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Tesla bull shares insights on why regulatory credits don’t matter for TSLA’s profitability

(Credit: Gabeincal)

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New Street Research managing partner Pierre Ferragu recently explained why Tesla’s (NASDAQ:TSLA) EV credits is only icing on the cake for the electric car maker. Tesla reported a revenue of $8.771 billion with a net income of $331 million in Q3, with regulatory credits accounting for $397 million of the EV maker’s earnings.

When asked about how regulatory credits have boosted Tesla’s numbers this year, Ferragu told Fox Business that the EV credits aren’t a big part of the electric car maker’s future valuation at all. This is partly due to regulatory credits being short-term, and Tesla’s vehicle margins.

“Why are you looking at profits of this year? You know Tesla is trading on maybe, like over 100x that, more than 100x that, so that’s not reason to drive our valuation of TSLA. What really matters is how much profit Tesla makes in 2025, in 2030. We’ve had a string of conversations about that,” said Ferragu.

He explained his stance further, saying: “So, to give you a sense of that, in 2025, I have Tesla making $16 of earnings per share just out of the auto business. And in that, there’s absolutely no credit revenues. We don’t have credit revenues in our model. Credit revenues are very short-term, have a very short duration, so you arrive at about $1.5 billion in pure profit this year. So that’s like free money Tesla gets and Tesla will be able to reinvest in their business.” 

A big portion of Tesla’s EV credits come from its Fiat pooling deal which was estimated to be worth $1.8 billion through 2023 by Baird analyst Ben Kallo. Recently, Honda joined Tesla’s pooling deal with Fiat Chrysler Automobiles (FCA), probably increasing TSLA’s profitability with EV credits. 

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Many TSLA bulls, specifically retail investors who have accumulated a good number of shares over the years, agree with Ferragu’s assessment of Tesla’s use of EV credits. As TSLA Bull @stevenmarkryan explained, EV credits are more of a byproduct of Tesla doing what it is already doing. During his interview with Fox Business, Ferragu strived to explain Tesla’s profitability without EV credits on the table. 

“But that money is going away relatively rapidly in the next three or four years. And that’s not part of the overall picture. What really matters today is to look at the gross margins of Tesla excluding the regulatory credits. And excluding credits, Tesla’s gross margins is about 20%, it’s a leading gross margin for a car manufacturer. And it continues to expand as the Model Y is a higher margin, the Model Y is included in the mix. That’s what really matters, and credits have nothing to blame there,” Ferragu said.  

Morgan Stanley recently raised its price target for TSLA to $540. “Mine is a tad above that. It’s $578. They’re getting closer to the truth,” Ferragu commented during his interview.

In October, Ferragu released a New Street Research analysis on Tesla and set his $578 TSLA price target for the company. The analysis hinted at a decade of hyper-growth for Tesla. In it, Ferragu and his fellow analysts estimated that Tesla had an addressable market of 20 million units. The S3XY lineup directly addressed 8 million units with an additional “trading up” opportunity of 12 million units. The Cybertruck added an extra 3 million units to the equation. 

Recently, Tesla joined the Zero Emission Transportation Association (ZETA) along with 28 other companies, like Rivian, Duke Energy, Seimens, and Lucid Motors. ZETA wants to reach 100% EV adoption by 2030 in the United States. In Europe, the EU Commission plans to enforce stricter emission standards that could kill the combustion engine by 2025. Other countries seem be preparing for an EV-lead auto industry as well, which could bring about Tesla’s hyper-growth in the next decade.

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Maria--aka "M"-- is an experienced writer and book editor. She's written about several topics including health, tech, and politics. As a book editor, she's worked with authors who write Sci-Fi, Romance, and Dark Fantasy. M loves hearing from TESLARATI readers. If you have any tips or article ideas, contact her at maria@teslarati.com or via X, @Writer_01001101.

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Elon Musk

Elon Musk shares unbelievable Starship Flight 10 landing feat

Flight 10’s Starship upper stage demonstrated impressive accuracy when it came to its target landing zone.

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Credit: SpaceX/X

SpaceX CEO Elon Musk recently shared an insane feat accomplished by Starship’s upper stage during its tenth test flight.

Despite the challenges it faced during its return trip to Earth, Flight 10’s Starship upper stage demonstrated impressive accuracy when it came to its target landing zone.

Against the odds

Musk’s update was shared on social media platform X. In a conversation about Starship upper stage’s return to Earth, Musk revealed that the upper stage splashed down just 3 meters (under 10 feet) from its intended target. Considering the size of the Starship upper stage and the ocean itself, achieving this accuracy was nothing short of insane.

Starship Flight 10 was a success as both the Super Heavy booster and Ship upper stage completed all their mission objectives. However, videos and images released by SpaceX showed the upper stage’s heat shield scorched golden-brown and parts of its aft skirt visibly missing. The flaps and other surfaces also bore signs of heavy stress from reentry.

SpaceX highlighted this in a post on X: “Starship made it through reentry with intentionally missing tiles, completed maneuvers to intentionally stress its flaps, had visible damage to its aft skirt and flaps, and still executed a flip and landing burn that placed it approximately 3 meters from its targeted splashdown point,” SpaceX noted.

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A key milestone

The result stands in stark contrast to Starship’s earlier test flights this year, when all three prior upper-stage flights in 2025 ended in premature breakup before splashdown. Flight 10 not only marked the first successful splashdown of the year for the Starship upper stage, but it also delivered near-perfect precision despite its battered state, according to a Space.com report.

For SpaceX, this success is a critical proof point in developing a fully reusable launch system. A spacecraft capable of surviving severe reentry conditions and still landing within meters of its target underscores the robustness needed for future missions, including orbital payload deliveries and, eventually, landings on the Moon and Mars.

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New Tesla Model Y Performance launches from Giga Berlin

The vehicle is produced at Gigafactory Berlin and is available to order now in Europe and the Middle East.

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Credit: Tesla

It took some time, but the new Tesla Model Y Performance is finally here. The new Model Y Performance features a blend of aerodynamic improvements, upgraded interior comforts, and high range enabled by new battery cells. 

The updated Model Y Performance is produced at Gigafactory Berlin and is available to order now in Europe and the Middle East. First deliveries are expected in 1-2 months.

Key Model Y Improvements

The new Model Y Performance sharpens the vehicle’s design and driving dynamics while adding subtle interior refinements. The revised variant now delivers 0–60 mph in 3.3 seconds, slightly quicker than its predecessor’s 3.5 seconds, while offering an EPA-estimated 308 miles of range, just about 1% less than the non-performance Dual Motor All Wheel Drive variant. Top speed is listed at 155 mph.

The exterior of the new Model Y Performance features new front and rear fascias, along with a carbon fiber spoiler designed for greater downforce and reduced drag. Staggered wheels and tires provide improved steering precision and grip, while high-performance brakes offer enhanced pedal feel and better heat management. The ride is supported by adaptive suspension that adjusts damping based on road conditions, paired with unique drive modes tailored for high-speed performance. Ground clearance is listed at 6.1 inches, and weight is listed at 2,033 kilograms (4,482 pounds).

Tech and Interior

Inside, Tesla has added carbon fiber decor, expanded ambient lighting in the footwells and door pockets, and upgraded seating. The first-row sport seats now include power recline, power tilt, heating, ventilation, and powered thigh extensions for added support during cornering. Rear passengers receive perforated heated seats with power recline. A new 16-inch QHD center touchscreen anchors the cabin’s technology suite.

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Additional upgrades include eight exterior cameras, with the refreshed design introducing a new forward-facing unit. The high-density battery pack also boosts charge capacity but also helps maintain range despite the Performance model’s added power output.

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Elon Musk

Elon Musk reveals when SpaceX will perform first-ever Starship catch

“Starship catch is probably flight 13 to 15, depending on how well V3 flights go,” Musk said.

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Credit: SpaceX

Elon Musk revealed when SpaceX would perform the first-ever catch attempt of Starship, its massive rocket that will one day take life to other planets.

On Tuesday, Starship aced its tenth test flight as SpaceX was able to complete each of its mission objectives, including a splashdown of the Super Heavy Booster in the Gulf, the deployment of eight Starlink simulators, and another splashdown of the ship in the Indian Ocean.

It was the first launch that featured a payload deployment:

SpaceX Starship Flight 10 was so successful, it’s breaking the anti-Musk narrative

SpaceX was transparent that it would not attempt to catch the Super Heavy Booster, something it has done on three previous occasions: Flight 5 on October 13, 2024, Flight 7 on January 16, and Flight 8 on March 6.

This time, it was not attempting to do so. However, there are bigger plans for the future, and Musk detailed them in a recent post on X, where he discussed SpaceX’s plans to catch Starship, which would be a monumental accomplishment.

Musk said the most likely opportunities for SpaceX to catch Starship itself would be Flight 13, Flight 14, and Flight 15, but it depends on “how well the V3 flights go.”

The Starship launched with Flight 10 was a V2, which is the same size as the subsequent V3 rocket but has a smaller payload-to-orbit rating and is less powerful in terms of initial thrust and booster thrust. Musk said there is only one more V2 rocket left to launch.

V3 will be the version flown through 2026, as V4, which will be the most capable Starship build SpaceX manufactures, is likely to be the first company ship to carry humans to space.

Musk said that SpaceX planned to “hopefully” attempt a catch of Starship in 2025. However, it appears that this will likely be pushed back to 2026 due to timing.

SpaceX will take Starship catch one step further very soon, Elon Musk confirms

SpaceX would need to launch the 11th and 12th test flights by the end of the year in order to get to Musk’s expected first catch attempt of Flight 13. It’s not unheard of, but the company will need to accelerate its launch rate as it has only had three test flights this year.

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