To avoid paying fines to failing to meet environmental standards in China, Volkswagen is reportedly buying electric vehicle (EV) credits from Tesla.
Like other countries around the world, China has a zero-emission mandate to ensure automakers produce a certain amount of EVs. For every EV made a manufacturer are awarded green credits, while conversely they receive negative credits for creating internal combustion engine (ICE) vehicles.
Automakers can purchase green credits from others to help offset the negative credits and avoid fines. Usually this is done between companies that are related in someway, either through a major shareholder or some other affiliation.
That’s not the case for Volkswagen’s joint venture with Chinese state-owned automaker FAW. According to three different sources who spoke to Reuters, VW has agreed to buy credits from rival Tesla.
It is unclear how many credits VW plans to buy from Tesla, but they will reportedly pay ¥3,000 ($575 CAD) for each one. The sources confirmed this price is higher than VW has paid in previous years.
Tesla is no stranger to receiving revenue from selling regulatory credits. They revealed in the Q4 2020 and FY financial report that they received $1.58 billion by selling credits to other automakers.