FCA Buys Credits from Tesla

This is an interesting bending of the rules – similar to the Volkswagen Group developing software to detect when a car is being tested such that the correct test results are delivered. FIAT Chrysler (FCA) is working with Tesla to lower the fleet emissions such that they won’t get fined by the EU.

FCA has already had to pay $800M a couple of years ago to settle a US lawsuit that accused them of matching the behaviour of VW with technology that simply gave the test results that the tester was looking for and at the end of last year they had to recall a million vehicles in the US to fix a problem that meant that the vehicles didn’t match the regulations.

FCA have already said that they would have battery electric and plugin hybrids on the market by 2022 and the Maserati 5-year plan defines what they plan to deliver to the market by that time. However, in Europe, the emissions standards change in 2021 and FCA cannot get anything to market before those regulations change. So to avoid hefty fines, FCA will pay Tesla a large sum of money (something they desperately need) to add in all Tesla sales under the FCA banner. That reduces the average fleet emissions total and drops it below the new standard. Remember that doing this means that all FCA cars will still be non-compliant and they are in effect cheating the system – legally.

Tesla might not even be in business by 2021 the way they are tracking at the moment with the valuation of the company falling off a cliff in the last three months from $322 a share to currently $190, far off the $420 that Elon Musk thought he would get. In fact the company has lost half its value in the last six months! So Tesla might want FCA to pay early to save them or you might see Tesla being absorbed into FCA to use their technology across the brands which would save a chunk of development costs for the Italians.

We read many comments on other sites in relation to this story. Many suggested that it spurs research and development and others suggested that the EU wanted to force manufacturers out of the market. If you pay someone to hide a problem you have, why would that spur you to develop a fix? If the transaction is less than the fine, it has a lot of value and it means that you can take your time to develop a proper fix and not a band-aid solution. The other comments about the EU wanting to banish manufacturers from the market is plainly stupid – the EU would collapse if all the factories had to close. Income tax would plummet and unemployment would rise, crippling every economy.

The underlying issue is that politicians are creating regulations without understanding the side effects of the decisions made. They always seem to think that any industry complaint is simply the manufacturers having a whinge, when in reality, often it is too costly to make the changes. Once the price of a product rises, the market will slow down which means lower sales and therefore lower revenues. Ultimately that means that workers lose their jobs and Governments have to take more tax from other industries to cover the costs of paying people their social benefits. That cycle can only last a short time until the economy dives and the politicians lose their own jobs.