this post was submitted on 30 Jan 2025
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So more than a third of their net profits come from selling credits they received from the government? Am I understanding that correctly?
They are emissions credits. Every company receives some amount of "CO2 emission credits" from the government. These allow you to emit a certain amount of carbon dioxide. If you don't emit all the CO2 that your credits allow, you can sell those credits to other companies that need more than the government gives them.
The idea is to put a total limit on the amount of emissions in the country, while letting the market figure out where it makes most sense economically to invest in emission reduction.
Tesla makes only EV cars and so it doesn't need all the credits a typical gasoline car company would receive. So they sell them.
"Tesla makes only EV cars and so it doesn't need all the credits a typical gasoline car company would receive. So they sell them."
Which means the system isn't working. Surplus credits should come from improved efficiencies, not excessive allotment.
Total number of credit goes down over time. That mechanism ensures an adapt, die or emigrate pressure for large polluters, and a financial stimulus for small-polluters.
Yes you are understanding that correctly. For producing EVs, they get credits from the federal government. I don't know the exchange rate -- e.g., how many EVs per credit.
Then, Tesla turns around and sells these credits to buyers, usually other companies. Companies buy these credits from Tesla to comply with regulations requiring certain environmental outcomes, and credits count towards these outcomes.
In theory this type of program incentivizes and rewards companies who invest in the technology(is) tied to these credits, in this case EVs. In practice it's a way for other companies to comply with renewables regulations without actually doing anything to meaningfully reduce their impact and footprint (other than buying credits)
So it's a government subsidy at no cost to the government, funded instead by other companies? That's actually quite a neat idea.
I guess the issues arise if Tesla just pockets the subsidy without passing on the savings to savings to people buying EVs
This report shows that they do just that: without the emissions credit system they would operate at a loss. In other words: they sell cars for cheaper than the cost of manufacturing. Coincidentally the same thing the US and EU claims China is doing, as motivation for mercantillist tarrifs.
Why is this an issue. They have their incentive to keep building and selling. As long as they’re building and selling, it doesn’t matter to the rest of us what their profit is.
If they’re building make excess profit, that’s just more opportunity for legacy manufacturers to be competitive. Capitalism 101
"Issue" was probably the wrong word "potential for controversy" would have been more appropriate. It's potentially controversial because if the profits exceed the subsidies you're effectively just giving money to shareholders.
No. This is entirely the opposite of capitalism. Under capitalism there are no subsidies. If a business isn't profitable then it fails. Simple.
What we have is an abomination of capitalism and corporate socialism. That's the controversy I referred to above. Where governments funnel money to enrich corporations and the select few rather than helping improve population they are charged with governing.
Right, we want EVs, Tesla gets a little boost from legacy manufacturers, so now we have a market, EVs are available. GM gets a break do it has time to design EVs, but are really annoyed at funding that bastard Elon, so have incentive to get their shit together. EVs are built a little sooner m, no one goes out of business (yet), we all win
You are. Without the EV credits, Tesla would have folded years ago.
It's not EV credits it's "cap and trade" carbon credits that they're selling.
I’m aware. The collateral for the credits are EV sales, hence my shorthand.
I think it's from Europe. Car manufacturers in Europe must sell at least n ev every year. Stellantis, that was asleep at the wheel and only has undesirable EVs that don't sell, is paying billions to Tesla to make a fictitious alliance, so they will meet the sales target and won't pay the fine