Tesla owners shouldn’t be proud about their “green” machine. Instead, they should be embarrassed about a rich person’s car paid for by poor people’s money.
A friend of mine here in affluent Marin is very excited: He just bought a Tesla yesterday. I was less excited. While I can appreciate the Tesla’s elegant design, powerful electric engine, and innumerable high-tech gadgets, I think the Tesla is a fundamentally immoral car. It is, quite simply, a car for rich people that is paid for by poor people. It’s the 21st century version of the old French ancien régime, and we know how that ended up.
The Tesla is fundamentally a product of crony fascism. Back in 2015, Phil Kerpen detailed the way Elon Musk has gamed the system, and I doubt much has changed since then:
Tesla’s flagship automobile, the Model S, would not only fail to make money in a free market, it would likely bankrupt any company that tried. As the Los Angeles Times reported, Tesla’s “cars themselves aren’t making the company any money.” A Model S with a typical options package sells for more than $100,000, but that is literally tens of thousands of dollars less than it costs to manufacture and sell.
How, then, does Tesla make its money?
Less well-known are the hidden subsidies that flow directly to Tesla, thanks to “zero-emission vehicle” (ZEV) credits. ZEV credits are a mandate dreamed up by the bureaucrats at the California Air Resources Board (CARB), which requires manufacturers to build and dealers to sell an arbitrary number of “zero-emission” vehicles each year. (Note that these vehicles are actually “zero-emission” only in the unlikely event that the electricity used by the car comes from a zero-emission source — which, of course, would also be heavily subsidized.)
Tesla’s Model S generates four credits per unit sold. This means the company can sell $20,000 in ZEV credits to other manufacturers for each Model S sold — a cost borne by purchasers of other cars.
And that amount used to be even higher. Because ZEV law is so arcane, Tesla was able to game the system for additional credits; for example, it was able to generate an additional three credits per vehicle when it demonstrated to CARB that its batteries could theoretically be rapidly swapped. But in fact the battery-swapping pilot program is more than a year late getting started. Nonetheless, those extra credits netted the company an additional $15,000 per car sold — and the company is now trying to get them reinstated.
In 2013, ZEV credits to Tesla totaled $129.8 million — to a company that lost $61.3 million for the year on its actual manufacturing and selling operations.
In 2014, Nevada lavished the company with one of the biggest corporate-welfare packages in history: In exchange for building a battery-manufacturing facility near Reno, Tesla will pay no payroll or property taxes for ten years and no sales taxes for 20 years, and will receive $195 million in cash via “transferable tax credits,” which can be sold to other companies to satisfy their Nevada tax bills. All of this amounts to a $1.3 billion giveaway.
Tesla and its apologists constantly tout the fact that the company paid off its hefty $465 million taxpayer-subsidized loan from the Department of Energy early, but they don’t explain why: Had the loan not been paid early, the U.S. Treasury stood to grab a significant portion of the company’s increased stock price by exercising warrants. Capitalizing on the subsidy-stoked electric-car mania that pumped its stock to record levels, Tesla issued $450 million in new stock to pay the loan early and cancel those warrants. The shrewd deal cost taxpayers about a billion dollars, leading Scott Woolley to conclude: “Tesla is worse than Solyndra.”
Tesla has effectively socialized its costs through subsidized loans, tax credits, abatements, and regulatory schemes while privatizing its gains by canceling the warrants owned by taxpayers.
All those who are so smug about fuel efficiency ought to be ashamed because they gain that efficiency on the backs of those who cannot afford Teslas. [Read more…]