Fiat Chrysler will pay for Tesla cars to be included in its fleet in order to meet European emissions limits

FCA Corporate Blog

• Fiat Chrysler is paying Tesla hundreds of millions to count its electric vehicles as part of its larger fleet, the Financial Times reported.
• The move will allow FCA to average Tesla's zero-emissions cars with its own cars, lowering its average emissions.
• In 2020, EU emissions limits will fall to 95 grams per kilometer.
• FCA currently averages about 115g/km, and could face millions in fines if it doesn't meet the new limit.

Fiat Chrysler will pay Tesla "hundreds of millions of euros" in order to count the company's electric vehicles as part of its own fleet, the Financial Times reported Sunday.

That move will allow the European automaker to avoid paying hefty fines if it were to exceed the EU's emissions limit, which drops next year to 95g per kilometer. In the most recent year available, FCA's carbon output averaged 115 per kilometer, according to official statistics.

If FCA does not meet the EU limit it could face up to 2 billion euros in fines, Jefferies analysts estimate, according to the FT.

Shares of Tesla rose about 2.7% in early trading Monday after the deal was announced. FCA was also up about 2%. No specifics were offered about how many cars Fiat will add to its existing fleet beyond the "hundreds of millions of euros" figure.

Read more: Fiat-Chrysler is investing $4.5 billion to keep up with Americans' insatiable appetite for SUVs

As Engadget points out, Tesla has a long history of making money from selling emissions credits. Not only was the automaker the first to hit its tax credit cap in the United States, it made $103.4 million in 2018 from selling zero-emissions credits.

However, now that the US tax credit has been halved to $3,750 for Tesla buyers as a result of the company hitting government sales thresholds, sales have fallen sharply, the company said last week. Elon Musk warned earlier this year that the company may not be profitable when it reports first quarter financials in the coming weeks, a sharp departure from his previous statements about Tesla's ongoing profitability.

More from Tesla's first quarter deliveries report:

• Morgan Stanley slashes its Tesla target for the 3rd time this year
• Tesla's disappointing first-quarter sales numbers aren't a reason to panic, but they reveal big challenges for the company, experts say
• Judge orders Elon Musk and the SEC to put on their 'reasonableness pants' and work things out
• 'By whatever means necessary': Tesla leaves some customers in the lurch as it rushes to deliver cars by the end of the quarter

Get the latest Tesla stock price here.