By on June 5, 2019

General Motors and Fiat Chrysler Automobiles have reportedly reached an agreement to purchase federal greenhouse gas credits from Tesla. While it’s common knowledge that the electric carmaker has raked in revenue by selling credits for years, disclosures with the State of Delaware help paint a clearer picture.

Apparently, GM filed to buy credits from Tesla earlier this year while FCA bought them on several occasions in 2016, 2018, and again earlier this year. Considering FCA’s American lineup, we’re not exactly quivering with disbelief. CEO Mike Manley could show up at a press conference, light a pool of gasoline on fire, and suggest it was Dodge’s new corporate model before we’d raise an eyebrow.

As unsurprising as FCA’s inability to adhere to present-day pollution mandates happens to be, there is a story here. The rising demand for greenhouse gas credits is changing the industry in some rather interesting ways. 

According to Bloomberg, Tesla has made over $2 billion from the sale of environmental credits thus far — most of them ZEV credits from CARB-friendly states, primarily California. FCA and GM now openly admit they need to buy credits to future-proof themselves against regulatory changes. Despite the Trump administration’s intent to roll back Corporate Average Fuel Economy standards, they’re still on the rise, leaving much of the industry worried about the future.

Even with the credit buy-up, FCA still found itself on the hook for $77 million in U.S. civil penalties late last year due to its failure to adhere to 2016 model year fuel economy requirements. The automaker says it will continue buying them in the coming years, with 2022 being the first annum the company hopes to be self-reliant. However, that will only come after FCA purchases additional regulatory credits from Tesla in Europe. The credits could reportedly cost the firm anywhere from a few hundred million to $2.3 billion, according to the Financial Times.

Depending on how you view the issue, this is either a testament to Tesla’s forward thinking and proof that automakers need to start building more EVs… or an open acknowledgement that every gasoline-powered car sold effectively subsidizes Tesla’s existence.

The Detroit Free Press explored the latter half of that equation. Jim Appleton, president of the New Jersey Coalition of Automotive Retailers, told the paper, “Last year, competing automakers paid Tesla $420 million to buy absolution because they were unable to meet the emissions mandate,” adding, “Every Tesla is sold at a loss, but that loss is subsidized by Chevy drivers and others by a couple thousand dollars.”

Appleton claimed people would be appalled if they truly understood the issue, adding that many would be “embarrassed to drive a Tesla because their neighbor would say, ‘When are you going to thank me for subsidizing that high-tech piece of status symbol you drive?'”

Knowing our reader base, we imagine a handful of people already do this. But it’s a fair enough question. Tesla drivers don’t have to pay fuel taxes and have enjoyed the federal EV tax credit for years, as well as various state-sponsored incentives, on what are basically luxury automobiles. Meanwhile, the company has started procuring side cash from automakers unable to meet modern emissions standards. But that’s how credit trading works.

While we could argue whether or not that’s fair for the rest of the day, or insist that automakers simply up their game and start going all electric since they previously claimed they could meet proposed targets, the reality is much more complicated. Automakers truly are trying to improve fleet-wide efficiency and promote electrification but most have failed.

General Motors, which has also benefited from EV tax credits, is all about pushing tech right now — spending billions to prepare its fleet for a hearty advance into battery power over the next few years. But it still has to sell the kind of vehicles today’s buyers want and it’s buying up Tesla’s greenhouse gas credits to weather the storm. Unfortunately, it was also one of ten manufacturers who failed to meet emissions standards for the 2017 model year in the absence of banked or bought greenhouse credits. The other nine were Fiat Chrysler, Ford, Hyundai Motor Group, Mazda, Mercedes-Benz, Nissan, Mitsubishi, Toyota and Volkswagen Group. As you’ll recall, VW is bending over backwards to reposition itself as a greener company.

As automakers promote themselves as more environmentally conscious than ever before, it’s unclear whether they’ll actually be able to meet efficiency rules in the coming years. The auto lobby wasn’t encouraging a roll back of economy targets just for fun. It understands that swapping over to battery-powered cars isn’t an easy task — or a realistic solution, until consumer acceptance improves.

The silver lining in all of this is that, as manufacturers increase their dependence on bought credits, Tesla should be able to rely on a steady source of income for a couple more years. It’ll help keep the lights on in Palo Alto.

[Image: LanaElcova/Shutterstock]

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47 Comments on “FCA, GM Stocking Up On Tesla’s Greenhouse Gas Credits...”


  • avatar
    SCE to AUX

    What a BS article.

    Tesla didn’t invent the ridiculous carbon credit system; it is merely *one* of its beneficiaries. For a long time, Nissan, Fiat, and GM were also selling these credits.

    No doubt Tesla needs to become self-reliant without this income. But I’m sure they’d prefer solid profitability than propping from carbon credits.

    As for subsidies and tax credits, we could endlessly debate the cross-subsidization of people’s children, charitable donations, business losses, farms, and mortgages.

  • avatar
    Master Baiter

    Greenhouse Gas Credits. Crony capitalism at its worst.

    Paging President Trump: Can you put down your Twitter phone and do something about CAFE? Pulling out of the Paris Climate Accords was nice, but we’re still suffering under senseless regulations based some nit wit’s computer model that predicts the Earth will be 2°C warmer 80 years from now.

    • 0 avatar
      Add Lightness

      Don’t forget that the US State Department and Military is effectively subsidising the Big Oil by meddling with every Oil State that that does not want to play nice with Houston.
      Worldwide, Oil Companies are the biggest beneficiary of Government tax credits and subsidises.

    • 0 avatar
      la834

      > we’re still suffering under senseless regulations based some nit wit’s computer model that predicts the Earth will be 2°C warmer 80 years from now.

      “some nit wit” = the entire world’s scientific community

    • 0 avatar
      blj1986

      People like you won’t listen to actual scientist on this Earth, but you’ll take fairy tales out of a 2000 year old book as fact. No wonder this planet is a dumpster fire.

  • avatar
    KingShango

    No one is forcing them to buy credits, they’re choosing to not be compliant. The bottom line is GM and FCA did the math and decided it’s cheaper to buy credits than put in the effort. The article even says GM doesn’t really need them, they’re just buying them for “insurance”. I mean how is GM supposed to meet the regulations, they’ve only been working on electric cars for 30 years!

    • 0 avatar
      MoparRocker74

      WRONG. First off the very idea of emissions laws is ridiculous. But this all boils down to the fact that CUSTOMERS, you know the ultimate vote for either cleany-greenie piles of sadness and suck, or 700 hp muscle cars and powerful large pickups have voted to actually enjoy the fruits of our labor, not hair shirts and austerity.

      This whole thing is nothing but a money grabbing sham by far left wack jobs, although pretty much all politicians are complicit in this. Eliminate the EPA and all of its idiotic regulations. The 27 or so you people who actually WANT low emissions cars can pay their money for them. I shouldn’t have to part ways with one red cent for something that doesn’t benefit me.

      • 0 avatar
        joeTaco

        Pollution is the textbook example of a negative externality. I.E. it is not captured in the price so you can’t just say “let them vote with their dollars”. Guess what, people will buy the cheaper cars. Imagine where we’d be in terms of emissions without American/California emissions regulation.

        To demand the elimination of these regulations is to demand your own right to pollute at the expense of everyone else.

      • 0 avatar
        Rick Astley

        Yup, that’s how a responsible society and government will act. Soley in the interests of a single individual with no oversight or foresight.

        Individualistic societies don’t exist or survive when there are nearly 9,000,000,000 human beings acting as a swarm of locusts on a planet.

        • 0 avatar
          MoparRocker74

          Really? Well the cars people WANT are mostly still being sold. There’s just a slimy shaving of dollars off the top and in some politicians pockets. Hows that resulting in all these unicorns and rainbows?

      • 0 avatar
        mcs

        @MoparRocker74

        An outdated and slow so-called “muscle car” (LMFAO), a Fiat demon, vs. a Tesla Model 3. The Fiat “demon” can’t even beat a Model 3. So sad. Talk about sadness and suck. Maybe Renault will work a little French magic when they buy them? You can keep your slow outdated fossil technology. I don’t care if it’s green, only that it’s fast.

        youtu.be/hS9yrwQFgL0

        Here’s a Model 3 on the Nurburgring being chased by an M2:
        youtube.com/watch?v=dD8gvM8M1zE

        • 0 avatar
          SCE to AUX

          In fairness, I’ll argue that the Demon driver can’t seem to launch his car properly, and it would certainly beat a Model 3 in a 1/4-mile race rather than a 1/8-mile race.

          OTOH, that Model 3P on the Nurburgring is legit. I saw speeds of up to 135 mph, and that M2 simply couldn’t pass him.

      • 0 avatar
        la834

        > This whole thing is nothing but a money grabbing sham by far left wack jobs, although pretty much all politicians are complicit in this. Eliminate the EPA and all of its idiotic regulations.

        You *do* know that the EPA was *created* by a conservative Republican administration, right?

        • 0 avatar
          golden2husky

          la834 – You are 2 for 2. Nixon created the EPA and is a good thing he did. Cars that no longer stink, no grease strip down the center of the highway, much cleaner air in cities….a good move for sure.

          RE trading credits – that is the way the system works and it is a good and effective system. Those who can easily make the target – or exceed it – can sell those credits to those who would have difficulty making the target.

        • 0 avatar

          Nixon was NO conservative.

          Wage/price controls that never work, tax increases AND he created the EPA by executive order instead of putting it thru Congress.

          I wish we could eliminate the EPA and all its onerous regulations, and trust industry to do the right thing.

          But history shows that they won’t. So we need it. Even Libertarian John Stossel acknowledges that.

          Where it runs off the rails is where zealots run the EPA while the agency winks and nods at real issues…like the NINETEEN waivers they gave BP in the construction of the Deepwater Horizon well.

          The whole cap-and-trade scheme was cooked up decades ago by the Trilateral Commission think tank. It needs to be abandoned NOW.

          • 0 avatar
            ToddAtlasF1

            Calling Nixon a conservative is something that only works in an echo chamber of the truly befuddled. He enacted more progressive legislation than all but a very few Democrats.

          • 0 avatar
            golden2husky

            …I wish we could eliminate the EPA and all its onerous regulations, and trust industry to do the right thing…

            You really can’t be serious. Learn from history. Read up about the Industrial Revolution.

          • 0 avatar
            ToddAtlasF1

            With reading comprehension like that, enlightenment lies just around the corner for g2h.

      • 0 avatar
        Arthur Dailey

        Quite obviously you are not old enough to remember how things were.

        The nice thick brown clouds over major North American cities.
        The air quality warning days.
        The thick black smoke belching out of diesels.
        The damage created by lead gasoline.
        The massive pollution of urban waterways/rivers.
        The mercury poisoning of lakes and rivers.
        Ac
        The Love Canal scandal.
        Acid rain etching our cars/buildings and killing aquatic wildlife.
        Those were all eradicated through government regulation.

        Thank goodness.

      • 0 avatar
        Michael Booth

        Go to Beijing for a week when the lovely smog clouds roll in and see how your attitude will change.

        Don’t worry, there is always the aftermarket so you can create your rolling smog cloud as your fight against all of us leftist that want to breathe without our throats burning from all of the smog and pollutants in the air.

  • avatar
    joeTaco

    I’m surprised that credit purchases seem to be continuing apace, even though the whole ZEV mandate system is still on the chopping block: https://www.reuters.com/article/us-autos-emissions-epa/u-s-epa-to-revise-proposed-freeze-of-vehicle-fuel-economy-rules-idUSKCN1RN321

    I get that there’s some uncertainty here, but I’d figure that GM/FCA would just delay these purchases for a few months.

    tldr – The ZEV credit system is California law, California gets a special waiver which allows them to do this, Trump/EPA is threatening to revoke the waiver, EPA submitted their proposed rule changes in Fall 2018 which would have revoked the waiver and eliminated the ZEV credit system, then there’s the comment period, now we’re waiting for the EPA to submit a revised proposal

  • avatar
    Jerome10

    Mazda has to buy credits?! Mazda??!! Don’t they have the highest fleet fuel economy of any car company in America?

    Ford, Hyundai, VW, Toyota, GM, FCA…. this is clearly an issue when it appears nearly every automaker of any consequence in this country needs to buy up credits, and the company with the highest average MPG needs them as well.

    Who actually doesn’t need these, besides Tesla?

    What a joke.

    • 0 avatar
      bullnuke

      Don’t fret about Mazda. They don’t sell enough vehicles to have much effect on the US greenhouse gassing and, according to recent sales volume reports, are helping the environment more and more by selling less and less.

    • 0 avatar
      Scoutdude

      Key word in the sentence Banked so no not everyone was buying credits some were using those that they have banked from exceeding standards in previous years.

      While the name CAFE did mean Corporate Average Fuel Economy the fleet average doesn’t mean anything any more. It is now possible for a company that has an average of 30 mpg to fail and another company to have an average of 25 mpg and meet the standard. Its all about footprint now and a specific target for a specific model based on that footprint. So selling a lot of small cars doesn’t automatically help you anymore since they have to meet a tougher standard than a larger car.

    • 0 avatar

      “Mazda??!! Don’t they have the highest fleet fuel economy of any car company in America?”

      Tesla beats Mazda every day in any aspect including fuel economy.

  • avatar
    Vulpine

    This almost reads like Tesla has become too important to let fail.

  • avatar
    Rick Astley

    All of these penalty payments just go into the Treasury general fund.

    Put some real teeth into CAFE fines and have them go towards something specific that the auto sector would hate to have this go towards such as public transportation, bicycle lanes, or renewable resources.

    • 0 avatar
      ToddAtlasF1

      Spend it on the wall. Spend it on reducing the deficit. Wasting it on expanding government and inefficient land use is worse than setting it on fire. The best thing would be to not collect it. The car companies need to make what people want to buy, and I’ve yet to see a ‘no pipeline’ bumper-sticker on a bicycle.

  • avatar
    Robbie

    Economists’ consensus view: the polluter should pay and the environment should not be polluted to an infinite extent because it is treated as a free good. Therefore, drivers should pay proportionally to the amount of pollution that their vehicles produce.

    That probably means a sizable gas tax, no CAFE, and a set of other common sense regulations that neither the left nor the right will ever get behind.

  • avatar
    Art Vandelay

    GM and FCA…WHAT A DISGRACE!!!

  • avatar
    tylanner

    Thank god for California.

    • 0 avatar
      thornmark

      yes, the high speed rail fiasco is looking real good

      of course they lied to the voters about just about everything to get the initiative passed and then ignored what the people voted on

  • avatar
    Jeff S

    Matt, thank you for this article it is very informative. I did not realize that the car companies were paying these fines and having to buy credits. Now I can better understand why the car companies have asked for the EPA standards to be pushed back and why GM and Ford are investing more in electronic car technology. Climate change and the environment is important to me but I can better see the position of the auto companies. It seems to me that Government and auto industry should work together on these standards and come up with more realistic goals and standards. Engineers from the auto companies should have a part in determining these standards and the time tables for meeting standards. Denying the need for standards is not the answer as having such severe standards that it jeopardizes the existence of the industry itself.

  • avatar
    28-Cars-Later

    “Every Tesla is sold at a loss, but that loss is subsidized by Chevy drivers and others by a couple thousand dollars.”

    …and the damn things still catch on fire.

    • 0 avatar
      Vulpine

      @28-Cars: The assumption that each Tesla car is sold at a loss is invalid; the MARGIN on each car exceeds 20%. The loss comes from other expenses that have nothing to do with manufacturing the car itself. As FCF moves more positive, the losses will vanish and become ‘profits’ which can then be used to pay more rapidly the debts and capital expenses still ongoing.

  • avatar
    thegamper

    There is one clear way to give the finger to Tesla and this system. Buy a fuel efficient vehicle instead of pickup truck. This is the result of your poor life choices America…… just sayin.


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