Tesla (TSLA, Financial) stands to gain significantly due to the inability of its competitors to meet stringent EU electric vehicle emission targets. The European Union has set tough emissions standards for car manufacturers, with non-compliance leading to hefty fines reaching hundreds of millions of dollars. Despite these new measures, electric vehicle sales across Europe have stagnated, and some countries have removed consumer subsidies for purchasing electric vehicles.
However, EU regulations provide a loophole allowing automakers to pool their fleets together, averaging emissions. Companies falling behind in electric vehicle sales can buy carbon credits from giants like Tesla. Manufacturers such as Toyota, Ford, Stellantis, and Mazda have opted to pool with Tesla. Meanwhile, Mercedes-Benz has teamed up with Volvo and Polestar. UBS analysts estimate this strategy could result in a $1 billion windfall for Tesla.
