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The Other Government Motors

05-Aug-2013

Tesla by the numbers: How taxpayers made an electric car company

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 introduced 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. Tesla's biggest windfall has been the cash payments it extracts from rival car makers (and their customers), via its sale of zero-emission credits. Taxpayers pay first so Tesla can build the cars and again to help the wealthy buy them. Another irony is that the main beneficiaries of this electric-car largesse belong to—well, the 1%. Tesla co-founder Elon Musk is already a successful entrepreneur, and his estimated net worth has soared past $4 billion thanks to the IPOs of Tesla and SolarCity. Tesla isn't oblivious to the politics of all this, and [last] Wednesday it said it had fully repaid its government loan. That's good, since Tesla's long-term prospects are far from certain. The major auto makers will soon have their own zero-emissions vehicles, which Mr. Musk says will end Tesla's credits boom by year end. Analysts are also warning that Tesla has yet to show it can sell its very pricey car to a mass market.
Source: The Wall Street Journal

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