Investor's Corner
GM and Fiat Chrysler admit that they’re buying regulatory credits from Tesla
Being an automaker that exclusively produces all-electric vehicles, Tesla has been gaining significant revenue over the years by selling federal greenhouse gas credits to fellow carmakers, which are needed by the car companies to offset the sales of internal combustion vehicles in the US market. Filings earlier this year have revealed that two of Tesla’s most notable credit buyers are none other than General Motors Co. (GM) and Fiat Chrysler Automobiles NV (FCA).
In filings to the state of Delaware, GM and FCA disclosed that they have an agreement to purchase greenhouse gas credits from Tesla. These filings, while light on details, are nevertheless notable, as they confirm that even established, veteran carmakers such as GM and Fiat Chrysler are looking to Tesla as a means to comply with the United States’ environmental regulations.
FCA’s purchase of credits from Tesla is quite unsurprising considering that the company has already been revealed to have entered an estimated $500 million open pool deal with the Silicon Valley-based electric car maker for the European region, which would allow Fiat Chrysler to count Tesla’s vehicles as part of its fleet to avoid incurring emissions penalties. What was surprising about the Delaware filings was that GM was purchasing credits from Tesla as well.
GM, after all, has been producing the Chevy Volt plug-in hybrid and Chevy Bolt EV for the US market for years. Despite the recent retirement of the Volt, it was largely assumed that GM’s electric and electrified vehicle lineup would leave the automaker in the clear when it comes to regulatory compliance. Nevertheless, Mike Taylor, founder and president of Houston-based environmental credit consultant and broker Emission Advisors, noted that GM’s decision to purchase credits from Tesla could be part of the company’s preparations for the future, especially if political tides shift in the 2020 election. “This might not be a bad hedge. If a Democrat gets elected in 2020, GM may need the credits and prices may go up,” Taylor said.
This assumption appears to have been highlighted by GM spokesman Pat Morrissey. In a statement to Bloomberg, the spokesman noted that the credits GM bought from Tesla are insurance against “future regulatory uncertainties.” FCA spokesman Eric Mayne, for his part, indicated that US standards are getting stricter at a pace that “far exceeds” the current level of demand for electric cars that are required for compliance. “Until demand catches up with regulatory requirements, and there is regulatory relief, we will use credits as appropriate,” Mayne stated.
Tesla has not issued a comment about GM and FCA’s credit purchases so far, though it should be noted that Chief Financial Officer Zachary Kirkhorn pointed out during a call with prospective investors that sales of credits will be a more significant part of the electric car maker’s business in the following years. The previous quarters have proven lucrative for Tesla in this light, as the company reported $216 million in revenue from the sale of regulatory credits in the first quarter alone.
Automakers in the United States appear to be dependent on credits to meet the country’s regulations so far. For the 2017 model year, for example, all American automakers were found to have complied with US rules, though the EPA has noted that most large car companies used credits to meet the requirements.
Tesla stock (NASDAQ: TSLA) closed at an all-time high on Tuesday, jumping over 3 percent during the day and finishing at $489.88.
The price beats the previous record close, which was $479.86.
Shares have had a crazy year, dipping more than 40 percent from the start of the year. The stock then started to recover once again around late April, when its price started to climb back up from the low $200 level.
This week, Tesla started to climb toward its highest levels ever, as it was revealed on Sunday that the company was testing driverless Robotaxis in Austin. The spike in value pushed the company’s valuation to $1.63 trillion.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
It is the seventh-most valuable company on the market currently, trailing Nvidia, Apple, Alphabet (Google), Microsoft, Amazon, and Meta.
Shares closed up $14.57 today, up over 3 percent.
The stock has gone through a lot this year, as previously mentioned. Shares tumbled in Q1 due to CEO Elon Musk’s involvement with the Department of Government Efficiency (DOGE), which pulled his attention away from his companies and left a major overhang on their valuations.
However, things started to rebound halfway through the year, and as the government started to phase out the $7,500 tax credit, demand spiked as consumers tried to take advantage of it.
Q3 deliveries were the highest in company history, and Tesla responded to the loss of the tax credit with the launch of the Model 3 and Model Y Standard.
Additionally, analysts have announced high expectations this week for the company on Wall Street as Robotaxi continues to be the focus. With autonomy within Tesla’s sights, things are moving in the direction of Robotaxi being a major catalyst for growth on the Street in the coming year.
Elon Musk
Tesla needs to come through on this one Robotaxi metric, analyst says
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Tesla needs to come through on this one Robotaxi metric, Mark Delaney of Goldman Sachs says.
Tesla is in the process of rolling out its Robotaxi platform to areas outside of Austin and the California Bay Area. It has plans to launch in five additional cities, including Houston, Dallas, Miami, Las Vegas, and Phoenix.
However, the company’s expansion is not what the focus needs to be, according to Delaney. It’s the speed of deployment.
The analyst said:
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Profitability will come as the Robotaxi fleet expands. Making that money will be dependent on when Tesla can initiate rides in more areas, giving more customers access to the program.
There are some additional things that the company needs to make happen ahead of the major Robotaxi expansion, one of those things is launching driverless rides in Austin, the first city in which it launched the program.
This week, Tesla started testing driverless Robotaxi rides in Austin, as two different Model Y units were spotted with no occupants, a huge step in the company’s plans for the ride-sharing platform.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
CEO Elon Musk has been hoping to remove Safety Monitors from Robotaxis in Austin for several months, first mentioning the plan to have them out by the end of 2025 in September. He confirmed on Sunday that Tesla had officially removed vehicle occupants and started testing truly unsupervised rides.
Although Safety Monitors in Austin have been sitting in the passenger’s seat, they have still had the ability to override things in case of an emergency. After all, the ultimate goal was safety and avoiding any accidents or injuries.
Goldman Sachs reiterated its ‘Neutral’ rating and its $400 price target. Delaney said, “Tesla is making progress with its autonomous technology,” and recent developments make it evident that this is true.
Investor's Corner
Tesla gets bold Robotaxi prediction from Wall Street firm
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Tesla (NASDAQ: TSLA) received a bold Robotaxi prediction from Morgan Stanley, which anticipates a dramatic increase in the size of the company’s autonomous ride-hailing suite in the coming years.
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Percoco dug into the Robotaxi fleet and its expansion in the coming years in his latest note, released on Tuesday. The firm expects Tesla to increase the Robotaxi fleet size to 1,000 vehicles in 2026. However, that’s small-scale compared to what they expect from Tesla in a decade.
Tesla expands Robotaxi app access once again, this time on a global scale
By 2035, Morgan Stanley believes there will be one million Robotaxis on the road across multiple cities, a major jump and a considerable fleet size. We assume this means the fleet of vehicles Tesla will operate internally, and not including passenger-owned vehicles that could be added through software updates.
He also listed three specific catalysts that investors should pay attention to, as these will represent the company being on track to achieve its Robotaxi dreams:
- Opening Robotaxi to the public without a Safety Monitor. Timing is unclear, but it appears that Tesla is getting closer by the day.
- Improvement in safety metrics without the Safety Monitor. Tesla’s ability to improve its safety metrics as it scales miles driven without the Safety Monitor is imperative as it looks to scale in new states and cities in 2026.
- Cybercab start of production, targeted for April 2026. Tesla’s Cybercab is a purpose-built vehicle (no steering wheel or pedals, only two seats) that is expected to be produced through its state-of-the-art unboxed manufacturing process, offering further cost reductions and thus accelerating adoption over time.
Robotaxi stands to be one of Tesla’s most significant revenue contributors, especially as the company plans to continue expanding its ride-hailing service across the world in the coming years.
Its current deployment strategy is controlled and conservative to avoid any drastic and potentially program-ruining incidents.
So far, the program, which is active in Austin and the California Bay Area, has been widely successful.
Tesla aims to combat common Full Self-Driving problem with new patent
Delaware Supreme Court reinstates Elon Musk’s 2018 Tesla CEO pay package
