The Tesla's Double Play with Regulatory Credits
In some European nations, automakers must sell a certain amount of electric, hybrid electric or other zero emission vehicles (or ZEVs) to meet regulatory targets. Those not meeting must buy credits from someone to be in compliance. Tesla sells only ZEVs, and certainly doesn’t need to keep the credits that it earns; it resells them before they expire.
"Last year, Fiat Chrysler Automobiles (FCA) made a deal with Tesla to comply with new European environmental regulations coming into play in 2021. In their most recent shareholder update, FCA disclosed that as of March 31, 2020, its agreements represent total commitments of €1.1 billion. FCA plans to use the credits it’s buying from Tesla to stay in compliance through 2023, the filing said. The deal was a boon for Tesla." CNBC
This is a double play strategy: as the world puts more emission mandates, this unit could become the rainmaker for Tesla, irrespective of its actual car sales margin. There is nothing better in business when one can turn "trash" into gold. Tesla is earning $billions for selling EV credits!
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