The main motor companies like Ford or Tata are known for making a profit by mainly selling vehicles /cars. Tesla may have been a new competitor in the race but it has shown rapid growth. But the dirty secret behind Tesla’s success is shocking.
Elon Musk’s company does not make more money from selling cars but from selling credits. The truth is 11 states require automakers to sell a certain percentage of zero-emission vehicles by 2025. If they can’t sell it, then the automakers have to buy regulatory credits from another automaker who meet the requirements like Tesla.
In 2020 alone Tesla earned a profit of $1.6 billion in regulatory credits. Over the 5 years, it has made $3.3 billion in regulatory credits. It is shocking and a bit disturbing as well. Because it was predicted that the company would sell 70 million cars in 2020 but it only sold 500,000 pieces in 2020. However, even if the company isn’t selling well it is growing at a healthy rate.
Tesla reported that it is doing well enough profit that it is not entirely dependent on credits itself. The gross profit of Tesla was $5.4 billion in 2020 by making cars alone, and excluding stock compensation, etc.
This shows a 158% growth of cash flow from a year earlier when there was a fear that Tesla was burning out. It was feared that the company would run out of money.
Many are betting on Tesla because it believes in the future of electric vehicles. EVs require fewer parts, no harmful fuel, and a better solution. Tesla is moving forward with a belief that in the future people will switch to an electric vehicle.