Tesla poised for $1 bn windfall from EU's emissions curbs

Tesla could collect more than INR 1 billion (USD 1 billion) in compensation from rival automakers that need help meeting tougher pollution standards in the EU this year, UBS Group analysts said.

The US company will pool the fleet of electric vehicles it sells this year with at least five other manufacturers, led by Toyota Motor, Stellantis and Ford Motor, according to an EU document issued on Tuesday.

The arrangement allows carmakers to average out the emissions of their fleets, with those selling fewer EVs compensating companies like Tesla that over-comply with limits on carbon dioxide emissions.

"Tesla's compensation could even exceed INR 1 billion if it monetizes its entire long CO2 position," UBS analysts wrote in a report published Wednesday. Volvo Car, which is pooling with Mercedes-Benz Group, could be in line for as much as INR 300 million in compensation this year, Hummel estimated in August.

Carmakers in the region have lobbied for the EU to ease the CO2 standards ratcheting up this year, warning that they'll be forced to either pay penalties, reduce production, pool with foreign competitors or sell EVs at steep losses. Plug-in car registrations stagnated last year after governments in markets including Germany phased out subsidies.

Any other manufacturers wishing to join Tesla's pool have until February 5 to submit their application, the EU document shows. Applicants must sign a non-disclosure agreement and provide data to Tesla on their CO2 emissions, so that the company can assess any risk that the pool would not meet its targets.

Manufacturers keen to join the Volvo-Mercedes pool are subject to similar terms and have until February 7 to apply.

Stellantis pooling with Tesla comes as a surprise, the UBS analysts wrote, because former CEO Carlos Tavares insisted the company would comply with EU rules organically.

The tie-up eases pressure on Stellantis to ramp up production of EVs that launched behind schedule.