Everyone likes to talk about Tesla’s regulatory credit sales, which makes sense — they’re one of the company’s more unique income streams. In a world where income is usually generated through sales of motor vehicles, accessories, or branded lifestyle merchandise, selling “adherence to the law tokens” seems like an ecclesial anomaly. But much like the Catholic Church before the Reformation, Tesla’s days of selling indulgences may be numbered.
A story from Automotive News speculates that Tesla’s EV credits will “become a hot commodity” with ever-tightening emissions restrictions, but it misses a few key details. For one, Tesla’s credits are already a hot commodity — the company sold $344 million worth in the last quarter alone. But the second detail is the real hitch for the company: California’s emissions law will soon ban the trade of regulatory credits.
See, California (and the states that follow its emissions standards) requires a certain percentage of sales from each manufacturer be zero-emissions. Tesla, as a manufacturer of exclusively EVs, regularly beats those percentage mandates — allowing the company to sell excess credits to automakers that haven’t quite gotten their shit together. As those percentages continually increase, traditional automakers will be scrambling to meet the new regulations; simultaneously, Tesla’s excess supply will begin to dwindle. This is what we in the biz call a seller’s market, where Tesla can demand astonishing prices for its credits.
But in eight short years, that fiscal joyride comes to an end, all thanks to our old friend, the California Code of Regulations. Specifically, 13 CCR § 1962.4, the latest update to those ZEV percentages. In it, there’s a single sentence that will cut all those hundreds of millions of dollars from Tesla’s income: “A manufacturer may not sell excess converted ZEV or PHEV values after 2030 model year.”
The company may have the time of its life selling EV credits in the short term, but the clock is ticking down its eight remaining years of sales. After that, it’ll have to fall back on its other major non-car income stream: novelty belt buckle sales.