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Comment by nabla9 | Hacker News Reader

2021 is critical for Tesla. They still make all their profits from selling regulatory credits to other manufacturers. More they make cars, more they sell credits.

FCA / PSA Group, Fiat Chrysler, GM, Volkswagen are buying ZEV credits from Tesla, but there are so many fully electric cars coming to mass market in 2022 (like F-150) that the ZEV revenue for Tesla dries up fast.

Tesla's Regulatory Credit Revenue Will Rise Again In 2021 https://insideevs.com/news/482452/tesla-revenue-emissions-cr...

Tesla is selling electric car credits to Volkswagen in China https://electrek.co/2021/04/01/tesla-selling-electric-car-cr...

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Every year we hear Tesla is going broke for the last ~10 years. Every year they survive. Regulatory credits are a legitimate revenue source as long as governments require legacy automakers buy them (who are profitable because they sell combustion vehicles without the externalities of burning fossil fuels captured in costs and prices). They’re growing units sold almost 100% year over year. Markets don’t care if one thinks regulatory credits are a handout (they’re not, they level the playing field against combustion vehicles). May they extract every bit they can to accelerate the electrification of transportation.

(no financial interest in TSLA besides being a customer)

Admittedly, not wanting them to go broke because you're a customer is an important financial interest, but I agree with the rest of your point.

To be frank, I couldn’t care less about our Tesla vehicles. I have kids, and climate change is coming. That is an existential concern, and why Tesla can’t yet go bust.

Only when a tipping point has been reached and combustion vehicles can no longer be built because manufacturing has retooled, supply chains have been reconfigured, and petroleum supply infra enters a death spiral can Tesla financially fail and the repercussions would be muted.

The big OEMs are aiming at 2035 to stop ICE production. So I think it is just a question of time by now.

Fair point - I agree with all of that! :)

I think you are projecting something negative to my comment. I was simply analyzing the situation. Billion in revenue/car is going away. Tesla should easily survive by diluting stocks.

If you think in numbers, it's clear that current valuation of Tesla is not coming from selling cars unless Tesla takes 40% of the car market in next 10-15 years.

You need to add Tesla is an energy company or something else into the mix.

When you can sell $5b in stock to the market any time you want and raise infinite capital, it's hard to go bankrupt

Tesla has $20B in the bank. They aren't going broke any time soon.

This line of thinking very likely has the causation backwards — Tesla is a complex-enough business that they can determine how much they're gonna make in regulatory credits, and then turn opex up or down accordingly, with profit being a downstream effect of that decision.

Government requirements are continuing get more and more difficult and because Tesla is producing more cars, even if the price of regulatory credits drop they might get more money from it.

And what really matter is automotive unit margin and Tesla is doing well there even without regulatory revenue taken into account.

Profits are increasing much faster than ZEV credits. It's just icing on the cake.

If you exclude non-recurring revenue like the regulatory credits, you should also exclude non-recurring expenses like Musk's stock grants. Especially given that the stock grants don't cost Tesla cash.

IOW, Tesla is profitable with or without the regulatory credits.

Your own article link is very positive on the future of regulatory credit sales

> Tesla is on a roll selling emissions credits to other automakers, and the end certainly isn't in sight.

> According to Credit Suisse analyst Dan Levy, regulatory credit revenue is poised to grow to $2 billion in 2021 compared to the $1.4 billion in 2020

> Levy believes the future will continue to look positive for Tesla, pointing to Europe's stricter emissions standards as one reason. While we don't know for sure how things might look in the US under the new Biden administration, just about everything points to huge support for electric cars.

This is a bit of a trope with Tesla. "Roadster sales will be limited by market" -> they then do S. S sales ... they do Y and 3. Car sales... -> they do battery storage.

Let me posit another possibility. Biden admin brings back a $7,500 credit for all US mfg's of EV's.

Or someone sticks a major gas tax on things.

Or a carbon tax.

Etc etc -> there are things out there that might improve tesla sales (for me it would be adding Apple Carplay).

These complaints about tesla assume tesla is not smart / able to change what they do, but they are probably TO flexible, and will almost certainly change.

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