The Other Government Motors


The Other Government Motors

The list of the Obama Administration’s industrial policy failures is long, from Solyndra to Fisker Automotive. But now we are hearing that one success redeems them all … . Tesla’s share price has soared this year on rave reviews for its electric car, growing sales and its first quarterly profit.

Rarely noted is how much this profit is a function of government subsidy and coercion. So let’s take apart Tesla by the numbers, if only to give our reader-taxpayers a better sense of what they’ve paid to make Tesla’s owners rich.

The decade-old Tesla debuted its first product, the Roadster, in 2006. With a base price of $109,000, it was discontinued before it hit 2,500 sales. Tesla introduced its Model S a year ago and had sold an estimated 9,650 at a bargain $70,000 through April. By contrast, Ford sold 168,843 F-series pickup trucks in the first quarter alone.

Tesla wouldn’t have sold even that many cars without the extraordinary help of government. In 2009 the company received a $465 million Obama loan guarantee, supplemented last year by a $10 million grant from the California Energy Commission.

That money has underwritten Tesla’s engineering and manufacturing, but federal and state governments also subsidize the purchase of Tesla products. Any U.S. buyer of a Tesla car qualifies for a $7,500 federal tax credit, while states like Colorado throw in up to $6,000 more in state income-tax credits. Taxpayers pay first so Tesla can build the cars and again to help the wealthy buy them.

Take away the credits and Tesla lost $53 million in the first quarter, or $10,000 per car sold. California’s zero-emission credits provided $67.9 million to the company in the first quarter, and the combination of that state’s credits and federal and local incentives can add up to $45,000 per Tesla sold, according to an analysis by the Los Angeles Times.

Tesla just repaid that $465M loan from the Feds, pretty much unique among the Obamian “Green Jobs” “loans”, where bankruptcies have been prevalent. But don’t think Tesla is off government subsidies! And those subsidies are well on their way to Sacred-Cow-Hood! For now, Tesla’s greatest challenges are:

  • Few companies whose “success” relies on hype and trendiness do well long-term;

  • Tesla’s product is very pricey, with poor utility (its range is better than the Volt or Leaf, but its carrying capacity worse);

  • Its lithium battery - “bricking”, fires, safety in accidents (for occupants and for responders - high voltage and chemicals), less than healthy battery vendors;

  • Scarcity of charging stations.