esla recorded another profitable quarter in the second quarter of 2020, marking a fourth consecutive quarter of GAAP (generally accepted accounting principles) profit for the company. It was a welcome change for the previously cash burning and unprofitable electric vehicle pioneer. But eagle-eyed investors will have noticed that virtually all of Tesla’s profit and free cash flow generated over the last 12 months was due to the sale of ZEV (Zero Emission Vehicle) credits. The company booked US$1.05 billion from the sale of regulatory ZEV credits in the 12 months ended 30 June 2020. During the same time period, Tesla recorded US$368 million and US$907 million in net profit and free cash flow, respectively. So what are regulatory ZEV credits? To incentivise automobile manufactures to sell ZEVs, some states in the USA have adopted a regulatory credits program, termed the ZEV Program. The ZEV Program is a state law, which currently applies to 12 states in the USA....