A Tesla car in London.
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Fiat Chrysler said in a earnings call on Wednesday that it spent $ 300 million ($ 362 million) on legal credits in Europe alone last year, most of which was bought from Tesla.
The automaker is now part of Stellantis, which was formed in January by a merger of Peugeot parent company PSA Groupe and Fiat Chrysler. Richard Palmer, CFO of Stellantis, said during the call that the company expects to spend just under $ 300 million on credits by 2021 to avoid carbon fines.
“We had a credit cost in 2020 of about $ 300 million for Europe, most of which was Tesla,” he said, adding that this year’s spending will be “but not significant”. (Palmer was previously CFO of Fiat Chrysler.)
In 2019, FCA has committed to spend approximately $ 2 billion on environmental regulatory credits by the end of 2021.
Car manufacturers struggling to meet stringent CO2 emissions standards in Europe can buy credits from less polluting car companies to meet new emission limits, or to lower their fines if they don’t meet the standards.
Selling these legal credits has become an increasingly important part of Tesla’s business as the automaker is committed to sustainable profitability. In 2020, Tesla generated $ 1.58 billion in revenue from legal credit sales, nearly tripling its 2019 amount of $ 594 million. That’s more than the company’s $ 721 million profit reported in 2020, its first profitable year.
Fiat Chrysler is not the only automaker to buy these credits from Tesla. For example, according to Schmidt Automotive Research, Honda has committed to buying credits at the end of last year.
As more automakers produce and supply their own electric vehicles, and in greater numbers, fewer automakers should rely on Tesla credits to meet environmental standards, even in strict states like California or regions like Europe. However, those standards can also become stricter.
During the recent earnings call for the fourth quarter of 2020, analysts asked Tesla executives for guidance on regulatory credit sales in 2021. CFO Zachary Kirkhorn said the sales were, in fact, too unpredictable to provide shareholders with concrete expectations.
“This is always an area that is extremely difficult for us to predict. Credit sales for 2020 were ultimately higher than our expectations, and it is difficult to guide that,” said Kirkhorn. “What I have said before is that in the long run, regulatory credit sales are not going to be an integral part of the business and we are not planning the business around that. It is possible that it will remain strong for a handful of additional quarters. that it isn’t. “
He noted that most of Tesla’s last quarter 2020 regulatory credit income was “not prepared before the start of the quarter.” Revenue from credit sales came from “individual deals closed during the quarter”.
A Stellantis spokesman declined to comment on Wednesday when CNBC asked for more details. A financial request from the company is expected soon.