FCA To Pay Tesla Hundreds Of Millions To Pool CO2 Emissions In Europe

Fiat Chrysler Automobiles has reportedly agreed to pay Tesla hundreds of millions of euros in order to include the EV maker’s electric cars in its fleet and avoid a large fine for breaking the European Union’s tough new emissions rules.

The report comes from The Financial Times, citing a document from the European Commission.

The deal will allow FCA to offset the CO2 emissions from its own cars against Tesla’s, dropping the company’s average to a permissible level. The EC’s document also revealed that Mazda and Toyota would also form an open pool for their emissions.

Starting next year, the European Union has set the target for average fleet CO2 emissions to just 95gr/km. The EU’s new target will become law in 2021.

According to data from UBS, Fiat Chrysler Automobiles averaged 123gr of CO2/km last year, making them the company with the “highest risk of not meeting the target”. The industry average emissions were 120.5gr/km.

Analysts at Jefferies predict that FCA could face a fine of over 2 billion euros ($2.2 billion) in 2021 if they fail to meet the target. Another study by PA Consulting last year said that the company is likely to go over the limit by 6.7gr/km, the biggest gap among the 13 carmakers in the study.

EU rules allow manufacturers to pool emissions both internally -like VW Group does- and externally, with rival companies forming the so-called open pools. However, until now, none of them have officially reached an agreement, so if this goes through, FCA and Tesla will be the first ones.

No financial details have become known at this point, with FCA declining to provide more information and Tesla confirming that they submitted their intention to form a pool to the European Commission on February 22, “to give other carmakers the chance to join.”