TESLA's House of Cards: How the Electric Car Company Secretly Makes its Money (And it's Not From Selling Cars)

If you've ever wondered how Tesla, a tiny start-up who only sell one product, could become the most successful car company in the world then you're not alone. Many people feel that the story just doesn't ring true, something doesn't add up, and you'd be right. It's all a house of cards.

Here's the dirty little secret Elon Musk would rather you didn't know about his flagship company.

Tesla's electric empire isn't built on selling cars, but on selling carbon credits.

Increasingly countries chasing Co2 targets demand that automakers sell a percentage of zero-emission vehicles, a percentage that is rapidly increasing until being 100% by 2035. Those failing to meet the targets must buy credits from companies like Tesla that exceed them. Between 2018 and 2023, Tesla’s carbon credit sales amounted to $7 billion, with $1.5 billion of that earned in 2022 alone. This financial boost allowed Tesla to appear profitable in a market dominated by giants like Toyota, Volkswagen, and General Motors who all dwarf the tiny electric car company .

Critics argue the company’s reliance on regulatory credits undermines its narrative of automotive superiority. “These guys are losing money selling cars. They’re making money selling credits. And the credits are going away,” said Gordon Johnson of GLJ Research, one of Tesla’s most vocal critics. Tesla’s Chief Financial Officer Zachary Kirkhorn admitted, “This is always an area that’s extremely difficult for us to forecast. … In the long term, regulatory credit sales will not be a material part of the business.”

Criticism has been swift and pointed. “The competition is rendering Tesla’s cars irrelevant,” Johnson claimed, highlighting that rival automakers are rapidly expanding their EV offerings. On social media, users questioned Tesla’s valuation, with one tweet reading,

“How does selling fewer than 2 million cars a year justify being worth more than the next 12 carmakers combined?”

Another user posted, “Without carbon credits, Tesla’s books would be in the red. It’s a house of cards.”

Tesla’s global vehicle sales of 1.8 million in 2023 represented just 2.5% of the estimated 72 million cars sold worldwide. Documents from California’s Air Resources Board corroborate Tesla’s credit dominance, listing it as the top supplier of zero-emission vehicle credits.

In 2023, Tesla sold approximately 1.81 million vehicles worldwide, marking a 38% increase from 2022. In contrast, the Volkswagen Group—which includes brands such as Volkswagen, Audi, Škoda, SEAT, Bugatti, and Lamborghini—delivered around 9.24 million vehicles globally in 2023, representing a 12% increase from the previous year.

While Tesla's sales have been growing rapidly, the Volkswagen Group still dwarf the electric car maker. the Volkswagen group are approximately six times bigger than Tesla, and sell significantly more vehicles.

The numbers paint a clear picture: Tesla’s financial narrative hinges on regulatory incentives, not automotive sales. For a company valued higher than the combined market capitalisation of Volkswagen, Toyota, and General Motors, the disparity is striking.

Tesla’s claims of being the world’s most successful carmaker feel hollow when scrutinised. Critics are justified in questioning how long the company can rely on a regulatory framework that is, by its own admission, “unlikely to remain strong.”

As automakers worldwide shift toward zero-emission vehicles, the competitive landscape is tightening. Volkswagen, which now outsells Tesla in Europe’s EV market, and General Motors, aiming for an all-electric fleet by 2035, exemplify this challenge. What happens when carbon credits no longer bolster Tesla’s earnings?

Elon Musk has been trying to fix the UK market in his favour as well. Musk secretly lobbied the UK government to impose higher taxes on petrol car drivers a FOI request has revealed.

For now, Tesla’s empire appears less like a triumph of engineering and more like a carefully constructed illusion—smoke and mirrors that can’t last forever.