Tesla’s record carbon credit sales are up 94% year over year

While Tesla has missed this year’s third quarter in terms of both profit and revenue expectations since the second quarter of 2019, the EV leader reported record sales of carbon credits, which the company called regulatory credits.

For more than 4 years, the EV maker has drawn attention by reporting record revenues from selling carbon credits. The automaker reported $554 million in revenue from the sale of carbon credits in the third quarter of 2023, contributing significantly to its earnings.

These record sales also represented a huge portion of Teslas net income in the third quarter of 2023 ($1.878 million) – 29%. Notably, its third quarter revenue for carbon credits increased 94% year by year, indicating the cost of Teslas EV production.

Tesla Carbon Credit Earnings Soar

Tesla has been receiving revenue from the sale of carbon credits since 2017. These credits, otherwise known as carbon offset credits or carbon allowances, enable companies to offset their carbon emissions by investing in projects that reduce planet-warming emissions.

Despite Elon Musk’s paranoia about the destabilization of the global economy due to ongoing wars, his growing carbon credit income is steadily contributing to his overall profits.

A 29% revenue-to-net income ratio is hard to ignore and speaks highly of Tesla’s creditworthiness.

Compared to previous quarters’ revenue ($282 million), this quarter saw a huge increase 96% increase in sales: 554 million dollars. So far, it’s the highest in third-quarter earnings and the second-highest of Tesla’s quarterly credit sales.

The first quarter of 2022 saw the highest revenue of $679 million, while the company also earned a total of $1.78 billion in that year alone.

It’s not clear exactly who bought the credits or for how much, but it’s likely they were sold to other car companies that miss California Air Resources Board (CARB) emissions standards.

Previous buyers include Teslas partners General Motors and Chrysler, but no buyers have been identified this year.

Proceeds from installment sales support Teslas mission to accelerate the transition to clean energy and sustainable transportation. By encouraging the adoption of EVs by other automakers, carbon credits help reduce the industry’s carbon emissions.

Ramping Up Clean Energy Solutions

Producing and delivering more EVs is just one part of Teslas commitment to a clean and sustainable energy transition. The automaker’s ever-growing business segment is lithium-based energy storage solutions.

Although this segment is much smaller than its automotive business, it has expanded rapidly.

In the current quarter’s financial report, the company’s energy generation and storage revenue also grew nearly 40% year-over-year. The segment collected revenue of $1,559 million in the third quarter of 2023, compared to $1,117 million in the same quarter last year.

Tesla also reported that its energy storage deployments hit a new record, growing 90% year-over-year to 4.0 GWh, its highest quarterly deployment ever.

The increase was primarily driven by the company’s continued expansion of its Megafactory in California. Tesla aims to produce 10,000 Megapacks (energy storage for large-scale commercial and utility projects) annually at this plant.

Other energy storage systems include the Powerwall for residential and the Powerpack for business, all of which use lithium-ion batteries.

The growing demand for Teslas Megapacks signals that there is a huge market for grid-scale battery energy storage solutions. Estimates suggest that this market will reach a growth rate of over 24% by 2027 to over $15 billion.

For Tesla Energy, that growth means its battery energy storage solutions, like the Megapack, could command significant market share. Musk even said that their battery storage division is becoming one of Teslas most profitable divisions.

This growing business, along with its solar deployments, is a key part of EV manufacturers’ journey to sustainability.

More than just a carbon credit winner

The production of electric cars, the use of battery energy storage and solar panels all generate carbon credits, avoiding carbon emissions. The revenue these loans generate is undeniably huge, giving Tesla billions of dollars in revenue.

But more than the cash, the increased sales highlight the role Teslas clean energy and sustainable solutions play in achieving net zero goals.

Achieving a sustainable global economy involves curbing greenhouse gas emissions, which requires addressing both energy production and use. Both areas are what the transportation and energy sectors are doing to reduce harmful emissions.

Tesla is in an advantageous position to take charge of this by designing and implementing clean transportation and sustainable energy solutions.

The automaker is expanding its manufacturing capabilities and using advanced technologies to continuously improve its clean energy operations. The auto giant is also working to reduce its own carbon footprint, as stated in its stability paper.

Tesla’s remarkable success in selling carbon credits not only strengthens its financial position, but also highlights the importance of clean energy solutions in the fight against climate change. As the company develops its sustainable practices, it continues to pave the way to net zero emissions.