Fiat Chrysler and Tesla have reached an agreement where Fiat will pay Tesla hundreds of millions of dollars to meet EU emissions rules.
The exact amount of the payment has not been revealed, but it is said to be hundreds of millions.
Pooling Resources to Meet Emissions Standards
By pooling Tesla’s electric vehicles with its own fleet of vehicles, Fiat Chrysler is able to meet the strict emissions rules that are coming into effect in 2020. This strategic move is perfectly legal and will benefit both companies. The European Union has set stringent emissions targets to combat climate change and reduce pollution, and automakers are under pressure to comply or face hefty fines.
Tesla has done this in the past by selling zero emissions credits. In 2018, Tesla made $103.4 million from selling these credits, and in 2017, the company earned $279.4 million. These credits are a significant revenue stream for Tesla, allowing it to fund further development of its electric vehicle technology and infrastructure.
Benefits for Both Companies
For Fiat Chrysler, this agreement is a pragmatic solution to a challenging problem. The company has been slower to adopt electric vehicle technology compared to some of its competitors. By partnering with Tesla, Fiat Chrysler can avoid the immediate financial penalties associated with non-compliance while buying time to develop its own electric vehicle lineup. This partnership also allows Fiat Chrysler to continue selling its popular but less fuel-efficient models without incurring fines.
For Tesla, the deal provides a substantial influx of cash. This additional revenue can be used to accelerate the production of new models, expand its Supercharger network, and invest in new technologies. Moreover, it strengthens Tesla’s position as a leader in the electric vehicle market and underscores the value of its zero emissions credits.
It will be interesting to find out exactly how much Fiat Chrysler is paying Tesla to pool their resources and meet the new emissions targets. This information could provide insights into the financial strategies of both companies and the value placed on emissions credits in the automotive industry.
The collaboration between Fiat Chrysler and Tesla highlights the evolving landscape of the automotive industry. As regulations become more stringent, traditional automakers are increasingly looking to innovative companies like Tesla to help them navigate the transition to cleaner technologies. This partnership could serve as a model for other automakers facing similar challenges.
Source Engadget
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