Tesla cashes in on carbon credits

Firm makes $1.79bn from selling automotive regulatory credits

Tesla cashes in on carbon credits
Tesla has started to use the credits to enable it to offer better pricing.

Tesla made $1.79bn from selling automotive regulatory credits in 2023, a 1pc increase on the amount it made in 2022, according to a filing to the SEC.

Auto manufacturers earn tradable credits under 16 different Zero Emissions Vehicle (ZEV) schemes in US states as well as Corporate Average Fuel Economy (“CAFE”) credits under U.S. Department of Transportation standards.

The crediting schemes require manufacturers to achieve a certain fuel efficiency. If they don’t meet the targets they can buy credits from other manufacturers in order to reach compliance.

Because EV pure plays easily meet the targets, they have credits to sell which can become a regular line item in budgets going forward. 

Tesla has started to use the credits to enable it to offer better pricing. 

“Our revenue from automotive regulatory credits is directly related to our new vehicle production, sales and pricing negotiated with our customers,” says the firm in its filing to the SEC. “We monetise them proactively as new vehicles are sold based on standing arrangements with buyers of such credits, typically as close as possible to the production and delivery of the vehicle or changes in regulation impacting the credits.”
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Rivian made $73mn in 2023 from the sales of regulatory credits in 2023, with $39mn in Q4 alone. 

“We expect the sale of regulatory credits to increase over time but to vary quarter-to-quarter,” said Rivian CFO Claire McDonough on the firm’s recent Q4 results call.

Lucid has said it profits from such credits but doesn’t separate the revenue as a line item in its budget. 

Polestar also sells carbon credits in a number of markets. It made $6.3mn from such credits in 2021, according to a regulatory filing. 2022 and 2023 figures were not provided in its annual results. 

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