Volkswagen is buying China EV credits from Tesla

Tesla has made a tidy little side business out of selling EV credits to automakers that can’t or won’t sell enough EV to satisfy regulators, both in California and in Europe. Some critics see this as a less respectable source of income than selling cars, but it’s part of the way the regulatory system was designed to work, and Tesla has always understood that it won’t last forever. 

Source: Volkswagen / Tesla

Now Tesla has extended its reg-cred side hustle to a third continent, and ironically it’s Volkswagen, the legacy automaker that seems to be the most serious about electrification, that has emerged as the latest buyer.

Reuters reports (via Electrek) that the FAW-Volkswagen Chinese joint venture has agreed to buy credits from Tesla. The unnamed sources didn’t reveal the amount of money involved, but reported that the price agreed upon is around 3,000 yuan per credit (approximately $450).

YouTube: Reuters

China’s zero-emission mandate requires automakers to sell EVs amounting to 12% of their total sales in the country. As in California and Europe, automakers who exceed the mandated levels of EV sales can sell excess credits to those that don’t.

Tesla receives five credits per EV sold, and it delivered some 140,000 vehicles in China last year. If the California carmaker managed to sell most or all of its credits at the price VW is said to have paid, it would earn a tidy sum. Last year, Tesla reported over $1.5 billion in revenue from the sale of regulatory credits in the US and Europe.

Volkswagen eventually means to comply with the Chinese mandate by selling its own EVs, and it has invested heavily in EV production in China. However, FAW-Volkswagen sells over 2 million cars per year in China, so it may be a while before it can move enough EVs to meet the 12% mandate.

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This article originally appeared in Charged. Author: Charles Morris. Source: Electrek