Tesla picked up $595,000,000 in regulatory credits for Q1 2025
By Jennifer Mahorasy | April 25, 2025
Tesla had a 71% drop in first quarter profits compared to last year, but those losses were minimised because they picked up $595,000,000 US in regulatory credits for the quarter.
Indeed, according to Tesla’s Q1 2025 earnings, net income fell 71% to $409 million from $1.39 billion the previous year, driven by a 13% drop in vehicle deliveries (336,681 vehicles) and a 20% decline in automotive revenue to $14 billion.
Regulatory credits, however, did bring in $595 million, up from $442 million the prior year, which was critical—without those credits, Tesla would’ve posted a loss for the quarter.
So, the credits acted like a financial lifeboat, keeping Tesla in the black despite weak sales and operational challenges, like updating factory lines for the refreshed Model Y and lower average selling prices due to discounts.
What Are Regulatory Credits, and Are They “Free Cash Ripped Off” from Petrol Car Makers?
Regulatory credits aren’t exactly “free cash” handed to Tesla like a government cheque, but they’re not pure market magic either. Here’s how they work:
The System: In places like the U.S., EU, and China, governments set emissions standards for automakers. Companies that sell zero-emission vehicles (like Tesla’s EVs) earn credits. Automakers who miss emissions targets—often those heavily reliant on gas-powered cars—must buy credits to avoid fines or bans. Tesla, producing only EVs, generates surplus credits and sells them to legacy automakers (e.g., Stellantis, GM, or Volkswagen). In Q1 2025, Tesla earned $595 million this way.
All prefaced on the need for an energy transition because apparently we have a climate catastrophe.
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