Tesla Sales Drop Could Put Emissions Credit Revenue At Risk

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Tesla CEO Elon Musk complained loud and long back in May of 2022, when the electric car company was 86’d from the S&P 500 ESG Index. ESG stands for the environment, social, and governance principles that Tesla and other businesses deploy to mollify regulators and attract investors, customers, and clients. Now, three years later, Tesla sales are plummeting alongside Musk’s alliance with President Trump and his takeover of US government resources. As a result, the automaker may have also put its emissions credit revenue at risk…oopsies!

Tesla Sales Are Not The Only Significant Source Of Tesla Revenue

As the only US carmaker exclusively making EVs, Tesla started out of the box during the Obama administration with a huge revenue advantage. In addition to selling its own cars, it can sell emissions credits to legacy automakers that are still enmeshed in the gasmobile business.

CleanTechnica took note of the importance of Tesla’s emission credits business last year, observing that the emissions revenue earned one of the top spots in the company’s Q3 newsletter. The second line read, “We also recognized our second highest quarter of regulatory credit revenues as other OEMs are still behind on meeting emissions requirements.”

“So, even as Tesla was achieving its best 3rd quarter for vehicle sales, it was also making a lot of money on regulatory credits — money it gets from other automakers — because legacy automakers continue to miss targets for cutting their vehicles emissions, or, more simply put, aren’t selling enough EVs themselves,” reported CleanTechnica editor Zachary Shahan.

The Great Tesla Sales Drop & The Emissions Credit Angle

As a result of the recent drop in Tesla sales, that revenue is now at risk. CleanTechnica has been tracking the damage, attributed partly to the political cloud hanging over Tesla’s brand reputation and partly to the fact that other automakers are rolling out new mass-market EV models hand over fist while Tesla sits on the Model 3 and Model Y.

Additionally, on March 3rd Politico reporter Jordyn Dahl noted that “Elon Musk’s political meddling in Europe is cratering Tesla’s sales” in the EU, and that has impacted its ability to meet its commitments to an emissions credit pool that includes Stellantis, Toyota and Ford.

According to Dahl’s reporting, Tesla made a total of $2.76 billion in emissions credit revenue in 2024, more than 50% more than the previous year. This year’s revenue is now in question.

“Tesla’s pool is already not meeting the 2025 emissions targets, according to an analysis from the ICCT, despite January EV sales increasing 34 percent in Europe,” Dahl adds.

There Goes Tesla Sales, Off A Cliff

Tesla sales have been falling so fast and so hard that it’s difficult to describe just how big of an anomaly the carmaker has become. One way to look at it is comparing the overall sales performance of EVs and gasmobiles before and after the COVID-19 lockdown of 2020, which was followed by supply chain disruptions and a long recovery period for the global auto industry.

For some types of vehicles, the recovery is still under way. Using Q4 sales records as a point of comparison, CleanTechnica ran the numbers and reported that overall automobile sales were down by 2% in Q4 2024 compared to the pre-COVID benchmark of Q4 2019. That doesn’t sound too bad, considering the circumstances. However, when EVs are sorted out from non-EVs, a clear difference emerges in the recovery rate. Sales of non-EVs were down by 9% in Q4 2024 compared to 2019, while EV sales were up 480%. That’s not a typo. EV sales were up 480%.

Against this backdrop of vigorous buyer interest in new electric mobility technology, Tesla sales have been going in the opposite direction. One early indication that a turning point was in store occurred in 2022, after Musk bought Twitter. The Tesla brand incurred a reputational hit, but as recently as October of 2024 Tesla sales were still charting in positive territory.

A much more dramatic turning point came in early December, when word leaked out that Musk reportedly bought himself a driver’s seat in the US government to the tune of $277 million. Since then, Musk has taken up the role that any megalomaniac aspires to, controlling the levers of power in the most powerful government on Earth, on up to and including foreign policy.

The Tesla story is not over yet, but the company has already become a modern Greek tragedy. Mainstream news organizations are eager to track its fall from grace. “Tesla sales plunged in Scandinavia and France in February from a year ago, eroding its market share, as the electric vehicle maker faced a brand loyalty test amid CEO Elon Musk’s role in U.S. President Donald Trump’s administration,” MSN reported on March 3.

MSN reporters Terje Solsvik and Louise Rasmussen noted that Tesla was #1 in sales in Norway, Sweden, and Denmark in 2023 and 2o24. However, while EV sales rose overall in the three nations in February 2025, Tesla sales in Sweden went down 42%. They fell even farther in Norway and Denmark, which both registered a 48% drop.

There Goes The US Government, Off A Cliff

Anyone following the Tesla story in detail over the past five years or so could see the warning signs, including labor issues involving the Fremont factory, environmental damage related to SpaceX operations, misdirection during the COVID lockdown, and Musk’s enthusiastic use of social media to undercut the US and NATO in the early weeks of 2022, even as Russia was preparing the final steps in its unprovoked invasion of Ukraine.

Well, S&P was watching. The firm adjusts its S&P 500 ESG Index every year, reflecting the extent to which corporations are attending to ESG (environment, social, governance) principles. Tesla would seem a no-brainer, based on its role in popularizing new zero emission automotive technology. Nevertheless, when S&P released its new ESG index in May of 2022, Tesla was nowhere to be found.

In an S&P Global blog post dated May 17, 2022, analyst Margaret Dorn provided a detailed explanation of the factors leading to Tesla’s exclusion. “While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens,” she concluded.

“So, while Tesla and others may not have been included in the index this year, the beauty of the annual rebalance is that they will once again have an opportunity to be reviewed for inclusion in years to come,” Dorn added.

Tesla did in fact claw its way back onto the ESG 500 Index in 2023. There it remains, though far outstripped by higher-performing corporate citizens.

As for whether or not Tesla deserves another go-around after the next rebalancing, if you have any thoughts about that, drop a note in the comment thread, or better yet, find your representatives in Congress and let them know what you think.

Photo: Tesla sales continue to tank alongside CEO Elon Musk’s takeover of the US government, putting the company’s substantial emissions credit revenue at risk as well (via CleanTechnica photo archive).