Pooling its line-up with Tesla is allowing FCA to cut its EU fleet-average CO2 liability
James Attwood, digital editor
24 April 2019

Tesla boss Elon Musk has admitted that making money from selling electric cars is tough. But in the past few years Tesla has made millions by getting rival car firms to pay it for a surprisingly valuable commodity: nothing. 

In the US, several states require car firms to produce a certain number of zero-emission cars, or face fines. But firms can buy EV ‘credits’ from other car makers, and because Tesla only makes electric cars, it has a huge number of those credits. In one financial quarter last year it made more than $190 million (£164 million) – more than two-thirds of its profit in that quarter – selling such credits to rivals.

Tesla has now found a way to turn nothing into profit with its European arm, through a new deal with the FCA Group, which owns Alfa Romeo, Fiat, Jeep and Maserati. In this case, the ‘nothing’ FCA is paying “hundreds of millions” of pounds to access is the 0g/km of CO2 emitted by Tesla’s EVs.

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By 2021, the EU will require the average CO2 emissions of a manufacturer’s new car fleet to be 95g/km or under (adjusted for each firm based on average fleet weight and some credits earned), down from the previous 130g/km fleet-average target. The penalties for failing to hit those targets are fines of €95 (£82) per vehicle per g/km over the 95g/km limit. 

FCA and Tesla have agreed to group their European fleets together in a ‘pool’, which the EU counts as a single entity when determining the average emissions of their new car fleet. FCA is in effect buying the right to use Tesla’s EVs to reduce its average CO2 emissions. 

According to industry analysts Jato Dynamics, FCA sold 961,000 units in the EU last year, with a fleet average of 125.3g/km. Assuming no change in those figures, FCA’s 2021 target will be 89.8g/km, meaning the firm faces a potential fine of £2.8 billion. 

Tesla only sold 29,000 units in the EU last year, but because cars that emit under 50g/km are rewarded with extra ‘super credits’, it’s enough to reduce the combined FCA/Tesla fleet average to 121.6g/km. While their 2021 target would rise to 91.6g/km (because of a higher average fleet weight), the potential penalty is reduced to £2.25 billion – a saving of more than £500m. 

Felipe Munoz, an automotive industry analyst at Jato, notes that a lot depends on how much FCA is paying Tesla – and he adds that the 2018 figures don’t account for “the big impact” the Model 3 is having on Tesla’s position in Europe. “As it sells more cars, it will have a bigger impact in any pool,” he says. By 2021 the Tesla deal is likely to save FCA even more money. 

FCA has also begun an electrification programme, with Jeep and Alfa Romeo plug-in hybrids and an electric Fiat 500 due next year. This deal will help to bridge the gap until those models are selling. 

Munoz notes that FCA isn’t the only one facing massive EU CO2 emissions fines, saying many “are not prepared” for the 2021 targets. Jato cites both the PSA and Volkswagen Groups as being particularly at risk of massive fines. Meanwhile, Toyota and Mazda have also agreed to pool their fleets, as have PSA’s brands. 

He adds: “By the time EVs become a real alternative to the internal combustion engine, it might be too late for the car makers, and many of them will have to look for solutions such as the FCA-Tesla pool.” 

Munoz does note that while the deal works for FCA now, “they are at the end feeding a competitor, making it stronger and more threatening.”

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Comments
28

24 April 2019
Bloody ridiculous.

24 April 2019
eseaton wrote:

Bloody ridiculous.

Shows how stupid this CO2 offsetting is as this does not reduce CO2 by a single unit and is a clear indication of the total ripoff this entire CO2 nonsense is.

24 April 2019

Absolutely ridiculous. If all the new emissions laws are doing is forcing companies to pay millions to big stonking american car companies, its not quite clear how that is helping climate change and all that crap in the EU.

Just shows how crazy this environmentalist stuff has got. And if its not enough that they're wrecking cars, they're also holding up traffic in London. It'd drive you crazy.

In my opinion, I think they should just stick to strict carbon limits in the cities, since thats where the problem lies. Plus, they could always ban smoking. That would help the emissions thing and improve the countries health at the same time, taking some pressure off the NHS.

JMax

24 April 2019
JMax18 wrote:

Absolutely ridiculous. If all the new emissions laws are doing is forcing companies to pay millions to big stonking american car companies, its not quite clear how that is helping climate change and all that crap in the EU.

Just shows how crazy this environmentalist stuff has got. And if its not enough that they're wrecking cars, they're also holding up traffic in London. It'd drive you crazy.

In my opinion, I think they should just stick to strict carbon limits in the cities, since thats where the problem lies. Plus, they could always ban smoking. That would help the emissions thing and improve the countries health at the same time, taking some pressure off the NHS.

When it comes to greenhouse emissions, obviously any improvemnet from vehicles is a good thing, but the REAL problem lies with eating meat - this creates more than double the greenhouse emissions from all transport added together and until mankind stops or drastically reduces its consumption of meat, we ll all be f*cked.

XXXX just went POP.

25 April 2019
typos1 wrote:

the REAL problem lies with eating meat - this creates more than double the greenhouse emissions from all transport added together and until mankind stops or drastically reduces its consumption of meat, we ll all be f*cked.

It's actually not that simple.

24 April 2019
So, new and better technology is being subsidised. Whats the issue exactly?

24 April 2019

they have left it too late to do  this "better" technology themselves so are taking advantage of the system to stop themselves being penalised as much.

 

24 April 2019

But it's allowing FCA to sell more high CO2 vehicles than it otherwise might while allowing Tesla lo loose slightly less money on its two-tonne monster EVs.

It seems like a loopole in the legislation to me, wouldn't it be a whole lot simpler to have more expensive hydrocarbon fuels and let market forces find the best solutions? This might encourage drivers to buy more sensible vehicles and use them more efficiently, rather than putting all responsibility on the manufacturers.   

24 April 2019

I'm not sure whether I despise FCA or Tesla more

24 April 2019

Tesla shouldn’t go along with this. It undermines and weakens their ethos and brand. Fiat should improve their cars, not play the system. And the authorities should not allow this because the rules are meant to reduce emissions and this doesn’t do that. It does the opposite. There’s nothing right about this. Why can’t anyone do the right thing these days?

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