Chinese Mandate Opens the Door for Tesla to Make Bank Off Volkswagen

According to a new report from Reuters,  Tesla is apparently selling EV credits to Volkswagen in China. The reason? Because the German automaker has yet to meet the country’s zero-emission mandate.

The mandate implanted in China in 2018 forces automakers to build more electric vehicles in the country. Automakers were required to have 12% of the vehicles they sell in China be electric by the end of last year or be subject to fines.

The zero-emission mandate in China is similar to other zero-emission mandates as the overachieving automakers who oversell the mandate are allowed to sell credits to automakers who didn’t reach the mandate, thus helping them avoid paying some hefty fines.

In the past EV giant Tesla has taken advantage of these mandates in other markets, benefitting financial off these credits, and it looks like they’re about to do it again.

Volkswagen’s FAW-Volkswagen Chinese joint venture is reportedly going to buy credits from Tesla (via Reuters): “To help meet increasingly tough targets, Volkswagen’s joint venture with state-owned Chinese automaker FAW, or FAW-Volkswagen, has agreed to buy credits from Tesla, the sources said, declining to be named as the talks were private.”

The price at which FAW-Volkswagen has agreed to pay per credit is reportedly around 3,000 yuan per credit (equivalent of around $450).

Although Volkswagen is seemingly on board with the Chinese mandate as it accelerates its plans of electrification, it also said that it may buy credits from competitors when needed.

Volkswagen recently held its own Power Day event, much like Tesla’s Battery Day event held last year. The German automaker spoke of its investments to produce its own electric vehicles. However, FAW-Volkswagen impressive sales in China makes the required 12% seem like a lot of EVs in order to avoid fines.

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