Tesla, Inc. (TSLA.US) is expected to benefit from European Union emission restrictions by over $1 billion.

UBS Group AG analysts predict that Tesla, Inc. (TSLA.US) is expected to receive over 1 billion euros (approximately 1 billion US dollars) in compensation this year from competitors in the automotive industry who need to meet stricter EU emission standards. According to the latest EU documents, Tesla, Inc. will join forces with at least five car manufacturers, including Toyota Motor Corp. Sponsored ADR (TM.US), Stellantis NV (STLA.US), and Ford Motor Company (F.US), to sell electric vehicles in order to balance fleet emissions. The agreement stipulates that manufacturers with lower sales of electric vehicles must compensate companies like Tesla, Inc. that exceed the CO2 emission limits. UBS Group AG analysts, led by Patrick Hummel, stated in a report released on Wednesday that if Tesla, Inc. were to monetize all its CO2 emission quotas, it could receive compensation of over 1 billion euros. Previously, the UBS Group AG analysts predicted that Volvo Cars could receive up to 300 million euros in compensation this year. Automakers in the region have been lobbying the EU to relax emission standards, or else they would face fines, production cuts, collaboration with foreign competitors, or selling electric vehicles at a loss. Last year, the registration of plug-in electric vehicles stagnated due to subsidy cuts. The documents reveal that manufacturers interested in joining the Tesla, Inc. alliance must submit applications by February 5th and sign confidentiality agreements, providing their CO2 emission data for the company to assess the risks of not meeting the targets. Meanwhile, the deadline for applications to join the Volvo-Mercedes alliance is February 7th. It is worth noting that the merger between Stellantis and Tesla, Inc. was unexpected, as former Stellantis CEO Carlos Tavares had indicated a commitment to complying with EU rules. The merger has relieved Stellantis of the pressure to accelerate the production of electric vehicles. Furthermore, UBS Group AG analyst Hummel stated that the establishment of the Tesla, Inc. alliance has raised questions about the compliance plans of Volkswagen and Renault, as these two companies face the highest emission compliance pressure. It is currently unclear whether Tesla, Inc. will be able to include more manufacturers. The analyst believes that the strategic choices of Volkswagen and Renault have been limited due to the establishment of the Tesla, Inc. alliance, potentially forcing them to sell more electric vehicles with lower profit margins, leading to a downward risk of around 10% in pre-tax profits this year. Renault has criticized the decision of the European Commission, stating that it will weaken European industry. The company said, "This is causing the weakening of European industry," and added that it is currently uncertain whether they will merge with competitors.