FAW-Volkswagen is reportedly turning to Tesla in China to comply with local environmental regulations.
To encourage car manufacturers to build more economical and cleaner cars, China, just like us, works with strict standards. In China, too, it is then possible to shift some of the ‘credit’ from one car manufacturer to another. According to Reuters, that’s exactly what’s going to happen between FAW-Volkswagen and Tesla.
The German / Chinese joint venture would be forced to buy a substantial amount of ‘co2 credits’ from Tesla, which, as a builder of purely electric cars, naturally complies with the rules by a large margin. The EV builder can sell this positive credit to a company that is in short supply. This practice is similar to what is happening in Europe, for example between FCA, Honda and Tesla. According to Reuters, the sale of this kind of credit to Tesla in 2020 brought in 1.58 billion dollars or about 1.34 billion euros.
FAW-Volkswagen is one of the joint ventures and thus branches of the German car manufacturer in China. Although Volkswagen is now seen worldwide as a potentially large player in the field of EVs, FAW-Volkswagen is still very big in China when it comes to traditionally powered cars. They are simply much more popular for the time being.
FAW-VW now has its own version of the Volkswagen ID4 in Chinese showrooms. That car resembles ‘our’ ID4 like two drops of water, where the variant of the other SAIC-Volkswagen joint venture has a clearly different front and rear.