Tesla Vs. Nio Vs. XPeng Vs. Li Auto: How EV Regulatory Credits In China Stack Up

Tesla, Inc. TSLA, which is a profitable electric vehicle manufacturer, is often criticized for relying on EV regulatory credits for propping up its bottom line.

This avenue of revenue stream is not unique to Tesla, and most other pure-play EV manufacturers benefit from it. Here's a look at what an EV credit is and how much of an impact it has for Tesla vis-à-vis Chinese companies such as NIO Inc. NIO, XPeng Inc. XPEV and Li Auto Inc. LI.

What You Need To Know About EV Regulatory Credits: EV regulatory credits are handed down by governments as incentives for pursuing manufacturing of zero-emission vehicles or low-emission vehicles.

With most governments requiring automakers to manufacture a certain proportion of electric vehicles, these companies can either fall short on the mandated regulatory credits or hold a surplus.

Those in surplus can trade the credits to those in deficit,  monetizing this government incentive.

Related Link: Nio's Deliveries Double In April Despite Supply Chain Disruptions And Factory Shutdown

Tesla And Regulatory Credits: Tesla's revenues from regulatory credits amounted to $1.58 billion in 2020, a 166% year-over-year increase. This accounted for 6% of the company's total revenues and also boosted automotive margins.

In the first quarter of 2021, Tesla's regulatory credits jumped 46% to $518 million, or about 5.8% of total revenue.
Excluding EV credits and Bitcoin BTC/USD trading profits, Tesla would have reported a loss of $181 million in the first quarter, according to Gordon Johnson of GLJ Research.

Tesla reported GAAP net income of $438 million and non-GAAP net income of $1.052 billion for the first quarter.

Tesla received over 860,000 regulatory credits in China in 2020, CnEVPost reported, citing data China's Ministry of Industry and Information Technology.

Valuing the credit at 3,000 yuan ($468) per unit, Tesla's credits are worth up to 2.58 billion yuan, the report said.
This is the highest of all automakers operating in China, the report said.

See also: How to Buy XPeng Motors (XPEV) Stock

Chinese EV Makers Trail Tesla: The government report, though not including Nio, said the automaker's manufacturing partner JAC earned 256,518 EV credits in 2020. The bulk of the credits are due to Nio, the report said.

This corroborates the numbers stated by Nio's founder, chairman and CEO William Li, who said the company earned 200,000 EV credits in 2020. Nio's EV credits are worth 600 million yuan, which is roughly 23% of the value of Tesla's credits. 

Nio revealed on its first-quarter earnings call that it booked 120 million yuan in EV credit sales in the fourth quarter, which boosted gross margins by 1.8%.

XPeng's EV credit figure for 2020, according to the report, is 109,992, valued at 330 million yuan. Li Auto trailed behind with 71,776 credits valued at 210 million yuan.

Related Link: Is Tesla Warming Up To Lidar?

Photo courtesy of Tesla.