- Tesla made almost $2.8 billion off cars its rivals didn’t sell last year.
- The company sells regulatory credits to automakers that haven’t sold enough EVs to meet emissions rules.
- That lucrative side hustle is now under threat, with Trump vowing to scrap electric vehicle targets.
Elon Musk may have won the status of President Donald Trump’s “first buddy” — but the new president could jeopardize one of Tesla’s most lucrative side hustles.
Tesla has made billions selling regulatory credits to rivals in the past decade, but with Trump scrapping federal EV targets in his first weeks in office, that revenue stream is now under threat.
The automaker’s regulatory credit business, which sees it sell emissions credits to automakers who haven’t sold enough EVs to meet strict federal and state targets, made $692 million in the fourth quarter of 2024.
That strong performance, along with bumper sales of energy storage systems and an unexpected bitcoin windfall, added a bit of shine to what was otherwise a disappointing set of results.
Tesla’s total automotive revenue dropped 8% from the same period in 2023 as rising competition and slowing EV sales growth hit the company hard, with Musk rallying investor enthusiasm by focusing on Tesla’s robotaxi rollout and the Optimus humanoid robot.
While robotaxis and robots are yet to make an impact on Tesla’s balance sheet, selling credits to rivals who have failed to shift enough EVs is a very real money-spinner for the company.
Tesla made $1.8 billion from the practice in 2023, and that figure grew to almost $2.8 billion last year as other automakers rolled back ambitious electric vehicle strategies amid stuttering demand for EVs.
But with Donald Trump back in the White House — with an assist from Musk — that income stream might be about to grind to a halt.
The president has vowed to roll back emissions targets and signed an executive order last week revoking a Biden-era target that 50% of new vehicles sold in the US should be electric by 2035.
“Tesla has relied on the credits to help really boost profitability,” Stephanie Valdez Streaty, director of industry insights at Cox Automotive, told Business Insider.
“If federal guidelines are less stringent, then other manufacturers have more time and they’re not going to need those credits as much, so I think it’ll definitely impact it,” she added.
Trump troubles
Current EPA rules mandate strict targets for automakers to cut the average emissions of their vehicle fleets every year. Those who fail to do so face substantial fines, which can be avoided by buying credits from automakers who sell a lot of EVs.
Because Tesla only sells EVs, this system allows the company to make money from something it is doing anyway. Its credits business was responsible for over a third of Tesla’s net income in 2024.
Tesla will continue to make money off the practice in places like Europe, where the automaker could be set to bank as much as $1 billion from credit sales, and in various US states that have their own emission rules schemes.
However, Trump has signaled his intention to challenge state-level rules too, issuing an executive order last week that sought to terminate state rules designed to phase out combustion engine vehicles.
It comes as Tesla boss Musk expands his role and influence in the Trump administration, taking on a key cost cutting role at DOGE and even reportedly occupying office space in the White House.
Musk’s status as “first buddy” has grown even as Trump has targeted EV incentives and subsidies that Tesla directly benefits from.
The Tesla CEO has expressed support for scrapping a key $7,500 tax incentive for new electric vehicles, a move reportedly considered by Trump’s team. Musk has said publicly that he thinks the move would hurt Tesla’s rivals more than his own company.
Alongside regulatory changes in the EV space, Tesla could also be stung by Trump’s proposed tariffs on China. The company’s CFO, Vaibhav Taneja, said on Wednesday’s earnings call that the imposition of tariffs would “have an impact on our business and profitability.”
Tesla did not respond to a request for comment, sent outside normal working hours.
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