EV maker Tesla (TSLA) could earn over €1 billion in compensation this year from automakers needing help to meet the EU’s strict carbon emission rules, according to UBS. This could be achieved by pooling its electric vehicle fleet with manufacturers like Toyota (TM), Stellantis (STLA), and Ford (F), which would allow these companies to average out fleet emissions. UBS analysts noted that Volvo (VLVLY) could receive up to €300 million in a similar arrangement with Mercedes-Benz (MBGAF).
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EU automakers need to decide whether to pay penalties, pool with rivals like Tesla and China’s BYD (BYDDY), or sell EVs at a loss as government subsidies for plug-in cars fade. Unsurprisingly, some lawmakers have urged the EU to reconsider its CO2 policies by warning that the current approach could weaken European manufacturers.
Stellantis Surprises Analysts
On the other hand, Stellantis joining Tesla’s pool was a surprise to analysts, given that former CEO Carlos Tavares planned to meet EU rules without partnerships. Separately, UBS questioned how Volkswagen (VWAGY) and Renault (RNLSY) plan to close their emission gaps and noted that failing to pool could force them to sell low-margin EVs, which would cut into profits. Renault also criticized EU policies by calling them counterproductive and said that it is undecided on whether or not to pool with competitors.
Is Tesla Stock a Buy, Hold, or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on TSLA stock based on 13 Buys, 12 Holds, and nine Sells assigned in the past three months, as indicated by the graphic below. After a 67% rally in its share price over the past year, the average Tesla price target of $320.90 per share implies 18.3% downside risk.
