Fiat Chrysler Automobiles has said it will pay electric carmaker Tesla close to C2bn to help it meet tough new emissions targets and has reported a 29 percent drop in first quarter profits. The company will purchase credits from Tesla to help it hit carbon dioxide goals and avoid large fines in the US and Europe, at an estimated cost of €1.8bn. Carmakers across Europe are striving to meet a 2020 EU target of average car CO2 emissions of 95g per kilometer. In 2018, average emissions were 120.5g per kilometer, according to data supplier Jato Dynamics.
Fiat Chrysler aimed to meet this target without the need for credits from 2022, banking on a strategy of making its own cleaner vehicles, as well as hybrid and pure electric models, said chief executive Mike Manley. About 80 percent of FCA’s CO2 compliance would come from purchasing credits from Tesla in 2020, falling to around 15 percent in 2021 as the company’s sale of battery and hybrid vehicles grew, he said.
Many carmakers are launching electric vehicles in the hope that the nascent market will expand as the new rules come into force. The partnership between Tesla and FCA in Europe was agreed privately in February and first reported by the FT last month.
On Friday, the Italian-American carmaker reported that profits fell by a third in the first quarter after slowing sales in its key markets and losses in China and Europe. Global sales fell 14 percent to 1m vehicles, with a slowdown in every one of the company’s regions, pushing adjusted earnings down by 29 percent to €1.1bn.
The company, which owns Jeep, Ram, Dodge, Alfa Romeo, and Maserati, said the results were in line with its own expectations and maintained its annual profits forecasts of €6. 7bn figures it downgraded three months ago citing tough market conditions.