Fiat Chrysler pools fleet with Tesla to avoid EU emissions fines

Fiat Chrysler Automobiles has agreed to pay Tesla hundreds of millions of euros so the electric carmaker’s vehicles are counted in its fleet in order to avoid large fines for breaking tough new EU emissions rules.

The move will allow FCA to offset CO2 emissions from its cars against Tesla’s, lowering its average figure to a permissible level. From next year, the EU’s target for average CO2 emissions from cars is 95g per kilometre.

In 2018, average emissions were 120.5g per kilometre, according to data supplier Jato Dynamics. FCA averaged 123g last year, according to UBS, which said the carmaker had the “highest risk of not meeting the target”.

Analysts at Jefferies forecast FCA could face fines in excess of €2bn in 2021 when the new targets become law. A study by PA Consulting last year said FCA was likely to exceed the target by 6.7 grammes of CO2 per kilometre — the biggest gap among the 13 carmakers it profiled. 

Under EU rules, carmakers are allowed to pool emissions internally, allowing Volkswagen, for example, to offset VW, Seat and Skoda emissions against those from Porsche and Audi cars.

The rules allow rival companies to form so-called open pools but until now none have agreed to do so.

“For Europe, this is the first time that completely separate manufacturers have pooled their emissions together as a commercially viable compliance strategy,” said Julia Poliscanova, a senior director at Transport & Environment, a green-energy lobby and research group. “Once you’ve set up a pool, it is valid for several years.”

FCA is planning to sell hybrid and electric vehicles in the future, but is regarded as being behind most other carmakers in this part of the market. Its low sales of electric cars make meeting the EU targets near impossible without the Tesla agreement. 

Chief executive Mike Manley has previously said the company would use all options available to meet the targets, including dropping the most polluting cars from its range and continuing to sell diesel vehicles that produce less CO2 than petrol models.

According to a declaration on the European Commission website, Fiat Chrysler formed an open pool with Tesla on February 25, saying Tesla would be counted in its fleet of brands that include Alfa Romeo, Jeep and Maserati. 

The document also revealed that Japanese rivals Mazda and Toyota would form an open pool. Toyota owns a 5 per cent stake in Mazda.

The declaration does not disclose financial details. FCA declined to comment on financial specifics. Tesla confirmed it submitted its intention to form the pool on February 22 “to give other [carmakers] the chance to join the pool.” Applications closed on March 25.

Tesla generates significant revenues by selling zero emission vehicle credits in the US. Last year, it earned $103.4m in this way, versus $279.7m the year before. The revenues can fluctuate widely depending on when contracts are executed, the company explained in a regulatory filing in February.