Earning billions from other car manufacturers

Earning billions from other car manufacturers

In documents that Tesla has recently submitted to US authorities, it is revealed that trading in emission rights is still one of the car manufacturer’s most important sources of income.

It reports The Drive.

In 2023, nearly $1.8 billion was brought in from the trade, but how long this important source of revenue will remain is unclear.

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Credits for environmentally friendly cars

It all revolves around emission credits given to manufacturers of emission-free cars, which are handed out by many US states and compensate for the punitive taxes given to cars with high emissions.

Since Tesla only manufactures electric cars, it gets a hefty load of emission credits every year, which it can then sell to car manufacturers with a more environmentally-friendly model range.

Buying the emissions credits from Tesla obviously costs these companies money, but it’s still significantly cheaper than paying the penalty taxes.

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10 percent of the profit

Since the only cost of the trade is lighter paperwork, Tesla can pretty much count the entire sum it receives for the emission allowances as pure profit.

In 2023, the company’s gross profit was 17.66 billion dollars, of which 1.79 billion, or just over 10 percent, came from the trading of emissions rights.

In 2022 and 2021, the figure was 1.776 billion and 1.474 billion, respectively, and over the years Tesla has collected around $9 billion on its emissions rights, according to Transport Topics.

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Stellantis is a loyal customer

One of the largest buyers of Tesla’s emissions rights has historically been the Fiat Chrysler Group, now Stellantis.

The group lags behind competitors in offering electric cars in the US market, and in recent years has lived well on its profitable but fuel-hungry models from the Ram, Jeep and Dodge brands.

Tesla’s “Gigafactory” in Berlin – Photo: Patrick Pleul/TT

In Europe, a few years ago Tesla and FCA also entered into a collaboration where they merged their emissions, in order to lower the average emissions for FCA’s aging model program.

The deal was very profitable for Tesla, and financed accordingly Automotive News Europe the billion-dollar construction of the brand’s “Gigafactory” factory in Berlin.

Doesn’t last forever

Now, however, Stellantis is finally transitioning to electric operation, while the thirstiest models are being taken out of production. In the end, the risk for Tesla is that there are no longer buyers for all emission rights.

Tesla would have been profitable in 2023 even without the allowances, but they are undeniably an important source of revenue for the company. This can be seen not least in the fact that the company has previously tried to hide the critical role of emissions rights in its accounting, according to Bloomberg Tax.

This has according to Bloomberg irked analysts of Tesla stock, as it could make Tesla’s brick-and-mortar business appear more profitable than it actually is.

This can be particularly problematic if the source of income is likely to be gone in a few years.

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