The Customers Who Were Compelled by LawThin moat

Tesla (TSLA) — moat facet

More than $12 billion collected from rivals compelled by regulation since 2018 — and $146 million in the latest quarter, a third of a year earlier.

For most of the last decade Tesla's highest-margin customers were the automakers trying to beat it. Emissions rules required manufacturers to sell a share of zero-emission vehicles or buy credits from someone who did; Tesla, selling nothing else, had credits to spare. It collected $12,380 million this way between 2018 and 20251, at essentially no incremental cost, and in the first quarter of 2025 the $595 million of credits it sold was larger than the company's entire net income of $409 million2.

Regulatory credit revenue by year ($M)$419M2018$594M2019$1,580M2020$1,465M2021$1,776M2022$1,790M2023$2,763M2024$1,993M2025Tesla 10-Ks FY2020, FY2022 and FY2025; $12.4B in total
Other carmakers paid Tesla $12.4B for credits between 2018 and 2025; the peak year was 2024.

That business is now disappearing, and quickly. Credit revenue fell to $146 million in the second quarter of 2026, from $439 million a year earlier and $380 million in the first quarter3. Toyota and Stellantis have withdrawn from Tesla's European CO₂ pool for 2026, leaving Ford, Honda, Mazda and Suzuki as its remaining partners there4.

The effect on reported profitability is direct and easy to overlook. In the four quarters to March 2026, credits added between 1.6 and 2.5 percentage points to automotive gross margin; in the second quarter they added 0.6, and automotive gross margin was 16.9%5. The underlying car business was always less profitable than the headline suggested, and the flattery is being removed.

There is nothing to watch for a recovery here, which is the point: this customer relationship existed because of a law, the law changed, and no commercial effort can restore it. Watch automotive gross margin excluding credits, 16.3% in the second quarter — it is becoming the clean measure of whether Tesla makes money building cars.

Moat trajectory: Narrowing

Credit revenue fell 67% year on year to $146 million in the second quarter of 2026, contributed 0.6 points of margin against 1.6-2.5 previously, and analysts expect it to disappear entirely in 2027 after standards were rolled back and Toyota and Stellantis left Tesla's European pool. This is not a business under pressure; it is a business being legislated out of existence.

The number that tests this moat
Moat Explorer calc
Margin contribution from regulatory credits
0.6 points in Q2 2026, from 1.6-2.5

Credit revenue fell to $146M from $439M a year earlier, and Toyota and Stellantis left Tesla's European CO₂ pool for 2026. More than $12B was collected between 2018 and 2025. There is nothing to watch for a recovery — the law changed, and no commercial effort restores it.

How it's calculated: GAAP automotive gross margin less automotive gross margin excluding regulatory credits, per quarter.
Source: Tesla Q2 2026 update ↗
References
  1. Moat Explorer calcTesla collected $12,380 million of regulatory credits between 2018 and 2025.
    Moat Explorer calc — automotive regulatory credit revenue by year from Tesla's 10-Ks: 2018 $419M, 2019 $594M (FY2020 10-K); 2020 $1,580M, 2021 $1,465M, 2022 $1,776M (FY2022 10-K); 2023 $1,790M, 2024 $2,763M, 2025 $1,993M (FY2025 10-K); total $12,380M — 2018-2025 · publ. Sept 2026 · source ↗
    Method: Sum of annual automotive regulatory credit revenue, 2018-2025, from the FY2020, FY2022 and FY2025 10-Ks.
  2. ReportedIn Q1 2025 regulatory credits of $595 million exceeded net income of $409 million.
    Tesla, Q4 2025 update (five-year table: deliveries 936,222 / 1,313,851 / 1,808,581 / 1,789,226 / 1,636,129 for 2021-2025; storage deployed 46.7 GWh in 2025; quarterly regulatory credits and net income, incl. Q1 2025 credits $595M against net income $409M) — FY2025 / Q4 2025 · publ. Jan 2026 · source ↗
  3. ReportedCredit revenue fell to $146 million in Q2 2026, from $439 million a year earlier and $380 million in Q1 2026.
    Tesla, Q2 2026 update (record revenue $28.2B, +26%; record Q2 deliveries of 480,126; automotive $20.5B, +23%; energy $3.14B, +13%; operating margin 1.4%; free cash flow -$1.1B; regulatory credits $146M; Robotaxi live in seven metros; installed capacity table) — Q2 2026 · publ. Jul 2026 · source ↗
  4. ReportedToyota and Stellantis withdrew from Tesla's European CO2 pool for 2026, leaving Ford, Honda, Mazda and Suzuki.
    Not a Tesla App — Toyota and Stellantis withdrew from Tesla's European CO2 pool for 2026, leaving Ford, Honda, Mazda and Suzuki; Tesla receives about $2 billion a year from emissions credits — Q2 2026 · publ. Mar 4, 2026 · source ↗
  5. Moat Explorer calcCredits added between 1.6 and 2.5 points to automotive gross margin in the four quarters to March 2026 and 0.6 in Q2 2026, when automotive gross margin was 16.9%.
    Moat Explorer calc — Tesla's Q2 2026 update: total GAAP automotive gross margin 17.2% / 17.0% / 20.4% / 21.1% / 16.9% against automotive gross margin excluding regulatory credits 15.0% / 15.4% / 17.9% / 19.2% / 16.3% (Q2 2025-Q2 2026); the difference is the credits' contribution — Q2 2025 - Q2 2026 · publ. Jul 2026 · source ↗
    Method: GAAP automotive gross margin less automotive gross margin excluding regulatory credits, quarter by quarter.
Sources
Generated September 23, 2026