Volkswagen Buys Tesla Credits to Comply with Chinese Regulations

A joint venture by Volkswagen has agreed to buy green car credits from Tesla to help meet environmental protocols in China.

This deal is the first to ever to trade green credits, which are a system of points automakers can earn from the Chinese government for helping reduce the carbon footprint. The credits are used to offset tax penalties that are incurred for producing more gas-based vehicles.

Manufacturers can either earn credits by producing more electric vehicles, or buying them from the Chinese government.

Volkswagen, who has pledged a fully electric vehicle lineup by 2030, partnered with Chinese automaker FAW to purchase a large sum of these green credits from electric vehicle breakout Tesla in order to help get them closer to their proposed target.

Tesla declined comment to reporters and Volkswagen-FAW did not provide comment according to Reuters

Volkswagen is the second largest vehicle manufacturer in the world, second only to Toyota, and stands to gain much from the launch of its electric vehicle lineup in China. China is the world’s largest auto market, with 25 million vehicles sold in the country last year. 

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