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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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5 years ago

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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.  

Tesla, VW lead the charge for EV dominance as EU sets plan to end combustion engines in 2025

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

Tesla CEO Elon Musk hits back at drug use claims, calls publications ‘hypocrites’

Elon Musk showed a clean drug test, dispelling any rumors of drug use that came from unfounded reports from two large media outlets.

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6 minutes ago

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June 17, 2025

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Credit: Elon Musk

Tesla CEO Elon Musk has responded to a report from the Wall Street Journal and the New York Times, as both publications claimed he was abusing drugs while being involved with President Trump on both the campaign trail and while he was active within the administration after the election.

A bombshell report from the New York Times, published in late May, stated that Musk was regularly using things like ketamine, ecstasy, and psychedelic mushrooms, and also stimulants like Adderall, during his time within the Trump administration.

The reports cited inside sources who claimed the Tesla and SpaceX frontman was using substances during his time with the government.

However, Musk published the results of a recent drug test performed at Fastest Labs of South Austin. They showed ‘Negative’ results across the board:

Musk was not done there.

He went on to say the New York Times “lies as easy as breathing. It’s normal for them.” He also said both the Times and Wall Street Journal reporters should also publish their own drug test results, stating, “They won’t, because those hypocrites are guilty as sin.”

Musk said years ago that he received ketamine prescriptions from doctors to treat depression. He said he had it “years ago and said so on X, so this is not even news.” He also said that ketamine “helps for getting out of dark mental holes, but haven’t taken it since then.”

Tesla fans and Musk enthusiasts have joked for days now that, if Musk were to be on drugs, other CEOs should also do them, considering his persistence on work-related projects, long hours, and commitment to his job.

Musk has now proven that there has been no drug use with this test, and it seems as if the reports could have some sort of legal impact, although he has not said he will take any action.

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Tesla’s Grok integration will be more realistic with this cool feature

Tesla is preparing Grok for its first integration into vehicles, but it’s making it more robust than ever, firmware shows.

Published

1 hour ago

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June 17, 2025

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Credit: Tesla

Tesla has not yet integrated the AI assistant Grok into its vehicles, but when it does, it will be even more realistic with a new feature that firmware coding shows.

CEO Elon Musk teased a few months back that Grok would be making its way into vehicles in the near future. The implementation has not yet occurred, but we are confident it will be rolling out soon, especially as Tesla has its sights set on a near-term rollout of the Robotaxi platform.

Tesla’s vehicles expected to get Grok voice assistant—but when?

Grok will enable AI assistance for drivers who are both manually operating Tesla vehicles or using the company’s Full Self-Driving suite. It has been widely popular and extremely useful for users on X, Musk’s social media platform.

However, Tesla hacker green has revealed through firmware that the company is planning to roll out Grok into vehicles with personalities, giving it an even more realistic tone that is totally customizable and catered to whatever the driver wants.

There are also a handful of kids’ versions that will do things like tell stories or play trivia:

The true capabilities of Grok are nearly limitless. Back in January, Musk said on a livestream on X that, “You’ll be able to talk to your Tesla and ask for anything.”

Grok appears to only be available on AMD-based vehicles, according to other things green found in the firmware. This means that Intel-based Teslas, which are usually older models, will not enable Grok support for right now.

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Tesla dominates Cars.com’s Made in America Index with clean sweep

Tesla continues to dominate Cars.com’s Made in America Index with a clean sweep of the Top 4 spots.

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4 hours ago

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June 17, 2025

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Credit: Tesla

Tesla has dominated the Cars.com Made-in-America Index with a clean sweep of the top four spots. All four Tesla vehicles that were eligible for the analysis placed in the top four.

The Model 3 overtook the Model Y for first place this year. The all-electric crossover was first in 2024, but the Model 3 managed to overtake its sibling vehicle to claim the top spot in 2025. The Model Y took second, while the Model S took third, and the Model X took fourth.

This is an improvement from last year, as the Model Y took first, but the Model S and Model X placed fourth and ninth, respectively. The Model 3 was not in the Top 10 in 2024.

“Tesla continues to lead, claiming the top four spots and showcasing its commitment to domestic production. About 25% of the more than 400 vehicles on sale in the U.S. made this year’s AMI, and whether a vehicle is No. 1 or No.99, it contributes to the U.S. economy,” Patrick Masterson, lead researcher for the program, said.

More than 400 vehicles were analyzed for this year’s study, with Cars.com officially ranking 117 of them. There were two other EVs in the Top 10, as the Kia EV6 took sixth place, and the Volkswagen ID.4 finished in tenth.

This year’s study reflected major geographic and strategic shifts across the automotive industry. Of the 117 vehicles ranked in the program, they were produced at 36 domestic factories, leaving only 11 total factories that did not yield a car on the list. There are 47 assembly plants in operation in the U.S.

However, there still has not been a vehicle to quite reach the 100 percent domestic parts content, something that is extremely elusive. Masterson says the global supply chain is still extremely crucial to even the most American-built cars on the market.

The average domestic parts content of the Top 10 cars was 83.4 percent in 2006, but that number has shrunk to 70.3 percent in this year’s rankings.

Some might wonder where cars like the Tesla Cybertruck or Rivian R1T are on the list. However, these vehicles did not qualify because the study only considers cars under a gross weight of 8,500 pounds.

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