Elon Musk (Craig T Fruchtman/Getty Images)

60% of Tesla’s shrinking profit effectively came from regulatory credits

Why Elon Musk's crusade against government EV subsidies is a pretty baffling stance

7/25/24 11:29AM

Tesla’s latest quarterly profit shrank by nearly half from a year earlier, and regulatory credits revenues were equal to more than half the profit it did generate, the Wall Street Journal reported.

The electric vehicle company gets these credits at no cost from the government for building environmentally friendly cars and then sells them to other automakers who haven’t met regulatory requirements.

If we’re to assume there are negligible costs associated with the credits and that it's generally viewed as pure profit, here's how much of Tesla's profit those credits have accounted for over time:

Tesla has been criticized for how those credits could obscure its true profits, and make a bad quarter look better somewhat artificially.

The company’s reliance on those credits also makes CEO Elon Musk’s desire to eliminate government subsides as well as his pro-Trump stance seem like a liability. Trump has promised to end federal support for electric vehicles.

On the earnings call Thursday, Musk tried to minimize the impact a loss of EV tax credits would have on the company.

“I guess there would be, like, some impact. But I think it would be devastating for our competitors and would hurt Tesla slightly,” Musk said. “But long term, probably actually helps Tesla, would be my guess.”

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eBay stock slumps on gloomy Q4 outlook despite solid Q3 earnings

Shares of eBay fell as much as 10.5% in premarket trading on Thursday morning after the company gave a lower-than-expected profit forecast for the important holiday shopping season.

The e-commerce giant reported solid numbers for the third quarter on Wednesday, with revenue up 9% as reported to $2.8 billion and gross merchandise volume rising 10% to $20.1 billion, topping the average analyst forecast of $19.4 billion, per Bloomberg.

However, concerns about the future somewhat overshadowed these results.

eBay outlined its profit outlook for the period ending in December to $1.31 to $1.36 a share, with revenue at $2.83 billion to $2.89 billion. According to Bloomberg-compiled data, this broadly matches Wall Street’s estimates for the top line, but misses on the bottom line, with analysts forecasting EPS to come in at $1.39 — suggesting the company expects some further margin pressure.

The company has been facing macroeconomic challenges since the US ended the de minimis tariff exemption in late August, with the online marketplace reliant on shipments. One small silver lining? CFO Peggy Alford highlighted a “less durable trend” on a post-earnings call: that as commodity prices for precious metals boomed, demand for bullion and collectible coins on eBay spiked.