Tesla Inc (NASDAQ:TSLA) is set to emerge as the top automobile credit winner in China ahead of the No. 2 rank holder BYD Co (OTC:BYDDY) this year, Nikkei Asia reported on Friday.
What Happened: Tesla is expected to earn about $390 million in emissions credits, $40 million more than homegrown Chinese BYD’s carbon trading earning.
Automakers in China receive credit points if 12% of their total sales volume is a mix of new energy vehicles that could include electric cars and plug-in hybrids.
Being a pure-play electric vehicle maker, the Elon Musk-led Tesla is able to sell surplus credits to other automakers who still don't sell enough electric vehicle volumes.
SAIC-GM-Wuling Automobile Co, the tripartite partnership of two Chinese state-owned automakers and General Motors Co (NYSE:GM), is expected to be the third-largest emissions-credits earner this year.
The joint-venture is best-known for a $4,500 electric vehicle and has developed a business model based on grossing earnings from the emissions credits market.
German automaker Volkswagen Ag (OTC:VWAGY) — which has multiple partnerships in China — would need to buy credits, as per the report.
See Also: This Is How Tesla's Earnings Will Impact Its Share Price
Why It Matters: Tesla makes nothing but electric vehicles and piles up way more emissions credits than most rivals. The electric automaker is also able to sell these credits at 100% profit which in turn boosts the company’s overall margins.
Tesla’s regulatory credit sales revenue in the second quarter was up nearly 200% from a year ago. The electric vehicle maker reported a $1.1 billion profit in the second quarter, with $354 million of that coming from emissions-credit sales. The rest came from automotive sales, as well as a boost in energy-storage sales.
Price Action: Tesla shares closed 0.89% higher at $818.32 a share on Thursday.
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