A Volkswagen joint venture in China has agreed to buy green car credits from Tesla to help meet local environmental rules
The deal, the first of its kind to be reported between the two companies in China, highlights the scale of the task Volkswagen faces in transforming its huge petrol carmaking business into a leader in electric vehicles to rival Tesla. Shares in Volkswagen, the world’s second-biggest automaker, have soared this year as investors warm to its plans to go electric. But in China, and elsewhere, the German company is still heavily reliant on traditional combustion-engine vehicles.
China, the world’s biggest auto market where over 25 million vehicles were sold last year, runs a credit system that encourages automakers to work towards a cleaner future by, for example, improving fuel efficiency or making more electric cars. Manufacturers are awarded green credits that can be offset against negative credits for producing more polluting vehicles.
The VW-venture’s gas-powered SUVs and sedans “have so far proved far more popular in China than their electric vehicles,” Reuters notes.
MarketWatch adds that “A deal to buy credits from Tesla at a premium represents Volkswagen buoying the margins of one of its fiercest rivals in the electric-vehicle space.”
According to Swiss bank UBS, Tesla and Volkswagen will be the two global leaders in electric-vehicle sales within the next two years. The analysts expect that Volkswagen will catch up with Tesla in terms of total volume of cars sold as soon as next year, when the two companies could deliver around 1.2 million cars each.
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