07 August, 2019

FCA will achieve CO2 targets over next two years

Fiat Chrysler Automobiles (FCA) will not have to pay fines for failing to comply with tough CO2 targets set by the EU for 2019 and 2020.

CEO Mike Manley suggested that the Italian carmaker will be compliant because of a regulatory credit deal with electric vehicle (EV) specialist Tesla.

The company will also launch plug-in hybrid (PHEV) versions of its Jeep Compass, Renegade and Wrangler models as well as adding a full-electric Fiat 500 and debuting some more efficient internal combustion engines.

New technologies

‘This year we’ll continue to roll out improved traditional engine technologies including our new GSE three-cylinder and four-cylinder petrol engines,’ Manley told analysts while discussing the company’s Q2 results.

The new vehicles could account for around 5% of FCA’s European sales mix. Together with the rollout of mild hybrid versions of models such as the Fiat 500 and the Jeep Renegade, and the benefits that FCA will get from pooling its result with those of Tesla, Manley is confident over its 2019 and 2020 CO2 targets.

However, as carmakers only have to comply with 95% of their sales in 2019 and 2020, it is 2021 where bigger fines are likely to be imposed as individual CO2 targets must be met across the entire fleet. Currently, FCA is targeted to achieve 91g/km of emissions. Manley did not comment on whether the company would be able to meet this target.

Compliance costs

While FCA believes it will avoid fines, it will still have to pay a substantial amount to achieve CO2 compliance or even just to get close to meeting its 2021 target.

During the carmaker’s Q1 presentation, CFO Richard Palmer said that the related cost to the company in Europe is €120 million. The total global cost for compliance in 2019 is set to be ‘moderately higher’ than the €600 million FCA spent in 2018.

The CFO said compliance costs are a 50 basis point (0.5%) drag on FCA’s profit margin in the European region, which includes Africa and the Middle East. Electrification will also increase industrial costs, he added. Manley said FCA aims to recover 60% of the additional vehicle electrification costs via pricing.

The CEO said FCA’s target is to be compliant without the help of credits from Tesla by 2022. To achieve full compliance by 2021, FCA plans to add another full-electric car to the line-up, another plug-in hybrid and four more mild hybrids, Manley said. By 2022, Manley believes that the ‘the need for pooling deals would be very, very small.’