In the second quarter of 2024, Tesla faced a challenging period, but the automaker was able to mitigate some of the financial impact, thanks to the assistance of the U.S. government. Although profits fell by 45 percent during this time, Tesla's income statement received a significant boost from the sale of regulatory credits to rival automakers. According to the Wall Street Journal, over half of Tesla's second-quarter profit was attributed to these credits, which are used by other manufacturers to meet emissions regulations.

While these financial gains are not technically considered subsidies, it is clear that Tesla is benefiting from government programs aimed at supporting the development of electric vehicles (EVs). Interestingly, Tesla CEO Elon Musk has been a vocal advocate for eliminating government subsidies that encourage EV development, even pushing for the return of former President Donald Trump to the White House. This juxtaposition highlights the irony of Tesla's reliance on government aid.

Tesla's ability to produce popular EVs, resulting in the earning of regulatory credits that are then sold to competitors worldwide, aligns with Musk's vision of Tesla as more than just an automaker. He envisions the company as an artificial-intelligence firm focused on developing autonomous vehicles and humanoid robots.

The Trump administration's criticism of the Biden administration's efforts to promote EVs has been a central part of Trump's messaging. Biden's administration has championed a 2022 law that links consumer tax credits for EV purchases to industry initiatives aimed at strengthening the U.S. supply chain for EV components. This measure aims to reduce the nation's reliance on Chinese suppliers. Additionally, President Biden has increased tariffs on Chinese electric cars to 100 percent, while Trump has also proposed higher tariffs.

During Tesla's second-quarter earnings call, Musk acknowledged that the elimination of federal EV subsidies would indeed impact Tesla's profitability. However, he expressed belief that the impact would be more devastating for competitors than for Tesla in the long run. Musk emphasized that the true value of Tesla lies in its autonomous driving technology and that other factors are negligible in comparison.

Regulatory credits reported for the period ending in June amounted to nearly $1 billion, a significant increase compared to $282 million in the same quarter the previous year. These credits have historically fluctuated from quarter to quarter, often providing timely financial assistance to bolster Tesla's performance. Although Tesla acknowledges the difficulty in forecasting these sales, it maintains that they represent only a small part of the company's equation.

In California, where the concept of regulatory credits originated and subsequently spread worldwide, Tesla has received an estimated value of credits exceeding $2.48 billion as of early 2023, according to Governor Gavin Newsom's office. Despite being at odds with Musk, Newsom has acknowledged the critical role played by these credits in Tesla's success, stating that without California's regulatory bodies and regulations, Tesla would not have achieved its current position.

Ultimately, Tesla's heavy reliance on regulatory credits highlights the significant role that government support plays in the EV industry. While the debate around subsidies and government intervention continues, it is clear that these credits have been instrumental in boosting Tesla's profitability and positioning the company as a leader in the electric vehicle market.