I don't understand why because Tesla is the only profitable EV manufacturer. It would have let them undercut their competitors
Correction, Tesla
was the only profitable EV manufacturer. Assuming that there are no changes or amendments to the OBBBA, assuming Tesla numbers stay relatively similar to what we've seen this year, and assuming no other types of intervention, Tesla will become deeply unprofitable once the OBBBA goes into effect.
Let me open the door and show you the wonderful world of "regulatory credits." It's some weird shit so buckle up.
The NHTSA and EPA administer the Federal Corporate Average Fuel Economy (CAFE) and Greenhouse Gas (GHG) standards. These programs have been around for a while, but under Obama, around the time Cash For Clunkers was rolled out, Congress expanded it to penalize manufacturers of gas guzzlers and coal rollers. Stay with me, alright? I don't want to get into the weeds about Obama or green energy or other bullshit, I'm just talking about how the system works, okay? How it works is that for every vehicle produced which does not meet CAFE and GHG standards, the manufacturer is fined according to how far below the standards the vehicle falls. Now, Congress isn't totally retarded; they realized that, naturally, some vehicles are just going to guzzle gas, it's unavoidable. Pickup trucks, delivery vans, SUVs, they are all vital and they are never going to meet standards, so what is the answer? Congress decided to assess these fines in totality and based on a non-zero-sum standard using "credits." If a manufacturer produces a car which exceeds these standards, they will receive a regulatory credit which will cover a vehicle which did not. On its face this makes sense, let's say Ford makes 10,000 F-150s which don't meet the standard, but they make 5,000 F-150 Lightnings which exceed them, they only have to pay the cost of 5,000 trucks, as they offset. So far, even if you don't care about emissions or whatever, it is internally consistent, right?
Here is the absolute bonkers shit which is just peak insanity. The credits are
transferrable. Yeah, you can fucking
accumulate and sell these. The government doesn't pay you for leftover ones, they aren't redeemable or anything. At the end of the year you turn over your numbers, and if you have a net negative of credits, you owe fines, and if you have zero or a surplus, you don't, you just get a good noodle star. So, how Tesla makes a
ton of money is by selling these credits to manufacturers who would otherwise be in the hole. Since Tesla's entire lineup is electric, they don't actually need any credits, so they can sell every one of these credits to Ford, Stellantis, whoever. To give you an idea of how much this is worth, in FY 2024 Tesla reported $2.74
billion in regulatory credit sales.
Things get really dire for Tesla when you break it down by quarter. While they likely would've been profitable (barely) in FY 2024 without the credit sales, with the collapse of Tesla sales this year, it's simply impossible. Looking at Q1 alone, we see a net reported income (profit) of $409m, which includes $595m in regulatory credit sales. Without regulatory credits sales, Tesla would've been in the red an astounding $186m.
OBBBA simply eliminates these regulatory credits and fines.