Tesla sells European emissions law lifeline to Fiat Chrysler
Over the weekend, the Financial Times reported that Tesla and Fiat Chrysler Automobiles (FCA) have entered into an agreement that will deliver Tesla a fresh influx of cash and deliver FCA from the hands of Europe’s tough new emissions regulations. Beginning next year, new European Commission rules begin to phase in that require a car maker’s fleet-wide emissions to average no higher than 95g/CO2/km—a figure that works out at roughly 57mpg for gasoline vehicles, or 76mpg for diesel-powered vehicles.
From 2020, 95 percent of an automaker’s new cars sold in the EU have to meet this target, with the remaining 5 percent falling under the law in 2021. And the penalties for failing are draconian: a €95 ($107) “excess emissions premium” per gram of CO2 over the target, for every single car registered in the EU that year. For some OEMs, this has the potential to be ruinous; if FCA’s portfolio were the same in 2021 as it was in 2018, the automaker would have to pay some €2.77 billion ($3.12 billion), out of total net global profits of €3.63 billion ($4.1 billion).
Some OEMs are going all-out in their efforts to electrify in order to meet the new rules; VW’s Roadmap E should be viewed in this context, for example. But for others, the road to electrification is not so simple. Although FCA announced a bold, €9 billion ($10.5 billion) plan to electrify its lineup by 2022, its actual plug-in portfolio is currently limited to the Chrysler Pacifica Hybrid (which is not sold in the EU) and the Fiat 500e, a car thought to lose the brand many thousands of dollars for each one sold.
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