Over the weekend Financial Times reported that Tesla and Fiat Chrysler Automobiles (FCA) have entered into an agreement that will put Tesla out of the hands of a new influx of money and FCA new emissions legislation in Europe. Starting next year, new rules will be introduced by the European Commission whose fleet-wide emissions from an automaker should not exceed an average of 95g / CO 2 / km – a figure that is around 57 mpg for petrol vehicles or 76mpg for diesel vehicles ,
From 2020, 95% of the new cars sold by an automobile manufacturer in the EU will have to achieve this goal, the remaining 5% will be anchored by law in 2021. And the penalties for failure are draconian: an "Excess Emission Levy" of 95 EUR (107 USD) per gram of CO 2 for each vehicle registered in the EU this year. For some OEMs this has the potential to be ruinous ; If FCA's portfolio in 2021 were the same as it was in 2018, the carmaker would need to spend $ 2.77 billion ($ 3.12 billion) on the global net profit of $ 3.63 billion ($ 4.1 billion). USD).
Some OEMs make every effort to electrify themselves to comply with the new rules; For example, VW's Roadmap E should be considered in this context. For others, however, the road to electrification is not so easy. Although FCA had announced a bold € 9 billion plan to electrify its lineup by 2022, its current plug-in portfolio is currently on the Chrysler Pacifica Hybrid (not sold in the EU) and the Fiat 500e a Auto believed to lose the mark for every hundred thousand dollars sold.
Although the exact financial terms of the deal are unknown, the FT says that the agreement is in the range of "hundreds of millions" of euros. "Interestingly, FT also reports that Tesla has broadened the offer to other OEMs to join this emissions pool, but had not accepted it by March 25. For Tesla, this is undoubtedly a welcome financial lifeline. Each of Tesla's four profitable quarters since the company's inception in 2003 has been heavily dependent on the sale of zero emission credits in California, and although the company has not yet published its results for the first quarter of 2019, we know it is in the In the first three months of the year, sales of the high-margin electric cars S and Model X had to be significantly lower.
In addition, the company had to plunge into its cash reserves to pay a hefty $ 920 million bond. In the near future, further debts will be due. And if that's not enough, then the company needs to design and then build the Model Y electric crossover, which requires significant investments in investment. (This type of spending has been declining lately, as Tesla has cut its budget as much as possible to improve its financial performance for the market.)
However, this is unlikely to be a long-term panacea. Eventually, the electrification of the FCA must take place (or it must abandon the sale of vehicles in the EU). Meanwhile, Tesla needs to sell as many electric vehicles as possible in Europe.