Opinion: Elon Musk's Criticisms of the EV Incentive Bill Are Valid

Matt Posky
by Matt Posky

Tesla CEO Elon Musk isn’t fond of the new electric-vehicle incentives being proposed by the United States Congress and recently stated as much over social media this week. He even went so far as to allege that the bill was lobbyists working on behalf of legacy automakers and the United Auto Workers, as it monetarily benefits domestic manufacturers with strong union ties above all others.

Truth be told, it’s kind of hard to respond to those claims with anything other than an affirmative nod. Due to his seemingly intentional manipulation of cryptocurrency and willingness to overpromise Tesla investors, I’m not the biggest fan of Musk. However, he’s getting support from other manufacturers and it’s pretty hard for your author to see any legislative scenario other than the one he’s supporting — especially since this is frequently how business is done on Capitol Hill.

While it’s rare to see any government going against domestic automakers, the United States arguably went above and beyond by funding their continued existence of General Motors and Chrysler via the 2008 bailout. Since then, we’ve seen CEOs approaching President Donald Trump to endorse regulatory rollbacks some manufacturers later denied ever having supported and the world’s largest automotive lobby trying to convince the Biden administration to subsidize the advancement of electric vehicles.

As we’re currently dealing with the latter example, let’s take a look at what the bill entails and how it’s making everyone feel.

The Democrat-backed plan seeks to reform federal EV incentives by resetting manufacturer quotas and upping the ante to a $12,500 electric vehicle tax credit. Conservatives have bashed the plan as anti-competitive and socialist, citing that the money coming from taxpayers should not be used to soften the financial blow for electric-car buyers that have typically been higher earners anyway. The updated policies are also embedded in a $3.5 trillion social spending bill Republicans have alleged is too broad. Meanwhile, supporters of the bill have claimed it’s the most direct way of ensuring EV adoption among low-income groups and will likely speed up the nation’s transition to alternative energy vehicles.

This places Elon Musk in a difficult position. While his company has undoubtedly benefited more from EV tax rebates and carbon credits than any other manufacturer, the new proposals place his company (and more than a few others) at a decided disadvantage. The government has added another $4,500 incentive atop electric vehicles coming out of facilities where workers are unionized. Tesla has actively tried to avoid having its staff organize a union in Freemont, California.

“This is written by Ford/UAW lobbyists, as they make their electric car in Mexico. Not obvious how this serves American taxpayers,” Musk said over Twitter in response to the bill.

If you’re wondering why he singled out Ford, the bill includes a grace period of 5 years for models produced outside of the country that still allows them to benefit from $7,500 in federal incentives. Blue Oval recently spent a small fortune building up a facility to manufacture the Mustang Mach-E in Mexico.

A clandestine meeting between legislators and Ford CEO Jim Farley is unlikely. But that’s what lobbyists are for and they’ve been incredibly busy, with the Alliance For Automotive Innovation (the largest industry lobby currently in existence) supporting some of the most aggressive pro-EV rulemaking you could imagine. AAI member companies include Ford, General Motors, Stellantis, Subaru, Honda, Toyota, Nissan, BMW Group, Hyundai, Kia, Mitsubishi, Nissan, Karma, Isuzu, Volkswagen, Volvo, and numerous technology firms — but not Tesla.

Toyota and Honda have likewise expressed their shared dismay with the proposals, presumably because they don’t have union facilities in the United States. They also aren’t presently building any electric vehicles stateside and are likely concerned with future investments and strategy.

Electrek managed to get a statement out of Ford regarding Musk’s comments. But it was sadly framed around the author’s assumption that anything that progresses electrification is good by default. I’m not sure what I was expecting from an outlet that literally exists to promote EVs. It just seems silly and shortsighted to assume the end justifies the means.

“Electric vehicle consumer incentives are key to accelerating the transition to a zero-emissions transportation future, and we appreciate Congressman Kildee and Senator Stabenow’s leadership on this issue,” Kumar Galhotra, President, Americas & International Markets Group, Ford Motor Company, told the outlet. “This legislation will help more Americans get into EVs, while at the same time supporting American manufacturing and union jobs. As the automaker who assembles more vehicles in America than any other, Ford is doing our part to lead the electric vehicle revolution by investing tens of billions of dollars in EVs. Initial customer response to the fully electric versions of our most iconic and popular vehicles, like the American-assembled F-150 Lightning and E-Transit, is exceeding our expectations. We will continue to work with our government and UAW partners to combat climate change and stand up for American workers.”

The phrase “government and UAW partners” is rather telling. Sen. Debbie Stabenow is a Michigan Democrat holding office since 2001 with deep ties to both the automotive industry and unions. Dan Kildee, U.S. Representative for Michigan’s 5th congressional district, has likewise been backed by the UAW. Neither items are scandalous, though they do paint a picture where legislators know exactly what their backers want to see happening in Washington if they’re to be elected again.

As I lack the ability to read minds, I cannot assume to know what their reasoning behind supporting the proposal was. But I don’t need to in order to have doubts about the bill itself. We’ve already spent vast amounts of money incentivizing people to buy electric vehicles and it’s starting to feel like additional payouts are just there to make things easier for the relevant corporations. Detroit automakers may have gigantic footprints in their home country but they’re also multinational organizations with facilities around the world. Having grown up in Michigan watching everyone’s parents get laid off, it’s often difficult to see them as the home team worthy of special privileges.

I am similarly inclined to agree that the plan severely discourages competitiveness. Knowing you can get 12 grand back (or potentially more with local incentives) on a vehicle is bound to influence purchasing decisions. Most people aren’t going to care which car is better when one of them is going to result in a juicy rebate. We’ve also been pursuing the free-money strategy for years, with the intent to limit it once EVs found their footing. But this new plan seeks to hit the reset button on that while pouring even more cash on the table, as environmental regulations becoming increasingly stringent. It seems wildly irresponsible and rather overbearing from my admittedly limited vantage point. I would much rather see money going exclusively toward supporting the ailing energy grid and installing charging points, guaranteeing good-paying American jobs while simultaneously preparing our infrastructure for more EVs.

Electric vehicles need to stand on their own at some point and we’re not even trying to pretend that’s the ultimate objective here. Elon Musk’s opinions on the proposals may be rooted in his own form of corporate greed (again, I cannot read minds). But his concerns remain valid. Passing this bill unfairly benefits specific automakers that have repeatedly taken advantage of American taxpayers and serves to elevate profits rather than product.

[Image: Architect of the Capitol]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Roader Roader on Sep 19, 2021

    It's payback time: Unions spent big to boost Biden. Will he return the favor? 'OpenSecrets', February 19, 2021 Labor organizations contributed $27.5 million to Biden's campaign and other groups that supported him. His opponent, former President Donald Trump, took in less than $360,000 from those with labor ties. Now, almost a month into his presidency, Biden is poised to make good on his campaign promises to workers and unions. On Tuesday, he hosted 10 union leaders at the White House to discuss his hallmark America Rescue Plan and infrastructure projects.

  • Akear Akear on Sep 20, 2021

    Tesla can count its blessing that their domestic competition is poor. The Bolt's main claim to fame, besides awful sales, is that it catches fire! Even the Nissan leaf is pulling ahead of the hapless Bolt. Why would anyone buy a vehicle, which could burn their home down?

  • Daniel J Until we get a significant charging infrastructure and change times get under 10 minutes, yes
  • Mike I own 2 gm 6.2 vehicles. They are great. I do buy alot of gas. However, I would not want the same vehicles if they were v6's. Jusy my opinion. I believe that manufacturers need to offer engine options for the customer. The market will speak on what the consumer wants.For example, I dont see the issue with offering a silverado with 4cyl , 6 cyl, 5.3 v8, 6.2 v8, diesel options. The manufacturer will charge accordingly.
  • Mike What percentage of people who buy plug in hybrids stop charging them daily after a few months? Also, what portion of the phev sales are due to the fact that the incentives made them a cheaper lease than the gas only model? (Im thinking of the wrangler 4xe). I wish there was a way to dig into the numbers deeper.
  • CEastwood If it wasn't for the senior property tax freeze in NJ I might complain about this raising my property taxes since most of that tax goes to the schools . I'm not totally against EVs , but since I don't drive huge miles and like to maintain my own vehicles they are not practical especially since I keep a new vehicle long term and nobody has of yet run into the cost of replacing the battery on an EV .
  • Aquaticko Problem with PHEV is that, like EVs, they still require a behavioral change over ICE/HEV cars to be worth their expense and abate emissions (whichever is your goal). Studies in the past have shown that a lot of PHEV drivers don't regularly plug-in, meaning they're just less-efficient HEVs.I'm left to wonder how big a battery a regular HEV could have without needing to be a PHEV.
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