Elon Musk's Tesla Defies Odds, Reportedly Rakes In $1.8B From Regulatory Credits Despite Expected Decline

Elon Musk‘s Tesla Inc TSLA has made a surprising $1.79 billion in revenue from this side hustle, according to a recent report.

What Happened: Tesla’s regulatory-credit sales in 2023 were revealed in a recent filing with the Securities and Exchange Commission. This income came from other automakers’ failure to meet emission regulations due to insufficient electric vehicle (EV) sales, reported Business Insider.

Tesla did not immediately respond to Benzinga's request for comment.

Despite Tesla’s expectation that this revenue stream would diminish as other automakers increased their EV production. This has been a significant revenue stream for Tesla, which has not disclosed the buyers of these credits. The company has earned nearly $9 billion from this business since 2009, with the earnings slightly increasing from the previous year.

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“We don't manage the business with the assumption that regulatory credits will contribute in a significant way to the future,” Zachary Kirkhorn, the company’s chief financial officer told investors in a 2020 earnings call, per Bloomberg.

“It will continue for some period of time, but eventually this stream of regulatory credits will reduce,” he added.

Why It Matters: While Tesla continues to dominate the US EV market, it is facing increasing competition, particularly from China. At the beginning of the year, BYD Co. Ltd. BYDDF overtook Tesla as the world’s leading EV seller, posing a significant threat to Tesla’s market dominance.

The unexpected resilience of Tesla’s regulatory-credit business comes at a time when the company is facing challenges on multiple fronts. Despite its fourth-quarter revenue of $25.17 billion, which was a 3% increase year-over-year, the company missed the Street consensus estimate of $25.62 billion.

Moreover, Tesla’s stock prices have been plummeting, leading to questions about its place among the “Magnificent Seven” tech stocks that have been driving the S&P 500 Index to new heights. Despite Musk’s efforts to position Tesla as an AI investment, the company is facing a slowdown in EV demand, which is casting doubt on its ability to maintain its rapid growth.

Read Next: ‘Elon Musk Would Probably Disagree,’ But Expert Says ‘Investors Don’t See Tesla As An AI Play Like Most Of The Other Magnificent Seven Stocks’

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