Tesla to Earn One Billion Dollars from Emissions Credits – report

Tesla to Earn One Billion Dollars from Emissions Credits – report

Producing cars isn’t the only way to make a profit as a car company – sometimes it’s what you don’t produce that sells.

A new report from Motor1 claims Tesla will earn an estimated US$1 billion (AU$1.6 billion) of profit in 2025 from selling offset emissions credits to its competitors in Europe and elsewhere.

Companies such as Toyota, Ford, and Stellantis – the parent company of 14 car brands, including Alfa Romeo, Jeep, Maserati, Peugeot, and Ram, among others – which have relatively few electric models are forced to buy emissions offset credits, as their fleets are above the mandated output set by authorities.

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By buying the credits, the companies can lower their reported emissions – avoiding large regulatory fines.

The report claims Tesla has already generated an estimated US$9 billion (AU$14.4 billion) profit since the business began from just selling credits.

Analysts predict a car manufacturer would need to have 20 per cent of its line-up as electric models to meet averages set by government authorities.

However, while carmakers are continuing to expand their electric-car line-ups, demand for battery-powered cars appears to be slowing in some markets – not helped by reduced government incentives.

Australia recently introduced the New Vehicle Efficiency Standards, which will require car companies locally to meet ever-tightening tailpipe emissions targets.

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FAQ

What is an emissions credit?

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In some markets, authorities mandate the maximum amount of tailpipe emissions the fleet of a carmakers can sell. For a company like Tesla, which only manufacturers electric cars, it's well below the limit, allow it to sell emissions credits to other companies that are above that limit.

How much is Tesla expected to make from emissions credits?

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Analysts believe Tesla will make an estimated US$1 billion of profit from emissions credits in 2025.

Does Australia have emissions caps?

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Australia recently introduced the New Vehicle Efficiency Standard, which will begin setting a limit for the amount of CO2 from new cars that a brand can sell.

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Ben Zachariah
Ben Zachariah is a seasoned writer and motoring journalist from Melbourne, having worked in the automotive industry for more than two decades. Ben began writing professionally more than 15 years ago and has written for Drive.com.au, Wheels, MOTOR, 4X4 Australia, Street Machine and CarSales.com.au. He has also freelanced for watch enthusiast website Time+Tide and US defence website Task & Purpose. He completed his MBA in Finance in early 2021 and is considered an expert on classic car investment.
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