Tesla reported its lowest profit margin in over five years and missed Wall Street earnings targets in Q2, as the company cut prices to boost demand while increasing spending on AI projects. However, Tesla’s carbon credit (regulatory credits) revenue is at an all-time high, hitting $890 million. 

Tesla Profit Struggles Amid Carbon Credit Sales Surge

Tesla reported a 45% drop in profit for Q2, earning $1.5 billion on $25.5 billion in revenue, compared to $2.7 billion on $24.9 billion in the same period last year. Thus, the operating profit margin fell to 6.3% from 9.6%.

This decline in profit increases pressure on CEO Elon Musk to find new growth avenues. Despite this, Tesla shares have surged 40% since May, driven by investor optimism that Musk will transform Tesla into an AI company offering driverless taxis and robots.

Tesla’s Q2 electric car sales fell 4.8% to 444,000 vehicles, with production down 14% to about 411,000 cars. This setback follows a 55% drop in profit and a 9% revenue decline in Q1 2024.

Tesla faces increasing competition as other manufacturers ramp up electric vehicle production. For the first time, Tesla’s share of U.S. electric vehicle sales fell below 50% in Q2, according to Cox Automotive.

Amid all these lackluster results, the EV giant has seen a record-high sale of carbon credits at $890 million, the highest since the company started selling these regulatory credits in 2017. This revenue stream is up 216% from $282 million a year earlier and a 102% increase from Q1 ($442m). 

Competition Hits Tesla Hard: Carbon Credits to the Rescue

Most notably, the $890 million carbon credit revenue is almost 60% of Tesla’s Q2 net income of $1,494 million. Thus, carbon credit sales bolstered the company’s bottom line.

This additional revenue stream is essentially pure profit, as companies can bank credits exceeding their immediate needs. For an EV-only company like Tesla, which has no combustion business to offset, the constant flow of these credits has been a financial “gusher,” comparable to a highly profitable oil strike in the fossil fuel industry.

Tesla continues to profit from selling carbon credits to competitors who need to comply with emissions standards. This business model is highly lucrative for Tesla, as earning these credits incurs minimal costs, translating to pure profit. This revenue stream has been crucial for Tesla’s financial success.

The EV maker aims to produce new, more affordable EVs by early 2025, though cost reductions will be less than expected. The company laid off over 10% of its workforce to reduce costs, and profits were impacted by restructuring charges and higher operating expenses driven by AI projects. Automotive gross margin, excluding regulatory credits, was 14.6%, below the estimated 16.29%. 

As a result of a series of price cuts, profit per vehicle plummeted.

Chart from Reuters

Elon Musk acknowledged that the influx of more affordable electric cars from other manufacturers “has made it more difficult for Tesla” to sell vehicles. From April through June, Tesla’s share of U.S. electric vehicle sales dropped to 49.7%, down from 59.3% a year earlier, according to Cox Automotive.

Ford Motor sold nearly 24,000 EVs in Q2, a 61% increase from a year ago, while General Motors’ sales of battery-powered models rose 40% to nearly 22,000 vehicles. Investment analyst Dan Coatsworth noted that Tesla has missed earnings targets for four consecutive quarters. 

Another Growing Business For Tesla

CEO Elon Musk highlighted that new competitors have significantly discounted their EVs, challenging Tesla. The company’s EV deliveries have declined for two quarters, facing rising competition and slow demand due to a lack of affordable new models. Sales of China-made EVs, which are also exported, fell in Q2 compared to strong growth from Chinese automakers like BYD Co.

Despite these challenges, Tesla expects a production increase in Q3. Amid declining profits, the company has seen significant growth in its rapidly growing energy storage business. 

In Q1 2024, energy storage deployments reached a record 4.1 GWh, with revenue and gross profit from the Energy Generation and Storage segment hitting all-time highs.

In Q2 2024, Tesla Energy deployed 9.4 GWh of energy storage products, including Megapacks, Powerwalls, and solar products. This marks a 132% increase from Q1 2024 and a 157% year-over-year rise.

The growing number of Megapack installations and an expanding fleet are expected to drive consistent profit growth in this segment. Battery system sales, primarily for electricity grids, doubled to $3 billion in Q2.

READ MORE: Tesla Signs A Landmark Multi-Billion Dollar 15 GWh Megapack Deal

Tesla’s Q2 financials reflect a significant drop in profit and production amid intensified competition and rising operating costs. However, record-high carbon credit sales provided a crucial boost to the bottom line, demonstrating the importance of this revenue stream. As Tesla navigates these challenges, its investments in AI and energy storage hint at new growth avenues beyond electric vehicles.

The post Tesla’s Profit Sees a 5-Year Low But Carbon Credit Sales Hit Record High appeared first on Carbon Credits.

With the global energy transition looming large, many have been setting their sights on materials critical to the energy transition, such as copper, lithium, or uranium.

Nickel is yet another mineral on that list, albeit one that seems to have largely flown under most investors’ radars thus far.

It’s understandable why that’s been the case – after all, the primary use for mined nickel has long been industrial, with over three-quarters of global nickel demand being for things like alloy production or electroplating.

However, there’s one avenue of “green” demand for nickel that’s been slowly yet steadily driving up consumption – and that’s electric vehicle (EV) batteries.

Last year, the average battery EV sold contained 25.3 kilograms of nickel – and that number has been going up year over year

Nickel is one of the key components of the lithium-ion batteries that power EVs worldwide, thanks to its unique physical and chemical properties.

In order to be used in an electric vehicle, nickel must first be refined to extremely high purities, creating what’s known as “battery grade” nickel. Following this, it then needs to be dissolved in sulphuric acid to create nickel sulphate, which can then be used to produce battery cathodes.

Nickel’s high energy density, which allows it to hold more charge for less weight, makes high-nickel battery chemistries more desirable in EV batteries. While the first iterations of the lithium-ion battery used equal proportions of nickel with manganese and cobalt, modern ones use as much nickel as manganese and cobalt combined.

And as technology continues to progress, it’s expected that the ratio will rise to as much as 80% nickel, or even more.

That’s why nickel is now on the critical minerals list of several countries including the US, the EU, and Japan.

RELATED: Top 3 Nickel Stocks for 2024

The Lights Are Green for Nickel.

EV manufacturers are adding more and more nickel to their batteries each year in order to increase the efficiency and range of their vehicles.

EVs sold in 2023 contained 8% more nickel, on average, than those sold a year previous

Combine that with the fact that EV sales are expected to continue growing at a breakneck pace, and what you end up with is very healthy outlook for long-term nickel demand.

Below you can see two charts created by the International Energy Agency. The one on the left forecasts nickel demand growth out to 2050 based on currently existing climate pledges, while the one on the right shows the same but in a more aggressive net zero scenario:

You can see that, regardless of which scenario we consider, nickel demand is expected to more than double over the next decade – the only question is how fast we get there.

Even in the conservative case where no more climate pledges are made in the coming years, as in the chart on the left, EV and cleantech demand for nickel is still expected to massively drive nickel’s demand growth.

Last year, total nickel demand amounted to 3.1 million tonnes, of which 478,000 came from EVs and cleantech. This latter portion is expected to grow to 2 million tonnes of nickel demand by 2030 and 3.4 million tonnes by 2040 in the base case – and it could easily be more, if governments around the world pursue additional climate targets

While all scenarios do see nickel consumption plateauing and falling off slightly towards the tail end of 2050 due to forecast lower demand for nickel-rich battery chemistries, there’s still a 9x increase in nickel demand for EV batteries and other cleantech even in the conservative case.

Simply put, the future for nickel looks tremendous.

However, the recent price performance of nickel seems to tell a different story:

And that’s because of the other half of the picture: nickel supply.

But There’s a Supply Jam . . .

Despite how strong the demand outlook for nickel looks, there’s no escaping the fact that right now, supply far outstrips demand.

And there’s exactly one factor we can point to for this: Indonesia.

In the past ten years, Indonesia has accelerated the pace of nickel mine development domestically, thanks to heavy Chinese investment.

In 2014, Indonesia produced just 7% of the world’s nickel, with just two nickel smelters. 10 years later in 2023, Indonesia now accounts for just over 50% of global production, with 43 operational smelters and another 52 on the way

Indonesia received $7.3 billion in foreign investment from China’s Belt and Road Initiative in 2023, the largest of any participating country. 90% of the nickel smelters in Indonesia were built by Chinese companies, and most of the mines are Chinese owned as well.

Thanks to the extensive Chinese involvement, the lower labor costs and environmental standards for nickel mines in Indonesia have also led to lower production costs. Nickel from Indonesian mines is cheaper to produce than it is on other countries like Australia or Canada.

This breakneck growth of Indonesian production, during a weak price environment where other producers have scaled back, has contributed to Indonesia’s rise to prominence as the top global nickel producer.

It’s expected that the nickel market will see a surplus of 36,000 tonnes this year, according to a recent report from Macquarie. And it’s unlikely that the nickel market will balance out until after 2025.

Further Down the Road, the Outlook Looks Rosy

Despite how the supply and demand balance looks right now, however, it’s not expected to stay that way as we near the end of the decade.

As the chart above shows, based on current announced mine supply, the nickel market is expected to enter a supply deficit shortly after 2025 – and this shortfall is expected to widen considerably in the decade following, even in the conservative scenario (the solid line).

In other words, even though the current low nickel price environment is discouraging investment, it’ll also create more opportunities down the road thanks to the eventual supply-demand gap that will widen due to the current lack of interest in nickel mining.

Furthermore, as you might recall, in order to be used in EV batteries nickel needs to be further processed into nickel sulphate, which is something not all raw nickel refineries are built to do.

The supply shortfall for nickel sulphate is expected to see an even wider gap than for mined nickel. That said, processing facilities for nickel sulphate can be built on the order of 18-24 months – much quicker than a mine, which is often a years-long process that can get bogged down in studies and permitting.

Even so, the sheer amount of additional nickel sulphate supply required represents yet another opportunity in the nickel markets.

In the near term, it’s likely that nickel prices will continue to stay weak as supply continues to outpace demand. As we near the end of the decade and the push towards net zero continues to accelerate, however, the projected supply-demand gap might just leave the nickel market in significantly different shape than how it looks now.

The post The Ultimate Guide to Nickel appeared first on Carbon Credits.

President Joe Biden’s decision to withdraw presidential election this Sunday marks a significant turn in American politics. During his tenure, the country has seen the introduction, establishment, and amendment of numerous climate policies involving massive investments. The past four years under the Biden administration have been eventful from a climate change perspective. Let’s refresh our memory on the climate agendas rolled out by this government.

Key Highlights of Biden’s Climate Change Plan

“That’s why, when people talk about climate, I think jobs.  Within our climate response lies an extraordinary engine of job creation and economic opportunity ready to be fired up.  That’s why I’ve proposed a huge investment in American infrastructure and American innovation to tap the economic opportunity that climate change presents our workers and our communities, especially those too often that have — left out and left behind.”

-Remarks by President Biden at the Virtual Leaders Summit on Climate Opening Session (source: The White House)

Rejoined the Paris Agreement

From day one, Biden initiated the process for the U.S. to rejoin the Paris Agreement. The U.S. officially re-entered the agreement shortly after. Biden issued an executive order on tackling the “Climate Crisis at Home and Abroad”, creating the position of Special Presidential Envoy for Climate and announcing several high-level climate summits. Later, he set a target to reduce carbon emissions by at least 50% below 2005 levels by 2030. That was a historic announcement!

LATEST: Is Biden’s $8 Billion American Climate Corps Budget Worth It?

Signed the Inflation Reduction Act

He signed the Inflation Reduction Act in August 2022. Notably, it’s one of the most critical climate agendas of America. It includes significant investments in climate protection, such as tax credits for households to reduce energy costs, funding for clean energy production, and incentives to lower carbon emissions. The administration concentrated on creating tax credit guidelines and initiating programs to execute its various clean energy measures. To achieve excellence in climate action, they needed to maintain prompt and fair implementation of the legislation while also filling policy gaps.

 Climate-Smart Stimulus Package to Revive from COVID-19.

Biden proposed a $2 trillion climate-smart stimulus package to boost the domestic economy, create jobs, and expand America’s clean energy sector. It surpassed the investments made in the 2009 economic recovery package. He prioritized modernizing the electricity grid, electrifying schools, and transit buses, enhancing the transportation system, upgrading public schools, boosting industrial innovation, and restoring trees to the landscape.

Biden committed to ensuring that at least 40% of the funding benefits go to the less-privileged communities. These investments targeted both short-term and long-term emissions-reduction goals. They installed solar, wind, heat pumps, and electric vehicles to cut costs. At the same time, they invested in future technologies which included the heavy emission sectors like steel, geothermal systems, and clean hydrogen.

READ MORE: US EPA to Invest $20B in Climate and Clean Energy Projects for Underserved Communities

Curb Hydrofluorocarbons (HFCs) and Methane Action Plan

The President ratified the Kigali Amendment to reduce hydrofluorocarbons (HFCs) in September 2022. The EPA issued regulations to phase down HFCs under the American Innovation and Manufacturing Act of 2020.

In November 2022, the Biden administration updated the Methane Action Plan with 50 measures supported by $20 billion from various laws. The Inflation Reduction Act introduced a methane emissions fee for oil and gas facilities, starting in 2024 and increasing to $1,500 per metric ton by 2026. At the 2023 UN climate summit (COP28), the administration announced strict standards to reduce methane emissions from the oil and gas sector. On January 12, 2024, the EPA proposed rules to enforce this fee.

Biden helped launch the Global Methane Pledge at the 2021 UN Climate Summit (COP26). By December 2023, 155 countries had committed to cutting their methane emissions by at least 30% by 2030.

source: World Resources Institute

Biden’s Milestones for the Energy Sector

Offshore wind was a crucial part of Biden’s promise to combat climate change that would generate jobs and enhance the economy. Biden approved the first U.S. offshore wind project and set new standards to cut methane emissions, which will prevent the equivalent of 1.5 billion tons of CO2. The American Clean Power Association (ACP) projected around 14 GW of offshore wind capacity along U.S. coastlines by 2030. This fell short of the 30 GW goal set by President Joe Biden’s administration in 2021 to boost the domestic energy industry.

MORE DETAILS: Transforming the American Clean Energy Landscape Under Biden’s Era

Biden and the EPA introduced national carbon pollution standards, mandating a 90% reduction in emissions from coal and new gas plants. They also modernized the federal environmental review process under the National Environmental Policy Act (NEPA). The rule introduces a new permit for efficiencies from the Fiscal Responsibility Act of 2023.

Biden also transformed the energy-efficiency standards for residential water heaters. These standards cut energy waste and carbon pollution. He envisioned that this would save nearly $1 trillion over 30 years and reduce utility bills by $100 or more per year for the average family.

Image: EIA projects renewables share of the U.S. electricity generation mix will double by 2050

Finally, Biden signed the ADVANCE Act in July this year to support advanced nuclear technologies and the continued operation of existing nuclear plants. Recently, President Biden signed The Prohibiting Russian Uranium Imports Act to strengthen America’s energy and economic security, and eventually eliminate reliance on Russia for nuclear power.

 MUST READ: U.S. DOE Aims to Expand Domestic Uranium Supply with US$2.7B RFP

Investments in CDR projects

On May 19, 2022, the U.S. Department of Energy (DOE) announced a $3.5 billion funding opportunity from the Bipartisan Infrastructure Law to capture and store CO2 directly from the air. The Regional Direct Air Capture Hubs program supported four large-scale hubs with carbon dioxide removal (CDR) projects. These hubs created jobs, engaged communities, and advanced environmental justice. Alongside other decarbonization efforts, this technology played a key role in achieving President Biden’s net-zero economy goal by 2050.

KNOW HOW: $100B Carbon Market Could Drive $700B Annual Investments in Projects

Curbing Transport Emissions

During his early tenure in 2021, Biden signed the bipartisan Infrastructure Act, allocating over $100 billion for rail, mass transit, charging stations, and zero-emission ferries and buses.

On March 29, 2024, the Biden-Harris Administration finalized the historic greenhouse gas standards ever for heavy-duty vehicles. This action protects public health, addresses the climate crisis, and keeps the American economy moving. The EPA adopted new emission rules for cars, aiming to cut 50% of CO2 emissions by 2032 and mitigate 7 billion tons of CO2 in the next 30 years. This rule can eliminate more GHG emissions than any other climate rule in U.S. history.

This year EPA also issued carbon emissions limits for heavy trucks, estimating a prevention of 1 billion tons of CO2 emissions. It introduced 3,400 electric school buses, and Biden released $1.7 billion for electric vehicle manufacturing. Additionally, the government released new standards for biofuels.

LATEST: New EPA GHG Standards for Trucks to Cut 60% Emissions by 2032

Despite global challenges, the U.S. has set strong examples in tackling climate change. President Joe Biden’s groundbreaking initiatives have significantly transformed the climate landscape. As America approaches a new presidential term, we hope the new leader continues to take responsible actions and drive further progress in combating climate change.

FURTHER READING: Multi-Billion Dollar U.S. Clean Energy Tax Credits Are Here

The post Top Achievements in Joe Biden’s Climate Agenda for America appeared first on Carbon Credits.

For more than two decades, Nestlé through its “Sustainable Agriculture Initiative” (SAIN) has empowered farmers to adopt sustainable practices in coffee production. This time, the company is enhancing its Arabica variety supply chain to mitigate the carbon footprint of coffee production. So, what’s brewing in here? Let’s find out.

Introducing Arabica Star 4: Nestlé’s Sustainable and High-Yielding Coffee Variety

Nestlé has developed a new high-yielding Arabica coffee variety called Star 4 to strengthen its coffee supply chain. As global coffee demand is growing significantly, irrespective of climate changes, Nestlé has innovated its coffee variety with a reduced carbon footprint. The news release highlighted that the company was very concerned about the shrinking of Arabica cultivation areas due to climate change. Thus, this prompted Nestlé to leverage its agricultural expertise to overcome environmental concerns while ensuring a steady supply chain.

Nestlé’s team of scientists, technologists, and agronomists hail that the Star 4 is a “novel high-yielding Arabica variety” selected in Brazil. It is highly resilient and has a unique Brazilian coffee flavor.

Jeroen Dijkman, Head of Nestlé’s Institute of Agricultural Sciences remarked,

 “Ensuring resilient coffee supply chains is crucial for future generations to enjoy exceptional coffee. Star 4, with its larger bean size and resistance to coffee leaf rust, demonstrates significantly higher yields compared to Brazil’s predominant local varieties, thereby reducing its environmental footprint.”

Notably, Marcelo Burity, Nestlé’s Head of Green Coffee Development has emphasized the importance of optimizing farming practices to minimize greenhouse gas (GHG) emissions associated with coffee cultivation. He added,

“Optimizing cultivation practices remains vital as they are the primary factor contributing to the environmental impact of a cup of coffee.”

MUST READ: Nestlé Unveils New Initiatives to Cut Cocoa Supply Emissions 

Planting More Shade Trees

Various initiatives focus on integrating shade trees within farming systems. This approach particularly benefits crops like cocoa and coffee, which thrive under shaded conditions. By encouraging farmers to plant more shade trees, the initiative aims to shield these crops from heat stress and other environmental threats such as heavy rainfall. Moreover, shade trees play a pivotal role in improving water management, enhancing biodiversity, and sequestering carbon dioxide from the atmosphere, thus contributing significantly to emission reduction efforts.

Boosting Soil Health

A critical component of sustainable agriculture involves improving soil health to maximize land productivity. Nestlé has adopted many eco-friendly practices such as no-tillage, cover cropping, crop rotation, and organic fertilizers. Additionally, composting agricultural waste essentially fosters a robust carbon cycle for sustainable farming practices.

Agroforestry in Border Areas

Another important criterion is optimizing the surrounding areas of the main farmland. Some such practices involve restoring forests and peatlands and implementing strategic projects like windbreaks. These efforts mitigate carbon emissions and protect the biodiversity of that agricultural land.

Some other significant technological advancements to enhance cocoa and coffee supply chains and restore carbon sinks involve:

farm-level assessments
sustainability certifications
satellite monitoring systems
100% renewable energy

Nestlé’s Emission Reduction Strategies

According to its current sustainability report, Nestlé achieved a 13.58% GHG emissions reduction in 2023 as compared to its 2018 baseline.

source: Nestlé

Nestlé has pledged to curb their emissions by 20% by 2025. By 2050, the organization aims to achieve net zero emissions by implementing regenerative agricultural practices. Furthermore, it is transitioning its logistics and operations to zero emissions. This ensures all facets of the organization contribute to environmental sustainability.

It will use high-quality natural climate solutions, benefiting communities and ecosystems to offset residual emissions. This approach balances environmental impact with societal well-being, supporting a sustainable future for all.

source: Nestlé

DID YOU KNOW?

Here’s a cool fact! Nestlé clinched the top spot for “coffee sustainability” in the 2023 Coffee Brew Index, as highlighted in the latest Coffee Barometer report. The accolade reflects Nestlé’s robust coffee sourcing strategy, which integrates social, environmental, and economic dimensions.

David Rennie, Head of Coffee Brands at Nestlé, emphasized,

“This recognition underscores our ongoing dedication to responsible coffee sourcing. Through initiatives like the Nescafé Plan and Nespresso AAA Sustainable Quality Program, we collaborate closely with coffee farmers to promote sustainable and inclusive farming practices. Our commitment remains steadfast in innovating and advancing coffee farming for the better.”

With these science-backed coffee varieties and a strategic focus on sustainability, Nestlé is sure to achieve its net zero goals. Until then, let’s wait for the moment to savor a fresh cuppa as it hits the stores.

KNOW MORE: Nestlé and Fonterra to Develop NZ’s First Net Zero Dairy Farm 

The post Brew Green: Nestlé Boosts Arabica Supply Chain to Lower Carbon Footprint appeared first on Carbon Credits.