Investor's Corner
Tesla’s rumored sale of regulatory credits to VW to last ‘two to three years’
Tesla’s rumored sale of its regulatory credits to Volkswagen to help the German automaker reach emissions targets is likely to last “two to three years,” according to VW Auto Group CEO Herbert Diess.
The sale of credits will help Volkswagen align with regional emissions targets that could affect the company’s ability to conduct business in China and the United States. The emissions targets are different in every country, some with more strict regulations than others. China has some of the toughest emissions regulations globally due to the massive number of passenger vehicles that operate in the country. Due to this fact, some automakers, like Volkswagen, must purchase regulatory credits from other automakers to meet the emissions targets. It helps the purchasing automaker avoid hefty fines, while it can help the selling automaker solidify financial safety and fund projects.
Tesla doesn’t have an issue reaching these targets due to its environmentally-friendly electric powertrains. For over a year, Tesla has been selling regulatory credits to other automakers, a deal that has helped Tesla fund some of its international projects. One of the most notable deals is Tesla’s sale of credits to Fiat-Chrysler Automobiles, requiring FCA to pay Tesla $2 billion through 2023. The sale was to help FCA reach the European Union’s CO2 requirement of 95g per kilometer in 2020. This deal recently ended after Stellantis CEO Carlos Tavares stated that the company would no longer need to purchase the credits from Tesla. This was due to the merger between Peugeot S.A. (Groupe PSA) and FCA in January 2021, which ultimately birthed Stellantis. Stellantis now controls 14 traditional automotive brands, including Fiat, Chrysler, Jeep, Maserati, and Peugeot.
However, Tesla isn’t losing all of its deals for its regulatory credits. It appears Volkswagen will still purchase credits from Tesla. Although it hasn’t been officially confirmed who VW will get its credits from, recent reports indicate that Tesla will be the seller. Recent comments from Herbert Diess, CEO of the Volkswagen Auto Group, on the company’s Earnings Call earlier today seem to indicate that the company will continue for several years.
?@VWGroup ‘s Diess confirms they are paying regulatory credits in China and US (likely to @tesla) and says they will continue to for the next “two to three years”, phasing out as the EV roll-out ramps up.
Chinese Q1 BEV volumes just 6,244 units compared to 42,421 in Europe. pic.twitter.com/KrCdgjOafy
— Matthias Schmidt (@auto_schmidt) May 6, 2021
“In Europe, we are confident that we will comply with the fleet targets,” Diess said during the Earnings Call. However, the case is different in China and the United States, and Diess says that the automaker will need to rely on credits to avoid the fines for “the next two or three years.” With VW’s expanding EV strategy, it appears that the German company will no longer need to purchase these credits by 2024 at the latest.
In China, VW will likely be purchasing the credits from Tesla. After a report from Reuters in April indicated that VW’s joint venture with state-owned Chinese carmaker FAW, called FAW-Volkswagen, would be purchasing credits from Tesla to meet the environmental standards set by the Chinese government. Three individuals close to the matter informed Reuters of the deal.
Concerns regarding Tesla’s financials and its ability to remain profitable without the excessive sale of EV credits continue to rage on. However, Tesla has shown that it generates revenue through several mediums, including automotive sales, car leases, and other investments, including the automaker’s Bitcoin purchase in late 2020. The $1.5 billion Bitcoin purchase was a way for not immediately used cash could generate “some level of return…but also preserve liquidity,” Tesla CFO Zachary Kirkhorn said during the company’s most recent Earnings Call.
Ultimately, it isn’t known who Volkswagen will purchase the credits from globally. However, if recent reports are correct, Tesla will be sending its credits to VW in return for hefty $56 per green credit prices.
Tesla stock (NASDAQ: TSLA) has landed an elusive “must own” status from Wall Street firm Melius, according to a new note released early this week.
Analyst Rob Wertheimer said Tesla will lead the charge in world-changing tech, given the company’s focus on self-driving, autonomy, and Robotaxi. In a note to investors, Wertheimer said “the world is about to change, dramatically,” because of the advent of self-driving cars.
He looks at the industry and sees many potential players, but the firm says there will only be one true winner:
“Our point is not that Tesla is at risk, it’s that everybody else is.”
The major argument is that autonomy is nearing a tipping point where years of chipping away at the software and data needed to develop a sound, safe, and effective form of autonomous driving technology turn into an avalanche of progress.
Wertheimer believes autonomy is a $7 trillion sector,” and in the coming years, investors will see “hundreds of billions in value shift to Tesla.”
A lot of the major growth has to do with the all-too-common “butts in seats” strategy, as Wertheimer believes that only a fraction of people in the United States have ridden in a self-driving car. In Tesla’s regard, only “tens of thousands” have tried Tesla’s latest Full Self-Driving (Supervised) version, which is v14.
Tesla Full Self-Driving v14.2 – Full Review, the Good and the Bad
When it reaches a widespread rollout and more people are able to experience Tesla Full Self-Driving v14, he believes “it will shock most people.”
Citing things like Tesla’s massive data pool from its vehicles, as well as its shift to end-to-end neural nets in 2021 and 2022, as well as the upcoming AI5 chip, which will be put into a handful of vehicles next year, but will reach a wider rollout in 2027, Melius believes many investors are not aware of the pace of advancement in self-driving.
Tesla’s lead in its self-driving efforts is expanding, Wertheimer says. The company is making strategic choices on everything from hardware to software, manufacturing, and overall vehicle design. He says Tesla has left legacy automakers struggling to keep pace as they still rely on outdated architectures and fragmented supplier systems.
Tesla shares are up over 6 percent at 10:40 a.m. on the East Coast, trading at around $416.
Investor's Corner
Tesla analyst maintains $500 PT, says FSD drives better than humans now
The team also met with Tesla leaders for more than an hour to discuss autonomy, chip development, and upcoming deployment plans.
Tesla (NASDAQ:TSLA) received fresh support from Piper Sandler this week after analysts toured the Fremont Factory and tested the company’s latest Full Self-Driving software. The firm reaffirmed its $500 price target, stating that FSD V14 delivered a notably smooth robotaxi demonstration and may already perform at levels comparable to, if not better than, average human drivers.
The team also met with Tesla leaders for more than an hour to discuss autonomy, chip development, and upcoming deployment plans.
Analysts highlight autonomy progress
During more than 75 minutes of focused discussions, analysts reportedly focused on FSD v14’s updates. Piper Sandler’s team pointed to meaningful strides in perception, object handling, and overall ride smoothness during the robotaxi demo.
The visit also included discussions on updates to Tesla’s in-house chip initiatives, its Optimus program, and the growth of the company’s battery storage business. Analysts noted that Tesla continues refining cost structures and capital expenditure expectations, which are key elements in future margin recovery, as noted in a Yahoo Finance report.
Analyst Alexander Potter noted that “we think FSD is a truly impressive product that is (probably) already better at driving than the average American.” This conclusion was strengthened by what he described as a “flawless robotaxi ride to the hotel.”
Street targets diverge on TSLA
While Piper Sandler stands by its $500 target, it is not the highest estimate on the Street. Wedbush, for one, has a $600 per share price target for TSLA stock.
Other institutions have also weighed in on TSLA stock as of late. HSBC reiterated a Reduce rating with a $131 target, citing a gap between earnings fundamentals and the company’s market value. By contrast, TD Cowen maintained a Buy rating and a $509 target, pointing to strong autonomous driving demonstrations in Austin and the pace of software-driven improvements.
Stifel analysts also lifted their price target for Tesla to $508 per share over the company’s ongoing robotaxi and FSD programs.
Investor's Corner
Tesla wins $508 price target from Stifel as Robotaxi rollout gains speed
The firm cited meaningful progress in Tesla’s robotaxi roadmap, ongoing Full Self-Driving enhancements, and the company’s long-term growth initiatives.
Tesla received another round of bullish analyst updates this week, led by Stifel, raising its price target to $508 from $483 while reaffirming a “Buy” rating. The firm cited meaningful progress in Tesla’s robotaxi roadmap, ongoing Full Self-Driving enhancements, and the company’s long-term growth initiatives.
Robotaxi rollout, FSD updates, and new affordable cars
Stifel expects Tesla’s robotaxi fleet to expand into 8–10 major metropolitan areas by the end of 2025, including Austin, where early deployments without safety drivers are targeted before year-end. Additional markets under evaluation include Nevada, Florida, and Arizona, as noted in an Investing.com report. The firm also highlighted strong early performance for FSD Version 14, with upcoming releases adding new “reasoning capabilities” designed to improve complex decision-making using full 360-degree vision.
Tesla has also taken steps to offset the loss of U.S. EV tax credits by launching the Model Y Standard and Model 3 Standard at $39,990 and $36,990, Stifel noted. Both vehicles deliver more than 300 miles of range and are positioned to sustain demand despite shifting incentives. Stifel raised its EBITDA forecasts to $14.9 billion for 2025 and $19.5 billion for 2026, assigning partial valuation weightings to Tesla’s FSD, robotaxi, and Optimus initiatives.
TD Cowen also places an optimistic price target
TD Cowen reiterated its Buy rating with a $509 price target after a research tour of Giga Texas, citing production scale and operational execution as key strengths. The firm posted its optimistic price target following a recent Mobility Bus tour in Austin. The tour included a visit to Giga Texas, which offered fresh insights into the company’s operations and prospects.
Additional analyst movements include Truist Securities maintaining its Hold rating following shareholder approval of Elon Musk’s compensation plan, viewing the vote as reducing leadership uncertainty.
@teslarati Tesla Full Self-Driving yields for pedestrians while human drivers do not…the future is here! #tesla #teslafsd #fullselfdriving ♬ 2 Little 2 Late – Levi & Mario
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