Are Tesla Stocks Shariah-Compliant and Halal?

The discussion around whether certain investments align with Islamic principles often intersects with the technology sector. As we explore the question of whether Tesla stocks are Shariah-compliant and halal, it's important to understand the criteria and standards used to determine such status.

Understanding Halal Stocks

Halal stocks refer to stocks issued by companies that adhere to Islamic practices. Under the principles of Shariah, investors are allowed to invest in the stock market provided that they meet certain criteria. Any money earned from these investments is also considered halal. This article delves into the specifics of Tesla's compliance with Shariah standards.

Tesla's Compliance with Shariah Standards

To understand the status of Tesla's stocks, it's crucial to examine the company from the perspective of Shariah standards. According to the Zoya mobile application, Tesla is considered 96 percent Shariah-compliant. This assessment is based on the company's business activities and revenue sources, which we will explore further.

Identifying Non-Shariah-Compliant Activities

Under Islamic precepts, there are several business activities that are prohibited, including:

Interest (riba) Alcohol sales Sales of pork and related products Tobacco sales and related activities Gambling and betting Activities related to music and entertainment Other activities against Shariah law

In the case of Tesla, the Bulk of revenue from its leasing contracts is estimated to account for only 2.9 percent of its total revenue. This means that according to Halal Investors, the non-material part of Tesla's revenue is considered haram. Therefore, it's essential to screen Tesla for any prohibited activities before concluding whether its stocks are Shariah-compliant.

Criteria for Shariah-Compliant Investments

There are two primary ways to make Islamic investments: Direct Investments and Indirect Investments.

Direct Investments

Direct investments involve individual trading of shares and equities listed on BSE and NSE. This requires finding Shariah-compliant stocks and adhering to Shariah screening standards. Here’s a brief explanation of the parameters and standards:

Sector-Based Screening: In this stage, companies are examined based on their business activities. They should not be engaged in activities such as financial services, alcohol sales, pork sales, tobacco, gambling, and related media and entertainment.

Accounting-Based Screening: Companies must meet financial ratios, including Debt-to-Equity, Accounts Receivables-to-Equity, and Cash-to-Equity. A company must pass these ratios to be considered Shariah-compliant.

Dividend Purification

If any income comes from non-Islamic activities, it must be purified and given to charity. This process is known as Dividend purification.

Evaluating Tesla's Stocks

Based on the information provided by the Islamicly app, Tesla is Shariah-compliant. The app uses a combination of sector-based and accounting-based screening to evaluate companies. According to their criteria, Tesla's revenue from activities that violate Shariah law is minimal, hence its classification as Shariah-compliant.

Conclusion

While Tesla's stocks can be considered Shariah-compliant, it's important for investors to review the criteria themselves and ensure that the companies they invest in align with their religious beliefs. Tools like the Islamicly app can help investors navigate these screening processes more efficiently.

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