As the global regulators update their emission standards for automotive manufacturers, some firms are finding it harder and harder to comply. Fiat Chrysler is one of those companies who is now having a hard time meeting the increasing global environmental demands. According to new reports, to avert potential penalties and possible sanctions from European Union regulators, Fiat has now sought the help of Tesla Inc to try and save it millions of dollars in the latest rounds of newly updated emission rules.
Reports have revealed that Fiat has struck a deal with Tesla, agreeing to pay the fully-electric automotive company hundreds of millions of dollars to include its vehicles in its fleet. The addition of the zero-emission vehicles from the Pal Alto-based company will significantly offset Fiat's overall average emissions of greenhouse gases from its fleet of vehicles. The addition of the vehicles will mean that Fiat will be able to avoid paying significant fines for violating the new EU emission standards.
The recent reports did not specify how much exactly Fiat will be paying Tesla, but it has been estimated to be in the hundreds of millions at least. Under the reported deal, Fiat will be paying Tesla for the right to count the company's vehicles as part of its fleet. This open pool deal will allow the Italian carmaker to report a significantly lower average emission figure to EU regulators.
Fiat has been lagging behind other European carmakers, which have already begun rolling out their own electric vehicles to meet global emission standards. The company had previously announced that it was going to be investing around US$10 billion in the next four years to develop its own electric vehicles.
Tesla has made quite a lot of money from selling its emission credits in the United States, where it is allowed to do so given that it is a completely zero-emission company. US regulators currently allow companies such as Tesla to sell their emission credits to other automotive manufacturers.
According to its latest report to the US Securities and Exchange Commission, Telsa made over US$1 billion in the past three years from simply selling its emission credits to other US-based automotive manufacturers. This has significantly helped the company increase its revenue and avert possible losses.
Fiat recently released a statement in response to reports of the deal and mentioned that it was simply finding the most optimal way to comply with the EU's regulations. The company also mentioned that it was committed to meeting all emission standards and the purchase from Tesla will allow them to comply with all regulations at the lowest cost possible.
