Volvo cars has sold so many hybrid models in europe that the swedish carmaker is open to selling environmental credits to rivals that are struggling to meet new emissions rules.
As the group announced its first 500m green bond to fund electric car development, volvo said almost one in three of its cars sold across europe this year had been a hybrid, as well as a smaller number of pure battery cars under its volvo and polestar brands.
Carmakers with sales in europe have to reduce their average co2 emissions to 95g/co2 per km this year, or face large fines. the new rules are a steep drop from the 130g required in 2015.
Under the eu emissions rules, carmakers generate credits by selling electric or some hybrid cars. those credits can be used to help the company meet the new co2 rules, or can be sold to rivals.
Fiat chrysler aims to meet the rules this year by buying credits from tesla, while vw entered a deal with mg to give it access to credits because of delays to its electric car programme.
We are in a good position. we will definitely not pay fines. in fact, we actually can support our competitors if they want, volvo cars chief financial officer carla de geyseleer told the financial times
While the company was open to selling its excess credits, it was not in talks with any current competitors, she added.
Volvo on thursday announced it sold 500m through a green bond, with the money set aside for investment into electric not hybrid cars.
The swedish company became the third european carmaker to issue a green bond after daimler and volkswagen both entered the market last month.
Volvos first battery-only model, the xc40, was launched this year, but the group is planning for a half of all its cars to be pure electric by 2025.
The projects earmarked as green investments account for about a quarter of its annual spending of skr20bn ($2.2bn). in time, volvo planned to phase out all bonds other than its green bonds, mrs de geyseleer said.
Volvo's inaugural green bond offered investors a coupon of 2.5 per cent for an issue set to mature in 2027.
The company received 2.5bn orders, five times more than it sold, highlighting the strength of demand for green debt, even at a time of great economic uncertainty.
Vivek bommi, portfolio manager at neuberger berman, said the interest in green finance helped junk-rated volvo launch and price the deal on the same day, a move more typical of investment-grade than high-yield deals.
This showed investors appetite for green bonds, driven to a large extent by increased demand for green/esg funds, he added.