A Tesla car in London.
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Fiat Chrysler said in an earnings call on Wednesday that it had spent 300 million euros ($ 362 million) on regulatory credits in Europe alone last year, most of which were bought from Tesla.
The carmaker is now part of Stellantis, which was formed in January by a merger of PSU Groupe, Peugeot parent and Fiat Chrysler. Richard Palmer, CFO of Stellantis, said on the call that the company expects to spend slightly less than EUR 300 million in credits in 2021 to avoid fines for CO2 emissions.
“We had credits of around 300 million for Europe in 2020, most of which were Tesla,” he said, adding that spending this year would be “but not significant”. (Palmer was previously CFO of Fiat Chrysler.)
In 2019, the FCA committed to spend approximately $ 2 billion on credit regulatory credits by the end of 2021.
Car manufacturers struggling to meet the strict CO2 emission standards in Europe can buy credits from less polluting car companies to meet new emission limits, or to reduce their fines if they do not stay within the standards.
The sale of these regulatory credits has become an increasingly important part of Tesla’s business as the automaker has drifted toward sustained profitability. In 2020, Tesla generated $ 1.58 billion in revenue from the sale of regulatory credits, nearly tripling its 2019 amount of $ 594 million. This is greater than the company’s profit of $ 721 million reported in 2020, which was the first profitable year.
Fiat Chrysler is not the only carmaker to buy these credits from Tesla. According to Schmidt Automotive Research, for example, Honda committed to buying credits last year.
As more automakers manufacture and deliver their own electric vehicles, and in larger numbers, fewer will have to rely on Tesla credits to meet environmental standards, even in strict states like California or regions like Europe. However, these standards can also be tightened.
During the recent Q4 2020 earnings call, analysts sought Tesla’s advice for guidance on credit sales in 2021. Chief Financial Officer Zachary Kirkhorn said the sales were basically too unpredictable to offer shareholders concrete expectations.
“This is always an area that is very difficult for us to predict. Regulatory credit sales in 2020 were ultimately higher than our expectations, and it is difficult to give guidance on that,” Kirkhorn said. “What I’ve said before is that in the long run, credit sales will not be an essential part of the business, and we are not planning the business on that. It is possible that it will remain strong for a handful of additional quarters. It is also possible that this is not the case. ‘
He noted that most of Tesla’s regulatory credit revenue for the last quarter of 2020 “was not in line before the start of the quarter.” Revenue from credit sales comes from ‘discrete transactions entered into during the quarter’.
A Stellantis spokesman declined to comment on Wednesday when asked by CNBC for details. A financial submission is expected from the company soon.