Tesla Made $1.8 Billion Selling Carbon Credits Last Year
You did it, you made it to a new week. It’s Monday, February 12, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: Tesla Made $1.8 Billion Selling EV Credits
Electric vehicle makers in the U.S. haven’t been having the best time in recent months. Ford announced it lost billions through its EV arm last year, GM is making a pivot back to hybrid models while EV sales struggle to ramp up and Honda has canned plans to co-develop new electric models. All that is playing into the hands of Tesla, which has found a way to rake in billions through the misfortunes of other companies.
Since 2009, Tesla has had a tidy little side hustle selling the regulatory credits it collects for shifting relatively huge numbers of EVs in markets like China, Europe and California. The company earns the credits selling EVs and then sells them to automakers whose current lineup exceeds emission rules set out in certain territories. This business has proven quite lucrative for Tesla, as Automotive News explains:
The Elon Musk-led manufacturer generated $1.79 billion in regulatory credit revenue last year, an annual filing showed last week. That brought the cumulative total Tesla has raked in since 2009 to almost $9 billion.
Three and a half years ago, Tesla’s chief financial officer said he expected the revenue to gradually dissipate.
“We don’t manage the business with the assumption that regulatory credits will contribute in a significant way to the future,” then-CFO Zachary Kirkhorn said during a July 2020 earnings call. “It will continue for some period of time, but eventually this stream of regulatory credits will reduce.”
However, Tesla’s income from selling these credits doesn’t seem to be reducing. In fact, while Automotive News reports that the company raked in $1.58 billion selling regulatory credits in 2020, that figure surpassed $1.7 billion in both 2022 and 2023.
What’s more, as earning the credits has “little to no incremental cost” for Tesla, these sales are pretty much pure profit, reports Automotive News.
2nd Gear: Nissan Value Drops As Sales Struggle
Automakers around the world are looking to China as the next booming market to try and capitalize on. However, for Nissan, competition from local brands and struggles in the region have hit sales, hit profits and taken $1.8 billion off the company’s market value.
According to a report from Reuters, the Japanese automaker slashed sales estimates and cut quarterly earnings that “undershot expectations by a large margin” as it faces struggles in the world’s largest car market. The site explains:
The emergence of fast-growing, Chinese brands such as BYD (002594.SZ), opens new tab that have rolled out affordable electric cars tailor-made for younger Chinese drivers has led to a steady loss of market share for foreign rivals in the world’s biggest auto market.
The stakes are, however, arguably greater for Nissan, which until 2022 counted China as its largest market. It has also struggled to fully recover after years of internal turmoil sparked by the arrest and downfall of former Chairman Carlos Ghosn.
Compared to rivals Toyota Motor (7203.T), opens new tab and Honda Motor (7267.T), opens new tab, Nissan is the “most vulnerable” in China where it has less brand equity and brand value, said James Hong, head of mobility research at Macquarie.
As a result of its “vulnerabilities” in China, Reuters reports that Nissan’s third-quarter operating profit dropped to a fifth below estimates, sitting at 141.6 billion yen ($948 million). Additionally, Nissan slashed its global vehicle sales outlook by 150,000 cars to 3.55 million.
To try and counter the falling sales, Reuters adds that Nissan is “taking steps to boost its competitiveness,” such as through new and improved incentives in global markets.
3rd Gear: Rivian Slashes Prices Ahead Of R2 Launch
Despite reportedly losing more than $30,000 on every electric truck it sells, Rivian has waded into the electric vehicle pricing war and slashed the cost of some of its vehicles. According to a report from the Drive, the American EV maker has cut more than $3,000 off the cost of certain R1T and R1S models, before federal tax breaks are applied.
The price cut means that a base R1T electric pickup truck starts at $71,700 and the R1S electric SUV retails from $76,700. In both cases, this applies to the standard, dual-motor model, which is capable of covering up to 270 miles per charge. As the Drive reports:
Rivian is believed to be reacting to the same EV demand slip as the rest of the industry. Its nature is widely debated; some characterize it as a true decline, while others chalk it up as a plateau or insist there’s no demand problem. However, it’s clear automakers are reacting to something, and that something is causing a price war.
It’s also pushing them to explore cheaper EVs, with Ford forming a “skunkworks” to stave off Chinese EVs that even Tesla’s CEO Elon Musk fears will “demolish” the western car industry. Tesla has also claimed to be working on a $25,000 EV to debut soon, though Musk previously suggested such a car could be on the market by 2023. Now, Reuters reports that model won’t be produced until at least June 2025.
The price cut comes just as the Amazon-backed company is projected to unveil a new, more affordable model that has been branded the R2. The new car is said to cost “about $40,000” and production of it could begin as soon as 2026.
4th Gear: Tesla Is Once Again Slashing Prices
Rivian isn’t the only automaker that’s taking a guillotine to its price list, as Tesla has once again slashed hundreds of dollars off the price of some of its models. The latest price cut affects the Model Y SUV and follows a long string of cuts that started in 2023.
According to a report from Reuters, Tesla has now slashed $1,000 off certain Model Y cars. The savings will be applied to rear-wheel drive and Long Range versions of the electric SUV, which now start at $42,990 and $47,990 respectively. Reuters reports:
New Model Y rear-wheel drive and Long Range model prices will be reduced for deliveries now through Feb. 29, Tesla said in a notice on its website, adding that that price would increase by $1,000 or more on March 1.
Prices of the Model Y Performance variant and other models remained unchanged, according to the website.
The latest round of cuts follows similar moves in Germany from the American EV maker. It also means that the Model Y now starts at more than $7,000 less than it did at this time last year. Back in February 2023, the American EV maker first started messing with its prices when it cut $1,000 off the price of the Model Y Performance. This was followed by cuts to other cars in Tesla’s lineup, including the Model 3 and Model X.
