Tesla sells cars. It also sells something you can’t drive: permission. For years, other automakers paid Tesla so they could keep selling big, thirsty trucks. On Sept. 28, the U.S. government said one version of that deal is over. CAFE credit trading between carmakers will stop for credits earned in model year 2028 and later.
Here’s the twist. The money was already gone.
How the system worked
CAFE stands for Corporate Average Fuel Economy. It’s a grade for a carmaker’s whole lineup, not for one car. The government sets a target: on average, your cars must go a certain number of miles per gallon. Sell lots of big SUVs, and your average drops. Sell only electric cars, and your average jumps.
A company above the target earns credits. A company below it has two choices. It can pay a fine, or it can buy credits from someone above the line. Tesla sells only EVs, so it always had extra credits. So it sold them.
Think of a group project graded on the team’s average. One student scores 100 on everything. The others pay that student to share the points. It works, but only while the teacher punishes a low average.
The teacher stopped punishing
In July 2025, Congress cut the CAFE fine to zero in the One Big Beautiful Bill Act. If missing the target costs nothing, nobody needs to buy credits. The buyers left before the rule did.
You can see it in Tesla’s numbers. Its regulatory credit revenue was about $2 billion in 2025. In the second quarter of 2026, it was $146 million, down 67% from a year earlier. That total covers several credit programs in the U.S. and abroad, and Tesla doesn’t say how much came from CAFE alone. But its own filing says government actions have restricted credit programs tied to its cars.
So when the rule formally ends CAFE credit trading in 2028, it is closing a store that already has no customers.
What’s left
Credits earned through model year 2027 can still be traded and used for five years, so buyers can apply them through 2032. But a coupon is only worth something if someone needs it. With no fine, few will.
The quiet winners are the traditional automakers. The new target is 34.9 mpg by 2031, down from about 50 under the Biden-era plan. And they no longer have to pay a rival to meet it.
One more detail from Tesla’s second quarter: the company booked about $1 billion in profit from the rising value of its SpaceX stake. That’s a gain on paper, not cash in the bank, the same idea we saw with Alphabet’s SpaceX stake. Tesla’s easy money didn’t vanish. It changed shape.
My take: The fine died first. This rule is just the death certificate.
Not advice. Just how I see it.