Background: Tesla is the OG electric car giant that launched its first car in 2008. While Tesla once dominated the EV space, its competitors have come in thick and fast. There’s the pure EV competitors like Polestar, Xpeng and Rivian as well as every legacy car maker who's building electric vehicles.

What happened: With more competitors and less government subsidies, Tesla is really feeling the electric-squeeze. In fact, its revenue fell 12% while its net income fell 16% in the second quarter. And that’s its biggest drop in quarterly revenue for over 10 years.

What else: But Elon Musk isn’t interested in talking about what his business is today, he’s focused on the the next big thing: robotaxis. Elon’s got plans to expand its robotaxi network to cover half of the US by the end of this year. Despite that distraction, an uplift in competition and the enormous drop in its carbon credits has really been hitting Tesla's bottom line.

What's the key learning?

💡Carbon credits allow polluting companies to purchase credits that effectively 'offset' their pollution. Polluting companies can buy carbon credits from cleaner companies, like Tesla. Tesla has relied on selling these carbon credits to traditional carmakers that still produce petrol vehicle.

💡Tesla has historically made hundreds of millions each quarter from selling these credits. But thanks to new laws, those juicy subsidies are drying up. In fact, Tesla earned $439 million USD just in the last quarter from other carmakers paying them for carbon credits and that is less than half what it reported in the same quarter a year ago.

💡These carbon credits were Tesla’s financial-safety-buffer. But, as these credits continue to decline, investors have realised that Tesla has relied too much on non-core revenue streams. So now, it’s all about the robotaxis, robotaxis and nothing but the robotaxis.