Stellantis Extends CO2 Credit Purchases from Tesla Despite EU Regulation Shift

Introduction

Stellantis (NYSE: STLA) has confirmed that it will continue purchasing CO2 credits from Tesla (NASDAQ: TSLA) in 2025 to meet the European Union's strict emissions reduction targets. Despite a regulatory change allowing automakers to comply with emissions limits over a three-year period (2025-2027) instead of just 2025, Stellantis' European chief Jean-Philippe Imparato stated that the company will still rely on Tesla's carbon credit pool.

Why Stellantis is Buying Tesla's Carbon Credits

1. EU's Stricter Emission Regulations

• European carmakers must reduce their CO2 emissions or face hefty fines.

• Firms that lag in EV adoption buy credits from companies like Tesla and Polestar (NASDAQ: PSNY), which have a strong zero-emission vehicle (ZEV) portfolio.

• Stellantis currently has a 14% EV sales mix, short of the EU's 21% target.

2. Regulatory Change: A Temporary Relief, Not a Solution

• The European Commission recently granted a 2025-2027 grace period for compliance.

• Despite this, Stellantis is still opting to buy credits, highlighting that its EV production ramp-up remains a challenge.

3. Tesla's Lucrative Carbon Credit Business

• Tesla generates billions of dollars by selling regulatory credits to legacy automakers.

• This revenue stream offsets production costs and supports further EV expansion.

• Polestar (PSNY) is also participating in this emissions credit market.

Impact on Stellantis, Tesla, and the Auto Industry

• Stellantis: Gains compliance flexibility but faces pressure to accelerate EV adoption.

• Tesla: Continues benefiting from a strong revenue stream beyond car sales.

• Auto Industry: European manufacturers may still struggle to meet emission targets, increasing reliance on EV leaders like Tesla.

Tracking Auto Industry CO2 Compliance

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Conclusion

Stellantis' continued purchase of Tesla's carbon credits underscores the challenges traditional automakers face in meeting EV targets. While the EU's regulatory extension provides a short-term buffer, the long-term solution remains scaling up EV production.