Tesla’s deal with Fiat Chrysler Automobiles, which allows its all-electric vehicles to be pooled with the other’s fleet, could pay for the EV automaker’s Gigafactory 4 in Brandenburg, said Robert W. Baird & Co. analyst Ben Kallo.
Europe’s new carbon-dioxide emission standards are making it difficult for traditional carmakers to comply with its new regulations. The new rules may be hard for old automakers to swallow, but for Tesla, it seems the new CO2 standards are validation.
Kallo recently downgraded TSLA stocks from Buy to Hold. In a note to Baird clients, he reasoned that Tesla’s stock price has reached appropriate levels, and it may be time for shareholders to benefit from their investments. Interestingly, Kallo raised his price target to US$525 from US$355 despite his downgrade.
Even though Kallo downgraded TSLA stocks, he still seems to believe in the EV car company’s growth. “While we acknowledge investors may want to strip out credits in evaluating operational execution, we do note the credits effectively fund Tesla’s European factory,” he wrote in a report.
Confirmed: 👍— #Gf4 #Gigafactory4 (@Gf4Tesla) January 10, 2020
A new turning lane is being prepared for the feeder road to #Gigafactory4 .
A vibrating roller compacts the soil.
In the next few days a layer of gravel will be filled in.
( information source: STRABAG )
"Road construction Joint stock company" pic.twitter.com/xDIPzXBrmf
Kallo’s prediction is based on Tesla’s deal to include some of its fleet with Fiat’s vehicles. Some traditional automakers, like Fiat, can not meet Europe’s new CO2 emission standards on their own due to their lack of green vehicles. Luckily, old carmakers can pool their fleet with a company like Tesla. Through the Tesla fleet, Fiat will be able to say that it's meeting European carbon-dioxide emission standards—at least on paper.
Of course, this deal can’t be beneficial to one party alone. As such, Fiat will pay Tesla an estimated US$2 billion for the pool deal, reported the Detroit News. This means that the EV-only automaker could make enough to at least start construction of Gigafactory 4 in Brandenburg with just its earnings from its Fiat deal alone.
Recently, Tesla’s purchase contract for the GF4 land was approved by the local government’s Finance Committee. Based on a draft of the agreement between the next-gen car company and Brandenburg officials, the 300-hectare forest cost Tesla 40.91 million euros.
Tesla was able to get a good deal for the site where Gigafactory 4 will be built. Now it seems another deal will help build the actual building or at least GF4 Phase 1.
Work on the GF4 forest started before approval of the purchase contract. Gigafactory 4 is expected to start production with the Model Y in 2021.
Featured Image Credit: @Gf4Tesla/Twitter