Tesla's regulatory credits to dry up

New US policies will end revenue stream

- ABHIRUP ROY AKASH SRIRAM

A key driver of Tesla's profit is disappearing fast as the US government changes policies on an environmental asset known as regulatory credits.

Investors were expected to have a number of questions for Chief Executive Elon Musk when Tesla reported second-quarter results yesterday (early today in Thailand).

Among them are how fast the EV maker can turn a trial robotaxi programme into a moneymaking business, how to avoid a decline in sales for the second year in a row, and Mr Musk's possible political plans.

Less sexy, perhaps, is the issue of regulatory credits, which are bought by traditional automakers from electric-vehicle companies to make up for the tailpipe pollution from their petrol-burning vehicles. But this income segment is crucial for Tesla's finances, having been the main driver of its profit in the first three months of the year.

Without the income from those credits, sold to internal combustion engine (ICE) automakers, Tesla would have reported a first-quarter loss, and Mr Musk may be pressed to say how long he thinks Tesla will be able to sell credits.