Fiat Flags a $2 Billion Credit Bill That Will Be a Boon to Tesla

(Bloomberg) -- Fiat Chrysler Automobiles NV entered into various agreements in the first quarter to secure emissions-related regulatory credits that will cost the company 1.8 billion euros ($2 billion) over the next three years.

Chief Financial Officer Richard Palmer didn’t identify any of the companies Fiat Chrysler is buying credits from during the company’s first-quarter earnings call Friday. The Italian-American automaker said last month it had reached a deal to pool its fleet with Tesla Inc.’s to comply with stricter European Union rules on carbon-dioxide emissions.

Without making dramatic changes to its fleet that would have hurt profit, Fiat Chrysler probably would have had to pay a fine of about 390 million euros, Chief Executive Officer Mike Manley said on the call. “The route that we’ve taken has dramatically reduced that number and we will achieve compliance,” he said.

Around the globe, automakers are increasingly required to sell a greater portion of electric and other non-polluting vehicles. If manufacturers don’t sell enough of them in jurisdictions including the U.S., European Union and China, they have to purchase credits from competitors like Tesla to make up the difference.

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