Elon Musk’s Tesla is literally riding a bubble – reaping profits off an inflated stock price that only exists because of extensive PR rather than actual material value. A report by Forbes has revealed that a huge percentage of Tesla’s revenue does not come from selling cars, but from selling regulatory credits to other companies.
While some experts have dubbed it as Tesla’s “dirty secret” – Elon Musk fanboys have retaliated with several arguments.
But what is really happening? Are their critiques correct in saying that Tesla is running a scam? Or is it just a well-crafted trick that uses a legal loophole to make money?
Tesla’s cars are actually causing a huge loss
First, we need to know what is a regulatory credit – and this could be best explained as follows. Many states in the US require car companies to produce zero-emissions vehicles, and if they can’t produce such cars – then they need to buy regulatory credits from the companies who are producing zero-emissions cars.
In this case, Tesla makes hay in the sunshine – as they have collected $3.3 billion in the last five years. In contrast, Tesla’s car sales have only made them $721 million.
If Tesla wasn’t selling regulatory credits, they would have actually reported a net loss in 2020.
Gordon Johnson of GLJ Research said:
“These guys are losing money selling cars. They’re making money selling credits. And the credits are going away.”
This is why Tesla’s stock is still high
Tesla’s stock rose by 743% in 2020 – mainly because Elon Musk refused to shut down his factories, putting profit over the health of his employees and production continued. Yet, Tesla managed to sell only half a million cars as compared to the 70 million cars sold worldwide by other companies.
But Tesla’s stock is still more than the 12 biggest car companies combined who sell more than 90% of the cars in the world.
The main reason behind this is that people might be switching to electric cars in the future – in an effort to save the environment. But the stark fact gets brushed aside is that Tesla charging stations often use diesel generators or public electricity that is produced from coal – so the only thing a Tesla electric car can do is to absolve the guilt of the owner who might feel like they are helping the environment but the final impact remains the same.
Until and unless the world decides to completely move towards solar and nuclear energy, no amount of fancy gadgetry can save our environment.
Report via: CNN
Featured Image Courtesy: Lioness’s Den
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