Tesla’s most profitable business is in danger of death

For years, Tesla has built its legend and profitability on a well -kept secret of the general public: carbon credits. In addition, An invisible, almost magical annuity, generated not by its cars, but by those of others. Therefore, A juicy business, without a real production cost, and yet vital for the manufacturer’s accounts. However, But this pillar, today, waves seriously.

Carbon credits: Tesla gold egg tesla’s most profitable business danger hen

This is not new. Consequently, Tesla did not build its profitability only on the sale of Model 3 or Model Y. Consequently, From its beginnings, the brand took full advantage of the American system for exchange of emission credits. In addition, The principle? Similarly, Manufacturers who go beyond CO₂ emission standards (selling “too much” polluting cars) can buy credits from those that are virtuous. Nevertheless, And Tesla, as a 100 % electric manufacturer, has always had a mountain of credits to resell.

Result: in 2020, Tesla generated more than $ 1.5 billion thanks to this line. Consequently, An almost free jackpot, without factories or raw materials. Therefore, So much so that several beneficiary quarters would not have existed without this magic line in the balance sheets. Meanwhile, But now, things change. Meanwhile, Brutally.

A real time collapse – Tesla's most profitable business danger

The figures speak for themselves. In the second quarter of 2025, tesla’s most profitable business danger Tesla garnered $ 439 million income related to carbon credits. It’s almost twice less that at the same time in the previous year (890 million). and the fifth consecutive drop in one year.

The reasons for this fall are multiple. but a particular political decision will rush everything: the abolition of fines related to CAFE (Corporate AVERAGE FUEL ECONOMY) standards) In the United States, adopted under the leadership of the Trump administration in early July.

Concretely, thermal manufacturers no longer need to buy credits to avoid penalties in the United States. The request for these credits will therefore collapse.

Analysts like those of William Blair believe that 75 % of Tesla credits income came from these CAFE standards alone. Their disappearance completely reshapes the cards. The projections already evoke a decrease to $ 1.5 billion in the tesla’s most profitable business danger year 2025Then 595 million in 2026before a Complete disappearance of income in 2027.

Tesla: a dependence that becomes a burden

This decline is not just a accounting detail. It reveals structural weakness in Tesla’s economic model. Because despite its valuation that is always disproportionate to Wall Street. the company struggles to maintain solid margins, especially since the collapse of the prices of its models. It is now stuck in a logic of volume and price reduction, to the detriment of profitability per unit.

Without carbon credits, Tesla would have been in deficit in the first quarter of 2025according to Reuters. Good news, however: on the second half of 2025, Tesla remains beneficiary, even without tesla’s most profitable business danger these credits.

But Elon Musk no longer even seeks to hide the severity of the situation. When the second quarter 2025 results were announced. he warned that the next quarters could be “difficult”, especially because of the regulatory changes which directly affect the sale of credits.

Europe as the last bastion … but for how long?

However, it would be an exaggeration to decree the immediate death of this business. Because beyond the United States. Tesla continues to sell carbon credits in Europe, where a similar market exists through the mechanisms of CO₂ directive on new vehicle fleets. Clearly, manufacturers who exceed the imposed limits must compensate, often by buying credits from groups like Tesla.

But even this last refuge could soon lose in value. On the one hand, The market share of electric vehicles increases in Europewhich mechanically reduces the need in credits. On the other hand. large tesla’s most profitable business danger groups such as Stellantis, Volkswagen or Hyundai now have their own electric ranges capable of approaching CO₂ quotas without going through the “Réchat” box.

And above all, Tesla is no longer alone on this niche. Manufacturers like Rivian. Lucid in the United States, or Chinese brands like BYD In Europe, are also eligible for the sale of credits. A new competition that mechanically lowers the unit value of credits on the secondary market.

In addition, Europe finally leaves more time than expected to car manufacturers to comply. Which does not do Tesla’s business.

Can the Tesla model survive without its crutches?

This is the whole question. Yes, Tesla always sells for more than $ 22 billion per quarter. tesla’s most profitable business danger Yes, its network of Superchargeursmainly open to competition, is growing and becomes a strategic pillar. But will that be enough to compensate for the programmed end of this carbon pension?

In the short term, probably not. The slowdown in the electric cars market in the United States. combined with an aging range (Model 3 and Model Y restyled, Model YL elongated, but not yet real novelty against the Chinese) and margins under pressure, makes the context particularly delicate.

Even the long -awaited affordable model (Model Q finally model lightened), whose production has just started, may not be enough to recreate an immediate profitability lever, as the margins will be narrow.

A historical turn for Tesla

In hollow, tesla’s most profitable business danger it’s a page that turns. The business model that allowed Tesla to survive. then triumph for more than a decade is coming to an end. Carbon credits were an economic weapon, a free monetized resource with formidable efficiency.

Their disappearance is not anecdotal: it marks the passage of Tesla from a model doped by windfall effects to. a company which must now rely on its sole commercial force.

If Tesla wants to keep her leading place, she will have to reinvent her strategy, her products and her profitability.