Fiat waited too long with going electric in Europe and now will basically pay others to bring more EVs to the market.

According to Robert W. Baird & Co. analyst Ben Kallo, the Fiat Chrysler Automobiles (FCA)'s deal to pool its fleet with Tesla to lower the average emission in Europe will effectively fund the Tesla Gigafactory 4 in Germany.

FCA was forced to seek such a partner because exceeding the average emission of 95 grams of CO2 per kilometer in EU from 2020 would result in high fines per vehicle sold. Fiat is not in a position in Europe to comply with strict requirements on its own (or it would be very costly to improve in a short time).

Robert W. Baird & Co. estimates that the deal is worth probably at least €1.8 billion ($2 billion) through 2023 or $150 million to $200 million per quarter (still less than the fines for exceeding emission limits), which is enough to basically fund the Tesla Gigafactory 4.

Tesla might see a new revenue stream starting in Q1 2020, which is more great news in a series of already outstanding weeks.

For Tesla, this is kind of like free money, because the company is selling only zero-emission cars. For FCA, it's the choice of the lesser losses for a temporary period, until a new electrified lineup will be ready.

Fiat intends to launch first all-electric models in Europe starting in 2020, including all-new Fiat 500 Electric from Q2 2020.

Source: Bloomberg