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Tesla’s ZEV credits in the United States are poised to become even more valuable

(Credit: Tesla)

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Tesla has made a fortune of sorts selling ZEV credits to rival automakers, but with the passing of the United States Inflation Reduction Act, it appears that the electric vehicle maker’s credits could become an even more desirable commodity. This should help Tesla bolster its numbers, which would be extremely helpful as the company attempts to reach its target of 20 million vehicles by 2030. 

The Inflation Reduction Act is poised to shake up the US auto sector, but even with its disruption, automakers would still need to collect ZEV credits in California and other ZEV states, which have applied some of CA’s regulations. Under the system, automakers gain anywhere from partial to multiple credits based on a zero-emission vehicle’s range towards requirements based on the company’s overall sales volume. 

Automakers are allowed to stockpile EV credits, but in the event that a company fails to sell enough zero-emission vehicles, they must purchase credits from other carmakers. Tesla has been a go-to company for ZEV credits for years, thanks in no small part to the company’s electric-only lineup. And with Tesla’s sales growing at an immense pace, the EV maker is poised to sit on an even bigger hoard of environmental credits that can be sold to rival carmakers. 

As noted by Automotive News, ZEV rules are expected to change in 2026, and it will make things quite a bit trickier for companies that still depend on fossil fuel-powered cars. Under the updated system, each battery or fuel cell electric car with a minimum of 150-mile battery range will receive only one credit. Credits will also have a five-year validity, unlike those earned today, which do not have an expiry date. 

Tesla has earned the most credits in California, and at the end of 2020 — the most recent year when ZEV states reported automaker balances — the EV maker logged an impressive stockpile of 752,445 credits. It should be noted that 2020 was a year when Tesla sold around 500,000 vehicles. The EV maker sold 936,172 cars the following year. Estimates suggest that Tesla had collected about 2 million credits from the start of 2021 to the end of 1H22. 

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Tesla booked about $2.1 billion in revenue from credit sales in 2021 and Q1 2022. And while the value of a ZEV credit could be flexible depending on demand, it appeared that Tesla averaged about $3,500 each, according to Auto News

California is at the forefront of the United States electric vehicle movement, and it appears that it intends to keep its place. The state recently approved an initiative to increase its minimum zero-emission vehicle requirement to 35% of a carmaker’s sales by 2026, and 100% in 2035. With California adopting this aggressive target, a lot of the other ZEV states could follow. And considering that California and the other 14 ZEV states account for almost 40% of new vehicle sales in the United States, the demand for ZEV credits could very well increase. 

And that, ultimately, is a golden opportunity for Tesla and its growing hoard of ZEV credits.

Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Tesla is ready with a perfect counter to the end of US EV tax credits

Tesla executives have mentioned that these more affordable models would resemble the company’s current lineup.

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Credit: Tesla Asia/X

The United States’ electric vehicle tax credit is coming to an end at the end of the third quarter. Tesla, the country’s leading electric vehicle maker, is ready to meet this challenge with a rather simple but clever counter. 

Tesla executives outlined this strategy in the recently held Q2 2025 earnings call.

End of the US EV tax credit

While Elon Musk has always maintained that he prefers a market with no EV tax credit, he also emphasized that he supports the rollback of any incentives given to the oil and gas industry. The Trump administration has not done this so far, instead focusing on the expiration of the $7,500 EV tax credit at the end of the third quarter.

Tesla has been going all-in on encouraging customers to purchase their vehicles in Q3 to take advantage of lower prices. The company has also implemented a series of incentives across all its offerings, from the Cybertruck to the Model 3. This, however, is not all, as the company seems to be preparing a longer-term solution to the expiration of the EV tax credit.

Affordable variants

During the Q2 2025 earnings call, Vice President of Vehicle Engineering Lars Moray stated that Tesla really did start the production of more affordable models in June. Quality builds of these vehicles are being ramped this quarter, with the goal of optimizing production over the remaining months of the year. If Tesla is successful, these models will be available for everyone in Q4. 

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“We started production in June, and we’re ramping quality builds and things around the quarter. And given that we started in North America and our goal is to maximize production with a higher rate. So starting Q3, we’re going to keep pushing hard on our current models to avoid complexity… We’ll be ready with new, more affordable models available for everyone in Q4.,” Moravy stated. 

These comments suggest that Tesla should be able to offer vehicles that are competitively priced even after the EV tax credit has been phased out. Interestingly enough, previous comments from Tesla executives have mentioned that these more affordable models would resemble the company’s current lineup. This suggests that the more affordable models may indeed be variations of the Model Y and Model 3, but offered at a lower price.

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Elon Musk reveals Tesla’s next Robotaxi expansion in more ways than one

Tesla Robotaxi is growing in more ways than one. Tesla wants to expand and hopes to reach half the U.S. population by the end of the year.

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Credit: Tesla

Tesla CEO Elon Musk revealed the company’s plans for its next expansion of the Robotaxi in terms of both the geofence in Austin and the platform overall, as it looks to move to new areas outside of Texas.

Tesla launched the Robotaxi platform last month on June 22, and has since expanded both the pool of users and the area that the driverless Model Y vehicles can travel within.

The first expansion of the geofence caught the attention of nearly everyone and became a huge headline as Tesla picked a very interesting shape for the new geofence, resembling male reproductive parts.

The next expansion will likely absolve this shape. Musk revealed last night that the new geofence will be “well in excess of what competitors are doing,” and it could happen “hopefully in a week or two.”

Musk’s full quote regarding the expansion of the geofence and the timing was:

“As some may have noted, we have already expanded our service area in Austin. It’s bigger and longer, and it’s going to get even bigger and longer. We are expecting to greatly increase the service area to well in excess of what competitors are doing, hopefully in a week or two.”

The expansion will not stop there, either. As Tesla has operated the Robotaxi platform in Austin for the past month, it has been working with regulators in other areas, like California, Arizona, Nevada, and Florida, to get the driverless ride-hailing system activated in more U.S. states.

Tesla confirmed that they are in talks with each of these states regarding the potential expansion of Robotaxi.

Musk added:

“As we get the approvals and prove out safety, we will be launching the autonomous ride-hailing across most of the country. I think we will probably have autonomous ride-hailing in probably half the population of the US by the end of the year.”

We know that Tesla and Musk have been prone to aggressive and sometimes outlandish timelines regarding self-driving technology specifically. Regulatory approvals could happen by the end of the year in several areas, and working on these large metros is the best way to reach half of the U.S. population.

Tesla said its expansion of the geofence in Austin is conservative and controlled due to its obsession with safety, even admitting at one point during the Earnings Call that they are being “paranoid.” Expanding the geofence is necessary, but Tesla realizes any significant mistake by Robotaxi could take it back to square one.

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Tesla warns customers of incentive strategy on EVs as tax credit nears end

If you’re thinking of buying a Tesla, the time to order is now, the company claimed.

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(Credit: Tesla)

Tesla has warned customers about its incentive strategy for qualifying electric vehicles, as the days of both the $7,500 EV tax credit for new EVs and the $4,000 credit for used EVs are coming to a close.

Both tax credits, which impact some of the vehicles in the Tesla lineup, are set to be eliminated at the end of Q3. The phase out of these consumer credits was always in the plans of the Trump Administration, but now we’re in the final quarter of their existence.

As a result, EV companies are scrambling to see how they can reduce costs or make their vehicles more affordable for customers. The $7,500 will price many consumers out of many EVs on the market, and Tesla is not immune to that.

However, Tesla has made a significant push into Q3 deliveries, rolling out numerous incentives to customers, including 0% APR on select purchases, lease deals, free upgrades on certain inventory units, and more.

The extensive list of incentives on Tesla vehicles in the quarter will not get any longer, either. During last night’s Tesla Earnings Call for the second quarter of 2025, company executives stated that their intention for these incentives was to encourage customers to place orders early in the quarter.

Tesla will only be able to apply the $7,500 credit with deliveries that occur before the end of September. Even if an order is placed before then, delivery must be completed by September 31 to receive the tax credit.

CFO Vaibhav Taneja confirmed that the incentives for the quarter are already out and encouraged customers to place an order sooner rather than later:

“Given the abrupt change, we have a limited supply of vehicles in the US this quarter. As we are already within lead times to order parts for cars, we have rolled out all our planned incentives already and will start pairing them back as we start to sell. If you are in the US and looking to buy a car, let’s roll now as we may not be able to guarantee delivery for orders placed in the later part of August and beyond.”

The loss of the incentives will impact every EV maker in the United States. Tesla has a plan moving forward, and it said last night that its affordable models would be rolled out in Q4, as introducing these cars any earlier could have detrimental effects on Model 3 and Model Y sales.

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