Carmakers Go From Shunning Electric Bets to Fueling Tesla Profit

(Bloomberg) -- Automakers that were leery of investing billions in electric vehicles because of the unlikelihood they'd generate returns are now the reason Tesla Inc. just turned another profit.

Revenue from regulatory credits surged to $354 million last quarter, a sum that exceeded Tesla's $227 million adjusted net income. The maker of the Model 3 sells the credits to manufacturers who need them to comply with emissions standards that are getting stricter in most markets around the world.

While Tesla doesn't disclose which carmakers it sells credits to, General Motors Co. and Fiat Chrysler Automobiles NV disclosed last year that they had reached agreements to buy U.S. greenhouse-gas credits from the company. Fiat Chrysler has said it's going to spend 1.8 billion euros ($2 billion) on credits over three years and reached a deal in 2018 to pool its fleet with Tesla's to comply with stricter European Union rules on carbon-dioxide emissions.

Analysts at Goldman Sachs, Credit Suisse and other firms are predicting established automakers will now be forced to again reconsider costly investments in electrification due to the immense financial strain spurred by the coronavirus pandemic. On Tuesday, Ford Motor Co. called off plans to jointly develop a plug-in Lincoln model with Rivian Automotive Inc.

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