Tesla’s Regulatory Credits ...
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https://www.cnn.com/2021/01/31/investing/tesla-profitability/index.html
Tesla's net profit doesn't come from selling cars, but from regulatory credits.
New York (CNN Business) Tesla posted its first full year of net income in 2020 -- but not because of sales to its customers.
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Eleven states require automakers sell a certain percentage of zero-emissions vehicles by 2025. If they can't, the automakers have to buy regulatory credits from another automaker that meets those requirements -- such as Tesla, which exclusively sells electric cars.
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It's a lucrative business for Tesla -- bringing in $3.3 billion over the course of the last five years, nearly half of that in 2020 alone. The $1.6 billion in regulatory credits it received last year far outweighed Tesla's net income of $721 million -- meaning Tesla would have otherwise posted a net loss in 2020.
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Tesla also reports other measures of profitability, as do many other companies. And by those measures, the profits are great enough that they do not depend on the sales of credits to be in the black.
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The company reported 2020 adjusted net income, excluding items such as $1.7 billion stock-based compensation, of $2.5 billion. Its automotive gross profit, which compares total revenue from its car business to expenses directly associated with the building the cars, was $5.4 billion, even excluding the regulatory credits sales revenue. And its free cash flow of $2.8 billion was up 158% from a year earlier, a dramatic turnaround from 2018 when Tesla was burning through cash and in danger of running out of money.
