Buying Credit: FCA Says It Won't Need to Pay EU's CO2 Fines

Matt Posky
by Matt Posky
buying credit fca says it wont need to pay eus co2 fines

Fiat Chrysler Automobiles CEO Mike Manley said the automaker will not have to pay fines for failing to meet the demands of tightening European air quality regulations. But that’s not because the automaker is actually going to adhere to them. FCA has been pretty open in explaining its willingness to simply endure fines or, conversely, buy enough carbon credits to circumvent the issue entirely. And, over the next two years, the latter strategy will be how it copes with the EU’s pollution mandates.

It’s not ignoring efficiency, however. FCA still plans on releasing an improved Fiat 500 BEV while expanding its hybrid offerings via the Jeep brand this year. It’s just easier (and cheaper) to buy credits in advance, knowing the manufacturer will need them.

In a conference call we were not privy to, CEO Mike Manley said the company’s upcoming EVs (as well as hybrids) will account for about 5 percent of the manufacturer’s European sales. According to Automotive News, Manley also said FCA plans to improve fuel economy incrementally by updating existing powertrains and expanding availability of the small (1.0 and 1.3-liter) GSE engines — which will soon be manufactured in both Poland and Italy.

While the smaller three-cylinder is likely to stay isolated in Europe, the 1.3-liter is already available in the United States in the Jeep Renegade and Fiat 500X.

The rest of the corporation’s environmental initiative will come by way of purchasing regulatory credits from Tesla Motors. However, FCA said it only plans to so through 2021 and aims to become fully compliant with EU rules over the next few years.

From Automotive News:

While FCA expects it will avoid fines, it will still have a substantial bill to achieve compliance. CFO Richard Palmer said during FCA’s first-quarter conference call that the cost to achieve compliance in Europe this year is 120 million euros ($134 million). The global total cost for compliance in 2019 is set to be “moderately higher” than the 600 million euros ($672 million) FCA spent in 2018.

The CFO said compliance costs are a 50 basis point (0.5 percent) drag on FCA’s profit margin in the European region, which includes Africa and the Middle East. Electrification will also increase industrial costs, he added. Manley said FCA aims to recover 60 percent of the additional vehicle electrification costs via pricing.

Manley did not say whether FCA will also be able to avoid fines in 2021, when the new EU rules take full effect (next year automakers will have to comply with 95 percent of their sales).

Manley did say that he wants FCA to go without credit help from Tesla by 2022, which seems just far enough away for the promise to not hold much weight. At any rate, the present deal is mutually beneficial. Tesla has made over $2 billion from the sale of environmental credits — most of them ZEV credits from CARB-friendly states, primarily California. The EV firm should clear hundreds of millions more over the coming years, as both FCA and General Motors have indicated they will purchase said environmental merits for the foreseeable future.

[Image: Jonathan Weiss/Shutterstock]

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  • Jeff S Jeff S on Aug 11, 2019

    This is more than the marketplace setting prices, it is the cost to the consumer in less reliable vehicles and vehicles that will not last as long. A CVT is not going to last as long as a traditional automatic transmission thus increasing the number of vehicles scrapped sooner than later. This might be good for the manufacturers and the dealers but the cost to consumers is increased and environmentally more vehicles being scrapped. Maybe long term technology will make the CVT more reliable along with turbo motors and some of the other technologies. As for cleaner air I agree. One of the biggest scams hoisted on taxpayers and consumers is methanol made from corn added to our fuel. Less about clean air and more about graft.

    • DenverMike DenverMike on Aug 11, 2019

      Planned obsolescence wasn't invented by regulators. Automakers would love to sell you cars that drive themselves to the crusher on their 10th birthday. They already disco "original" replacement parts before that, and you're left at the mercy of the aftermarket and scrappers. If you plan on keeping it a while, I would hope you bought a very popular car. Just a stinkin' processor can have it parked permanently, never mind hard to find crash parts, suspension, etc. But regulators would love it too, since they can't cash in on the old stuff as much.

  • Jeff S Jeff S on Aug 11, 2019

    Yes I know about planned obsolescence like water heaters and appliances that last 6 to 8 years. I expect as much as vehicles cost that they should last at least 10 years. Doesn't have to last forever but when you pay a lot of money you expect something to last. Also in the past I bought a less popular truck (Mitsubishi) and had problems getting parts for it a lesson learned. As for regulators and many politicians they want you to buy an electric car or ride a bicycle while they are provided either a chauffeured limo or a luxury vehicle. Again my point is because of many of the current regulations the consumer pays more and gains little or nothing.

  • Wjtinfwb How does the ICE mid-engine C8 platform work for... anything else? A sedan? SUV? With a mid engine configuration? A mid-engine SUV will have to be Suburban sized to offer the utility of a CRV. GM should dust off the Omega platform designed for the Cadillac CT6 for an SUV/Sedan offering with exceptional handling, Rear or AWD capability and acceptable space utilization. They also need to focus on interior fit & finish, trim choices and high quality final engineering and assembly. What GM doesn't need is another half-baked product with a storied and prestigious badge on the decklid and a premium price on the Monroney. No more Cimarron's, Allante's or X-cars needed to tarnish the reputation of Corvette.
  • InCogKneeToe BUILD It and they will come.By Build It, I mean a Vehicle that the Customer Wants and it works for them. It could be called Chevette for all that that matters. The Mach E's success isn't because it totes the Mustang on it.Just build what people want, the next Caravan/Taurus/Beetle/Maverick (truck).
  • YellowDuck do you make a mid-engine crossover? Or even a 4-door coupe? Me not get.
  • 28-Cars-Later Thanks Corey. The head stud job on NOrthSTAR-T was $3K *years ago* as it involves an engine pull so rear wheel arch rust in and of itself isn't a show stopper. I'll be sure to check out the trunk as it may start to add up on deferred maintenance. Supposedly this was garaged so the underneath the rockers etc. should be decent but if those are shot its not gonna work.
  • Mark 2016 Hyundai Sonata Hybrid, G4NG engine with connecting rod bearing issues. Engine needs to be replaced, but Hyundai is denying warranty claim. I have all maintenance records from mile zero. It has been in Hyundai Service department 5 time in 4 months. They added the knock sensor and software update to let you know the engine is about to blow up. They kicked the can down the road doing patch work until the car was past the 120k extended extended warranty. I have that documentation too. So how can I join the class action law suit or find a Lawyer that handles these types of issues?