In the past year, Tesla reported $2.763 billion in profits from regulatory credits. Concerns over the impact of the Trump administration's emphasis on fossil fuels and potential elimination of emissions credits have plagued investors. However, Piper Sandler analyst Alexander Potter believes these concerns are exaggerated. He asserts that Tesla stacked emissions credits while competing companies faced deficits, and he views the outlook for earnings, particularly related to regulatory credits, as stable through 2025 despite government changes.
We frequently receive questions about Tesla's regulatory credits, and for good reason: the company received ~$3.5B in 'free money' last year, representing roughly 100% of FY24 free cash flow.
Potter believes the issue is overblown: will recent regulatory changes threaten Tesla's earnings outlook? In short, we think the answer is no, at least not in 2025.
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