By CCN: Tesla reportedly funds itself by selling credits to traditional auto manufacturers. Tesla sells fewer units, which are more efficient by lightyears, so it has excess government credits to sell, which other members of the industry, including GM lap up.
For years, Tesla has behaved more like a Silicon Valley company than an automaker. They don’t come to mind when you think of investing in US automobiles, but perhaps they should.
The company’s stock has seen high volume and skyrocketing values. Whether or not it will continue this trend or gradually deflate is currently a question, but probably not a very good one.
The better question is how long it will be until the whole industry, including TSLA, rise back up. There are good reasons to believe that the market is currently over-saturated with vehicles. If companies continue producing without getting significant sales, eventually people are going to realize something’s wrong.
For its part, Tesla has tried to branch beyond automobiles. The company is also reportedly working on selling home batteries, which might provide a revolutionary alternative energy solution for everyday homeowners. When and if such options become available, companies like Tesla will offer them. It may become the future of the power grid.
People power up their batteries now and then, but most people no longer have a constant need for the power grid. This frees up energy and lowers demand, making it cheaper, which starts a cycle.
That’s one potential future. As is one full of Tesla self-driving cars. At this point, there’s no particular reason to doubt the self-driving revolution will take over. It’s a question of when. Existing models have a decade or more to indeed expire, and even a road increasingly filled with self-driving vehicles would be shared with people who drive themselves. The self-driving models would have to become inexpensive enough that they made sense when it came time for people to buy new vehicles. Presently, it’s questionable whether that can be the case anytime soon.
For its part, GM told Fortune that it bought credits for future years where environmental regulations against automakers might be much more stringent. In the grand scheme of things, selling electric vehicles helps a lot. Making them inexpensive enough is the problem. They come with expensive battery technology, even in the lowest models. As such, they’re quite costly to build.
Reportedly, Tesla has taken in around $2 billion selling regulatory credits. The credits give companies a haven in their emissions requirements. In some cases, for the sake of selling specific models, it makes sense to own extra credits. The credits then enable further production and profit. Currently, GM has no need for them, but it believes a future is coming where they’ll be quite valuable as a “hedge.”
This article was edited by Samburaj Das.