Fiat Chrysler Buys 8.2 Million Emissions Credits from Rivals
Fiat Chrysler has purchased millions of greenhouse gas emissions credits from Toyota, Tesla and Honda to help meet US fuel efficiency requirements for the 2014 model year.
Fiat Chrysler Automobiles (FCA) has bought around 8.2 million megagrams of greenhouse gas emissions credits from Toyota, Tesla and Honda, according to a report from the US Environmental Protection Agency (EPA). The credits, which cover the 2014 model year, allow FCA to comply with US fuel efficiency regulations despite lagging behind rivals in average fleet economy.
Why Fiat Chrysler needs credits
FCA’s line-up in the US leans heavily on large SUVs and pickups, a segment that has grown as petrol prices hit their lowest in eight years. This shift has made it harder for the company to meet the government’s rising fuel economy targets. The EPA figures show FCA’s fleet average for 2014 was 20.8 miles per gallon, the lowest among major manufacturers. The company was projected to nearly tie General Motors for last place in 2015, with a fleet average of 21.8 mpg.
Emissions credits are used by carmakers to offset shortfalls in meeting fuel efficiency or emissions regulations. Credits can be earned by building hybrid or electric vehicles, improving air-conditioning systems, or using alternative fuels. Manufacturers who exceed standards can sell surplus credits to those who fall short. FCA has previously bought credits from Tesla, Nissan and Honda, and the latest EPA report shows it added 6.5 million more through the end of 2014, including 5.5 million from Toyota and Honda and about 1 million from Tesla.
How emissions credits work
A megagram is equal to 1,000 kilograms, and the credits are calculated on emissions saved over legal requirements. While FCA would still have complied with 2014 rules without the extra credits, the purchases provide a buffer as regulations tighten. The company also earned credits for improvements in air conditioning and other technologies, but these were not enough to close the gap with its rivals.
- Emissions credits can be earned by selling hybrids, EVs or alternative-fuel vehicles.
- Credits can be sold by manufacturers who exceed emissions or fuel economy targets.
- Carmakers who fall short can purchase credits to avoid regulatory penalties.
Market context and future challenges
With cheap fuel encouraging buyers towards larger vehicles, US fleet fuel economy stagnated at 24.3 mpg in 2014, unchanged from 2013. The EPA noted that this followed a 0.7 mpg improvement the previous year. As FCA continues to focus on trucks and SUVs, it may face further challenges in meeting tightening standards unless it increases its offering of fuel-efficient models or continues to rely on credits from greener rivals.
