As an all-electric automaker, Tesla is able to easily meet regulatory emission requirements in the European Union (EU), and elsewhere in the world.
This allows Tesla to build up a bank of credits, which it can sell to other automakers who are unable to meet the same requirements.
This not only provides Tesla with a lucrative source of revenue, it is also beneficial to the automaker purchasing the credits as it helps them avoid large fines.
Facing the prospect of paying a large fine due to lagging I-Pace sales, Jaguar Land Rover has filed an application to join Tesla’s CO2 pool for 2021 alongside Honda. (via Schmidt Automotive Research)
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The financial details of the deal were not disclosed, but in 2020 Jaguar Land Rover failed to meet their emission requirements and paid a £35M (~$60M CAD) fine.
In their Q3 2021 earnings update, Tesla reported a total of $279M in regulatory credit revenue. That figure was down 30% year-over-year (YoY), but showed the automaker does not need the revenue to stay out of the red by posting their 9th straight quarterly profit.
Fiat Chrysler Spent $362 Million on Regulatory Credits in 2020 – a Majority From Tesla