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Fiat Chrysler will pay Tesla to avoid EU emissions fines

Call it a marriage of convenience.
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Dursun Aydemir/Anadolu Agency/Getty Images

Environmental regulations can create strange bedfellows, it seems. The Financial Times has learned that Fiat Chrysler Automobiles will pay Tesla hundreds of millions of euros (specific numbers aren't available) to pool the EV brand's cars with its own fleet and avoid fines for violating stricter EU emissions rules in 2020. The move should help FCA meet the EU's CO2 emissions target of 95g per kilometer by lowering its average from a higher-than-usual 123g. Fiat Chrysler has been relatively slow to adopt electric and hybrid cars -- this buys it time to catch up without having to take many (if any) radical steps.

It was expected that car makers would pool their own sub-brands together. VW can use improving emissions with its regular brands to offset exotic brands like Porsche and Lamborghini, for example. However, this (along with a deal between Mazda and Toyota) is the first time two wholly separate car companies have agreed to pool their emissions in Europe, and shows the pressure on companies to electrify their lineups.

This sort of deal isn't completely unusual for Tesla. In 2018 alone it made $103.4 million by selling zero-emissions credits, and it made $279.7 million the year before that. The EU pact could significantly pad Tesla's bottom line, though, and it's coming at a good time. Tesla's sales fell sharply in early 2019 as reduced EV tax credits and the typical early-year slowdown took their toll. While the company isn't facing a crisis, it probably won't mind an influx of cash while it tries to improve sales and gears up for future cars like the Model Y.

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