Tesla Inc.’s business selling regulatory credits to automakers that need help complying with emissions rules will keep on booming this year, according to Credit Suisse.
Regulatory credit revenue probably will rise to $2 billion from about $1.4 billion in 2020, analyst Dan Levy predicted in a note previewing Tesla’s quarterly earnings Wednesday. He wrote that his estimate for 2021 is higher than consensus of $1.3 billion.
A surge in regulatory-credit revenue had been a major factor in Tesla’s streak of quarterly profits that’s sent shares soaring and made the stock eligible for the S&P 500. Levy suggested in his note that Europe’s stricter limits on automotive carbon-dioxide emissions will present an opportunity for the company this year.
Tesla doesn’t say which carmakers it sells credits to, though General Motors and Fiat Chrysler Automobiles disclosed in 2019 that they had reached agreements to buy U.S. greenhouse-gas credits from the company. FCA also estimated that year it would spend 1.8 billion euros ($2.2 billion) on credits over several years and announced it would pool its fleet with Tesla’s to comply with the European Union’s CO2 standards.
FCA merged with PSA Group earlier this month to form Stellantis. CEO Carlos Tavares said last week that the company will have no CO2 compliance issues once Fiat Chrysler’s agreements with Tesla expire.