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Tesla made almost $2.8 billion off cars its rivals didn’t sell last year.
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The company sells regulatory credits to automakers that haven’t sold enough EVs to meet emissions rules.
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That lucrative side hustle is now under threat, with Trump vowing to scrap electric vehicle targets.
Elon Musk may have won the status of President Donald Trump’s “first buddy” — but the new president could jeopardize one of Tesla’s most lucrative side hustles.
Tesla has made billions selling regulatory credits to rivals in the past decade, but with Trump scrapping federal EV targets in his first weeks in office, that revenue stream is now under threat.
The automaker’s regulatory credit business, which sees it sell emissions credits to automakers who haven’t sold enough EVs to meet strict federal and state targets, made $692 million in the fourth quarter of 2024.
That strong performance, along with bumper sales of energy storage systems and an unexpected bitcoin windfall, added a bit of shine to what was otherwise a disappointing set of results.
Tesla’s total automotive revenue dropped 8% from the same period in 2023 as rising competition and slowing EV sales growth hit the company hard, with Musk rallying investor enthusiasm by focusing on Tesla’s robotaxi rollout and the Optimus humanoid robot.
While robotaxis and robots are yet to make an impact on Tesla’s balance sheet, selling credits to rivals who have failed to shift enough EVs is a very real money-spinner for the company.
Tesla made $1.8 billion from the practice in 2023, and that figure grew to almost $2.8 billion last year as other automakers rolled back ambitious electric vehicle strategies amid stuttering demand for EVs.
But with Donald Trump back in the White House — with an assist from Musk — that income stream might be about to grind to a halt.
The president has vowed to roll back emissions targets and signed an executive order last week revoking a Biden-era target that 50% of new vehicles sold in the US should be electric by 2035.
“Tesla has relied on the credits to help really boost profitability,” Stephanie Valdez Streaty, director of industry insights at Cox Automotive, told Business Insider.
“If federal guidelines are less stringent, then other manufacturers have more time and they’re not going to need those credits as much, so I think it’ll definitely impact it,” she added.
Current EPA rules mandate strict targets for automakers to cut the average emissions of their vehicle fleets every year. Those who fail to do so face substantial fines, which can be avoided by buying credits from automakers who sell a lot of EVs.
