FCA Locked with Tesla (TSLA) on Carbon Credits with Multi-Year Agreement

In 2020, Europe introduced tough new targets for average CO2 emissions from cars, prompting automakers to urgently seek solutions to their problems. Fiat Chrysler (FCA) formed an open pool with Tesla on February 25, 2019, stating that Tesla will be accounted for in its fleet of brands, including Alfa Romeo, Jeep and Maserati, according to a statement on the European Commission website. FCA has agreed to pay Tesla hundreds of millions of euros, so the electric vehicle manufacturer's vehicles are now counted in its fleet to avoid heavy fines for violating tough new EU emission regulations.

FCA CEO Mike Manley says that the group locked with Tesla on carbon credits with a multi-year agreement, reported Benzinga. This means that Tesla will continue to benefit financially from this deal for several more years. This, in turn, will have a positive effect on the financial situation of the company, which is now building factories on three continents and strives to continue further expansion.

The deal allows FCA to offset CO2 emissions from its vehicles relative to Tesla's, bringing the average down to acceptable levels. If this deal had not been signed, FCA could face fines of over 2 billion euros as early as 2021.

EU rules allow competing companies to form so-called open pools. The Tesla-FCA deal for Europe marks the first time wholly separate producers have pooled their emissions together as a commercially viable regulatory compliance strategy.

Tesla generates significant revenues by selling zero-emission vehicle credits. Thus, the more electric vehicles Tesla produces, the more carbon credits it can sell, which in turn will have a positive effect on the company's revenue.

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