Tesla Losing Massive Revenue Source with End of Regulatory Carbon Credits

For more than a decade, Tesla has inflated its profits by selling regulatory carbon credits to other automakers. Those sales have brought in nearly $11.8 billion USD for the company since 2010.

The credits allowed automakers to continue selling gas-guzzling SUVs and cars without paying heavy fines, by complying on paper with CAFE (Corporate Average Fuel Economy) standards.

Elon Musk called for the end of subsidies... and got it
Tesla boss Elon Musk openly advocated for the end of government subsidies, for electric vehicles and for oil and gas. Washington has now ended tax credits for EVs and eliminated fines for automakers failing to meet CAFE standards. As a result, the main driver of Tesla’s profitability for the past decade is disappearing.

A heavy dependence on carbon credits
According to analyst Gordon Johnson of GLJ Research, “without the sale of regulatory credits, Tesla loses money in its core business.” These sales sometimes accounted for up to a third of its quarterly revenue. Several automakers had even signed long-term contracts with Tesla to ensure a supply of credits.

However, starting in 2026, demand is expected to drop by 75%, before disappearing completely in 2027, according to analysts at William Blair & Co.

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