Tesla is set to lose out on an easy, major source of revenue thanks to President Donald Trump‘s administration — you know, the one for which Elon Musk was once the right-hand man.
The passage of Trump’s Big Beautiful Bill cut tax incentives for electric vehicles, as well as the Corporate Average Fuel Economy (CAFE) requirements. All automakers were required to hit these CAFE requirements, but if they couldn’t, they were allowed to purchase carbon credits from companies like Tesla, which had a surplus. These carbon credits became a billion-dollar source of revenue for Tesla, bolstering the EV maker’s earnings even as Tesla sales plummeted.
InsideEVs wrote a detailed piece on the implications of the Big Beautiful Bill for Tesla, and in short, these credits have made Tesla $11.8 billion in revenue over the last decade. That money helped Tesla stay afloat.
“These regulatory credit sales are the reason that Tesla exists today,” Gordon Johnson, an analyst with GLJ Research, told InsideEVs.
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Musk himself said he wanted all credits to be cut as recently as last year.
Reuters wrote about the credits in July and noted that “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 credits, Tesla would’ve reported a loss in Q1 of 2025. And about half of its Q2 operating income — which took a steep, 42 percent drop year over year — came from credits.
The credits are basically free cash for the EV maker, and they’re now set to entirely disappear. Meanwhile, Tesla sales continue to drop globally amid, well, everything going on with Musk. And don’t forget about the end of the $7,500 EV tax credit that helped U.S. buyers afford electric cars in the first place.
Despite the difficulties it may cause, Musk himself called for the end of all EV subsidies as recently as last year.
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The billionaire Tesla chief might feel differently now, but it seems he will get his wish.
