Tesla has sharply increased its earnings. And he did it by finding gold outside of selling cars.

The electric vehicle giant unveiled its latest quarterly results, in which it not only pleased its investors, but also showed that there is life beyond selling cars: its earnings from alternative sources signify significant growth.

In numbers:

• Earnings per share: $0.72 (+8% year-on-year).
• Cost of production of one car: $35,100 (historical minimum).
• Car sales growth: +6%.
• Increase in regulatory loans: +33%.

Panoramic. Tesla improved its quarterly results, but not so much by selling more cars (which it also did) but by improving production efficiency. And maximize other sources of income.

Musk’s company has found the sweet spot between cutting costs and knowing how to take advantage of regulatory opportunities.

behind the scenes. Tesla’s good quarter tells us about an unconventional strategy. On the one hand, it managed to reduce the cost of production of one car to an average of $35,100, that is, $2,400 less than in the same quarter last year.

On the other hand, their revenues grew significantly by selling regulatory credits to other non-compliant manufacturers.

• The system works like an environmental offset market: the US requires car manufacturers to sell a certain percentage of zero-emission vehicles.
• Those who don’t achieve these goals because they depend on the sale of internal combustion engine vehicles must buy credits from companies with excess credits, such as 100% electric vehicle manufacturers… like Tesla.
• This is a very convenient and attractive source of income for Tesla: this is money that comes without associated costs and is almost completely transferred into net profit.

However, this advantage may be eroded as traditional manufacturers increase production of electric vehicles and require less credit.

Details. These loans increased by 33%. This is a big increase compared to the 6% growth in auto sales.

In addition, solar and battery revenues, which had not been much in line with the results, nearly doubled, up 93%. Here’s how Tesla’s revenue broke down by division for its most recent full fiscal year:

Big question. Will Tesla be able to maintain this cost optimization and alternative revenue maximization strategy over the long term? Especially in the medium term, when traditional manufacturers will presumably produce more electric vehicles than they currently do.

Musk currently forecasts auto sales growth of 20-30% in 2025. This would be a big change from the current trend, but it needs to be implemented.

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Featured Image | Bram Van Ost on Unsplash