Tesla, the leading global electric vehicle manufacturer, is projected to earn more than €1 billion this year primarily through the sale of carbon dioxide (CO2) credits rather than from vehicle sales.
Despite a decrease in car sales in 2024, Tesla's revenue from selling CO2 credits to other automakers remains robust. The company, led by Elon Musk, has established itself as a key player in the carbon credit market.
The Corporate Average Fuel Economy (CAFE) standards require automakers to maintain specific CO2 emission limits across their vehicle fleets. These limits will tighten in 2025, mandating that manufacturers sell at least 20% electric vehicles (EVs). Automakers failing to meet these requirements face significant penalties.
Jean-Philippe Imparato, CEO of Alfa Romeo, warned that companies not achieving the 20% EV threshold will incur substantial costs. Tesla, which exclusively produces zero-emission vehicles, has a surplus of CO2 credits to sell.
Major automotive manufacturers, including Stellantis, Toyota, Ford, Subaru, and Mazda, are expected to pay premium prices for these credits. Analysts from UBS suggest that Tesla's earnings from CO2 credits could exceed €1 billion if the company monetizes its entire CO2 position.
In the past 15 years, Tesla has generated over $10.2 billion from emissions credit sales, with significant growth in the last two years. The tightening CAFE standards will further benefit Tesla by lowering the emissions cap to an average of approximately 80 g/km.
Other manufacturers, such as Volvo, particularly due to the success of its electric SUV EX30, may also see lucrative cash rewards. A deal has been established with Mercedes to offset excess CO2 emissions, and analysts predict Volvo could earn up to €300 million.