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they earn 100% margins on selling $400M in mysterious regulatory credits

by xoxoy 6y ago

baggachipz 6y ago
There's nothing mysterious about them. Car companies are required to produce clean vehicles, or they can instead buy credits from companies who do. Companies are paying right now rather than producing, and Tesla is there to benefit from it. There's nothing shady or mysterious here.
- xoxoy 6y ago
  they don’t break out who the buyers of these credits are. i cannot find any information from a Ford or Toyota or GM describing the millions of credits they’ve purchased from Tesla shrug
  - baggachipz 6y ago
    So this suggests to you that it's somehow shady or below the table? Why would they disclose that information if they don't have to?
    - xoxoy 6y ago
      yes it is objectively shady because it appears they have full discretion to decide when to recognize these credits, and also unclear who is actually buying them. they also don’t have credits listed as an asset on their balance sheet when you’d otherwise expect these credits to go from asset -> revenue when they decide they should be recognized, instead it is as if these credits just appear out of thin air and sold.
      - baggachipz 6y ago
        Again, they are not required to report that so there is no reason to. I'm sure they have squirreled away lots of these credits in their war chest to break out at opportune times (like today). They're not fabricating the numbers, they are audited and exist. There's nothing illegal about it. They just don't have to disclose them publicly so they don't, because it would needlessly give information to competitors.
        dmurray 6y ago
        If Tesla own something that's worth money, they generally are required to disclose that publicly. They need to include it on their balance sheet and send that to the SEC quarterly in their 10-Q or 10-K filing. That's the main requirement of being a public company. Tesla's accountants know this and follow the SEC rules, even if Musk doesn't. Is there some special treatment for these tax credits? Are they rolling this credit in with something else? Otherwise I don't believe they can be "squirreled away" to make the numbers look good "at opportune times".
  - MLR 6y ago
    https://www.teslarati.com/tesla-pooling-fca-avoids-co2-fines-2020/ https://www.teslarati.com/tesla-pooling-fca-avoids-co2-fines...
- matthewdgreen 6y ago
  I think the question is whether it’s sustainable as a business. And whether Tesla’s other businesses are growing quickly enough that they can make up for the loss of those credits when other manufacturers start producing more EVs.
  - xoxoy 6y ago
    right there’s like a dozen EVs coming to market in 2021/2022. it will disappear very quickly over the next 2 years.
    - jupp0r 6y ago
      I'm not convinced. New vehicles have been announced each year in the last couple of years now and they have been largely unsuccessful so far. I think it will be hard for other manufacturers hit the same sweet spot that the Model 3 is hitting. That being said, there are lots of segments (vans, pickup trucks, ...) that are still open for grabs.
  - baggachipz 6y ago
    I think it'll surprise you how long it lasts. These big car companies take a long time to change in a meaningful manner and every month they spend trying to do that is time Tesla is advancing themselves. These credits should stick around (albeit in a diminishing manner) for at least a few more years.
    - xoxoy 6y ago
      look at the pipeline for EVs coming to market in 2021/2022. there are dozens.
      - baggachipz 6y ago
        "There are dozens of us! Dozens!" Though many cars have been announced, I can virtually guarantee most of them will be late or never arrive. Not one EV has arrived on market when it was actually announced to do so. These take lots of time and money to produce.
- shuckles 6y ago
  Pretty odd to consider that every other carmaker, obsessed with optimizing their business, would rather pay Tesla straight cash than rush out an electric drivetrain car. Across the Taycan, i3, and Bolt, there’s certainly plenty of evidence that they can.
  - baggachipz 6y ago
    That's because they could build them, but not profitably. Changing the design wholesale and then retooling your lines to build the cars at scale is insanely expensive and will take a long time to do. The i3 and Bolt are objective failures (in the US) because they're just not that good compared to what Tesla is doing at about the same price. The dealers also have an inverse incentive to sell them so one has to go way out of their way to purchase an electric from the legacy manufacturers. It's a classic disruption case against entrenched players who refuse to adapt. The only one making a real effort is VW and they're currently paying dearly for it.
    - shuckles 6y ago
      You first point is around whether it’s economical. A carmaker can scale a program in ~3 years, so that they haven’t is almost certainly a conscious choice. Furthermore, the Bolt shares a production line with the Sonic so the process concerns are limited. In terms of competitiveness, the Bolt offered longer range at a lower price than the Model 3 at launch and still does. Here people respond by saying the Tesla is a much better driving experience because of software, but if that’s the case they’d be much more profitable selling their in car experience software on top of ICE vehicles. All that said, Tesla also doesn’t build and sell cars profitably. Selling credits is the source of their profits. EVs are not disruptive in any well-defined sense of that word. They are more expensive and do not create demand against non-consumption of automobiles. The disruptive electric mobility option is the explosion of personal form factors such as ebike, scooters, and the like.
      - bryanlarsen 6y ago
        > All that said, Tesla also doesn’t build and sell cars profitably. Selling credits is the source of their profits. GAAP gross margin is 21%. They're making excellent profits on their cars.

they earn 100% margins on selling $400M in mysterious regulatory credits

by xoxoy 6y ago

they earn 100% margins on selling $400M in mysterious regulatory credits

There's nothing mysterious about them. Car companies are required to produce clean vehicles, or they can instead buy credits from companies who do. Companies are paying right now rather than producing, and Tesla is there to benefit from it. There's nothing shady or mysterious here.

xoxoy 6y ago
they don’t break out who the buyers of these credits are. i cannot find any information from a Ford or Toyota or GM describing the millions of credits they’ve purchased from Tesla shrug
- baggachipz 6y ago
  So this suggests to you that it's somehow shady or below the table? Why would they disclose that information if they don't have to?
  - xoxoy 6y ago
    yes it is objectively shady because it appears they have full discretion to decide when to recognize these credits, and also unclear who is actually buying them. they also don’t have credits listed as an asset on their balance sheet when you’d otherwise expect these credits to go from asset -> revenue when they decide they should be recognized, instead it is as if these credits just appear out of thin air and sold.
    - baggachipz 6y ago
      Again, they are not required to report that so there is no reason to. I'm sure they have squirreled away lots of these credits in their war chest to break out at opportune times (like today). They're not fabricating the numbers, they are audited and exist. There's nothing illegal about it. They just don't have to disclose them publicly so they don't, because it would needlessly give information to competitors.
      - dmurray 6y ago
        If Tesla own something that's worth money, they generally are required to disclose that publicly. They need to include it on their balance sheet and send that to the SEC quarterly in their 10-Q or 10-K filing. That's the main requirement of being a public company. Tesla's accountants know this and follow the SEC rules, even if Musk doesn't. Is there some special treatment for these tax credits? Are they rolling this credit in with something else? Otherwise I don't believe they can be "squirreled away" to make the numbers look good "at opportune times".
- MLR 6y ago
  https://www.teslarati.com/tesla-pooling-fca-avoids-co2-fines-2020/ https://www.teslarati.com/tesla-pooling-fca-avoids-co2-fines...
matthewdgreen 6y ago
I think the question is whether it’s sustainable as a business. And whether Tesla’s other businesses are growing quickly enough that they can make up for the loss of those credits when other manufacturers start producing more EVs.
- xoxoy 6y ago
  right there’s like a dozen EVs coming to market in 2021/2022. it will disappear very quickly over the next 2 years.
  - jupp0r 6y ago
    I'm not convinced. New vehicles have been announced each year in the last couple of years now and they have been largely unsuccessful so far. I think it will be hard for other manufacturers hit the same sweet spot that the Model 3 is hitting. That being said, there are lots of segments (vans, pickup trucks, ...) that are still open for grabs.
- baggachipz 6y ago
  I think it'll surprise you how long it lasts. These big car companies take a long time to change in a meaningful manner and every month they spend trying to do that is time Tesla is advancing themselves. These credits should stick around (albeit in a diminishing manner) for at least a few more years.
  - xoxoy 6y ago
    look at the pipeline for EVs coming to market in 2021/2022. there are dozens.
    - baggachipz 6y ago
      "There are dozens of us! Dozens!" Though many cars have been announced, I can virtually guarantee most of them will be late or never arrive. Not one EV has arrived on market when it was actually announced to do so. These take lots of time and money to produce.
shuckles 6y ago
Pretty odd to consider that every other carmaker, obsessed with optimizing their business, would rather pay Tesla straight cash than rush out an electric drivetrain car. Across the Taycan, i3, and Bolt, there’s certainly plenty of evidence that they can.
- baggachipz 6y ago
  That's because they could build them, but not profitably. Changing the design wholesale and then retooling your lines to build the cars at scale is insanely expensive and will take a long time to do. The i3 and Bolt are objective failures (in the US) because they're just not that good compared to what Tesla is doing at about the same price. The dealers also have an inverse incentive to sell them so one has to go way out of their way to purchase an electric from the legacy manufacturers. It's a classic disruption case against entrenched players who refuse to adapt. The only one making a real effort is VW and they're currently paying dearly for it.
  - shuckles 6y ago
    You first point is around whether it’s economical. A carmaker can scale a program in ~3 years, so that they haven’t is almost certainly a conscious choice. Furthermore, the Bolt shares a production line with the Sonic so the process concerns are limited. In terms of competitiveness, the Bolt offered longer range at a lower price than the Model 3 at launch and still does. Here people respond by saying the Tesla is a much better driving experience because of software, but if that’s the case they’d be much more profitable selling their in car experience software on top of ICE vehicles. All that said, Tesla also doesn’t build and sell cars profitably. Selling credits is the source of their profits. EVs are not disruptive in any well-defined sense of that word. They are more expensive and do not create demand against non-consumption of automobiles. The disruptive electric mobility option is the explosion of personal form factors such as ebike, scooters, and the like.
    - bryanlarsen 6y ago
      > All that said, Tesla also doesn’t build and sell cars profitably. Selling credits is the source of their profits. GAAP gross margin is 21%. They're making excellent profits on their cars.