A Tesla car in London.
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Fiat Chrysler said on Wednesday in a profit call that it invested 300 million euros (US $ 362 million) in regulatory loans last year in Europe alone, most of which it bought from Tesla.
The carmaker is now part of Stellantis, formed in January by a merger of the parent company Peugeot, PSA Groupe and Fiat Chrysler. Richard Palmer, chief financial officer of Stellantis, said in the call that the company expects to spend just under € 300 million in 2021 on loans to avoid fines for CO2 emissions.
“In 2020 we had credit costs of around € 300 million for Europe, most of which were Tesla,” he said, adding that spending will be lower “but not significant” this year. (Palmer was previously the chief financial officer of Fiat Chrysler).
In 2019, FCA pledged to spend about $ 2 billion on environmental regulatory credits by the end of 2021.
Car manufacturers struggling to meet strict CO2 emission standards in Europe can buy credits from less polluting car companies to reach new emission limits or reduce their penalties if they are not kept within the standards.
The sale of these regulatory credits has been an increasingly important part of Tesla’s business, as the automaker has driven sustained profitability. In 2020, Tesla generated $ 1.58 million in revenue from regulatory credit sales, nearly tripling its $ 594 million figure in 2019. This is higher than the company’s reported $ 721 million profit in 2020, which went be your first profitable year.
Fiat Chrysler isn’t the only carmaker to buy these credits from Tesla. For example, Honda pledged to buy credits late last year, according to Schmidt Automotive Research.
As more automakers manufacture and deliver their own electric vehicles, and in higher numbers, they should rely less on Tesla credits to meet environmental standards, even in strict states like California or regions like Europe. However, these standards may also be stricter.
In its recent earnings call for the fourth quarter of 2020, analysts asked Tesla executives for guidance on sales of regulatory credits in 2021. Chief Financial Officer Zachary Kirkhorn basically said sales were too unpredictable to offer shareholders specific expectations.
“It’s always an area that is extremely difficult for us to predict. Sales of regulatory credits in 2020 ended up exceeding our expectations and it’s hard to give guidance on that,” Kirkhorn said. “What I’ve said before is that in the long run, credit sales won’t be an important part of the business and we don’t plan the business around that. It’s possible that for a handful of additional quarters it stays strong. It’s also it may not be “.
He noted that most of Tesla’s regulatory credit revenue for the last quarter of 2020 “did not align before the beginning of the quarter.” Revenue from credit sales came from “discreet deals that were reached throughout the quarter.”
A Stellantis spokesman declined to comment Wednesday when CNBC asked for more details. The company expects a financial presentation soon.