is not anymore place for me to invest.
bullrider_21 OP 73372627 : Yes, China can make EVs cheaper than any country because of its supply chain. US is also proposing to ban the use and testing of Chinese technology and equipment in automated driving and vehicle communications systems. Chinese EVs now all come with ADAS. No China EV makers will sell in US with the high tariffs and proposal. All these are designed to keep Chinese EVs from American roads which is the same as a ban.
bullrider_21 OP : In the Jan-Sep period, Tesla's Shanghai factory delivered 675,758 vehicles, contributing 52.24% of Tesla's 1,293,656 global deliveries in the same period, according to data compiled by CnEVPost.
Stock_Drift bullrider_21 OP : Elon has way different rules than any foreign company in China. Uncanny control Elon gets.
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