Is Tesla Stock Halal?

Is Tesla Stock Halal?

This report attempts to answer the question “Is Tesla Stock Halal?” by focusing on Tesla’s Business, Financial, Environmental, Social, and Governance (ESG) impact. We find that:

  • From a business perspective, Tesla does not generate a material part of its revenue from haram sources.
  • From a financial perspective, Tesla has no material reliance on interest (riba) to run its business.
  • From an ESG perspective, Tesla has an overwhelmingly positive impact. This assessment comes from acknowledging the millions of tons of carbon that Tesla’s electric vehicles have spared the planet as well as the safety Tesla vehicles afford their passengers.
  • We conclude with a Comfortable rating for Tesla stock. That is, we are comfortable investing in Tesla from a halal perspective.

For more details, read below…

How much of Tesla’s revenue comes from haram?

Tesla earns its revenue from the following sources:

  • Automotive Sales:

Primarily composed of Tesla’s electric vehicle sales. 

  • Automotive Leasing:

Tesla offers up to 48-month rental contracts for their vehicles.

Qualifying Tesla customers are given the option to purchase their vehicle after their lease has ended. 

  • Energy Generation and Storage:

Includes installation and sales of solar energy generation and storage products. 

These products include Tesla Solar Roof, Solar Panels, Powerwall, and Megapacks/Powerpacks.

  • Services and Other:

Includes sales of used vehicles, retail merchandise, vehicle insurance, repair and maintenance services, and access to Tesla’s Supercharging network.

From time to time, Tesla sells gimmick merchandise such as Tesla shorts and Tequila. 

Tesla has not mentioned the contributions these limited-time items make to Tesla’s overall revenue in any of its SEC filings. We think this is likely because gimmick products contribute only a trivial amount to overall revenue. Considering all other contributors to Tesla’s “Services and Other” segment, Practical Islamic Finance estimates gimmick products to contribute less than 1% of Tesla’s overall revenue. 

Practical Islamic Finance concludes:

Only a non-material portion of Tesla’s revenue comes from haram. 

Does Tesla rely on interest to operate?

Q1-2022Q2-2022
Interest Income / Revenue0.1%0.1%
Interest Expense / Total Operating Expense3.2%2.8%

Practical Islamic Finance concludes:

Tesla is not reliant on interest in its operations. 

What is Tesla’s Environmental, Social, and Governance (ESG) impact?

Environment

Tesla vehicles have saved millions of tons of CO2 from polluting the environment.

According to the World Health Organization, “air pollution kills an estimated seven million people worldwide every year.”

One can extrapolate from the prior two data points to say that Tesla’s electric vehicles have saved lives because of the improvement in air quality they have brought about.

Social

According to Tesla’s Q4 2021 safety report, Tesla vehicles registered 1 accident for every 4.31 million miles driven with their Autopilot system engaged. 

For drivers who were not using Autopilot technology (no Autosteer and active safety features), Tesla recorded one crash for every 1.59 million miles driven.

Tesla compares their accident data with the NHTSA stating that 1 accident occurs for every 484,000 miles in the United States.

Therefore, riding in one of Tesla’s vehicles with autopilot engaged can be 10x safer compared than a non-Tesla car.

Tesla’s Xinjian showroom

On Dec. 31, 2021, Tesla announced it was opening a showroom in Xinjiang, a region that is home to China’s Uyghur Muslim population which has been subjected to immense brutality and even enslavement by the Chinese Communist Party (CCP).

While we do not agree with Tesla’s decision to open a showroom in Xinjian since the event was likely used by the CCP to advertise normality in this region, we have not seen evidence suggesting that Tesla’s showroom is having a negative impact on the Uyghur Muslim population in Xinjiang or increasing their suffering.

Governance

No notable governance highlights.

Is Tesla Stock Halal?

From Tesla’s business, financial, and ESG reviews, Practical Islamic Finance rates Tesla stock as:

Comfortable to invest in from a Halal perspective.


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Sources

Tesla Vehicle Safety Report 

Tesla Carbon Impact Live Count 

WHO Air pollution 

Lease-End Options 

Form 10-Q 

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