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Tesla published its third quarter shareholder letter today and held its conference call for shareholders. There were a few interesting points, including that more affordable Tesla models are supposed to be arriving in 2025, but the first thing that jumped out to me was the second line — because it was just the second line of the shareholder slidedeck and because of the point being made.
Here are the first two lines of the shareholder letter: “We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes. We also recognized our second highest quarter of regulatory credit revenues as other OEMs are still behind on meeting emissions requirements.”
So, even as Tesla was achieving its best 3rd quarter for vehicle sales, it was also making a lot of money on regulatory credits — money it gets from other automakers — because legacy automakers continue to miss targets for cutting their vehicles emissions, or, more simply put, aren’t selling enough EVs themselves.
I do find that disappointing and embarrassing. It’s been a dozen years since the first Tesla Model S was delivered. It’s been many years now since fuel economy regulations were laid out for legacy automakers. It’s been almost a decade since the Tesla Model 3 was unveiled. Battery costs have come down tremendously, EV charging station installations have gone up tremendously, and legacy automakers still have to buy regulatory credits from Tesla.
Not only is it a disappointment in terms of competitors’ own polluting fleets, but it’s also simply putting money in the bank account of what is now one of their top competitors. It’s money that is going to grow and improve an automaker that is surely going to steal more and more sales from them. It’s a dereliction of duty at this point to give Tesla money due to inadequate EVs in one’s own fleet or inadequate efforts to sell the EVs one has — or inadequate supply chain procurement in order to produce the volumes of EVs needed.
Tesla doesn’t indicate how much money the company receives for regulatory credits in each country or region, so we don’t have insight into how much this is happening in Europe versus California versus elsewhere. And, of course, we don’t know the breakdown of how much money Tesla is making off of different automakers’ backs.
However, what we know is Tesla made $739 million from regulatory credits, which was slightly down from the 2nd quarter of 2024, when the company made $890 million from regulatory credits, but up significantly from the 3rd quarter of 2023, when Tesla made $554 million from regulatory credits.
Meanwhile, Tesla made $18.831 billion from automotive sales and $446 million from automotive leasing. So, of course, the vast majority of Tesla’s $20.016 billion of revenue earned last quarter was from its own automotive business, but about 4% of it was made simply from other automakers failing. Shame on them.
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