Latest news with #CAFE
The Star
7 hours ago
- Automotive
- The Star
Tesla's easy money from regulatory credits set to dry up amid weakening sales
FILE PHOTO: A logo of Tesla Motors on an electric car model is seen outside a showroom in New York June 28, 2010. REUTERS/Shannon Stapleton/File Photo SAN FRANCISCO (Reuters) -A key driver of Tesla's profit is disappearing fast as the U.S. government changes policies on an environmental asset known as regulatory credits. Investors are likelyto have a number of questions for Chief Executive Elon Musk when Tesla reports second-quarter results on Wednesday. Among them are how fast the EV maker can turn a trial robotaxi program into a money-making business, how to avoid a decline in sales for the second year in a row, and Musk's possible political plans. Less sexy, perhaps, is the issue of regulatory credits, which are bought by traditional automakers from electric-vehicle companies to make up for the tailpipe pollution from their gasoline-powered vehicles. But this income segment is crucial for Tesla's finances, having been the main driver of its profit in the first three months of the year. Without the income from those credits, sold to internal combustion engine automakers, Tesla would have reported a first-quarter loss, and Musk may be pressed to say how long he thinks Tesla will be able to sell credits. The U.S. government incentivized zero-emission vehicle production by giving credits to EV makers while imposing hefty penalties on combustion engine vehicle manufacturers that fail to meet emission standards. The traditional automakers can avoid the fines by purchasing credits from companies like Tesla. Recent legislation passed under the U.S. President Donald Trump, however, is set to eliminate fines for automakers that fail to meet National Highway Traffic Safety Administration's Corporate Average Fuel Economy standards — which underpin much of the demand for these regulatory credits. "They are making conventional ICE vehicles more competitive while making EVs less competitive," said Batt Odgerel, a director at the Energy Policy Research Foundation, referring to Congress, Trump and the federal government. Tesla risks losing revenue from the credits as well as market share, he added. The future of two other sources of credits - from the U.S. Environmental Protection Agency and California's zero-emission vehicle program - is uncertain, with proposed rule changes and political and legal challenges. "That is certainly likely to be a big loss of revenue for automakers" that were selling credits, added Chris Harto, a senior policy analyst at Consumer Reports. Tesla has reported more such sales than anyone else in the automotive sector. FASTER DECLINE THAN EXPECTED One question for Tesla is how fast the credit sales are falling and whether the EPA and California transactions are holding up for now. Other credit producers include smaller EV playersRivian and Lucid. Analysts at William Blair calculate that about three-quarters of Tesla's credit revenue comes from CAFE standards. Within days of the new law, they slashed estimates for Tesla's 2025 credit revenue by nearly 40% to about $1.5 billion. They expect it to plummet to $595 million next year, before being wiped out in 2027. That is a faster decline than seen by many on Wall Street. Tesla's revenue from credit sales will fall 21% this year to $2.17 billion and fall consistently in the coming years, according to 14 analysts polled by Visible Alpha this month. "The elimination of the corporate average fuel economy (CAFE) fines requires a reset in expectations," the William Blair analysts said in their note earlier this month. Revenue from credits wasalways expected to dwindle as traditional automakers ramped up production of zero- or low-emission cars, but not so fast. Tesla has acknowledged its financials would be "harmed" if demand and prices of credits dropped. It did not respond to a request for comment. The credits, which have virtually no cost to produce, were instrumental to keeping Tesla profitable several years ago. While surging Model Y demand once pushed Tesla's profit well above regulatory credit income, recent sales declines and aggressive price incentives have meant regulatory credits are once again a key support for profit. Tesla's loss is a win for internal combustion engine automakers such as General Motors, Ford and Honda, and it comes on top of a second win - the early end of a $7,500 U.S. tax credit for EVs, which now will happen at the end of September. (Reporting by Abhirup Roy in San Francisco and Akash Sriram in Bengaluru; Editing by Peter Henderson and Matthew Lewis)
Time of India
10 hours ago
- Automotive
- Time of India
US tariffs help push Jeep owner Stellantis into massive loss
Jeep owner Stellantis said on Monday it suffered a massive loss in the first half of the year, when it felt the first impact of new US tariffs and took a massive charge following a change in US laws. The 2.3-billion-euro ($2.7-billion) net loss in the first half of the year came as sales in North America continued to slump, down 25 percent by volume in the second quarter year-on-year. The carmaker, whose stable of brands also includes Peugeot, Citroen and Fiat, said first-half net revenues dropped 12.6 percent to 74.3 billion euros, according to the preliminary and unaudited results. Sales of vehicles fell by six percent in the second quarter year-on-year, after having dropped nine percent in the first three months of 2025. Stellantis said "the early effects of US tariffs" had a 300-million-euro negative impact and disrupted its plans to boost its struggling performance in North America. Automakers have struggled to respond to US President Donald Trump 's new US tariff of 25 percent on imported cars that are not largely made within North America. The company, which also owns the Chrysler, Dodge and Ram Truck brands, paused production at some plants in Canada and Mexico in April as the tariffs went into force. Stellantis said the sharp drop in North American sales volume was "due to factors including the reduced manufacture and shipments of imported vehicles, most impacted by tariffs," as well as lower sales for corporate fleets. Restructuring charge Stellantis also took a 3.3-billion-euro charge, which it said was "primarily related to programme cancellation costs and platform impairments, net impact of the recent legislation eliminating the CAFE penalty rate and restructuring". Trump's massive tax and spending legislation, approved earlier this month, removed the penalties for not respecting the so-called CAFE fuel economy targets, meaning automakers can produce and sell more higher polluting cars in the United States. The company said it was in the early stage of taking action to improve performance and profitability, with new products expected to deliver a larger impact in the second half of 2025. Stellantis suspended its financial guidance in April due to the heightened uncertainty generated by US tariffs. Analysts at finance group ODDO BHF said a drop in sales was widely expected and noted that new chief executives often clean house by passing new provisions or restructuring charges. Company veteran Antonio Filosa took over as chief executive in June and immediately launched a management shake-up. Filosa headed up the North American region that accounts for most company profits and whose struggles last year precipitated the sacking of Carlos Tavares , and has retained responsibility for the region. While the overall six-percent drop in sales volumes was in line with analyst expectations, according to ODDO BHF, the 25-percent drop was double the 12 percent foreseen by analysts. Shares in Stellantis fell 2.1 percent in morning trading on the Paris stock exchange, which was 0.4 percent lower overall. Stellantis said it would release audited first half results on July 29 as scheduled.
The Advertiser
15 hours ago
- Automotive
- The Advertiser
Tesla loses billion-dollar revenue source as US ditches fuel economy fines
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. 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. 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. "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. 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' Content originally sourced from: 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. 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. 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. "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. 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' Content originally sourced from: 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. 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. 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. "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. 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' Content originally sourced from: 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. 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. 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. "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. 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' Content originally sourced from:
7NEWS
15 hours ago
- Automotive
- 7NEWS
Tesla loses billion-dollar revenue source as US ditches fuel economy fines
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. 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. 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. '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. 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).
Perth Now
15 hours ago
- Automotive
- Perth Now
Tesla loses billion-dollar revenue source as US ditches fuel economy fines
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'
