Tesla is under renewed scrutiny as multiple forces threaten its financial model. President Donald Trump’s One Big Beautiful Bill (OBBB) risks erasing earnings from carbon credit sales. Also, Elon Musk’s recent political endorsement rattles investors, and Canada has frozen $40 million in aid over environmental concerns tied to Tesla’s projects.
Together, these developments supersede typical market volatility and signal a potential turning point. Let’s examine each of these instances and consider their impact on Tesla.
OBBB Bill Could Erase Billions in Carbon Credit Profits
In 2024, Tesla generated a record $2.76 billion by selling regulatory credits (carbon credits), which is nearly 39% of its net income ($7.09 billion) that year. These credits allowed other automakers—unable to meet emissions standards—to avoid penalties by purchasing Tesla’s excess credits. Over time, Tesla has earned more than $10 billion from credits since 2017.
However, the OBBB threatens to overturn this revenue stream. The bill removes clean energy and EV tax credits. This includes credits linked to emissions performance. It also ends federal penalties for vehicles that do not comply.
- With this policy shift, analysts warn Tesla could lose as much as 80–90% of its U.S. carbon credit income, which could result in a loss of more than $2 billion in annual revenue.
RELATED: Tesla’s Carbon Credits Crash in Q1 2025: Earnings Drop and EV Sales Fall
Tesla aims to close this gap by boosting vehicle production and cutting costs. However, the electric vehicle (EV) industry faces challenges. Global EV sales hit 17 million units in 2024, and they could exceed 20 million in 2025. However, growth might slow down due to changes in policy.
The global EV market is now valued at $1.33 trillion. It is expected to grow to $6.5 trillion by 2030, showing a 32.5% annual growth rate. However, some analysts predict a more conservative growth rate of 14.5%, estimating it will reach around $1.66 trillion by 2030.
Investor Concern Mounts After Musk’s Political Endorsement
Tesla’s stock fell sharply in early July following Elon Musk’s public endorsement of a conservative politician. While credit sales had buoyed Tesla’s earnings, market analysts say that “more backlash could affect demand among politically sensitive consumers”.
Market experts also warned that this move could threaten TSLA’s value. Dan Ives, global head of technology research at Wedbush Securities, noted:
“Very simply Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story.”
The stock dropped by ~15% since early 2025, partly due to OBBB concerns and Musk’s activism. Investors are now recalculating Tesla’s value without carbon credit income: P/E ratios may fall significantly.
Why Canada Hit Pause on $40M in Tesla Aid
Canada has frozen $40 million in subsidies to Tesla. This is after the company submitted nearly 8,700 rebate requests in just three days, draining funds meant for electric vehicle buyers.
Moreover, Tesla lowered Model Y prices to qualify for subsidies, a legal but controversial move. The Canadian government is investigating and has paused payments until claims are verified. Several provinces have also blocked Tesla from their EV incentive programs, citing trade tensions and concerns over fairness. The company’s sales in Canada dropped 70% amid this dispute.
This decision further comes from concerns about not consulting Indigenous groups and potential environmental risks. Canadian officials have tied funding release to Tesla’s compliance with strict environmental standards and local partnership agreements.
This move is more than financial; it signals stronger scrutiny of Tesla’s global operations. As Tesla plans new battery or vehicle manufacturing in Canada, this aid freeze raises potential execution risks and reputational exposure.
Global EV Landscape and Tesla’s Expanding Competition
Tesla, once the undisputed leader, is facing growing competition. China continues to dominate, accounting for two-thirds of EV sales and holding nearly 60% of global EV production.
Meanwhile, BYD overtook Tesla in global EV market share (16% vs. 14%). The Chinese carmaker continues to gain ground in international markets, including Europe and Southeast Asia.
Tesla’s competitive edge is being challenged not only by Chinese automakers but also by legacy carmakers. These include Volkswagen, Hyundai, and GM, which are accelerating their EV rollouts.
Hyundai-Kia, for example, now holds nearly 7% global EV share, and Volkswagen has committed to launching 30+ new EV models by 2030. Startups like Rivian and Lucid are also carving out niche segments.
Despite positive long-term trends, the U.S. EV market is slowing. The International Energy Agency (IEA) lowered its forecast for U.S. EV market share to 41% by 2030. This is a drop from nearly 50%. They point to fading subsidies and rising EV prices as reasons for this change.
BloombergNEF agreed, saying that policy uncertainties might slow EV adoption. This could affect over $150 billion in planned battery investments.
Can Tesla Weather the Storm?
Given the various challenges Tesla is facing, can it surpass all these and regain investors’ trust once again? Here are the top concerns to watch out for in the EV leader’s future.
1. Will vehicle sales make up for lost credit revenue?
Tesla needs to significantly boost sales. However, its 2024 deliveries — 1.78 million EVs — marked the first decline year-over-year. Its path forward relies on a balanced mix of new models (Cybercab, affordable versions) and global rollout, but competition and policy delays remain risks.
2. Does Musk’s political play threaten brand appeal?
CEO visibility impacts Tesla’s brand. With a growing political rift among its consumer base and investors, Tesla may lose market traction unless it separates its business strategy from divisive rhetoric.
3. Will Canada’s compliance push stall expansion?
The Canadian aid freeze sets a precedent. Grant applications, potential program abuse, environmental oversight, and community engagement would be crucial to Tesla’s growth plans.
4. Can diversification maintain growth?
Tesla’s energy and AI segments suggest diversification. Its Powerwall and Megapack storage deployments reached 16.7 GWh in 2024, and its Supercharger network now exceeds 65,000 stalls. Expanding charging infrastructure, AI vehicle updates, and energy offerings could partially offset credit and auto earnings gaps.
Tesla faces a mix of policy, political, and operational pressures. These challenges threaten its profits from carbon credits. While the company has built resilience through innovation in energy, AI, and scale, reversing or adapting to policy reversals will be critical.
Success depends on Tesla’s ability to grow in volume, cut costs, and expand globally. In the meantime, the OBBB, Musk’s spotlight, and Canada’s freeze combine to make this a critical moment for the EV pioneer’s future.
