By on February 17, 2015

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Despite its visions of having a valuation on par with Apple within a decade, Tesla’s subsistence on subsidies may be hard for some to swallow.

The Wall Street Journal said as much in an opinion piece following Tesla CEO Elon Musk’s proclamation to grow his company 50 percent annually, with a stock valuation of $700 billion to come in 10 years’ time; the company is currently valued at $27 billion. The publication points out that its $108 million loss in Q4 2014 — thought to be linked to delivery issues, a strong dollar and manufacturing issues — would have been much worse had it not taken $86 million from selling federal carbon credits that quarter.

Continuing with the train of thought, WSJ noted those credits were the result of Tesla’s lineup falling in line with federal and state fuel-efficiency and ZEV mandates, the surplus of said credits being sold to other automakers whose own lineups may be lacking in the green department. In 2014 alone, Tesla sold $216 million in credits, matching 7 percent of what the company sold in EVs.

Other points noted include the $1.5 billion in tax breaks bestowed upon the automaker in its native California and in Nevada, where its Gigafactory battery-pack production facility, as well as the $7,500 federal tax rebate consumers receive upon purchasing a Model S. The publication concluded by urging Musk to “turn off the taxpayer tap,” on the premise that by so doing, he and his company would gain more friends “for the long haul,” whomever they may be.

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40 Comments on “WSJ To Tesla: Cast Aside Corporate Welfare To Improve Image...”


  • avatar
    an innocent man

    WSJ is calling out people on corporate welfare? That must have been a really loooooonnnnggggggg article, eh?

  • avatar

    More important: the sort of progress Tesla symbolizes may not be the sort of progress that will turn the tide for the U.S. car industry which does not hold a particular good track record when it comes to exports. Not only does it depend on government subsidies and fiscal incentives in and outside the U.S., but it is prone to failure in the light of any disruptive new technology and competition with deeper pockets (I luv the new GM Bolt). Toyota already got rid of its Tesla ties in favor of hydrogen propulsion. My guess is that there is more to come.

    • 0 avatar

      We exported 2.1 million new vehicles last year. Tesla was an infinitesimal part of that.

      • 0 avatar

        When I think of U.S. manufactured and exported cars, I tend to think of the American brands. If you include the U.S. car plants of BMW, Honda, Toyota and other foreign brands the results are way better, I agree. BMW grew out to be America’s #1 car exporter according to: http://www.autoblog.com/2014/07/18/bmw-biggest-us-auto-industry-exporter/

  • avatar
    CoreyDL

    So they got a champagne taste on an MRE budget.

    I agree, go it alone for a while and you’re bound to be taken more seriously. But can you hack it? (Probs not.)

  • avatar
    Pch101

    Tesla has issues, but that isn’t one of them. Leave it to the Murdoch-era WSJ to run everything through its right-wing political grinder.

    • 0 avatar
      FreedMike

      That’s right, I can just hear the cries of “Murrica!!!” from Mississippi right now.

    • 0 avatar
      WheelMcCoy

      “Other points noted include the $1.5 billion in tax breaks bestowed upon the automaker in its native California and in Nevada, where its Gigafactory battery-pack production facility,”

      What company doesn’t angle for tax breaks in return for creating jobs?? The WSJ is inconsistent and self-serving. I prefer the Spanish pronunciation: The Wall Street Urinal.

      • 0 avatar
        Pch101

        More to the point, there isn’t a lick of proof that the company has suffered a net loss of customers, sales volume or revenue due to its sale of tax credits or its acceptance of subsidy packages.

        Only the WSJ and a few right-zingers are up in arms about this. Why should the company care about this editorial position when it doesn’t help their business in any way?

        Mind you that I would have not provided these subsidies — if it were up to me, then we would have funded the Manhattan Project of power storage, not an EV producer. But the business issue being discussed here is a different matter.

  • avatar
    el scotto

    As they say in the sales profession “Who are you going to sell to after you’ve sold your family?” Tesla’s “family” are rich people who can afford them. Can they sell (or even make)a product for the more thrifty? The more thrifty will be their new customers and not “family”

    • 0 avatar
      highdesertcat

      Exclusivity has been the selling point for the Tesla and Volt; toys for the idly rich, or the greenweenies with money to put where their mouth is. In the same price range and league as M-B, BMW, Audi, et al.

      Not so with the Prius line. Aimed at “The Thrifty” from the onset. And the sales numbers support that premise.

      • 0 avatar
        merkidemis

        I am not sure why people hate on the Volt so much. Your situation may vary, but for me it was cheaper to lease my 2013 Volt than even a standard Prius, let alone the Plugin version. It was also cheaper, with the cost of fuel/electricity calculated in, when compared to a Ford Focus SE. Lumping a $77K car (base Model S) together with a $34K one is silly. Granted, it IS $4,500 more than the Prius Plug-In hybrid, but it does come with longer EV range and more standard equipment. Now, if you had used the Caddilac ELR instead…

        • 0 avatar
          highdesertcat

          I suspect that there is a higher demand for a Prius. Whenever I am in SoCal I see a lot more Prii on the road than Tesla and Volt combined.

          Maybe the majority of people choosing a PHEV are in the thrifty category, judging from the number of Prii on the road.

      • 0 avatar
        nickoo

        I can buy a volt for 19,999 after rebates in San Diego. Economically, there isn’t another new car that will cost less to drive over 100,000.

    • 0 avatar
      FreedMike

      I don’t think they need to get all THAT thrifty…but a range of expensive products, versus just one, would probably be immensely helpful.

  • avatar

    I’m extremely disappointed in TESLA.

    My disappointment stems from the elimination of the 45KWh battery trim.

    When I test drove the car in November 2012 and made my video about it (TESLA HIGH SPEED) with the P85, I was excited, I was amazed and I was certain that they’d do far better than Fisker (Which at that time hadn’t gotten flooded by Hurricane Sandy on the Jersey shore storage – and started having problems)

    I bought into the stock and I truly believed I’d buy a 60KwH version – trying to pitch people on the possibility of them considering the 45 or 60.

    Now I look back. My stock value dropped because they took too long to bring out the Model X. The Model 3 should have been designed and fielded already for a price around $50,000.

    The Teslas are TOO EXPENSIVE compared to everything you could get from Mercedes, BMW or just about everyone else. The P85D offers LESS than the RS7 and costs more.

    I could buy both the Challenger and Charger Hellcat for the cost of a P85D.

    Elon Musk is a SCAM ARTIST. Yes, he delivered a viable Electric Vehicle, but if the cost is so ridiculously high that only the upper one percent can afford it, what’s the point? How long do the masses have to wait for a sub-$60,000 model?

    • 0 avatar
      jdash1972

      It’s a house of cards and always has been. Musk is so careful with his statements, if there’s ever a run on the stock it will all be over in 5 minutes. Manufacturing is hard and there are no short cuts to the learning curve. I suspect the cost to manufacture a P85 leaves no room for adequate margin. It’s only sustainable as a Ponzi scheme and eventually someone will be left holding the bag. It doesn’t matter if it’s a good car.

    • 0 avatar
      cmoibenlepro

      Comparing a P85D to a RS7 is like comparing a Mustang with a R8 and saying that the R8 sucks so much because you could get a V8 in a Mustang for half the price.

    • 0 avatar
      daniel g.

      hey bigtruck, I try to see the other end:
      the knowledge and development, in patents terms, how many they costs?
      USA in the first place of technology, how valuable is?

      they expend the money in the base, seats, interior, etc can be improve in the short term close o superior to any european, can they manufacture an electric car in the next month?

    • 0 avatar
      FreedMike

      “The P85D offers LESS than the RS7 and costs more.”

      No, it offers something different, and far more technically advanced, and that’s why it costs more.

      If the Tesla sedan was failing in the marketplace you’d have a point. But it isn’t.

      • 0 avatar
        MeaCulpa

        The Tesla more advanced than a RS 7? Well, no. The Tesla is a decent high trim medium size sedan by euro tech standards when it comes to the actual engineering content of the car. It’s a last gen Golf, only bigger with an electric motor, an expensive battery and a larger touch screen.

  • avatar
    SCE to AUX

    I thought we addressed this already.

    Carbon credits aren’t corporate welfare; it’s Al Gore’s fake carbon economy, bought and sold among the mfrs. Consumers pay for this (or save, depending from whom you buy a vehicle), not taxpayers.

    As for CA and NV – talk to their governors and legislatures. Then go talk to the governments of ON, TX, NC, GA, OH, MI, TN, AL, SC, and every other state with an interest in auto mfg. Then talk to the states who provide giveaways to non-automotive giants.

    Gimme a break on the ‘Tesla / corporate welfare’ thing. Everybody says they hate corporate welfare, until it means spending other people’s money to get a few jobs in their district.

    • 0 avatar
      Russycle

      This. Today’s Oregonian has a story about businesses that moved to Hillsboro and got huge tax breaks for “creating jobs”. One of the companies created one job and got a break to the tune of $775,000. A lot of the others weren’t much better. Taking advantage of government largess is as American as apple pie, the only reason WSJ is going after Tesla is their image as a green company. They’re just hippie-punching.

  • avatar
    nickoo

    Heh, irrelevant rag writing an article paid for and by the petro industry. Why dont they call for frackers to pay for their massive environmental damages? Who is really getting off cheap in this industry? It is certainly not Tesla.

  • avatar
    Timtoolman

    Dumping more tax money is plain wrong. At least when the government bailed Chrysler and GM, it got a return on its investment. They probably saved the economy from going into a much deeper and extensive recession/depression by doing so. At some point, Tesla either needs to figure out how to support itself, or close its doors.

    Mandating unrealizable goals, such as 54 MPG is not the answer. The carbon credits are a sham to get less-economical car builders to pony-up money buying credits given to Tesla, thus finding a way for Tesla’s competitors to support the enemy. Slick in so many ways.

    • 0 avatar
      highdesertcat

      “At least when the government bailed Chrysler and GM, it got a return on its investment.”

      This business concept brought to you by the Al Sharpton School of Business, whose motto is “Lose money on everything you do and never, ever, pay taxes.”

    • 0 avatar
      SCE to AUX

      Nissan sells more carbon credits than Tesla. Fiat is third.

      Tesla repaid its Federal government loans. The losses from GM and Chrysler were in the billions.

      The ‘government’ money you’re referring to is now the giveaway programs of the states. So call your state’s leaders and tell them you don’t want the jobs that Company XYZ will bring, because you don’t support corporate welfare.

  • avatar
    FreedMike

    I see. So…when Tesla takes advantages of tax breaks (or credits, or whatever you want to call it) related to energy policy, it’s wrong. But I don’t see any condemnation of Exxon for taking tax breaks when it’s making billions in profits without them.

  • avatar
    wmba

    Where I live, there are no carbon taxes/credits and no consumer credits for buying EVs. Not a one. And the result is – no sales whatsoever of these vehicles. They are only made semi-viable in other markets by subsidy from government.

    If that isn’t reality, I don’t know what is. Lashing up an electric motor in a vehicle is hardly rocket science. Back yard weirdos have been doing it for a hundred years, and getting pictures of their smiling mugs in the pages of Popular Science standing next to their bent-tin wonders. Whoop de doo.

    If you, Mr. Entrepreneur, dream up some business that is only profitable by the presence of external public subsidies, or open up a fast food restaurant that is only profitable by paying workers minimum wage, you have one piss poor business plan. It works only when you leach your prosperity from the backs of everyone else’s efforts.

    The EV owners also pay no road tax, buy power at basically wholesale rates with no taxes and thus sponge off the rest of us. How is this good policy? It isn’t. It is the same old story of attempted monopoly to fill the coffers of the scammers who thought it up.

    I agree with Pch101. Something like energy storage systems that benefit one and all are what public funds should be spent on. Picking some area of the economy and futzing around with the natural way of doing things benefits only those who ratio nalize in their own minds what wonderful forward-thinking people they are.

    From there it’s only a short step to believing your own BS as some inviolable truth. $700 billion worth of fairy blossom fluff.

    • 0 avatar

      Sheeeshhh! Don’t poke the green balloons. They are positioned to inherit the Earth.

      And I agree, Pch has a rather (for our times) take that would do more than all this favoritism. In the end, Tesla points a possible way, but won’t be there when it ends. However, those who did this will be very well off thanks to all the smoke in everybody’s eyes.

    • 0 avatar
      healthy skeptic

      @wmba

      Where do you live? Wherever it is, I bet the lack of EVs is more due to other concerns. For instance, if you live way out in rural Texas, I doubt EVs would sell well no matter how generous the tax breaks. Assuming you live anywhere in America, buyers would still get the federal tax credit.

      On the other hand, out here in sunny hippie-granola California, I think EVs would still be doing okay. My guess is that Leaves and Volts would have taken a hit, but Teslas would probably still be doing well. Most of the folks who buy Teslas really want the car, and have enough wealth where they don’t fret about a few thousand dollars difference in price. In fact, Tesla prices have been creeping up for years, and they’re still selling like hotcakes.

  • avatar
    wmba

    Where I live, there are no carbon taxes/credits and no consumer credits for buying EVs. Not a one. And the result is – no sales whatsoever of these vehicles. They are only made semi-viable in other markets by subsidy from government.

    If that isn’t reality, I don’t know what is. Lashing up an electric motor in a vehicle is hardly rocket science. Back yard weirdos have been doing it for a hundred years, and getting pictures of their smiling mugs in the pages of Popular Science standing next to their bent-tin wonders. Whoop de doo.

    If you, Mr. Entrepreneur, dream up some business that is only profitable by the presence of external public subsidies, or open up a fast food restaurant that is only profitable by paying workers minimum wage, you have one piss poor business plan. It works only when you leach your prosperity from the backs of everyone else’s efforts.

    The EV owners also pay no road tax, buy power at basically wholesale rates with no taxes and thus sponge off the rest of us. How is this good policy? It isn’t. It is the same old story of attempted monopoly to fill the coffers of the scammers who thought it up.

    I agree with Pch101. Something like energy storage systems that benefit one and all are what public funds should be spent on. Picking some area of the economy and futzing around with the natural way of doing things benefits only those who rationalize in their own minds what wonderful forward-thinking people they are.

    From there it’s only a short step to believing your own BS as some inviolable truth. $700 billion worth of future fairy blossom fluff.

    • 0 avatar
      mcs

      >> Where I live, there are no carbon taxes/credits and no consumer credits for buying EVs. Not a one.

      Sounds like you’re not in the US since there is a US Federal Credit. There may be other factors in play in the country you live in.

      >> Lashing up an electric motor in a vehicle is hardly rocket science.

      There’s more to it than that – modern battery chemistry is extremely complex.

      >> The EV owners also pay no road tax, buy power at basically wholesale rates with no taxes and thus sponge off the rest of us.

      In my state, the gasoline taxes are only one source of funding, the other sources are paid by EV owners just like ICEs.

      >> buy power at basically wholesale rates with no taxes and thus sponge off the rest of us.

      What? We pay the same rates as everyone else. Also, I don’t see how we’re sponging off of you since you started by stating you lived in a place where there were no subsidies.

      Now, if we’re going to talk about subsidies, what about the gas and oil industry? Plenty of subsidies there, and who’s going to pay for that cleanup from the oil train accident in West Virginia?

  • avatar
    RHD

    Too bad we don’t have a thumbs up/thumbs down option for the comments on TTAC. The common sense shown in the comments refuting the blatant hypocrisy of the WSJ article is refreshing to see.
    The “corporate welfare” doled out to rice farmers and petroleum companies (as just a couple examples) are simply astounding. The tax credit for a home mortgage has an enormous effect to raise real estate values, but no one bats an eye at that one, no matter how much it costs the federal government.
    It’s very easy to knock someone who is innovative, successful and bucking the status quo (especially when being spoon-fed the words by corporate special interests, a la Sara Palin with an earpiece), but how many NYC op-ed writers could put together an entire automobile company, much less a cutting-edge organization such as Tesla? (Answer: Zero!)

  • avatar
    Big Al from Oz

    I find it amazing how the consumers’ (taxpayer) forks out handouts and subsidises businesses that can’t exist. Why do we have them, we all wonder why our nations are in deficit.

    Imagine if money was spent researching how to provide solar panels and batteries on every home. This would remove more pollutants than these waste of money pie in the sky vehicles.

    Imagine if all of the money wasted by the State and Fed was spent increasing gas pipeline infrastructure to all homes.

    This would be a benefit to all and not just the road users and these billionaires living off of welfare.

    Why do we insist on wasting this money.

    • 0 avatar
      shaker

      People LOVE cars here – they capture an inordinate amount of wealth, despite being poor investments – a fast, luxury EV will prompt the wealthy owner to explore solar power for their EV (green cred), the more that do this, the more the possibility that it will lead to more investment in alternative energy sources, eventually making it more affordable for a larger number of people.

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