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Piece on Tesla from Reuters

 

 

How Tesla defined a new era for the global auto industry

https://www.reuters.com/article/us-autos-tesla-newera-insight/how-tesla-defined-a-new-era-for-the-global-auto-industry-idUSKCN24N0GB

 

Pretty graphics:

Tesla electrifies the auto industry’s new era

https://graphics.reuters.com/AUTOS-TESLA/NEWERA/bdwvkerrkvm/index.html

 

 

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Guest cherzeca

Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

What are margins on those regulatory credits?  ;D

 

Those should continue at least from their 1Q 10-k:

 

 

 

Automotive Regulatory Credits

Deferred revenue related to sales of automotive regulatory credits was $140 million as of March 31, 2020 and December 31, 2019. No revenue was recognized from the deferred revenue balance as of December 31, 2019. We expect to recognize the deferred revenue as of March 31, 2020 in the next 12 months."

 

...

 

Our revenue from regulatory credits fluctuates by quarter depending on when a contract is executed with a buyer and when the credits are delivered. However, we generally expect higher revenue from regulatory credit sales as our production and deliveries increase. For example, our revenue from regulatory credit sales in the three months ended June 30, 2019 was $111 million while it was $354 million in the three months ended March 31, 2020.

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

Still a drop in the bucket vs all the direct and indirect subsidies to fossil fuels and autos historically.

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

Still a drop in the bucket vs all the direct and indirect subsidies to fossil fuels and autos historically.

 

What are some examples of the big subsidies to the oil industry?  I've heard this argument, but never any examples.  One recent example that comes to mind is the current administration offering to bail out the fracking industry, but that 'bailout' doesn't seem to have happened.

 

When you purchase gas at the pump part of the price is state and federal tax.  Electric vehicles don't have a "charge" tax. 

 

I would just like to better understand this argument.

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

Still a drop in the bucket vs all the direct and indirect subsidies to fossil fuels and autos historically.

 

What are some examples of the big subsidies to the oil industry?  I've heard this argument, but never any examples.  One recent example that comes to mind is the current administration offering to bail out the fracking industry, but that 'bailout' doesn't seem to have happened.

 

When you purchase gas at the pump part of the price is state and federal tax.  Electric vehicles don't have a "charge" tax. 

 

I would just like to better understand this argument.

 

There are taxes on electricity generation and distribution.  Look at your electricity bill.  There are also corporate taxes the various companies involved pay.

The governments of the world, but especially the US, is so involved in the energy markets it isn't even funny.  Subsidies, regulations, taxes, tax-breaks for some and not for others, wars/military actions to protect/obtain supply, etc within the industry and possible competitors.  Who knows what the net effect of all of it is and what the world would look like with a free market in energy.  Maybe if the governments of the world didn't spend such enormous amounts of money building and maintaining roads we would all have flying cars by now.

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Most regulated utilities in the US pay low or no taxes.  This is by design because taxes are essential a pass-through cost to the consumer. 

 

https://www.cnbc.com/2019/12/16/these-91-fortune-500-companies-didnt-pay-federal-taxes-in-2018.html

 

Replacing the gas tax with something else when EV's become more prevalent will be an interesting debate.  Even now, most of the wear and tear on the highways are from semi-truck trailers.  They are essentially subsidized by everyone else.

 

[edit] Now that I actually look at my electric bill (from a local municipality) I see there is a line item for "electric tax".  I haven't noticed that before.

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

the story here is why aren’t fossil fuel car companies doing what TSLA is doing. it’s a level playing field if they also enter the market  no?

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

the story here is why aren’t fossil fuel car companies doing what TSLA is doing. it’s a level playing field if they also enter the market  no?

 

The bears have been saying for almost a decade that the established automakers could just start making electric vehicles and put Tesla out of business at any time.  So far there has been zero evidence that this is true or even plausible. How many electric typewriter companies started making microcomputers and survived the change?  IBM did, but they were already in the mini-computer business.

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+1. Legacy mindset is very difficult to change.

 

 

Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

the story here is why aren’t fossil fuel car companies doing what TSLA is doing. it’s a level playing field if they also enter the market  no?

 

The bears have been saying for almost a decade that the established automakers could just start making electric vehicles and put Tesla out of business at any time.  So far there has been zero evidence that this is true or even plausible. How many electric typewriter companies started making microcomputers and survived the change?  IBM did, but they were already in the mini-computer business.

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

Still a drop in the bucket vs all the direct and indirect subsidies to fossil fuels and autos historically.

 

What are some examples of the big subsidies to the oil industry?  I've heard this argument, but never any examples.  One recent example that comes to mind is the current administration offering to bail out the fracking industry, but that 'bailout' doesn't seem to have happened.

 

When you purchase gas at the pump part of the price is state and federal tax.  Electric vehicles don't have a "charge" tax. 

 

I would just like to better understand this argument.

 

There's been all kinds of favorable treatments of oil exploration and exploitation in tax codes, cheap land leases, lots of externalization of costs (including pollution and accidental spills) for extraction and refinement and transport, there's been huge indirect subsidies from military expenditure protecting oil assets and routes around the world, a huge push to favor private automobiles over other alternatives (cities riping out their tramways, etc, after lots of lobbying from automakers), etc. Without a lot of that, cleaner sources of energy and EVs would've been competitive on price long ago.

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

the story here is why aren’t fossil fuel car companies doing what TSLA is doing. it’s a level playing field if they also enter the market  no?

 

The bears have been saying for almost a decade that the established automakers could just start making electric vehicles and put Tesla out of business at any time.  So far there has been zero evidence that this is true or even plausible. How many electric typewriter companies started making microcomputers and survived the change?  IBM did, but they were already in the mini-computer business.

 

Everybody has been saying the same thing about Apple. Thousands of "iPhone Killer!" headlines over the year...

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

the story here is why aren’t fossil fuel car companies doing what TSLA is doing. it’s a level playing field if they also enter the market  no?

 

The premise for this post is simply not true. Please take a look at the product pallette from Volkswagen AG.

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Guest cherzeca

 

Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

the story here is why aren’t fossil fuel car companies doing what TSLA is doing. it’s a level playing field if they also enter the market  no?

 

The premise for this post is simply not true. Please take a look at the product pallette from Volkswagen AG.

 

speed makes a huge difference.  with Tesla, musk wakes up one morning and says we need to do this, that afternoon they are starting to do it.  with all other autos (ICs), committees, internal presentations, review protocols etc.  all this speed may backfire on Tesla, but you cant say that IC auto companies are posing any real threat so far.

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On the reg credits - can TSLA recognize these as revenue when JoeShmoe et al put down the $100 or whatever-it-is deposit for a new Tesla? Or is it only when a vehicle is delivered?

 

If so, one angle is this: Tesla designed this cheap customer deposit structure so it can legally comply with revenue recognition laws. Therefore, it can start recognizing these regulatory credits - which it can then sell to other automakers for Cash, Today.

 

OK yes so they do recognize deferred revenue from regulatory credits, but I am still not sure when that recognition takes place. Is it when the car is delivered but the credits are yet-to-be-sold to another automaker? Or is it when a customer places a non-refundable order (therefore Tesla has reasonable assurance the car will be built&delivered, and therefore the reg. credits delivered from the gov't) and then the credits are sold.

 

 

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Tesla’s sale of environmental credits help drive to profitability

 

https://www.cnbc.com/2020/07/23/teslas-sale-of-environmental-credits-help-drive-to-profitability.html

 

Tesla revenue hit $6.04 billion during the second quarter of 2020, with about 7% of that, or $428 million, coming from sales of regulatory credits.

 

CFO Zach Kirkhorn said during the company’s earnings call Wednesday that Tesla expects revenue from sales of regulatory credits to double in 2020 versus the prior year but to decline over time.

 

Without zero-emission vehicle (ZEV) and other regulatory credits, Tesla would not have been able to report a four consecutive quarters of GAAP profitability, a milestone it reported Wednesday that meets the qualifications for Tesla to join the S&P 500.

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

the story here is why aren’t fossil fuel car companies doing what TSLA is doing. it’s a level playing field if they also enter the market  no?

 

The premise for this post is simply not true. Please take a look at the product pallette from Volkswagen AG.

 

 

Many car companies are doing EV now. It is good to see many choices in the next few years.

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Gotta hand it to Musk, turning in a profitable quarter despite all the narratives floating around covid and auto. Oh, and in light of the fact that the "real" auto companies lost boatloads of money...

 

its all about the regulatory credits, baby

 

the story here is why aren’t fossil fuel car companies doing what TSLA is doing. it’s a level playing field if they also enter the market  no?

 

The premise for this post is simply not true. Please take a look at the product pallette from Volkswagen AG.

 

 

Many car companies are doing EV now. It is good to see many choices in the next few years.

 

True. It's good to have more choices from more brands soon. The future is electric!

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Many car companies are doing EV now. It is good to see many choices in the next few years.

 

Can't wait. I've been hearing the exact same thing since the S came out in 2012, and I'm still waiting for all these compelling choices to come out...

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