Welcome back to the latest episode of The Future of Automotive on CBT News, where we put recent automotive and mobility news into the context of the broader themes impacting the industry.
I’m Steve Greenfield from Automotive Ventures, and I’m glad that you could join us.
This week I’d like to take the opportunity to discuss how Tesla continues to cash in (to the tune of billions of dollars) on other carmakers.
These other OEMs need help to meet their emissions standards, which has effectively become a very lucrative side business for Tesla.
Tesla generated a jaw-dropping $1.79 billion in regulatory credit revenue last year. That brought the cumulative total Tesla has raked in since 2009 to almost $9 billion.
At the beginning, the electric automaker, founded 20 years ago, was to many investors and fans the answer to climate change, especially as Elon Musk showed the world that a zero-emissions vehicle could be both cool and profitable. At one point, he said helping to reduce the risk of catastrophic climate change is why Tesla “exists.”
For a decade, Tesla was de facto the only EV manufacturer. So, they were in the advantageous position of then being able to sell carbon offset credits to other automakers, who had zero EVs in their vehicle portfolios.
Selling regulatory credits is a tidy business for Tesla. It earns them by making and selling electric vehicles, then sells the credits to manufacturers whose new-vehicle fleets exceed emissions limits set by various authorities, including in China, the European Union and the state of California.
Tesla bears little to no incremental cost earning the credits, so the sales are virtually pure profit to Tesla’s bottom line.
Tesla has brought in more than $1.7 billion each of the last two years.
It really frustrates the legacy automakers that Tesla got so much of an economic boost out of being the only purely electric car manufacturer out there. They effectively have funded the growth of their biggest EV competitor.
Recently, automakers including Volkswagen and General Motors have fallen short of their EV goals and delayed or canceled electric-vehicle manufacturing investments. Volkswagen and GM both have needed help meeting emissions standards in recent years, as has Honda and Jaguar Land Rover.
Meanwhile, emissions rules aren’t getting any easier. Europe has set stricter car-emissions targets starting next year and from 2030 onward, while the UK adopted a zero-emission vehicle mandate beginning this year. A number of automakers–including Volvo, Buick, and Bentley, for example–have pledged to stop selling ICE vehicles by 2030.
Back here in the U.S., New Jersey became the latest state to New Jersey will require automakers to exclusively manufacture zero-emission vehicles (ZEVs) by 2035, joining a growing number of states with plans to ban internal combustion engine (ICE) vehicles.
If these aggressive EV mandates hold for a number of the legacy automakers, Tesla’s regulatory credit business may still have a lot more room to run.
Companies to Watch
Every week we highlight interesting companies in the automotive technology space to keep an eye on. If you read my weekly Intel Report, we showcase a company to watch, and take the opportunity here to share that company with you.
PaperShell
PaperShell compresses paper back into a more resistant version of wood.
PaperShell is dedicated to building paper back into an artificial and high-tech wood creating strong load bearing components.
The company’s sustainable alternatives to traditional plastics, composites, and sheet metal are readily available for B2B applications.
Utilizing a patented process, PaperShell creates fiber-hardened paper-based materials that can be produced in various shapes, patterns, and designs, meeting both aesthetic and technical preferences.
Their components can replace existing load-bearing materials in your product design or become integral parts of entirely new product concepts.
The company’s cellulose composites offer one of the most sustainable materials on the market, with large-scale availability made possible by their highly automated and scalable production process.
PaperShell is working to harness the full potential of sustainable materials, setting new standards for eco-friendly and innovative product design, aiming for carbon net zero and a transition towards a circular bio-economy.
If you’d like to learn more about PaperShell, you can check them out at www.papershell.se.
So that’s it for this week’s Future of Automotive segment.
If you’re an AutoTech entrepreneur working on a solution that helps car dealerships, we want to hear from you. We are actively investing out of our new DealerFund.
If you’re interested in joining our Investment Club to make direct investments into AutoTech and Mobility startups, please join. There is no obligation to start seeing our deal flow, and we continue to have attractive investment deals available to our members.
Don’t forget to check out my book, The Future of Automotive Retail, which is available on Amazon.com. And keep an eye out for my new book, “The Future of Mobility”, which is almost done, and will be out early this year.
Thanks (as always) for your ongoing support and for tuning into CBT News for this week’s Future of Automotive segment. We’ll see you next week!
