Tesla's Biggest Profit Driver Isn't Sustainable

Last week, Tesla (NASDAQ: TSLA) reported a quarterly profit under generally accepted accounting principles (GAAP) for the fourth consecutive quarter. This was a particularly important milestone for the electric vehicle pioneer, as it makes the company eligible for inclusion in the prestigious S&P 500 index. Furthermore, earnings easily beat analysts' estimates.

Tesla delivered this better-than-expected performance despite having its main factory in Fremont, California closed for the first six weeks of the quarter due to a local stay-at-home order. However, it got another huge windfall from selling regulatory credits last quarter -- and this recent source of profit is unlikely to last very long.

In the first quarter, Tesla booked $354 million of regulatory credit revenue: up 64% year over year. This accounted for 6.9% of the company's automotive revenue and 5.9% of its total revenue. Considering that Tesla's Q1 operating profit and net income totaled just $283 million and $16 million, respectively, this revenue stream represented the difference between a net profit and a significant loss.

Source Fool.com