Volkswagen's joint venture in China will buy carbon credits from Tesla to comply with local environmental regulations and avoid paying hefty penalties, sources told Reuters.
The deal underscores how much effort Volkswagen needs to put into electrifying its fleet to compete with Tesla. Tesla, as a pure electric car manufacturer, can sell carbon credits to other companies that face multibillion-dollar penalties. Tesla’s revenue from selling regulatory credits totaled $1.58 billion in 2020, according to the filings.
To help meet increasingly tough targets, Volkswagen's joint venture with state-owned Chinese automaker FAW, or FAW-Volkswagen, has scheduled a carbon buyout from Tesla, according to Reuters sources. There is currently no information on how many green credits FAW-Volkswagen will buy from Tesla. However, it is known that FAW-Volkswagen's offer was around RMB 3,000 per credit, higher than prices in previous years, sources said.
Tesla generates significant revenue by selling zero-emission vehicle credits. Thus, the more electric vehicles Tesla produces, the more carbon credits it can sell, which in turn has a positive effect on the company's revenue.
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