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SEC letters to Tesla made public yesterday

As reported by Nicola White at Bloomberg, we have the SEC to thank for new transparency around Tesla’s revenue from government credits. Elon Musk’s attorney has complained that the SEC is targeting Musk and Tesla because he’s a government critic. Musk just can’t catch a break. The SEC Division of Corporate Finance sent Tesla a series of letters and they were made public yesterday. To be clear, this newly public SEC interaction has nothing to do with the SEC investigations into Tesla’s governance processes, solar panel defects or possible insider trading violations.

Yesterday’s SEC letters concern Tesla’s disclosure of government credits for electric vehicle sales. The SEC was concerned that Tesla’s inclusion of credits in their Automotive Sales could cause “investor confusion”.

What did the SEC have to say?

“We note the sale of regulatory credits has increased substantially in 2020 and now exceeds your revenues from other activities such as automotive leasing. As regulatory credit sales represent sales of an intangible asset, it appears you should either present the revenues separately as their own source of revenue or present them in your "Services and other" category to avoid investor confusion.”

Read more here.

Why do we care?

Government programs offer credits for the purchase of electric vehicles in order to incentivize consumers to purchase cars with lower emissions. Tesla benefits from these credits and records them as revenue. Up until their most recent annual report, Tesla lumped credits in with their normal sales.

Including credits within automotive sales could be misleading to investors. Automotive sales are indicative of Tesla’s core business success whereas government credits are not. In 2021,credits represented approximately 3% of Tesla’s total automotive revenues. See details below:


tesla revenues 2021, 2022, 2023

Going forward, Tesla’s filings will offer more transparency. However, it should never fall to the regulator to promulgate transparency. The Tesla management team could and should have recognized the importance of transparent reporting to investors without SEC intervention.

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