22/02/2016 8:43 PM AEDT | Updated 15/07/2016 12:51 PM AEST

Volkswagen Asked To Make Electric Cars In US As Compensation: Report

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The US Environmental Protection Agency is asking Volkswagen to take electric car production to the United States as part of compensation for the German carmaker’s fake emission results, according to a newspaper report from Germany's Welt am Sonntag.

The EPA is in discussion with Volkswagen over the punishment for 2015’s ‘dieselgate,’ when it was discovered over half a million VW diesel vehicles were critically in breach of emission caps, releasing up to 40 times the limit.

The report alluded to potential compensation through electric car production in Tennessee and construction of an electric vehicle charging station network, which may completely dash any hopes of a Volkswagen electric vehicle making its way to Australia despite the company’s increasing popularity.

Australian Volkswagen sales bumped up 10% in 2015 in trend with its 90% increase over the past 15 years but represents a comparatively small market that, along with the complex infrastructure costs and distraction of crisis management, thwarts any chance of cars, like the e-Up or e-Golf, being sold down under.

Despite Volkswagen's sales initiative to rebuild customer trust in America after the revelations of November, sales there dropped by seven per cent in January.

Another German newspaper, Bild am Sonntag, also previously reported Volkswagen's supervisory board chairman Dieter Poetsch has pledged full commitment to solving the crisis regardless of the impact on the company, so its priorities seem clear.

Bringing across new models and competing in the emerging Australian electric vehicle market will not be at the top of Volkswasgen’s list as it continues working towards a final report on the diesel crisis management to law firm Jones Day around April.

Neither Volkswagen nor the EPA have confirmed reports on a deal or commented on the ongoing negotiations, and Welt am Sonntag has not disclosed its source.