Latest news with #CorporateAverageFuelEconomy
Time of India
2 days ago
- Automotive
- Time of India
Tesla's easy money from regulatory credits set to dry up amid weakening sales
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 likely to 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 players Rivian 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 per cent 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 per cent 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 was always 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.
Politico
2 days ago
- Automotive
- Politico
How Trump will hit Tesla's bottom line
Donald Trump is vaporizing an easy source of profit for his onetime 'first buddy' and campaign donor Elon Musk. We're talking about America's opaque but lucrative system of emissions credits — a windfall for Tesla that Trump has been busy dismantling. The president erased the biggest market for the credits in June when he signed a bill to revoke California's vehicle emissions standard. Republicans then doubled down in the megalaw by removing any fines against automakers that don't meet fuel economy standards. The consequences may start weighing on Tesla as soon as Wednesday when the company reports its latest financial update. 'I think Tesla is going to take it on the tailpipe,' said Dan Becker, a transportation advocate at the nonprofit Center for Biological Diversity. 'Elon Musk has made an unforced error that is going to cost Tesla a lot of money.' Environmentalists aren't the only ones coming to this conclusion. For years, financial analysts have known that these emission-trading systems, which were designed to improve air quality while giving automakers flexibility, are a windfall for Tesla. Because it produces only electric cars, Tesla can sell its zero-emissions credits to other automakers who fall short of pollution standards. In many past quarters, Tesla would have shown a loss without the money from those credits. Instead it reported profits, forming the basis for the company's sky-high market value. For example, in the second quarter of last year, Tesla's $890 million of regulatory credits made up 63 percent of its profit. The impact this year is even higher. In the first three months of this year, with credits removed, Tesla's $409 million in profits would have turned into a $186 million loss. And now, 'going forward, that source of extra earnings is going to be slim to none,' Pavel Molchanov, an analyst at investment bank Raymond James, said in an interview. California's clean car credits are critical The biggest hit to Tesla, watchers say, will be the end of California's market for clean-car credits (though the state is appealing Congress' repeal of its clean-car program). No one knows how much money Tesla makes from California's market — or any other market — for emissions credits, since the prices aren't transparent like a stock market's. But Tesla's competitors probably would have paid the electric automaker a lot. The penalty for failing to meet California's rules was $20,000 per individual car, and the per-car requirements were poised to ratchet up dramatically starting with models going on sale later this summer. Less impactful, but still important, is the megalaw provision that removed any fines against automakers that don't meet Corporate Average Fuel Economy standards. Those rules have been a key driver of improving fuel economy in America's cars since the 1970s. 'Basically, it's an invitation to cheat,' said Becker. For automakers, an appealing way to cheat — er, not comply — would be to stop paying millions of dollars to Tesla for its fuel-economy credits. With Trump's new rules, an automaker's 'willingness to pay would soften substantially,' said James Sallee, an economics professor at the University of California, Berkeley. It's Tuesday — thank you for tuning in to POLITICO's Power Switch. I'm your host, David Ferris. Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to dferris@ Today in POLITICO Energy's podcast: Zack Colman breaks down how Republicans are favoring fossil fuels and nuclear energy. Power Centers Trump's anti-renewables pushThe Trump administration's battle against renewables is ramping up, Benjamin Storrow writes. On the heels of the megalaw, Interior Secretary Doug Burgum announced that no renewable energy projects on public lands could move ahead without approval from him or one of his deputies. Developers are concerned that it will lead to more rejected projects. 'The Trump administration is extremely anti-renewables,' Michael Wara, a senior research scholar at Stanford University, told Ben. 'I think this is fundamentally distorting the market and the broader transition that's already occurring in the U.S. and occurring everywhere on the planet.' Burgum is also taking the anti-renewable message to Congress. On Tuesday, the Interior secretary spoke at the GOP weekly meeting, just weeks after Republicans passed a megalaw with provisions to fast-track fossil fuel projects and phase out clean energy tax credits. Members said Burgum spoke about further unwinding the Biden administration's policies to boost renewables, Andres Picon writes. Picking winners with gustoRepublicans are embracing big government intervention to help fossil fuels and nuclear power, after spending four years slamming the use of the same federal arsenal to help clean energy, Zack Colman writes. 'They're picking winners and losers, no doubt of that,' said Shuting Pomerleau, director of energy and environmental policy at center-right think tank American Action Forum. 'There has been a convergence of both Democrats and Republicans into the industrial policies propping up the industries or technologies they love with the resources and the legal authorities they have.' The aims, however, are worlds apart. The Trump administration is offering billions of dollars to fossil fuel producers while rolling back environmental rules. The Biden administration set out to steer hundreds of billions of dollars to clean energy manufacturing in an effort to counter climate change. Upcoming barriers to wind and solarWind, solar and grid batteries could face more roadblocks once the Treasury Department releases guidelines next month for projects to receive federal tax credits, Christa Marshall writes. The guidance is the result of an executive order after the megalaw's passage that called for 'ending the massive cost of taxpayer handouts to unreliable energy sources.' In Other News Tariff troubles: General Motors' profits in the second quarter fell by more than a third, but its sales of electric vehicles more than doubled. Curbing crude: China's consumption of oil is expected to hit a peak in 2027 and then fall, as the nation moves away from imported fossil fuel and toward electric vehicles. Subscriber Zone A showcase of some of our best subscriber content. Maryland regulators said they won't change the approvals for an offshore wind project that the Environmental Protection Agency said contained an error. House Republicans included language in a spending bill that would prohibit Washington from spending any money from its climate lawsuit against the fossil fuel industry. California Rep. Scott Peters was named Democratic co-chair of the House Bipartisan Climate Solutions Caucus. That's it for today, folks! Thanks for reading.
The Star
3 days 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)
The Advertiser
3 days 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
3 days 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).
