Volkswagen To Buy Credits From Tesla

The deal, the first of its kind to be reported between the two companies in China, highlights the scale of the task Volkswagen faces in transforming its huge petrol car-making business into a leader in electric vehicles to rival Tesla.

Shares in Volkswagen, the world’s second-biggest automaker, have soared this year as investors warm to its plans to go electric. But in China, and elsewhere, the German company is still heavily reliant on traditional combustion-engine vehicles.

China, the world’s biggest auto market where over 25 million vehicles were sold last year, runs a credit system that encourages automakers to work towards a cleaner future by, for example, improving fuel efficiency or making more electric cars.

Manufacturers are awarded green credits that can be offset against negative credits for producing more polluting vehicles. They can also buy green credits to ensure compliance with overall targets, though trade is usually between affiliated companies…

It is unclear how many green credits FAW-Volkswagen will buy from Tesla, but FAW-Volkswagen’s offer was around 3,000 yuan per credit, higher than prices in previous years, the sources said.

The deal effectively sees Volkswagen, the biggest foreign carmaker in China, subsidizing a rival while the German group ramps up production of electric vehicles. Its ventures in China plan to roll out five electric ID series models this year.