Tesla Future Profitability In Question With Loss Of Regulatory Credit Revenue From Stellantis, Says Analyst

Tesla Inc.’s TSLA future Profitability is in question following the “devastating” loss of regulatory credit revenue from automaker Stellantis N.V. STLA, according to Louis Navellier.

What Happened: Navellier, chief investment officer at Navellier & Associates, said in a note that excluding the $518 million in carbon/EV tax credits and short-term gains of $101 million from the sale of Bitcoin (BTC) holdings in the latest quarter, Tesla “once again lost money in their operations.”

He noted that Tesla similarly received $1.58 billion in tax credits in 2020, but only made a net profit of $721 million, indicating that the Elon Musk-led company actually lost $859 million in the year from making electric vehicles.

According to the analyst, the persisting trend in the first quarter will be exacerbated with the announcement by Stellantis that it will exit a European emissions-credit agreement with Tesla.

Navellier said that Tesla could lose the support of fundamental investors if it is unable to achieve profitability. But increased awareness of the role played by carbon tax credits in its profitability may lead to a fundamental re-valuing of the company in the coming year, he added.

See Also: Tesla Says Will Continue To 'Accumulate' Bitcoin, Believes In Long-Term Value Of The Crypto

Why It Matters: Tesla’s first-quarter results showed that its profits are more reliant on non-core activities than on selling cars.

The Palo Alto-based company, which already has a huge lead in electric vehicle technology, generated revenues of $1.58 billion from regulatory credits in 2020. That is almost triple the company’s 2019 figure of $594 million. The regulatory credits accounted for 5.8% of Tesla’s automotive revenues of $27.24 billion last year.

See also: How to Invest in Tesla Stock

Vehicle manufacturers in Europe are required to either produce a certain amount of zero-emission vehicles or pay hefty fines to offset their CO2 emissions. They can also purchase credits from other less-polluting automakers to meet their emission limits.

It was reported in March that Stellantis purchased most of the $362 million in regulatory credits last year in Europe from Tesla.

Price Action: Tesla shares closed almost 0.4% lower in Wednesday’s regular trading session at $670.94. On the same day, Stellantis shares closed 7% higher in the regular trading session at $17.94.

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