In
a previous update from last August, a pact between
Fiat Chrysler Automobiles (FCA) and
Tesla was highlighted, enabling the companies to lawfully combine their carbon emissions. This accord is aimed at assisting FCA in avoiding substantial penalties imposed by the European Union due to stricter environmental guidelines. There’s a dual benefit as Tesla is also benefiting from this arrangement as it’s now revealed that FCA’s contributions are effectively supporting the development of its eagerly anticipated new Gigafactory in the outskirts of Berlin,
Germany.
Constructing Gigafactories incurs high expenses; the Nevada establishment alone cost Tesla $5 billion. Despite cost reductions over the years, they remain a significant investment. The partnership with FCA is expected to mitigate Tesla’s construction outlays as per
Automotive News Europe, highlighting that payments could range from $150 million to $250 million per quarter until 2023, essentially acting as funding for Tesla’s factory in Europe. With the Berlin site progressing swiftly thanks to this financial backing, Tesla will be better positioned to
meet global
demand and achieve its
production objectives, as evidenced by the successful launch of its Chinese Gigafactory.
Tesla frequently grapples with financial instability and the ongoing need for additional capital, underscoring the value of the FCA deal from Tesla’s board’s perspective.
The arrangement benefits FCA by essentially diluting the emissions of its vehicles by factoring in Tesla’s vehicle count. By spreading CO2 emissions across a larger vehicle pool, this maneuver diminishes the overall carbon footprint—at least on paper. FCA anticipates that Tesla’s vehicles, combined with the slated introduction of an electric Fiat 500 and hybrid versions of the Jeep Compass, Wrangler, and Renegade, will aid in compliance with emissions regulations. While this strategy involves some creative accounting, FCA’s accord allows it to evade a 700 million euro penalty for failing to meet emissions targets by 2021.
If Tesla adheres to its proposed timelines, with FCA’s assistance or the resultant entity post its merger with Peugeot, the Gigafactory in Berlin is projected to commence operations in July 2021, focusing on producing Tesla’s Model 3 sedan and Model Y crossover.
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