Investor's Corner
GM and Fiat Chrysler admit that they’re buying regulatory credits from Tesla
Being an automaker that exclusively produces all-electric vehicles, Tesla has been gaining significant revenue over the years by selling federal greenhouse gas credits to fellow carmakers, which are needed by the car companies to offset the sales of internal combustion vehicles in the US market. Filings earlier this year have revealed that two of Tesla’s most notable credit buyers are none other than General Motors Co. (GM) and Fiat Chrysler Automobiles NV (FCA).
In filings to the state of Delaware, GM and FCA disclosed that they have an agreement to purchase greenhouse gas credits from Tesla. These filings, while light on details, are nevertheless notable, as they confirm that even established, veteran carmakers such as GM and Fiat Chrysler are looking to Tesla as a means to comply with the United States’ environmental regulations.
FCA’s purchase of credits from Tesla is quite unsurprising considering that the company has already been revealed to have entered an estimated $500 million open pool deal with the Silicon Valley-based electric car maker for the European region, which would allow Fiat Chrysler to count Tesla’s vehicles as part of its fleet to avoid incurring emissions penalties. What was surprising about the Delaware filings was that GM was purchasing credits from Tesla as well.
GM, after all, has been producing the Chevy Volt plug-in hybrid and Chevy Bolt EV for the US market for years. Despite the recent retirement of the Volt, it was largely assumed that GM’s electric and electrified vehicle lineup would leave the automaker in the clear when it comes to regulatory compliance. Nevertheless, Mike Taylor, founder and president of Houston-based environmental credit consultant and broker Emission Advisors, noted that GM’s decision to purchase credits from Tesla could be part of the company’s preparations for the future, especially if political tides shift in the 2020 election. “This might not be a bad hedge. If a Democrat gets elected in 2020, GM may need the credits and prices may go up,” Taylor said.
This assumption appears to have been highlighted by GM spokesman Pat Morrissey. In a statement to Bloomberg, the spokesman noted that the credits GM bought from Tesla are insurance against “future regulatory uncertainties.” FCA spokesman Eric Mayne, for his part, indicated that US standards are getting stricter at a pace that “far exceeds” the current level of demand for electric cars that are required for compliance. “Until demand catches up with regulatory requirements, and there is regulatory relief, we will use credits as appropriate,” Mayne stated.
Tesla has not issued a comment about GM and FCA’s credit purchases so far, though it should be noted that Chief Financial Officer Zachary Kirkhorn pointed out during a call with prospective investors that sales of credits will be a more significant part of the electric car maker’s business in the following years. The previous quarters have proven lucrative for Tesla in this light, as the company reported $216 million in revenue from the sale of regulatory credits in the first quarter alone.
Automakers in the United States appear to be dependent on credits to meet the country’s regulations so far. For the 2017 model year, for example, all American automakers were found to have complied with US rules, though the EPA has noted that most large car companies used credits to meet the requirements.
Elon Musk
Norway’s $2 trillion sovereign wealth fund votes against Elon Musk’s 2025 performance award
The fund is managed by Norges Bank Investment Management (NBIM), and it holds a 1.14% stake in Tesla valued at about $11.6 billion.
Norway’s $2 trillion sovereign wealth fund has voted against Elon Musk’s 2025 performance award, which will be ultimately decided at Tesla’s upcoming annual shareholder meeting.
The fund is managed by Norges Bank Investment Management (NBIM), and it holds a 1.14% stake in Tesla valued at about $11.6 billion.
NBIM’s opposition
NBIM confirmed it had already cast its vote against Musk’s pay package, citing concerns over its total size, dilution, and lack of mitigation of key person risk, as noted in a CNBC report. The fund acknowledged Musk’s leadership of the EV maker, and it stated that it will continue to seek dialogue with Tesla about its concerns.
“While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the total size of the award, dilution, and lack of mitigation of key person risk- consistent with our views on executive compensation. We will continue to seek constructive dialogue with Tesla on this and other topics,” NBIM noted.
The upcoming Tesla annual shareholder meeting will decide whether Musk should receive his proposed 2025 performance award, which would grant him large stock options over the next decade if Tesla hits several ambitious milestones, such as a market cap of $8.5 trillion. The 2025 performance award will also increase Musk’s stake in Tesla to 25%.
Elon Musk and NBIM
Elon Musk’s proposed 2025 CEO performance award has proven polarizing, with large investors split on whether the executive should be given a pay package that, if fully completed, would make him a trillionaire.
Institutional Shareholder Services and Glass Lewis have recommended that shareholders vote against the deal, and initiatives such as the “Take Back Tesla” campaign have rallied investors to oppose the proposed performance award. On the other hand, other large investors such as ARK Invest and the State Board of Administration of Florida (SBA) have urged shareholders to approve the compensation plan.
Interestingly enough, this is not the first time that Musk and NBIM have found themselves on opposing sides. Last year, NBIM voted against reinstating Musk’s 2018 performance award, which had already been fully accomplished but was rescinded by a Delaware judge.
Later reports shared text messages between Musk and NBIM Chief Executive Nicolai Tangen, who was inviting the CEO to a dinner in Oslo. Musk declined the invitation, writing, “When I ask you for a favor, which I very rarely do, and you decline, then you should not ask me for one until you’ve done something to make amends. Friends are as friends do.”
Investor's Corner
Michael Dell points out practical advantage of Elon Musk’s proposed pay package
As pointed out by the Dell Technologies CEO, Musk will only be rewarded if he delivers extraordinary value to shareholders
Michael Dell has weighed in on Elon Musk’s controversial 2025 CEO Performance Award, offering a grounded perspective amidst the noise surrounding the pay package today.
As pointed out by the Dell Technologies CEO, Musk will only be rewarded if he delivers extraordinary value to shareholders. Musk would quite literally receive no compensation if he fails to achieve his targets.
Dell emphasizes results over rhetoric
Dell shared his thoughts about Musk’s 2025 CEO Performance Award in a post on X.“Vote FOR Elon Musk. The award is only achieved IF he hits exceptionally ambitious market-cap and operational milestones—if he falls short, he gets nothing,” Dell wrote in his post.
“If he succeeds, shareholders will win big through unprecedented value creation, and he will earn added voting rights to continue driving Tesla’s long-term vision.”
Musk replied with a short “Thanks Michael,” acknowledging Dell’s support. Dell’s framing cuts through the debate surrounding Musk’s compensation, as he simply focused on the incentive structure’s risk-reward balance.
Musk’s ambitious pay package
Elon Musk’s 2025 CEO Performance Award requires Tesla’s market capitalization to rise from roughly $1.1 trillion today to $8.5 trillion within a decade. This would make Tesla more valuable than any company in history.
Apart from this, Tesla’s operating profit must also grow from $17 billion to $400 billion annually. Musk must also lead the company to several product-related milestones, such as 20 million cumulative vehicle deliveries, 10 million Full Self-Driving subscriptions, 1 million Tesla Bots, and 1 million operating Robotaxis.
So far, proxy advisors Glass Lewis and ISS have urged shareholders to vote against the plan. Some prominent investors, including ARK Invest CEO Cathie Wood, however, have voiced strong support for the plan. Wood called Musk “the most productive human being on earth,” arguing that his vision and ability to attract talent are central to Tesla’s success.
Investor's Corner
Elon Musk’s 2025 pay package gets support from Tesla’s biggest bull
ARK Invest founder Cathie Wood has previously stated that she is quite confident that the vote on Elon Musk’s 2025 Performance Award would pass.
Cathie Wood, CEO of ARK Invest and one of Tesla’s most ardent bulls, reiterated her support for Elon Musk’s 2025 CEO Performance Award.
Wood highlighted that Musk’s leadership attracts incredible talent, and it has allowed the companies he leads such as Tesla to become disruptors in their respective fields.
ARK Invest supports Musk’s leadership
Elon Musk’s 2025 CEO Performance Award has received a mixed reception. Proxy firms such as Glass Lewis and Institutional Shareholder Services (ISS) have stated that they would be voting against Musk’s pay package. Other entities, such as the State Board of Administration of Florida (SBA), have stated that they would be voting in favor of Tesla’s proposals.
ARK Invest founder Cathie Wood, for her part, has previously stated that she is quite confident that the vote on Elon Musk’s 2025 Performance Award would pass. She also stated that a favorable result to the vote for Musk’s 2025 pay plan would be beneficial for Tesla.
“Elon Musk is the most productive human being on earth. And a human being who attracts incredible talent, people who want to solve the world’s hardest problems. This is a win-win for all of us if Elon succeeds this time,” Wood stated. Musk appreciated Wood’s comments, stating, “Thanks Cathie!” In a post on X.
ARK Invest has been one of Tesla’s most loyal bulls
Tesla is ARK Invest’s single largest holding, with the firm holding an estimated $1 billion worth of TSLA, as noted in an Insider report. Wood previously said she expects the approval of Musk’s pay package to trigger “super-exponential growth” for the automaker, as new products like the Cybercab and Optimus expand Tesla’s offerings.
“Because think about it. It is a convergence among three of our major platforms. So, robots, energy storage, AI, and it’s not stopping with Robotaxis. There’s a story beyond that with humanoid robots, and our $2,600 number has nothing for humanoid robots. We just thought it’d be an investment, period,” Wood stated during an appearance at Steven Bartlett’s podcast The Diary Of A CEO.
Norway’s $2 trillion sovereign wealth fund votes against Elon Musk’s 2025 performance award
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