Tesla is losing source of revenue that has been key to profits

Automotive Industry

Source: Automotive News Europe, 2021-05-07

Tesla is about to lose one source of the regulatory-credit revenue that has been crucial to its almost two-year run of consecutive quarterly profits.

Stellantis, the automaker formed through the merger of  PSA Peugeot Citroën and Fiat Chrysler, said on Wednesday 5 May that it is exiting a European emissions-credit agreement with Tesla.

Complying with standards on its own will save the company about €300m ($360m), roughly two-thirds of which would have gone to Tesla, Stellantis Chief Financial Officer Richard Palmer said.

"Stellantis will be in a position to achieve CO2 targets in Europe for 2021 without open passenger-car pooling arrangements with other automakers," the company said in an emailed statement. A Tesla representative didn’t immediately respond to a request for comment.

Tesla has steadily increased sales of regulatory credits to carmakers that need help complying with emissions standards that are getting stricter in Europe, China and the US.

The revenue goes straight to the electric-car maker’s bottom line and has routinely exceeded net income on a generally accepted accounting principles, or GAAP, basis. Without the credit sales in recent quarters, the company would have recorded losses. Stellantis CEO Carlos Tavares first announced the plan to end its agreement with Tesla in an interview with the French weekly Le Point.

The company will consider partnering in the future with Tesla, if necessary, in other regions in order to achieve the lowest cost of compliance.

Fiat Chrysler first announced credit-purchasing agreements with Tesla in May 2019, saying then that it would cost the company €1.8bn over three years.

FCA is now paired up with PSA Peugeot Citroën’s lineup of plug-in hybrid and fully electric models, which will continue to expand this year. It has scheduled an EV-related investor day for 8 July.

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