BEIJING - - Volkswagen is expected to make about $35 million this year from automobile emission credits in China, while Tesla looks to be the biggest loser in the CO2-technical scheme.
Automakers and auto importers operating in China are required to produce and sell a certain number of new-energy vehicles, which include electric cars and plug-in hybrids. For exceeding the goal, which is to be achieved in 2020 at 12% of total sales volumes with credit points (GTA) issued. Trading of the credit points has started this year.
China's Industry Ministry recently released details on the number of credits allotted to automakers in 2020. Tesla Electric Vehicle Company makes electric vehicles in Shanghai. It is the top recipient of the credits. The U.S. automaker has 890,000 points, including the points earned at its import and distribution center in Beijing.
The amount of income Tesla earned from selling the credits has not been disclosed. But Chinese media reports indicate the company could reap approximately 2.5 billion yuan $387 million LMC Automotive, an international market intelligence firm, estimates each credit was worth 3,000 in 2020.
BYD, the Chinese electric vehicle powerhouse, ranked as second with 750,000 points. The credits would be worth about $350 million, equal to more than half of last year's net profit.
SAICGM was third with 440,000 points. The Automobile brand took $4,500 to its EV-A fleet. The joint venture develops a business model that is based on income from the emissions credit market.
Not all automakers can sell enough new-energy vehicles. The trading system lets companies buy surplus credits from the companies that did. The volume of trading is expected to reach 10 billion yuan this year.
Two of Volkswagen's joint ventures compiled negative credits. FAW-Volkswagen Automotive was slapped with 130,000 negative points, the most of all automakers, due to its sparse selection of new power vehicles.
According to some reports, FAW-Volkswagen will need to purchase 400 million yuan worth of credits, according to some media reports. Some speculate that Tesla has already purchased credits from the company.
SAIC Volkswagen Automotive is the second-largest recipient of negative credits. The venture has disclosed it is buying emission credits from outside, but said no further details were revealed.
Volkswagen will invest 15 billion euros $17.3 billion in Chinese new-energy vehicles between 2020 and 2024 to tap a growing market and cut spending on credits. The company aims to have at least 30 such models by 2030 and quickly eliminate credit purchases.
Japans automakers have performed neither well for nor against them. Honda Motor's two joint ventures were among the three claimed in negative credits. The Honda Arm has only three new energy models for Beijing, though 10 new Honda vehicles will roll out in five years.
Toyota Motor is the top-selling Japanese carmaker in China, which also is behind by credits at its joint ventures. Dongfeng Motor, backed by Nissan Motor, placed third in terms of negative credits. Dongfeng plans to introduce 9 new energy models in China by 2025.
High state subsidies helped China increase sales of 1.36 million new-energy vehicles last year. The share among all new vehicles sold soared to 5% and Beijing targets 20% in 2025. Cash flow and emissions credits trading will serve as the driving force behind this goal. It is believed the credit market is modeled after California's bankruptcy system.
The new-energy vehicle quota is raised by 2 percentage points annual until it hits 18% in 2023. Failure to offset the negative credit may impact on the registrations of new automobiles in the following year. In that light, companies appear to be much obliged to adhere to the rules. Each credit will be traded at 5,000 in the average amount this year, forecasts LMC Automotive.