In case you've been living under a rock for the last several centuries, it's pretty easy to get out of certain kinds of trouble, so long as you've got a lot of money lying around. For Fiat Chrysler Automobiles, that pile of cash can ensure the automaker is complying with EU emissions regulations.
FCA will pay Tesla a substantial amount of money to count Tesla's cars as part of its own fleet in Europe. This move, which the Financial Times first reported on Sunday, is designed to allow Fiat Chrysler to remain in compliance with strict new European emissions regulations, despite the fact that its electrified-vehicle portfolio is awfully small.
Of course, compliance doesn't come cheap. The Financial Times' report states that FCA will pay Tesla "hundreds of millions of euros" to make this happen. While these pooling arrangements do occasionally occur, most involve separate automakers under the same umbrella. What makes the Tesla-FCA tie-up unique, according to the report, is that the automakers are entirely separate with no other financial involvement between the two. This is allowed under the EU's pooling rules, kind of like a carbon-trading scheme.
The Financial Times' report points to data from UBS that said Fiat Chrysler had the best chances of failing to meet next year's average emissions target of 95 grams of carbon dioxide per kilometer. FCA's emissions last year were reportedly above the average. When the regulations are in full force, not being compliant could result in billions of euros in fines, the Financial Times said in its report, citing comments from Jefferies analysts.
"FCA is committed to reducing the emissions of all our products. At the same time, we will optimize the options for compliance that the regulations offer," a Fiat Chrysler spokesperson said in an emailed statement. "After all, the whole point of a CO2 credit market is to leverage the most cost-effective ways to reduce overall GHG emissions in the market. The purchase pool provides flexibility to deliver products our customers are willing to buy while managing compliance with the lowest-cost approach." Basically, it's cheaper to pay Tesla in this way than it would be to develop compliant cars and foist them upon a group of buyers that may not prefer them. Tesla did not immediately return a request for comment.
The move will easily benefit both automakers. Tesla has already signaled that, given multiple factors in play, the company will likely miss profitability in Q1 2019 but hopes to be back in the black in Q2, and receiving a nine-figure sum from FCA would definitely help. As for Fiat Chrysler, this allows the automaker to kick the development can down the road a little longer, despite being a laggard in this regard already.