What if one of Tesla’s most profitable side gigs were on the chopping block? Let’s talk about Tesla’s knack for turning rivals’ missed opportunities into billions—and why that may not last forever.
For years, Tesla has been raking in cash by selling regulatory credits to other automakers. Here’s the deal: companies that don’t sell enough electric vehicles (EVs) to meet emissions rules can buy credits from Tesla to avoid hefty fines. Last year alone, Tesla pocketed nearly $2.8 billion from this side hustle. But things could change fast with new political winds.
How Tesla’s Credit System Works
Tesla’s business model is unique—beyond making EVs and energy products, it cashes in on being ahead of emissions targets. These credits are pure profit because Tesla already meets the regulations just by doing what it does best: selling EVs.
In 2024, Tesla’s credit sales brought in $692 million in the fourth quarter alone. This helped offset disappointing revenue in other areas, including an 8% drop in automotive revenue compared to 2023. Rising competition and slowing EV demand have been tough on Tesla, but these credits, combined with energy storage sales and even a surprise bitcoin boost, kept the numbers shiny.
What’s the Problem?
Enter President Trump. Back in the White House, he’s wasting no time undoing EV-friendly policies. His recent executive order rolled back a Biden-era target for 50% of new cars sold to be electric by 2035. If federal emissions rules become more lenient, automakers won’t need as many credits—and Tesla’s billion-dollar bonus could shrink.
Stephanie Valdez Streaty, an industry expert, put it simply: “If federal guidelines are less stringent, other manufacturers have more time. They’re not going to need those credits as much.”
Tesla’s Global Backup Plan
Thankfully, Tesla isn’t putting all its eggs in one basket. While the U.S. market faces uncertainty, the company still has opportunities in Europe and certain U.S. states with stricter emissions rules. In Europe, Tesla’s credit sales could bring in another $1 billion this year.
But Trump isn’t stopping at federal policies—he’s also eyeing state-level emissions rules, potentially challenging states that aim to phase out gas-powered cars.
Musk, Trump, and Tesla’s Future
Interestingly, Elon Musk seems to have a strong connection with Trump, earning the nickname “first buddy.” Musk has even supported scrapping the $7,500 federal EV tax incentive, arguing it would hurt Tesla’s competitors more than Tesla itself.
However, Trump’s proposed tariffs on China could also hit Tesla’s profitability. With a significant portion of Tesla’s supply chain tied to China, this adds another layer of risk.
What’s Next?
The big question: can Tesla weather the storm if its credit business takes a hit? While regulatory changes could shake things up, Tesla is betting on robotaxis, humanoid robots, and global credit sales to keep the momentum going.
Whether these changes mark a speed bump or a detour remains to be seen, but one thing’s for sure—Tesla’s journey is never boring.
