Fiat Will Pay Tesla to Help Overcome Tough EU Emissions Regulations

Fiat will pay the electric car company a handsome sum to avoid big EU fines.

Fiat Will Pay Tesla to Help Overcome Tough EU Emissions Regulations
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Tesla is reportedly teaming up with Fiat to help it overcome some EU regulation hassles. According to Bloomberg, Fiat will pool its vehicles with Tesla to comply with the new rules on carbon-dioxide emissions.

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It’s rumored Fiat will pay the electric car company in the order of hundreds of millions of dollars for the privilege. The new rules will potentially cost Fiat 2 billion euros ($2.2 billion) in potential fines in each of 2020 and 2021 Jefferies analyst Philippe Houchois told Bloomberg.

Fiat needs action to avoid fines

Fiat have released a statement saying they are cooperating with Tesla on the issue to achieve “the lowest-cost approach.” Fiat has dragged its feet on meeting the emission targets so could potentially team up with Tesla to pool its cars.

Under EU regulations, car makers can join fleets together to meet the targets. Tesla cars don’t create any emissions so they can get Fiat off the hook and get some serious cash for themselves too.

Tesla gets a cash injection

Fiat may be prepared to pay more than 500 million euros as part of the deal. Fiat didn’t confirm the amount it would pay but said the deal was environmentally focused. 

“FCA is committed to reducing the emissions of all our products...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.

Many consumers abandoned diesel vehicles in favor of regular gasoline cars in the wake of the well documented Volkswagen diesel-cheating scandal in 2015. The European Commission’s website shows that Fiat formed an open pool with Tesla on February 25.

Collaboration needed in next-generation auto world

Other car companies teaming up for the sake of regulations include Mazda Motor Corp and Toyota Motor Corp. The EU has a new average new-car emission target of 95 grams of CO2 per kilometer by 2021.

This is from the previous target of 130 grams per kilometer. Tesla has been selling emissions credits in the United States for the last three years netting the company over $1 billion.

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The figures reported in the Texas annual report lodged with the U.S. Securities and Exchange Commission shows that the company would have been financially in trouble without the sales.

Tesla makes big bucks off credits

Regulations in the US allows manufacturers of zero-emission vehicles to earn credits and sell excess credits to other manufacturers. Many car companies have been unexpectedly teaming up for the sake of electric car development. There is a huge financial commitment required by carmakers to get started on an electrification route.

Ford and Volkswagen announced a new 'memorandum of understanding’ between the two groups that would see them explore the options of co-creating autonomous and electric vehicles. The deal will see Volkswagon be able to leverage off Ford’s 4 billion dollar commitment to autonomous driving while Ford will benefit from Volkswagens advanced electric car knowledge.

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