The automotive giant Fiat Chrysler has found a way to escape the EU’s stricter exhaust requirements. How will they do that? The trick is to pay Tesla “hundreds of millions of euros” for emissions credits according to the Financial Times, in what could potentially amount to up to $750 million.
EU Emission Requirements
As of 2020, the European Union demands that cars emit no more than 95 grams of carbon dioxide per kilometer on average. Those manufacturers who fail to do so will receive a hefty fine. Unfortunately for Fiat Chrysler, their fleet released an average of 123 grams last year. Analysts estimated that Fiat Chrysler could be forced to pay up to 2 billion euros (over $2.2 billion) in fines as a result.
So how can the company get around this?
Much like the ZEV mandate in California, EU rules allow car manufacturers to merge different brands’ emissions in order to escape being slapped with a fine. So while Fiat Chrysler may prefer putting out big SUVs and pickups with a thirst for gasoline, they could potentially find a buddy selling zero-emission vehicles to help balance that out.
Tesla Offers Fiat Chrysler Emissions Credits
So the two automakers reached an extremely lucrative agreement. Fiat Chrysler pays Tesla an as-yet undisclosed amount of money, and Tesla can provide them with emissions credits which allows them to count Tesla’s cars in their fleet numbers. This allows them to lower the average emissions in their fleet and escape the threat of being forced to pay fines to the EU. Instead of being fined billions, Fiat Chrysler will pay Tesla hundreds of millions for their cooperation.
The Consequences of Tesla-Fiat Chrysler Union
So where does this union leave us in general? It’s no secret that Fiat Chrysler is dragging its feet (and complaining the whole way) when it comes to electrification, and this deal really does not help their case. Basically, it is cheaper to pay Tesla than it would be to develop compliant cars and try to sell them to a consumer base who may not be interested in them in the first place. Some say that Fiat Chrysler should not be allowed to make this move– they should either be force to pay the fines or get on the electric vehicle bandwagon, no matter how reluctant they might be.
But there is a flip side. Filling Tesla’s coffers means that the financially shaky company can remain in the electric vehicle race longer and continue to develop technology that will benefit the industry as a whole. It can expand European consumers’ experiences with electric cars and further increase the demand for them. Perhaps this could finally give Tesla the opportunity to build a Gigafactory in Europe.
No matter what happens, it seems clear that Tesla is poised to capitalize on Europe’s growing interest in electric vehicles, even if their competition is not.