From bitcoin to emissions credits, here’s how Tesla got creative to turn its biggest profit ever

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Elon Musk has been a key driver of the craze for all things crypto. Odd Andersen/Getty Images
  • Tesla posted a record quarterly profit of $438 million on Monday, but it wasn’t all from selling cars.
  • More than $500 million came from selling regulatory credits to other automakers.
  • Another $101 million came from selling some of its multi-billion-dollar bitcoin stake.
  • See more stories on Insider’s business page.

Tesla reported hefty earnings for the first three months of 2021 on Monday, beating Wall Street estimates and turning its largest-ever profit.

The company posted a net income of $438 million on revenues of $10.4 billion, marking its seventh consecutive quarter of profitability following years in the red.

But the electric-car maker didn’t make all that money selling electric cars. Clever maneuvers involving bitcoin and sales of emissions credits buoyed the company’s bottom line.

Tesla made $101 million – the equivalent of nearly a quarter of its profits – by selling a 10% stake from its bitcoin holdings in late March, CFO Zach Kirkhorn said. Since the carmaker first revealed it had bought $1.5 billion worth of bitcoin in February, the cryptocurrency has continued to climb to unprecedented heights and is up about 60% since Tesla’s first disclosure.

According to Kirkhorn, the cryptocurrency is proving to be an ideal way for Tesla to store excess cash “that’s not immediately being used for daily operations or maybe not needed till the end of the year and be able to get some return on that.”

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Tesla also earned $518 million by selling regulatory credits to fellow automakers. That figure alone accounts for almost all of Tesla’s $533 million pre-tax income during the three-month period from January through March.

Other car companies buy credits from Tesla to meet emissions regulations if they can’t produce enough hybrid or electric vehicles on their own. They’re virtually pure profit for Tesla, which has been tight-lipped about who the customers are.

But sales of emissions credits aren’t totally divorced from vehicle production, given that Tesla has to make electric cars to earn the credits it then sells. However, the automaker probably can’t go on deriving so much of its profits from the credits forever: The sales are expected to gradually dry up as car companies worldwide expand production of low-emission and zero-emission vehicles.

That outlook may explain why shares of Tesla sank following its earnings report, even though it topped many of Wall Street’s expectations.

Musk has previously said that Tesla’s main goal isn’t to make money, but rather to make its vehicles accessible to more buyers.

“We want to be slightly profitable and maximize growth and make the cars as affordable as possible, and that’s what we’re trying to achieve,” Musk said in July 2020.