More Billions for Tesla from China and EU Gas Car Penalties

China has penalties for companies that do not sell at least 12% EVs in China. Tesla sold 140K cars in China last year and those are worth 700K in credits and each credit in china is worth about $450. A pure EV car in China is worth 5 credits. Tesla 2020 EV sales were worth about $300M/yr in credits. VW will buy credits from Tesla. Tesla will be selling 400k-500K cars in China in 2021. Those worth will be worth about $1B in credits for 2021. Tesla is earning from Europe and China EV penalty and credit systems.

Tesla production levels are increasing around the world and especially in Europe and China.

The New Energy Vehicle mandate policy applies only to passenger cars and took effect April 1, 2018. China revised its new energy vehicle (NEV) credit score program for 2021-23 to form a long-term mechanism to develop the industry. The proportion of NEV production and sales is targeted at reaching 20pc of total auto production by 2024, according to MIIT. The new programme will raise the NEV credit to 14pc in 2021, 16pc in 2022 and 18pc in 2023, from 10pc in 2019 and 12pc in 2020.

The formulas are also updated in the new 2020 plan. The coefficient of all-electric vehicles’ driving range will be reduced from 0.012 to 0.0056, while the points for plug-in hybrid vehicles will be cut to 1.6 from 2. Fuel-cell vehicles’ points will be 0.08 times of energy efficiency, down from 0.16.

The credit points are allowed to be carried forward and traded when auto manufacturers fail to meet production targets. The points in 2019 can be carried forward in equal amounts for one year, while the points in 2020 can only be carried over by 50pc each time. It aims to enhance the trading value of credit points and to encourage trading among new energy manufacturers.

A correlation mechanism has been set up between the energy-saving level of auto producers and NEV credit points. If the fuel consumption of an auto producer’s traditional energy passenger cars reaches a certain level, 50pc of its NEV credit points can be carried forward.

Volkswagen will buy green credits from Tesla in China. Volkswagen sold about 2.2 million cars in China and most were gas cars. Volkswagen will be paying Tesla in the range of $100 million to $200 million. If Volkswagen is still selling 2 million cars in China in 2024 then they will need to either sell 400,000 EV cars or they will need to buy credits for any shortfall in their EV car mix. This would be the same for GM and other carmakers. GM sells about 3 million cars per year in China. Ford sells about 600,000 cars per year in China.

Ford new electric Mustang Mach-e had first-quarter sales of 6614 cars. The projection is that Ford could sell 50,000 Mach-e in 2021. Ford sold 2,637 in March which was lower than in February. Mach-E were 1.3% of the total Ford sales in March and 2.4% in February.

Europe is increasing the CO2 penalty they are charging gas car makers.

In 2020, European Union emissions standards that require a fleet average of 95 grams per kilometer of CO2 took effect. EU fleet emissions in 2018 were 120g/km, which means automakers need a 21 percent reduction overall to avoid fines that could total as much as 33 billion euros this year, according to some estimates. Each gram over the limit, per vehicle, will cost automakers 95 euros. Cars with emissions of 50g/km or less, generally either battery-electric cars or plug-in hybrids, are eligible for so-called “supercredits,” a benefit that will be phased out in two years.

Average penalty for a 120 g/km would be 25 times 95 euro or 2450 euro per car.

SOURCES- ICCT, Argus Media, AutoVistaGroup,
Written By Brian Wang, (Brian owns shares of Tesla)

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