Tesla’s Credit Revenue Remains Resilient Despite Trump’s Anti-EV Agenda, Says Piper Sandler
Tesla’s lucrative income from regulatory credits—often dubbed “free money” for selling zero-emission vehicles and benefiting from automakers that fall behind on environmental compliance—accounted for nearly all of its free cash flow in 2024. With the Trump administration pushing to dismantle federal EV and battery subsidies, questions have emerged about whether this revenue stream could be in jeopardy.
According to a recent note from Piper Sandler analysts, that concern may be premature. The firm believes Tesla (NASDAQ: TSLA) is still well-positioned to maintain its regulatory credit earnings, at least in the near term, as any major policy changes will likely take time to roll out.
“We don’t believe the credit income will dry up in 2025,” the analysts wrote. “Even though the government aims to phase out EV-related financial support, we expect Tesla to earn about $3 billion in credits this year, and $2.3 billion in 2026.”
While the projected $3 billion for 2025 represents a decline from the $3.5 billion earned in 2024—which made up nearly 100% of Tesla’s free cash flow—it’s far from a collapse. The forecasted drop is attributed to Piper’s own revision of 2026 estimates, not a broader collapse in credit demand.
“This update reflects only a modest adjustment to our previous estimates,” they said, “and doesn’t warrant any drastic changes to broader financial expectations.”
Although the Trump administration’s stance on EV support has shaken investor sentiment, Piper Sandler believes the market will soon shift its focus to Tesla’s advancements in full self-driving technology. The firm highlighted robo-taxi tests underway near Austin, Texas, as a key driver of future growth.
“We believe these positive FSD developments will more than offset any negative concerns tied to lower 2025–2026 estimates,” they added.
For now, Piper Sandler is maintaining its $400 price target, despite slightly trimming its 2026 earnings per share forecast from $2.99 to $2.86. The analysts argue that Tesla’s high valuation remains justified, backed by the company’s expanding focus on AI and autonomous driving.
