Automakers invest billions of dollars into making plug-in electric vehicles and hybrids, not because of high demands, but to comply with the government’s requests.
This month, Ford Motor Co. announced it would invest $4.5 billion in EVs, adding 13 electric cars and hybrids to its lineup by 2020 and the company’s CEO, Mark Fields, publicly admitted the automaker would not have spent the money if it wasn’t obligated to do so.
The federal Clean Air Act demands carmakers to reduce tailpipe emissions to the amount of 54.5 miles per gallon by 2025, which means that in states like California, 15% of the cars must have zero emissions. The only vehicles which can do that are the EVs and the fuel cell cars.
However, consumers are in no rush to buy electric cars that are available at premium prices. For example, in California, which is Tesla Motors’ hometown, fewer than 2% of the cars sold there are electric models. And because gas prices average now less than $2 a gallon, buyers are not inclined at all towards the electric car choice.
Fiat Chrysler Automobiles (FCA) found a different way to comply with the law, and unlike Volkswagen’s, it is legal. Instead of producing cars nobody wants to buy, it studied the law and invested $500,000 in regulatory credits, most of which were purchased from other carmakers. The U.S. Environmental Protection Agency (EPA) let us know that FCA bought 8.2 million greenhouse gas credits from brands like Honda, Toyota and Tesla back in 2014. The sum of money for that would be of around $344 million, as EPA revealed last year that a credit’s value revolves around $42 in the case of Hyundai and Kia settling charges.
According to EPA, Fiat Chrysler now has 13.76 million credits stocked, worth a massive $578 million. And while the company will not comment on the information, in a recent filing it listed regulatory credits worth of $545 million. This way, FCA is not selling enough clean cars to comply with the Clean Air Act, but has more credits from other automakers, helping the company meet the requirements.