Threats to Tesla's revenue are piling up
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Tesla faces fresh risks to a big income stream: sales of regulatory credits to other automakers under vehicle emissions and efficiency rules, Axios Generate author Ben Geman writes.
Why it matters: Regulatory credits represent big money for the electric car maker, which earns them for exceeding government emissions standards and then sells them to rivals whose gas-powered models fall short.
- Since 2012, Tesla has made $15 billion from credit sales — $595 million in the last quarter alone.
The latest: Republicans on the Senate's commerce committee late last week proposed ending civil penalties under the Transportation Department's fuel economy rules.
What they're saying: "This Senate action would effectively end the market for CAFE credits," Chris Harto, a senior policy analyst at Consumer Reports, tells Axios.
- Dan Becker, who heads the Safe Climate Transport Campaign at the Center for Biological Diversity, noted: "Why buy credits if Trump gives you a get out of CAFE free card?"
Separately, DOT on Friday issued an "interpretive rule" that bars consideration of EVs when setting future mileage rules.
- This paves the way for less aggressive requirements — and less need for buying credits.
The big picture: The regulatory credit market was already facing risks on multiple fronts as Republicans roll back Biden-era policies.
Threat level: Potential loss of credit revenues comes at a perilous time for Tesla.
- Its sales have slumped in recent quarters, and the end of $7,500 tax incentives won't help.
- The meltdown of Elon Musk's relationship with President Trump also creates new and unpredictable risks for the Tesla CEO's business empire.
What to watch: Most of these regulatory battles will end up in court in any case.
