Fiat and Tesla to join forces to comply with EU emissions laws
Tightening EU rules that come into force in 2020 could cost Fiat €2bn in potential fines in 2020 and again in 2021
Rome/Milan — Fiat Chrysler Automobiles is pooling its fleet with Tesla to comply with stricter EU rules on carbon-dioxide emissions, in a deal that is likely to pay the US electric-car leader hundreds of millions of dollars.
Tightening EU regulations that come into force in 2020 could cost Fiat €2bn in potential fines in each of 2020 and 2021, according to Jefferies analyst Philippe Houchois. In a statement, Fiat said co-operating with Tesla will give it flexibility to find “the lowest-cost approach”.
The Italian-American car maker is behind on meeting the new standard, and the so-called open pool option available at the EU allows vehicle makers to group their fleets together to meet the targets. Payments to Tesla, whose electric cars do not produce carbon dioxide emissions, may amount to more than €500m, according to Jefferies. Compliance has gotten harder for vehicle makers with a move by consumers toward petrol cars, which emit comparatively more carbon dioxide, since Volkswagen’s 2015 diesel-cheating scandal.
Fiat shares climbed 1.5% at 10.15am in Milan. Earlier, the company declined to comment on a Financial Times report on Sunday that it was paying Tesla hundreds of millions of euros for the arrangement.
“The whole point of a carbon dioxide credit market is to leverage the most cost-effective ways to reduce overall greenhouse gas emissions in the market,” Fiat Chrysler said in a statement. “The purchase pool provides flexibility to deliver products our customers are willing to buy while managing compliance with the lowest cost approach.”
A notification on the European Commission website shows Fiat formed an open pool with Tesla on February 25. Mazda and Toyota are also forming a pool. The EU’s target for average new-car emissions of carbon dioxide will decline to 95g from 130g per kilometre by 2021.
Fiat is readying some electrified vehicles, including an upcoming plug-in hybrid Jeep and showing a battery-powered Fiat Centoventi prototype in March at the Geneva car show. The investment strain of complying with new emissions standards has prompted Fiat to explore a partnership with Peugeot-maker PSA to collaborate on a “super platform”, people familiar with the talks said earlier in APril.