Fiat Chrysler Spent Over $300 Million on Green Credits in Europe Last Year — Mostly From Tesla

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  • Fiat Chrysler spent around EUR 300 million ($362 million) on regulatory credits in Europe last year -- most of that with Tesla.
  • The automaker, now part of Stellantis, plans to step that spending down but only slightly in 2021, executives revealed on an earnings call Wednesday.
  • Tesla generated about $1.58 billion in revenue from sales of regulatory credits last year and has never been profitable on an annual basis without credit sales to bolster its automotive margins.

Fiat Chrysler said Wednesday on an earnings call that it spent EUR 300 million (US $362 million) on regulatory credits last year in Europe alone — most of which it bought from Tesla.

The automaker is now part of Stellantis, formed in January by a merger of Peugeot parent PSA Groupe and Fiat Chrysler. Stellantis CFO Richard Palmer said on the call that the company expects to spend slightly less than EUR 300 million in 2021 on credits to avoid fines for CO2 emissions.

"We had costs of credits in 2020 of around 300 million for Europe, most of which were Tesla," he said, adding that spending will be lower "but not significantly" this year. (Palmer was previously Fiat Chrysler's CFO.)

In 2019, FCA committed to spend about $2 billion on environmental regulatory credits through the end of 2021.

Automakers who struggle to meet stringent CO2 emissions standards in Europe can buy credits from less-polluting auto companies to meet new emission limits, or to lower their penalties if they do not stay within the standards.

Selling these regulatory credits has been an increasingly important part of Tesla's business as the automaker has pushed toward sustained profitability. In 2020, Tesla generated $1.58 billion in revenue from sales of regulatory credits, nearly tripling its 2019 figure of $594 million. That's greater than the company's profit of $721 million reported in 2020, which was its first profitable year.

Fiat Chrysler is not the only automaker buying these credits from Tesla. For example, Honda committed to buy credits late last year, according to Schmidt Automotive Research.

As more automakers manufacture and deliver electric vehicles of their own, and in higher numbers, fewer should need to rely on Tesla credits to meet environmental standards, even in strict states like California or regions like Europe. However those standards may grow more stringent, too.

On its recent Q4 2020 earnings call, analysts asked Tesla execs for guidance on regulatory credit sales in 2021. CFO Zachary Kirkhorn said, basically, the sales were too unpredictable to offer shareholders any concrete expectations.

"This is always an area that's extremely difficult for us to forecast. 2020 regulatory credit sales ended up being higher than our expectations, and it's difficult to give guidance on that," Kirkhorn said. "What I've said before is that in the long-term regulatory credit sales will not be a material part of the business and we don't plan the business around that. It's possible that for a handful of additional quarters it remains strong. It's also possible that it's not."

He noted that most of Tesla's regulatory credit revenue from the final quarter of 2020 was "not lined up prior to the beginning of the quarter." Credit sales revenue came from "discrete deals that were struck over the course of the quarter."

A spokesperson for Stellantis declined to comment on Wednesday when CNBC asked for further details. A financial filing is expected from the company soon.

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