Fiat Chrysler (FCA) is apparently paying millions of dollars to Tesla for the privilege of selling its cars in Europe under Tesla’s marketing umbrella.
But it’s not a marketing decision designed to sell more cars. Rather, it’s a clever ploy to get around the European Union’s (EU) increasingly strict limits on automobile emissions. By being lumped in with Tesla’s fleet, which produces no emissions, FCA’s per car emissions falls significantly, helping it to avoid significant fines.
The Financial Times reports FCA is taking this step so that it’s fleet of cars sold in Europe can meet the EU’s target of limiting CO2 emissions to 95 grams per kilometer. Before bundling its cars with Tesla’s, FCA’s average was 123 grams.
The move exposes a rather large loophole in the new EU regulations and the lower emissions cap that is set to go into effect next year. Volkswagen has taken steps to lump its low-emission vehicles with its high-performance brands, Porsche and Lamborghini. But two totally unrelated and unconnected car companies being presented as one breaks new ground.
Nice source of revenue
According to The Financial Times, Tesla has been active in using its clean emissions numbers as a source of revenue. Last year, the company reportedly made $103.4 million by selling off zero-emissions credit. It raked in even more the year before.
The EU has set a cap on automobile emissions in an effort to reduce greenhouse gas. But in dealing with individual car companies, it has permitted automakers such as Tesla, with very low emissions, to trade the unused portion of their cap to other automakers whose cars create more greenhouse gas.
The cap went into effect in 2005 but has gotten smaller each year since, forcing car companies, as well as power plants, to become increasingly efficient in managing their carbon output.
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