How Government Subsidies Put Money in Tesla's Coffers

Buck Throckmorton12 May, 2024 4 Min Read
About 10 percent of gross income comes from selling carbon credits,

There is a strange paradox right now in which Elon Musk has become the “good oligarch” fighting on behalf of free speech and western values against the evil oligarchs trying to impose censorship and global eco-communism. It’s a paradox because Musk is the founder and CEO of Tesla, the flagship product for those engaged in virtuously “green” conspicuous consumption. The left has come to despise Musk for allowing free speech to thrive on the X (Twitter) platform, yet their religious fanaticism against internal combustion (“ICE”) vehicles compels them to continue to subsidize Tesla’s electric vehicles with market-distorting carbon credits and tax credits, which make Musk even richer and more influential.

Meanwhile those of us who reject electric vehicle mandates, and who understand that the purpose of “the EV transition” is ultimately about restricting freedom, find ourselves grateful to Musk for being the lone plutocrat challenging a global leftist cabal that is hostile to freedom.

There is a middle ground, however, where both left and right have the opportunity to pursue their various goals regarding Musk and EVs. Let’s stop subsidizing Tesla with taxpayer money and government-created “carbon credits,” and then both sides win. If Tesla’s impressive customer loyalty and market share in metro areas could be achieved without mandates or tax incentives, some of the conservative criticism of EVs would evaporate. And the left must certainly want to stop subsidizing their political enemy, which they are doing with the generous government incentives that flow into Tesla’s income statement.

Doing well by doing good.

Over the past decade, Tesla’s financial success has had a component that it alone among major auto manufacturers enjoys, specifically, revenue from the sale of “carbon credits” which it earns for no other reason than the source of its vehicles’ propulsion. In recent years, about 10 percent of Tesla’s gross income has come from the sale of carbon credits, which are awarded by various governmental agencies. Tesla then sells these credits to other auto manufacturers whose product is gasoline powered vehicles. To stay in compliance with the various governmental regulations regarding CO2 emissions or EV sales as percentage of vehicles sold, these traditional auto manufacturers are compelled to buy carbon credits from Tesla.

In recent years, the sale of these regulatory credits has provided Tesla an additional revenue stream exceeding $1.7 billion per year.

Tesla's income from zero-emissions vehicle regulatory credits was disclosed in its Form 10-K for calendar year 2023, where it reported $17.66 billion in gross profit. $1.79B came from said credits, up from $1.77B in 2022, and further from $1.46B in 2021. That means credit sales make up more than 10 percent of Tesla's gross profit, and potentially a larger proportion of its $14.97B in net income.

Tesla sold 1,808,581 vehicles globally in 2023, so the $1.79 billion in revenue from the sale of carbon credits amounts to about $1,000 per vehicle sold for doing nothing more than selling a virtual slip of paper given to Tesla by various governmental agencies.

Since 2009, Tesla has been paid over $9 billion by legacy auto manufacturers for carbon credits. This $9 billion is effectively pure, bottom-line profit with no variable costs nor cost of goods sold -- just pure cash. To put that in perspective, Tesla’s manufacturing plant in Austin that commenced operations in 2022 had an original construction cost of $1.1 billion and is estimated by Musk to have a long term cost of $10 billion for all additional buildout and investments. Because of the economically distorting marketplace for government-issued carbon credits, massive amounts of Tesla’s overhead is being funded by its competitors.

As we’ve documented here at The Pipeline, American consumers have thoroughly rejected EVs outside of the boutique niche that Tesla has carved out, but when an EV-rejector buys a traditional ICE vehicle from a legacy American or Japanese auto manufacturer, it is highly likely that part of the purchase price is the vigorish that will be paid to Tesla for "carbon credits." Non-Tesla customers have to pay a premium for their new cars so that a part of their purchase price can flow to Tesla. Whether you love Elon Musk or hate him, can we agree that Tesla should not be getting a cut of the action when someone buys a Honda or a Chevrolet?

An $8,500-per-car subsidy sure does help.

Above and beyond the carbon credit is the obscene $7,500 tax credit for which most of Tesla’s product line is eligible. That tax credit also steers money into Tesla’s coffers from sources other than those who are actually buying its vehicles. Combined with Tesla’s carbon credits being sold to other manufacturers, Elon Musk’s EV company is collecting about $8,500 per unit sold from tax incentives and carbon credits. Tesla’s market success while enjoying an $8,500 per unit advantage over its ICE competitors is not a capitalist success story, rather, it’s a crony capitalist affront to free enterprise.

The defenders of the government incentives benefiting Tesla often argue that other manufacturers can do the same thing Tesla is doing, but that is not the case. Most legacy auto makers manufacture a broad spectrum of products, whereas Tesla only makes a small lineup of high-end electric products. But beyond that, all the various EV credits would evaporate if it was only electric vehicles that were being manufactured. There would not be any ICE manufacturers needing to buy carbon credits, nor would the government need to keep subsidizing car buyers with $8,500 per unit to buy EVs if there were no longer the preferable alternative of buying an ICE car.

If Tesla can thrive without mandates that favor EVs, and without government-created credits that provide Tesla with billions of non-customer revenue, its success story will be truly impressive. Perhaps the anti-Musk left and anti-EV right can unite to give Tesla the chance to make this happen.

Buck Throckmorton is a writer ("co-blogger") at the Ace of Spades HQ blog. His career includes many years in banking and commercial lending, as well as a stint with an American auto manufacturer. Buck's writing often takes a critical look at electric vehicles, "green" energy, and woke capital. Twitter: @BuckThrockmort; email:


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3 comments on “How Government Subsidies Put Money in Tesla's Coffers”

  1. What is the saying? "Don't hate the player, hate the game." We need to stop worrying about the players and end the game of carbon offsets/credits and the like. It is a massive scam. Our focus should be on how we can expose the fraudsters behind that stupid game, then ending the CO2 credits game altogether.

  2. Transferring the wealth of average citizens to make the CEO of Tesla the richest guy in the world should leave a bad taste in everyone's mouth, yet nobody had a problem with this until Elon Musk acquired Xwitter and allowed for a broader range of viewpoints. The "new totalitarians" popped a vein and now view Musk as an enemy. Happened pretty quick.
    Regardless, it is vulgar to have average people buying their vehicle of choice and subsidizing the wealthy to ride around in an overpriced EV. How else can we characterize this?

  3. EVERY business venture of Musk profits from government cronyism and they would all fail otherwise. He skillfully plays the “good cop” shtick to distract the unthinking public while he picks their pockets.

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