Tesla Losing Source of Credit Revenue That’s Been Key to Profits
Signage outside a Tesla Inc. service center in Sydney. (Photographer: Brent Lewin/Bloomberg)

Tesla Losing Source of Credit Revenue That’s Been Key to Profits

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

Stellantis NV, the automaker formed through the merger of PSA Group and Fiat Chrysler, announced Wednesday it is exiting a European emissions-credit agreement with Tesla. Complying with standards on its own will save the company about 300 million euros ($360 million), roughly two-thirds of which would have gone to Tesla, 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 U.S. 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.

Tesla Losing Source of Credit Revenue That’s Been Key to Profits

Stellantis Chief Executive Officer 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 1.8 billion euros over three years. The company is now paired up with PSA’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 July 8.

Stellantis shares rose as much as 5.9% in New York trading, while Tesla advanced as much as 1.7%.

©2021 Bloomberg L.P.

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