Tesla is selling electric car credits to Volkswagen in China

A new report states that Tesla is selling electric car credits to Volkswagen in China, as the latter hasn’t managed to catch up to the zero-emission mandate yet.

In 2018, China implemented a zero-emission mandate to force automakers to build more electric vehicles in the country.

By the end of last year, automakers had to have 12% of the vehicles they sell in China be electric or face fines.

Like other zero-emission mandates, automakers who exceeded the mandate can sell credits accumulated from the sale of electric vehicles to automakers who didn’t achieve the mandate in order for them to avoid the fines.

Tesla has made a lot of money from these mandates in other markets, and now we learn that it might start to make money from the Chinese EV mandate.

Reuters reports that Volkswagen’s FAW-Volkswagen Chinese joint venture is going to buy credits from Tesla:

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 report doesn’t disclose how many credits they plan to buy from Tesla, but the price per credit agreed upon is reportedly around 3,000 yuan per credit, which is the equivalent of around $450.

Tesla gets five credits per electric vehicle in the country, and the automaker sold 140,000 vehicles in China last year.

Volkswagen has confirmed that it plans to comply with the Chinese mandate through the sale of its own electric vehicles, but it also said that it might buy credits from competitors when needed.

The German automaker has already invested heavily in the country to produce its own electric vehicles since the mandate has been announced, but FAW-Volkswagen sells over 2 million cars per year in China, and therefore, it needs a lot of electric vehicles to achieve the 12% mandate.

Tesla hasn’t reported revenue from the mandate in China, but the automaker has already made billions from similar schemes in the US and Europe.

Last year, the automaker reported over $1.5 billion in revenue from the sale of regulatory credits.

Most famously, FCA, now part of Stellantis, is reportedly going to pay Tesla $2 billion for credits in Europe as the automaker lags behind the industry when it comes to electric vehicles.