FCA to pay Tesla hundreds of millions to wash its CO2 troubles away

Last Sunday, the Financial Times reported that the Fiat Chrysler group has reached an agreement with Tesla to pool their vehicles and thereby avoid a monster fine in the European Union for not respecting the 95 g/km CO₂ limit in 2021. Or rather, the 91.8 g/km limit in case of FCA, as it mainly sells city cars - a factor that the EU takes into consideration.

According to Jato, Fiat registered a volume-weighted average of 119 g/km in 2018. Jeep came in at a worrying 142.5 g/km, raising the group’s average. Reaching 91.8 g/km in just two years’ time is nearly impossible as the group does not have a massive electrification offensive planned, unlike most of its competitors in Europe.

By pooling its vehicles with the zero-emission cars from Tesla, FCA makes sure it hits the target. The FT report did not mention the specific amount that Fiat Chrysler has agreed to pay Tesla, but it is expected to be “several hundreds of millions”. That is just a fraction of the potential fine of €3 billion if things change as they are, Evercore Isi estimates.

"The purchase pool provides flexibility to deliver products our customers are willing to buy while managing compliance with the lowest cost approach," FCA said in a statement. In the United States, FCA has previously purchased emission credits from Tesla, Toyota and honda, Autonews reports.

Win-win, but not for consumers

Indeed, for FCA, paying Tesla to pool their vehicles costs less than paying a hefty fine to the EU. For Tesla, the extra cash is more than welcome to cover for its operational costs. Recently, the company has taken several measures to cut costs and stay competitive. It has traded zero-emission credits in the US before.

Still, the move raises a lot of questions as to CSR and ethics. Again, companies seem to get away with not complying with the rules by finding creative solutions that eventually come at the expense of European consumers.   

If FCA is let off the hook, it can continue building cars that are less fuel-efficient and therefore emit more CO₂. Arguably, it may find it increasingly difficult to sell vehicles that emit more CO₂ than those of the competition, presuming that vehicle taxation will increasingly be based on carbon dioxide emissions in the different EU member states.