Is Tesla Stock Halal?

Read our most recent Halal Report on Tesla here.

A common question I get is whether Tesla shares are Halal or Haram.

I mentioned in a previous video/article that I thought ownership of Tesla shares was absolutely Halal.

I think it’s useful to revisit a Halal designation every so often to make sure that nothing has changed that would cause one to change their original assessment.

In this article, I will revisit my Halal designation for Tesla in light of Tesla’s most recent quarterly report.

I use a scale of 1 through 10 for my halal ratings with 1 being absolutely haram and 10 being absolutely halal.

The alcoholic beverage company Budweiser would be a 1, i.e. absolutely Haram.

Rakaan’s free trips to Hajj and Umara would be a 10, i.e. absolutely Halal.

In most cases, a company will fall somewhere on this spectrum between absolutely halal and absolutely haram and it’s up to you to make a decision about what you feel comfortable with.

Criteria for Scoring the Halalness of Stocks

The criteria I use for score designation are:

1- Can I describe the amount of income the company earns from non-halal sources compared to its overall income as being trivial?

2- Do I think the company is causing more good than harm?

3- My personal gut check: How comfortable am I publicizing my investment in this company?

If you want to know why I use these criteria watch my video/read my article: How to pick Halal stocks.

Revenue Breakdown

Starting with my first criteria regarding the company’s income, according to 4th Quarter, 2019 reported results [1], Tesla’s Revenue breakdown is as follows:

*Services and other: refers to revenue from vehicle repairs and sales of parts and used cars. [2]

Nothing in Tesla’s revenue breakdown strikes me as a Haram source of revenue.

Common concerns I hear about Tesla’s operations are the following:

Tesla Lending:

Tesla itself does not lend money to car buyers.

When you apply for Tesla financing, what’s really happening is that you’re applying for financing through Tesla, not from Tesla; Tesla only helps you secure financing from another lender.

BTW, if you live in the United States are in the market for a Tesla and would like a halal way to finance your purchase, go to and apply for funding. 

Tesla leasing:

A lease is just a long-term rental contract.

There is nothing wrong with renting an asset in Islam. Renting was commonplace at the time of the prophet peace be upon him and he never prohibited it.

Tesla’s Debt: 

There are two schools of thought as it relates to debt and its impact on the halalness of a stock.

To be clear, interest-bearing debt is haram in any amount.

However, almost all commentators on this topic agree that designating all companies that have any dealings with interest-bearing debt as being haram would leave virtually no halal companies left for Muslims to invest in which is not practical and would ultimately be detrimental to the well-being of Muslims in general.

I agree with this.

In light of this position, almost all commentators on the topic have attempted to limit the amount of debt on a company’s books to some arbitrary percentage of market capitalization (number of shares outstanding X price of a share). Some have said the limit should be 30% others have said the limit should be 33%. Both numbers were pretty much pulled out of thin air and have no basis in either the Quran or Sunnah. 

This is the wrong approach. 

Limiting debt-to-market capitalization to some arbitrary percentage will often mean that when a company is expensive, Muslims are allowed to buy it but when it is cheap and the debt-to-market capitalization is higher then Muslims aren’t allowed to buy.

Tesla is a good example of the debt-to-market capitalization limit being completely counterproductive.

When a share of Tesla was going for $200 9 months ago, the debt-to-market capitalization ratio was too high according to the aforementioned arbitrary limits set on debt-to-market capitalization and it was deemed haram to invest in.

Now that the price of a share is $750/share the debt-to-market cap ratio is well below the threshold and it’s suddenly halal to invest in.

This is a horrible approach.

As an alternative, I’ve suggested my criteria which are based on putting the debt level in the context of what the company does. 

Are they curing cancer? If yes, then maybe I’m more flexible with their debt amount. Are they simply a highly indebted video gaming company? Then I’m not going to tolerate much debt.

In the case of Tesla, they are playing a key role in saving humanity from its reliance on fossil fuels through electrification of mass transport. Accordingly, I’m going to be flexible on their debt levels. 

Anyway, at this point, their debt level is on the smaller end of the spectrum compared to the size they’ve reached.

Is Tesla’s Impact Good or Bad?

In the case of Tesla, their impact is clearly positive. Tesla is leading the charge of transitioning humanity from reliance on fossil fuels to relying on renewable sources of energy that don’t destroy the environment, specifically solar energy.

In fact, one could argue that Tesla already had a more positive impact on humanity in its short life than any other company during the same period.

Am I Comfortable with Publicizing My Investment in Tesla?

Yes, very.

My Halalness Score For Tesla Stock

My overall Halalness score for Tesla is a 9.5/10.

I shaved off half a point because of their referring customers to interest-based lenders when they ask for financing.

You’re welcome Elon Musk.




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