We now have our first look at one of the major features in 2022.28.
With 2022.28 Tesla is introducing the ability to minimize a video in Tesla Theater. This will allow you to reduce the size of the video that's playing so that you can access other car functions.
Tesla first introduced Tesla Theater with Netflix and YouTube in its v10 release back in 2019. Tesla Theater allows Premium Connectivity subscribers to watch streaming services such as Disney+ while their vehicle is parked. You can also watch streaming videos without Premium Connectivity if you're connected to Wi-Fi.
In Tesla Theater you have a quick actions bar that lets you access some vehicle functions when the screen is tapped, however, the functions offered are fairly limited.
If you want to turn on your seat heater, open your trunk, or access any other vehicle functions, then you're stuck having to exit the video app, perform the function you wanted, reload the app and find your video again. It can be a slow and painful process.
Depending on what you're trying to access, one option is to use the Tesla app, however now with 2022.28 you will now be able to minimize the video that's currently playing in order to perform other functions.
When playing a video in full screen, there will be a new minimize icon at the top left corner that allows you to reduce the size of the video that's currently playing.
With update 2022.28 Tesla is making improvements to Tesla Theater
Not a Tesla App
When you tap the button in a Model 3 or Model Y, it will continue to play the video in a smaller size on the right portion of the screen, where maps usually lie. This will expose the vehicle's bottom menu and the car visualization area, giving you access to open the frunk, trunk, door locks and more. You'll now be able to perform most functions without ever having to stop the video.
Tapping on the video will bring it back to full screen.
For owners who often rely on Tesla Theater for entertainment, this will be a huge improvement and makes Tesla Theater much more usable.
The animation when the video is minimizing and maximizing stuttering a little bit, although it's perfectly usable and it's likely limited by the CPU in the vehicle. We expect that this will be much smoother on newer vehicles with MCU 3.
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Tesla is currently not rolling out update 2022.28 to customers as it's in later testing phases. However, 2022.28 may start rolling out to select customers in the next couple of weeks, so keep an eye on our software update pages or subscribe to our newsletter.
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For years, a key part of the Tesla investment thesis - and a common point of criticism - has been its revenue from regulatory credits. This “free money,” as Piper Sandler analyst Alex Potter put it, has been a significant contributor to Tesla’s bottom line and profitability to date.
With increasing competition and evolving government policies, a persistent question has followed Tesla: when is this multi-billion-dollar revenue stream going to dry up? Before the Q2 2025 Earnings Call, Alex Potter suggested the answer is that it won’t, at least for now. He’s forecasting Tesla will still book around $3 billion in regulatory credits this year. Now, with the latest numbers in hand, we can take a closer look.
What Exactly Are Regulatory Credits?
These credits can easily be confusing due to their mixed state/federal/international natures. Regulatory credits are a mechanism used by governments to accelerate the transition to zero-emission vehicles (ZEV).
Regulators, like the California Air Resources Board (CARB), with its ZEV program, or the European Union with its CO2 emissions targets, require legacy automakers to sell a certain percentage of electric vehicles. If they fail to meet this quota, they have two options.
They can either pay a fine or purchase regulatory credits from a company that has a surplus to cover the gap. In general, companies that hold surplus sell them for less than the fine, incentivizing automakers with high emissions to purchase credits rather than paying the steep fines.
As a company that only sells EVs, Tesla generates a massive number of these credits simply by conducting its core business. Selling these credits to other automakers, who would otherwise be hit by fines, results in what is nearly 100% pure profit for Tesla.
Tesla’s Trend
The Q2 2025 Earnings Call provides us with clear, if somewhat concerning, data points. Revenue from automotive regulatory credits was $439 million in Q2 2025. On its own, that’s a substantial number. However, looking back, it doesn’t look great. Instead, it confirms a general downward trend.
Quarter
Revenue from Regulatory Credits (USD)
2024
Q2 2024
$890 million
Q3 2024
$739 million
Q4 2024
$692 million
2025
Q1 2025
$595 million
Q2 2025
$439 million
Tesla confirmed that lower regulatory credit revenue had a negative impact on both year-over-year revenue and profitability. This steady decline seems to support the narrative that as legacy automakers begin to produce more of their own EVs, their need to buy credits from Tesla is diminishing.
The Effects of the Big Beautiful Bill
A major factor accelerating this decline in the US is the recently enacted BBB. While the bill has wide-ranging impacts on tax policy and clean energy, its most direct impact was on regulatory credits. It completely eliminates the fines for non-compliance with the Corporate Average Fuel Economy (CAFE) standards for passenger cars.
Previously, automakers faced substantial fines for failing to meet these fuel economy targets - fines that totaled over $1.1 billion between 2011 and 2020. This penalty was the stick that made the market for regulatory credits. With the fine effectively set to zero, there is no incentive for legacy automakers to produce more efficient vehicles or purchase credits from Tesla in the US market.
In addition, several legacy automakers have stopped sales of their EVs in the US, citing poor performance, but a good portion of the reason is the end of the penalties.
The Analyst View
This is where the situation gets more nuanced and where Alex Potter’s analysis is crucial. Despite the quarterly decline, the firm still anticipates that Tesla will earn $3 billion in credits in 2025, followed by $2.3 billion in 2026.
There are several factors at play here. First off, the sale of credits isn’t always a smooth, linear process. It often involves large, negotiated deals with multiple other automakers that can cause revenue to be inconsistent from quarter to quarter. A weaker Q2 doesn’t necessarily mean a stronger Q3 or Q4, but it does happen.
In addition, while legacy automakers are producing more EVs, regulators are simultaneously moving the goalposts. The EPA has set much stricter emissions standards as of 2027 - but we may not know how these impact the sale of credits in the United States at this time. However, the EU’s Fit for 55 package mandates a 100% reduction in CO2 emissions by 2035, with interim targets getting progressively tougher. This means that even if competitors sell more EVs, they’ll likely still fall short of these higher requirements, sustaining the international demand for Tesla’s credits.
Finally, no other automaker is producing EVs at Tesla’s scale in North America and Europe. In Q2 2025 alone, Tesla produced over 410,000 vehicles. This volume ensures that Tesla will continue to generate a massive surplus of credits faster than any other automaker.
Shrinking, But Still Significant
The era of regulatory credits as a pillar of Tesla’s profitability is clearly changing. The combination of increased competition elsewhere in the world and the removal of the federal CAFe penalties in the US creates a headwind in the regulatory credit market.
However, this isn’t the end of the market. The demands from stricter international regulations, particularly in Europe, remain robust. Coupled with Tesla’s unmatched EV production volume, international sales of credits will continue for a long time.
The revenue stream is transforming from a domestic gusher into a more internationally-focused and less predictable source of income. It is a shrinking but still significant revenue—billions of dollars in pure profit that will continue to help fund Tesla's ambitious transition into an AI and robotics leader.
Tesla has just soft-launched two new official accessories for its two best-selling vehicles, the Model 3 and Model Y. These items, which are currently only available on the Australian Tesla Shop, are a new Headrest Pillow and Lumbar Pillow, which are designed to offer improved comfort and support for drivers and passengers.
Tesla is pricing the Headrest Pillow at $60 AUD (about $39 USD), while the Lumbar Pillow is priced at $70 AUD ($45 USD). While Tesla is advertising them as a set in their shop, they are sold individually.
Designed to Match
According to Tesla, the design inspiration for these new pillows comes directly from the already comfortable seats of your Tesla. They feature a minimalist design that matches the vehicle's interior and simply display a Tesla wordmark.
According to Tesla, both accessories are built from a synthetic ultra-fine leather material chosen to match the existing vehicle interior - it seems quite similar to the already existing and much-loved Alcantara trim, but without the suede-like texture. Tesla describes the material as having excellent wear resistance and a delicate texture, which means it should last and be comfortable to put your head on.
Comfort and Support
The focus of the new products is on improving passenger and driver comfort. The headrest is filled with DuPont bio-cotton, which means it should be soft, safe, and eco-friendly.
The lumbar pillow is tailored to the specific curvature of the Model 3 and Model Y seats and is designed to conform to the body’s natural lumbar curve, offering additional support.
The new lumbar pillow is a particularly welcome addition, as Tesla has stopped including adjustable lumbar support on the passenger seat on the Model 3 and Y in 2021. Tesla claimed that data showed passengers weren’t adjusting the lumbar support on the seat, so they decided to cut costs by removing the ability to adjust it.
The new lumbar pillow looks very comfortable.
Not a Tesla App
Availability
For now, both the new Headrest and Lumbar Pillows are only available for purchase in Australia (Thanks, Mike and Kamal). However, as is common with Tesla accessory launches, a wider rollout to other regions and markets will likely follow in the coming weeks or months.
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