By on August 9, 2019

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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20 Comments on “Buying Credit: FCA Says It Won’t Need to Pay EU’s CO2 Fines...”

  • avatar
    SCE to AUX

    Codependence for FCA and Tesla, in a broken, ill-conceived system.

    CO2 is tree food.

  • avatar

    It’ll be pretty funny if the rent-seekers implode before they can carry Fiat into 2021.

  • avatar

    That’s okay, I’m sure the EU will find another way to fleece their pockets.

    It’s all they seem capable of doing these days.

  • avatar

    Jazz hands for FCA!

  • avatar

    Those credits that they have to buy don’t actually help the environment one bit.

    And who pays for all this extra expense anyway? The customers (yes, even EV buyers).

    Well done, politicians! Everyone loses except you guys funnel lots of our money to yourselves (and your thousands of footsoldiers).

  • avatar

    Abarth 124 Spiders converted to use E85 for everyone! That way they’ll be compliant!

    (Abarth 124 Spiders running on E85 and intake plus exhaust and a tune can put out 300hp: win-win.)

    • 0 avatar
      Art Vandelay

      Now I’m going down an internet rabbit hole…thanks.

    • 0 avatar

      Using E85 only substitutes other harmful emissions for CO2 during production.

      Plus, the amount of CO2 reduction isn’t as much as most people think.

      From an independent testing lab on a 4.0l Explorer.

      Table 4 – Tailpipe Emissions Test Results Average Tailpipe Emission, grams/mile
      Fuel THC CO NOx CO2 Fuel Efficiency, miles/gallon
      Holiday E10 0.016 0.436 0.027 531 17.1
      SA E10 0.019 0.267 0.054 525 17.2
      BP E10 0.022 0.341 0.051 525 17.2
      Non-ethanol 0.032 0.543 0.044 531 16.8
      E85 0.002 0.820 0.018 510 14.2
      SULEV 0.01 1.0 0.02 — —

      • 0 avatar

        The idea is that nowadays E85 can be economically (maybe with the need for a bit of tax reductions, though that is arguably only fair since it is ecological and not an established product) produced from waste.

        At least in Europe where producing it from food-capable raw materials is frowned upon, many industrial process wastes are being converted into E85. Much of that waste would otherwise result in some amount of methane gas which is a much stronger greenhouse gas than CO2. And much of E85 is, I believe, considered to be renewable. So it replacing non-renewable oil is better, right?

        E85 isn’t as good for the environment as biomethane (in CNG vehicles), but I’d say pretty much around the numbers of EVs. Not that modern gasoline vehicles would really be _that_ much worse for the environment than any of the above to call for such drastic and expensive measures…

  • avatar
    Master Baiter

    “…fines for failing to meet the demands of tightening European air quality regulations…”

    Our betters apparently assume the ignorant public will think CO2 emissions have something do with air quality.

    What’s next: We must reduce our consumption of dangerous di-hydrogen oxide! We’re all going to die!

  • avatar
    Jeff S

    The best Government money can buy. Here’s to more ethanol in our gas and less longevity for our vehicles with higher vehicle prices. A win win for regulators and manufacturers but a lose lose for the consumer.

  • avatar

    Government underreach. No automaker really has to comply with the rules, as long as government gets their share of the pie. The fines are a joke, on a per Gas Guzzler basis, but combined from all (guilty) automakers, staggering obscene amount.

  • avatar
    Jeff S

    Don’t entirely agree with the fines being a joke unless it is a bad joke on the final consumer. The rules encourage gaming the system especially with CVT and smaller turbo motors. Manufacturers are in business to make a profit and costs such as buying credits and paying fines increase the cost of vehicles to the final consumer. I am all for cleaner air but the current standards are less about clean air and efficiency and more about increased regulation.

    • 0 avatar

      The marketplace sets the price. Automakers are just along for the ride. And yes the fines are laughable, and small potatoes compared to total costs of production. It’s all the same to automakers, and it’s a write off, but remember, the gas guzzlers are where the money is at for automakers. Those (cleverly) drafting the rules know this very well.

      Of course the rules aren’t intending cleaner air. That’s the default. If It really was a concern, they would be all over the airliner industry, military, rail, cargo/cruise ships, and others. All they do is roll coal. Follow the money.

  • avatar
    Jeff S

    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.

    • 0 avatar

      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.

  • avatar
    Jeff S

    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.

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