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)
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