Tesla aims to capture $ 390 million in the Chinese CO2 market
BEIJING – Tesla is expected to make around $ 390 million from auto carbon credits in China this year, while Volkswagen appears to be the biggest loser in the carbon trading system.
Automakers and auto importers operating in China are required to manufacture and sell a certain percentage of new energy vehicles, including electric cars and plug-in hybrids. Companies receive credits for exceeding the target, which was set at 12% of total sales in 2020. Trading in these credits began that year.
China’s Ministry of Industry recently released data on the number of loans granted to automakers in 2020. Tesla, which manufactures electric vehicles in Shanghai, is the main recipient of the loans. The US automaker scored 890,000 points, including points from its import and distribution center in Beijing.
The amount of revenue Tesla made from selling the credits has not been disclosed. However, Chinese media reports suggest the company could rake in about 2.5 billion yuan ($ 387 million). LMC Automotive, a UK research firm, estimates that each loan was worth an average of 3,000 yuan in 2020.
BYD, the Chinese power plant for electric vehicles, took second place with 750,000 points. The loans would be valued at approximately $ 350 million, more than half of last year’s net income.
SAIC-GM-Wuling Automobile, known for its US $ 4,500 electric vehicle, took third place with 440,000 points. The joint venture has developed a business model based on revenues from the carbon credit market.
Not all automakers can sell enough new vehicles. The trading system allows them to buy excess loans from companies that have done so. The trade volume is expected to reach 10 billion yuan this year.
Two of Volkswagen’s joint ventures created the most negative loans. FAW-Volkswagen Automotive was beaten by 130,000 minus points, the most of all automakers, due to its sparse selection of New Energy vehicles.
According to some media reports, FAW-Volkswagen has to buy loans worth 400 million yuan. Some speculate that the company has already bought loans from Tesla.
Volkswagen was the first foreign automobile manufacturer to enter China in the 1980s. But the multinational was late in responding to the demand for green vehicles.
SAIC Volkswagen Automotive is the second largest recipient of negative credits. The company said it was buying carbon credits from the outside but did not provide any further details.
Volkswagen will invest 15 billion euros (17.3 billion US dollars) in Chinese new energy vehicles between 2020 and 2024 to help tap a growing market and reduce loan spending. By 2030, the company wants to have at least 30 such models and quickly abolish loan purchases.
Japanese automakers haven’t done well either. Honda Motor’s two joint ventures ranked fourth and sixth in terms of negative credit. The Chinese arm only offers three New Energy models, although ten Honda brand electric cars are expected to hit the market in five years.
Toyota Motor, the Japanese automaker with the highest sales in China, is also lagging behind with its joint ventures. Dongfeng Motor, supported by Nissan Motor, took third place in terms of negative credit. Dongfeng plans to introduce nine new energy models in China by 2025.
Government subsidies helped China mass sell 1.36 million New Energy vehicles last year. The share of all new vehicles sold rose to 5%, Beijing is aiming for 20% in 2025. Carbon trading will be the driving force. The credit market is believed to be modeled on the California system.
The new car quota increases annually by 2 percentage points until it reaches 18% in 2023. If the negative credit is not offset, this can have an impact on new registrations in the following year. With this in mind, companies seem to be sticking to the rules. LMC Automotive predicts that each loan will trade at an average of 5,000 yuan this year.