Volkswagen Joint Venture Forced To Buy Credits From Tesla In China

A recent report via Reuters claims that a Volkswagen joint venture in China will buy "green car" credits from Tesla. The move is apparently necessary to comply with China's environmental rules. However, it's important to note that the news came from anonymous people familiar with the matter, and VW has declined to comment about the matter.

Reuters calls this deal the "first of its kind to be reported between the two companies in China." It also points out what a major undertaking VW has ahead, as it works to challenge and surpass Tesla as the world's leader in electric cars, though, it may have to resort to paying Tesla in the meantime.

While VW is touting its future EV efforts, it hasn't moved forward with electrification in a big way in China, at least not yet. In fact, most VW Group efforts in China are still grounded in internal combustion vehicles. Meanwhile, Tesla has built a factory in the country and is cranking out EVs for local customers and global markets.

China pushes automakers to "go green" through the use of credits. Essentially, carmakers get credits for producing cleaner cars. If they choose to continue producing gas guzzlers, they have to buy credits from cleaner automakers.

To help its joint venture comply, Volkswagen has reportedly agreed to buy credits from Tesla in China. The venture in question is China-based FAW-Volkswagen. The number of credits required at this time is unknown, but sources said each credit will sell for 3,000 yuan, which is considered high based on past transactions.

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Volkswagen has only said that it would buy credits if needed, but that it is "strategically targeting to be self-compliant." Tesla didn't respond to requests for comment.

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Automakers in the US commonly buy similar credits from Tesla, which help the electric automaker's revenue stream. Reports have stated that carmakers won't need to continue buying credits from Tesla in the future, since they'll be producing their own electric cars. However, that hasn't yet become the case. It appears rivals will need to continue buying credits from Tesla in multiple markets for years to come.

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