Tesla Made More Money Selling Credits and Bitcoin Than Cars

Tesla recorded another profitable quarter in the first three months of 2021 even with two of its models on the sidelines, posting a net income of $438 million while recording $10.4 billion in revenue. This profit didn’t materialize thanks to car sales, however, which is ostensibly the main business of an automaker.

Rather, Tesla has two main items to thank for posting a profitable quarter: Sales of emissions credits to other automakers, and sales of its bitcoin holdings.

Emissions credits accounted for $518 million in revenue in a quarter that saw a pretax income of $533 million and a net income of $438 million on a GAAP basis. Needless to say, the credits account for almost the entirety of Tesla’s profit for this quarter—in fact, sales of emissions credits have been a major source of revenue for Tesla for quite some time, contributing to hundreds of millions in income for the past few quarters. The automaker accumulates regulatory credits because it produces only EVs and sells them for a profit to other automakers that are short of these credits.

The second item that helped Tesla were sales of bitcoin, the “positive impact” of which amounted to $101 million. The automaker purchased some $1.5 billion worth of the cryptocurrency at the end of 2020, and has begun accepting the cryptocurrency for sales of its cars just a few weeks ago. It has now sold about a tenth of its bitcoin holdings, which helped its position in the first quarter of 2021, proving to be a bet that has paid off amid a sharp rise in the cryptocurrency’s value. It also came at a time when CEO Elon Musk has repeatedly mentioned bitcoin and other cryptocurrencies on social media.

Both of these sources of income and investment should prompt some deeper examination of what the automaker is doing to generate it.

For one thing, if the government emissions credits did not exist and were not given to automakers under a cap-and-trade system, Tesla would simply not have any to sell—the government is essentially giving credits to Tesla to sell to other automakers for cash. For another, the automaker that trades on offering vehicles that produce zero emissions in the use phase (if not the build phase) has invested $1.5 billion in an electronic currency that requires tremendous amounts of energy to “mine,” drawing power from what are often not the cleanest sources of energy all over the world, in amounts greater than those produced by some individual countries by some estimates, for the sake of producing electronic currency.

One other unusual aspect of this quarter’s results is that Tesla also produced close to zero Model S and Model X vehicles in the first quarter, with both reportedly affected by a parts shortage ahead of crucial updates, including a redesigned interior for the Model S and the option of a yoke-style steering wheel. Tesla still posted record deliveries in the first quarter of 2021, delivering 184,800 vehicles and producing 180,338, with Tesla’s plant in Shanghai now playing a big role in the company’s global output.

“Model Y ramp in Shanghai is progressing well. We expect that our Shanghai factory will continue to increase quarterly production output through the year,” the company noted in its Q1 financial report. “We recently improved our domestic supply sourcing ratio to over 90%. Vehicle exports to Europe and APAC continue to progress as planned.”

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This means that the Model 3 and the Model Y accounted for 182,780 of its deliveries in the first quarter, also reflecting the consumer market’s turn to more affordable EVs amid booming battery-electric vehicle sales in Europe and China. Both updated Model S and Model X vehicles are expected to reenter production shortly, with the Model S due to begin shipping in June.

“First deliveries of the new Model S should start very shortly, Model Y production rate in Shanghai continues to improve quickly and two new factories Berlin and Texas are making progress,” the automaker said. “There is a lot to be excited about in 2021.”

Perhaps the greatest challenge to Tesla’s car-building operations will arrive later this year, as a number of automakers roll out their first mass-market battery-electric models in several crucial regions. Whether this will dent Tesla’s profits in the short term remains to be seen.

Will demand for Tesla cars be dented by the presence of other players in the EV field? Let us know in the comments below.

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