logo
Tesla loses billion-dollar revenue source as US ditches fuel economy fines

Tesla loses billion-dollar revenue source as US ditches fuel economy fines

Perth Now7 days ago
For the first time in 50 years, automakers in the US will no longer be fined for failing to meet fuel consumption standards, significantly impacting a major revenue stream for electric vehicle (EV) maker Tesla.
US President Donald Trump's July 4 (2025) bill ended penalties for automakers that do not meet North America's world-leading CAFE (Corporate Average Fuel Economy) standards, first introduced in 1975. It acts retrospectively, with automakers not liable for any penalties incurred from and including 2022.
According to Reuters, the National Highway Traffic Safety Administration (NHTSA) is 'working on its reconsideration of fuel economy rules'.
CarExpert can save you thousands on a new car. Click here to get a great deal. Supplied Credit: CarExpert
The same bill also terminated US federal tax credits for new and used EVs of between $US4000-$7500 (A$6137-$11,507), which will end on September 30, 2025.
The US Department of Transportation (DOT) describes CAFE's purpose as 'to reduce energy consumption by increasing the fuel economy of cars and light trucks'.
It adds: 'When these standards are raised, automakers respond by creating a more fuel-efficient fleet, which improves our nation's energy security and saves consumers money at the pump, while also reducing greenhouse emissions'.
The removal of fines is a boost for the bottom line of some of the world's largest car manufacturers, including Ford, General Motors (GM) and Stellantis – the latter of which has US brands including Jeep, Chrysler, Dodge and Ram under its umbrella. Supplied Credit: CarExpert
According to Reuters, Stellantis paid almost $US600 million (A$921m) in CAFE fines between 2016 and 2020, while GM paid $US128.2 million (A$196.7m) in penalties between 2016-2017.
Tesla, on the other hand, has now suffered a major blow to one of its most important revenue streams. The EV company raked in $US2.76 billion (A$4.23bn) in 2024 alone from selling 'carbon credits' to other automakers, including credit revenue collected in other markets such as Europe.
The company's 2024 credit revenue represented a 54 per cent year-on-year increase, yet it wasn't enough to prevent a fall in profit from $US15 billion (A$23bn) in 2023, to $US7.1 billion (A$10.89bn) for the 2024 calendar year, when the Toyota RAV4 also poached the title of world's best-selling car from the Model Y by fewer than 3000 sales.
The EV brand was already under stress from the first recorded annual sales decline in its history – with deliveries sliding by 1 per cent in 2024 – even before the elimination of revenue from carbon credits. Supplied Credit: CarExpert
'If things go bad for Tesla and they don't sell enough cars this year, they might not have enough credits for what they promised Stellantis and the others,' Peter Mock, managing director of the International Council on Clean Transportations (ITCC) told Politico in March. 'Tesla is under pressure.'
With these credits disappearing in the US, the pressure on Tesla has now increased.
Under CAFE, fuel economy (and therefore emissions) was averaged across all models sold by a manufacturer, with those exceeding the limits able to buy 'credits' from those that haven't.
Doing so allows automakers in breach to lower their average fuel consumption figure to reduce or avoid fines.
EV-only brands such as Tesla and Polestar were able to make considerable profit from US credits, while also 'pooling' credits with automakers struggling to meet ever-tightening emissions laws in Europe. Supplied Credit: CarExpert
It's a similar arrangement to Australia's New Vehicle Efficiency Standard (NVES), which was introduced this year with fines for automakers that exceed average CO2 emissions targets across their model ranges, in the form of penalties or credits for each sold vehicle under those limits respectively.
NVES and the CAFE regulations have nearly identical goals, and have attracted the same arguments for and against on both sides.
Likewise, NVES allows carbon credits to be traded between brands to reduce fines – although Polestar Australia boss Scott Maynard recently said their monetary value is debatable after Polestar announced its best start to a year with a 51 per cent global sales increase in the first half of 2025.
In the first half of 2025, Tesla remained Australia's most popular EV brand, with the Model Y mid-size SUV being the best-selling EV followed by the BYD Sealion 7 medium SUV and Model 3 sedan in third.
Tesla is due to announce its global sales figures for the second quarter of 2025 tomorrow (July 23).
More: Everything Tesla
More: What the first federal emission standard means for Aussie car buyers
More: Polestar boss says new Australian emissions regulations 'didn't kill the weekend'
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Can the world trust Trump? This golf video might have the answer
Can the world trust Trump? This golf video might have the answer

Sydney Morning Herald

time36 minutes ago

  • Sydney Morning Herald

Can the world trust Trump? This golf video might have the answer

London: Donald Trump has made some big claims over the past few days – on trade, the Epstein scandal, global conflict and more – but his tough talk could be drowned out by his dubious play on the golf course. A video of the American president near a sand trap on a Scottish fairway shows one of his caddies dropping a golf ball onto the grass in a convenient location for Trump to seemingly play his next shot. The move seemed to spare Trump from the harder work of getting his ball out of the bunker and onto the green. The caddy leaned down, dropped the ball behind him and walked on as if nothing had happened. Trump was able to climb out of his golf buggy and prepare to play a more favourable shot. Presidents cheat at golf. Bill Clinton was famous for it. But the video spread at the very moment Trump was engaged in big talk that raised a big question: can anyone rely on anything he says? A few days ago, Trump claimed his trade deal with Japan included a $US550 billion ($843 billion) investment fund to spend on American assets under his direction, but the Japanese later described it as an ambition rather than a binding promise. On Sunday, he announced a $US600 billion investment from Europe under a trade deal with the European Union, but EU officials admitted they could not direct companies to spend the money. It is highly likely they are rebadging funds that would be invested anyway. Then, on Monday, he said he wanted most countries to incur tariffs in the range of 15 to 20 per cent on their exports to America. This is in line with the Japanese and EU outcomes, which both applied a 15 per cent tariff on most of the products they ship to the US. But it is out of line with the rates he has imposed elsewhere – like 35 per cent on Canada, 30 per cent on Mexico and 50 per cent on Brazil. What does this mean for Australia? The signal is that it may incur tariffs of 15 to 20 per cent. Right now, Australian exports are subject to a baseline rate of 10 per cent, but the final rate is meant to be set by this Friday.

Can the world trust Trump? This golf video might have the answer
Can the world trust Trump? This golf video might have the answer

The Age

time36 minutes ago

  • The Age

Can the world trust Trump? This golf video might have the answer

London: Donald Trump has made some big claims over the past few days – on trade, the Epstein scandal, global conflict and more – but his tough talk could be drowned out by his dubious play on the golf course. A video of the American president near a sand trap on a Scottish fairway shows one of his caddies dropping a golf ball onto the grass in a convenient location for Trump to seemingly play his next shot. The move seemed to spare Trump from the harder work of getting his ball out of the bunker and onto the green. The caddy leaned down, dropped the ball behind him and walked on as if nothing had happened. Trump was able to climb out of his golf buggy and prepare to play a more favourable shot. Presidents cheat at golf. Bill Clinton was famous for it. But the video spread at the very moment Trump was engaged in big talk that raised a big question: can anyone rely on anything he says? A few days ago, Trump claimed his trade deal with Japan included a $US550 billion ($843 billion) investment fund to spend on American assets under his direction, but the Japanese later described it as an ambition rather than a binding promise. On Sunday, he announced a $US600 billion investment from Europe under a trade deal with the European Union, but EU officials admitted they could not direct companies to spend the money. It is highly likely they are rebadging funds that would be invested anyway. Then, on Monday, he said he wanted most countries to incur tariffs in the range of 15 to 20 per cent on their exports to America. This is in line with the Japanese and EU outcomes, which both applied a 15 per cent tariff on most of the products they ship to the US. But it is out of line with the rates he has imposed elsewhere – like 35 per cent on Canada, 30 per cent on Mexico and 50 per cent on Brazil. What does this mean for Australia? The signal is that it may incur tariffs of 15 to 20 per cent. Right now, Australian exports are subject to a baseline rate of 10 per cent, but the final rate is meant to be set by this Friday.

Elon Musk signs $25bn AI deal
Elon Musk signs $25bn AI deal

News.com.au

time36 minutes ago

  • News.com.au

Elon Musk signs $25bn AI deal

Chief executive officer Elon Musk is doubling down on Tesla's AI future, signing a $US16.5bn ($25.3 billion) deal with Samsung Electronics to build its next generation AI chips in the United States. The agreement confirmed Monday by Musk will see Samsung produce Tesla's AI6 chip at its plant in Taylor, Texas. The AI6 chip is part of Tesla's internal Dojo supercomputing project, designed to process vast amounts of data from its global fleet. Samsung’s giant new Texas fab will be dedicated to making Tesla’s next-generation AI6 chip. The strategic importance of this is hard to overstate. Samsung currently makes AI4. TSMC will make AI5, which just finished design, initially in Taiwan and then Arizona. — Elon Musk (@elonmusk) July 28, 2025 It's a strategic risk at a volatile time. Last week, Tesla reported a 42 per cent drop in year-over-year operating income for Q2 2025, from USD $1.6 billion to $923 million, a concern for investors. Tesla shares rose 1.9 per cent in US premarket trading after the announcement and Samsung shared jumped 6.8 per cent, hitting its highest level in nearly a year. While the initial deal is valued around $25 billion, Musk added on X that the figure is 'just the bare minimum'. 'Actual output is likely to be several times higher,' Musk said in a post on X. WIN, WIN FOR TESLA, SAMSUNG The deal will be a win for Samsung and assist its Texas facility, which has never had a major client and faced delays in operation since being completed in 2022. Tesla is one of Samsung's most high-profile contracts in years and a win for the company who has lost ground in the global chipmaking race. Elon Musk has long insisted Tesla is 'an AI company as much as a car company,', and this new partnership will assist Tesla's goals for vertical integration. It will also support the US government's priorities to strengthen domestic production. 'Samsung's giant new Texas fab will be dedicated to making Tesla's next-generation AI6 chip. The strategic importance of this is hard to overstate. Samsung currently makes A14. TSMC will make the A15, which just finished design, initially in Taiwan and then Arizona,' Elon Musk said. Musk added that Tesla engineers will work closely with Samsung to improve production efficiency, and that he would personally oversee production lines. The AI6 chips are critical for Tesla's Full Self-Driving technology. While Tesla has begun beta-testing its 'Full Self-Driving v12' software with select users, critics and regulators have been sceptical of Musk's project. The AI6 chips will also likely assist robotaxi platforms and possibly Tesla's robotic projects, including a humanoid robot, Optimus.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store