TOKYO -- Global automakers face the risk of 14.5 billion euros ($17.2 billion) in fines from the European Union for failing to meet tougher new emissions standards, a prospect that has sent them racing to buy carbon credits from U.S. electric vehicle maker Tesla.
Tesla sold $428 million in the credits for the quarter ended in June, up fourfold on the year to produce 7% of the company's revenue. Most of the sales come from a similar system in California, but major automakers increasingly seek to buy EU credits.
The electric vehicle producer expects revenue from emissions credits to double this year from $594 million in 2019.
The EU's updated corporate average fuel economy, or CAFE, standards take full effect in 2021. Each automaker needs to reduce average fleetwide emissions to 95 grams of carbon dioxide per kilometer. Failure to comply brings a 95-euro penalty per vehicle for each gram in excess of the threshold.
The new CAFE standards represent a roughly 30% reduction in carbon dioxide emissions from the previous targets set for 2015. Yet 20 major auto brands that sell in the EU exceeded the updated limits last year, British researcher JATO Dynamics reports.
Another British data firm, PA Consulting, said 13 automakers are on track to pay a total of 14.5 billion euros in fines in 2021.
Volkswagen shapes up as a leading offender, with carbon dioxide emissions per kilometer slated to average 109.3 grams in 2021. That would result in a fine of roughly 4.5 billion euros, equating to one-quarter of the German company's operating profit last year.
Nissan Motor's alliance, which includes French partner Renault and fellow Japanese maker Mitsubishi Motors, faces a fine equivalent to about 130 billion yen ($1.22 billion). Nissan already anticipates a net loss of 670 billion yen for the fiscal year ending March 2021.
Toyota Motor's average emissions would just exceed the threshold at 95.1 grams, but the company's heavy sales volume in the EU would produce a fine of roughly 2.2 billion yen.
The impact will be reflected in production costs. For Mazda Motor, each Mazda3 subcompact would incur as much as 400,000 yen in additional expense.
The EU offers noncompliant automakers an alternative to fines. Manufacturers that exceed the bloc's emissions standards can buy credits from other companies that outperform the requirements, potentially paying less than they would in fines depending on the price negotiated.
Fiat Chrysler Automobiles and General Motors have reached deals to buy emissions credits from Tesla. Fiat Chrysler, which faces an estimated 2.5 billion euros in penalties next year, is reportedly set to buy 1.8 billion euros in credits between 2020 and 2023.
Manufacturers of conventional gasoline vehicles oppose the EU regulations, which they say will squeeze their finances and threaten jobs.
The European Automobile Manufacturers' Association in March asked the European Commission to postpone implementation of the new standards. The EU, which holds that the stricter requirements are crucial for the fight against climate change, has not changed its stance.