Tesla set for a $1 billion windfall in Europe after rivals fail to sell enough EVs
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- Tesla might be about to make a huge windfall off its rivals failing to sell enough EVs.
- The US automaker is banding together with rivals like Ford and Toyota to help them meet tough new European emissions rules.
- UBS analysts estimated the move could net Tesla $1 billion in compensation.
Tesla might be about to make a huge windfall on electric cars its rivals aren't selling.
The EV giant is banding together with major competitors, including Ford, Stellantis, and Toyota, to help them meet European emissions targets, in a deal UBS analysts estimated could net the company as much as $1 billion.
European manufacturers face tough emissions targets this year, and could be hit with hundreds of millions of dollars worth of penalties and fines if they fail to comply.
The strict new measures come even as electric vehicle sales across the continent have stagnated, with several countries rolling back subsidies for customers buying EVs.
Carmakers lagging behind on electric vehicle sales have the option to "pool" with rivals to average out their emissions, effectively buying carbon credits from EV heavyweights like Tesla.
Toyota, Ford, Stellantis, and Mazda were among the automakers who have "pooled" with Tesla, according to a European Union filing released on Wednesday, with Mercedes-Benz forming a separate pool with Volvo and EV brand Polestar.
A report from UBS analysts on Wednesday found that Tesla's total compensation for selling credits to its pooled rivals could exceed $1 billion, while Volvo and Polestar could be in line to bank $300 million.
Selling regulatory credits to rivals who are lagging behind on EV sales has been a highly lucrative business for Tesla in recent years, with the company making $739 million from the practice in the third quarter of 2024.
Tesla's regulatory credits business has long been expected to diminish as other automaker's EV efforts pick up speed, but it has remained strong as lacklustre demand for electric vehicles has left many of the company's rivals struggling to meet emission targets.
That could soon change, however.
Incoming US president — and Elon Musk's political ally — Donald Trump has promised to roll back emissions targets and EV regulations once in office. JP Morgan analysts recently warned that removing EV regulations and subsidies could cost Tesla as much as $3.2 billion.
Tesla did not respond to a request for comment from Business Insider.