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.
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.
Tesla just upgraded its headlights through a software update, making them even better without any physical or hardware upgrade.
Tesla’s latest software update is quietly improving nighttime driving for a small number of owners. Version 2026.38 includes a new capability called Dynamic Headlight Leveling.
The feature automatically adjusts the aim of the low beams in response to driving conditions and nearby traffic, with the goal of giving the driver more usable light on the road while reducing glare for oncoming vehicles and traffic ahead.
2026.38 just dropped.
Model 3 gets Dynamic Headlight Leveling — low beams auto-aim around traffic for max visibility, less glare. Model 3 / Y (AMD HW3) also pick up sharper Tesla visuals + an enhanced park scene on the center display.
Legacy Intel cars get Supercharger Site… pic.twitter.com/45ac4AH6Vs
— Frunk To Trunk (@FrunkToTrunk) September 30, 2026
Unlike Tesla’s matrix high-beam system, which selectively dims individual LED segments to create shadows around other cars, Dynamic Headlight Leveling physically tilts the low-beam projectors. Internal motors respond to changes in vehicle pitch.
When the car accelerates hard, climbs a steep grade, or carries extra weight in the rear, the headlights can otherwise point higher than intended. The software counters that movement in real time so the beam stays aimed at the road surface rather than into the eyes of other drivers.
Early indications reveal the update is reaching a limited set of vehicles, including certain Model 3 and Cybertruck examples in the United States and the United Arab Emirates. The rollout does not appear tied to a single hardware revision, and Tesla has not published a broader schedule. It is simply a common waiting game until your car receives it.
The change arrives against a backdrop of wider complaints about headlight glare. Some earlier Model 3 and Model Y vehicles were the subject of an NHTSA recall related to excessive low-beam glare; the software adjustment offers a potential mitigation for cars equipped with the necessary leveling hardware. It does not replace adaptive high beams where those are already available, nor does it alter the basic low-beam pattern itself.
Instead, it keeps an existing beam pointed where it is most useful.
For drivers who have received the update, the system requires no new settings or user input. The headlights simply respond as road conditions and traffic change. As the feature reaches more vehicles, it adds another example of Tesla using over-the-air software to refine existing hardware rather than waiting for a new model year. Nighttime visibility and reduced glare for others are the practical results owners are expected to notice first.
Lifestyle
Tesla teases “Halloween Mode” update with Optimus rising from a graveyard
Tesla’s Halloween teaser hides a covered vehicle and an Optimus hand rising from the ground.
Tesla has started teasing a Halloween software update for its vehicles, with a short clip on X that reads, “Halloween is coming.” The clip opens on a glowing pumpkin before pulling back to the car’s center touchscreen, where the usual parked visualization has been replaced by a graveyard scene, and the vehicle draped with a white sheet so it reads as a cartoon ghost.
Halloween is coming pic.twitter.com/lM3ASUeOqX
— Tesla (@Tesla) October 1, 2026
The second detail is a robotic hand clawing its way out of the dirt like a zombie, which looks to be the hand of Tesla’s latest Optimus V3 humanoid robot. While Tesla still has not formally shown Optimus Gen 3 walking around in service, renders pulled from Tesla’s Android app last month gave the clearest look yet, including far more refined hands that Tesla has said carry 22 degrees of freedom. The hand has been the hardest part of the program. Musk has called it the majority of the robot’s engineering difficulty, and Tesla’s patents describe a design driven by tendons with the actuators moved into the forearm.
Tesla Optimus V3 hand and arm details revealed in new patents
Optimus also has a Halloween track record. Last October the robot handed out candy in Times Square, and a costumed “zombie” Optimus shuffled around the Tesla Diner in Los Angeles on Halloween night.
On the software side, Tesla’s 2025 Holiday Update expanded Santa Mode with a Santa sleigh, snowmen, snow effects, and a festive lock chime, so it wouldn’t be too far fetched if we saw something similar but themed for a Halloween Mode.
Tesla Full Self-Driving is set to receive improvements to address its two biggest issues, according to a company engineer.
Director of Engineering at Tesla AI, Phil Duan, revealed in a post on X that improvements to both pothole avoidance and navigation “are coming,’ something we have heard many times in the past. However, there are a few things that seem to hint that things might be different this time around.
Improvements on both are coming.
— Phil Duan (@pduan) October 1, 2026
Pothole avoidance, navigation, speed control, and left lane camping are some of the most prevalent and frequently mentioned shortcomings of the Full Self-Driving suite. These are a few of the biggest issues that have kept Tesla Full Self-Driving as a Supervised suite, meaning drivers must remain attentive during operation.
Pothole Avoidance
Pothole avoidance was first mentioned as an “Upcoming Improvement” with the Tesla Full Self-Driving v14.3 update back in early April of this year. It was listed alongside “Expand reasoning to all behaviors beyond destination handling.”
It’s been six months since we first saw pothole avoidance explicitly mentioned, and it has not moved beyond that and joined the main release notes yet.
Tesla has not shed any light on why pothole avoidance has been such an issue for it to solve, but it also has issues identifying large bumps much of the time, so its modeling of sudden changes in road conditions is likely pretty weak at this particular point. I’ve had more issues with large bumps than potholes, personally, but both are issues that need to be resolved.
This is that big bounce that I mentioned in the quoted post.
It’s just a tad too drastic to take at the speed FSD wants to go over it. You can see me quickly swipe down into Sloth, but I intervened. https://t.co/K20PK9ysBg pic.twitter.com/81Oc82ZJcZ
— TESLARATI (@Teslarati) August 2, 2026
It makes sense that things might be pretty close to being released to the public, as we are going on such an extensive period of time between it being mentioned and it actually being deployed.
Navigation
Navigation is likely the most painful part of using Full Self-Driving, as it routinely takes strange routes, has trouble with local rules (like Except Right Turn Stop Signs in Pennsylvania), and sometimes does not realize that maneuvers it is suggesting are against the law. Turning out of my neighborhood, you cannot turn left, yet my Model Y still suggests it roughly 70 percent of the time when I’m leaving.
However, Tesla might be close to a breakthrough on this. With the Summer Update, Tesla added “Preferred Routes” alongside “Automatic Navigation.”
Preferred Routes prioritized roads that the driver had actually taken before, instead of always defaulting to what the vehicle believes is the most efficient path. This has already solved many of my issues. Formerly, I would turn off the Online Routing setting, and that would eliminate most of my complaints with routing, but then you lose out later on the Live Traffic Visualization.
Tesla’s Navigation has improved tremendously thanks to the Preferred Routes release with the Summer Update, but it still could use some polishing, as it still suggests strange routes from time to time, and it also has a lot of issues getting out of a parking lot. I find that those truly confuse FSD sometimes.
Tesla just made its headlights even better through a software update
Tesla teases “Halloween Mode” update with Optimus rising from a graveyard
