If Tesla Is Worth More Than GM, Why Are Taxpayers Still Subsidizing It electric semi truck, pickup

Tesla passes GM to become #1 US automaker in market cap

Image result for tesla
Motor City: The big news in the auto world was that Tesla (TSLA) topped the market value of General Motors (GM). That means the car company that gets massive taxpayer subsidies is now worth more than the car company taxpayers bailed out a few years ago. Welcome to the world of crony capitalism.


On Monday, Tesla’s stock closed at $312.39, which meant the startup electric car company, which sold a grand total of fewer than 80,000 cars last year, was worth more than GM, which sold 80,000 Chevy Silverados every eight weeks. (Tesla’s market cap edged below GM’s on Tuesday.


Is this a case of irrational exuberance gripping investors? Or the electric car version of the 1990s internet bubble? Is the future of Tesla really that bright? We tend not to second-guess the wisdom of the markets to get things right, at least over the long term.


But it’s worth noting that whatever Tesla’s growth potential, at the moment the company is heavily reliant on taxpayer support.

For every Tesla car sold (up to No. 200,000), federal taxpayers kick in $7,500 to lower the costs. State taxpayers in a multitude of states pony up still more. In Colorado, they contribute another $5,000 to the electric car kitty, in California, it’s $2,500.


When the Los Angeles Times crunched the numbers two years ago, it found that Tesla buyers had received more than $284 million in federal tax incentives and more than $38 million in California rebates. And that was before Tesla’s banner 2016 year.

The taxpayer help only starts there. Tesla also collects hundreds of millions from competing automakers by selling environmental credits in California and more than half a dozen other states to car companies that can’t meet the states’ “zero emissions” sales mandates.


Plus, Nevada ponied up $1.3 billion in incentives to convince Tesla to build its huge battery factory near Reno.


And this doesn’t include the fact that electric car owners don’t pay into the Highway Trust Fund — which is funded by the per-gallon tax on gasoline and pays for road construction and upkeep.


Whether Tesla can survive without all this taxpayer largesse isn’t altogether clear. When Edmunds looked at the electric car market as a whole, it concluded that without federal and state tax credits, “this market is likely to crash.”


As evidence, Edmunds points to Georgia, where EV sales plummeted by more than 80% immediately after the state canceled its $5,000 tax credit in 2015. Tesla sales were far less impacted, but then again, Tesla was only selling luxury cars at the time, and buyers could still get the $7,500 federal credit.


Whatever the impact these subsidies have on Tesla, there is no good reason for taxpayers to continue subsidizing electric cars made by it, or any other car company.

First, there’s the fact that these taxpayer subsidies are nothing more than welfare for the rich. A study published by the National Bureau of Economic Research found that 90% of electric car subsidies go to the top 20% of households.


Second, the supposed environmental benefits of electric cars have been vast — and we mean vastly — oversold.


While they might emit “zero emissions” while on the road, electric cars are barely any cleaner than good-old internal combustion engine cars when you look at the complete environmental impact picture. Getting the materials to make lithium-ion batteries, for example, is an extremely dirty business, and the electricity to recharge the batteries most likely comes from a power plant fueled by coal or some other fossil fuel.


Even if a midsize EV manages to last 20 years and 150,000 miles, total CO2 emissions would be just 19% less than a comparable gas-powered car, according to an analysis by Arthur D. Little.


That is a lot of welfare-for-the-rich for the very little environmental benefit.


This isn’t to say that traditional automakers don’t get government assistance. Bailing out GM cost taxpayers $11.3 billion, according to the Treasury Department. But adding more crony capitalism to the books isn’t the answer. Getting rid of all forms of corporate welfare is. If that means Tesla’s valuation comes back down to Earth, so be it.

Tesla shares jump after Musk reveals timeline for electric semi truck, pickupImage result for tesla semi truck

Tesla Inc.’s plans to pad its lineup of electric vehicles are taking shape, with Elon Musk sketching out a timeline for the arrival of a semi truck, pickup and sports car.

After the final unveiling of the Model 3 sedan in July, Tesla will show an electric semi truck in September and a pickup in 18 to 24 months, the chief executive officer wrote in a series of tweets Thursday. The Palo Alto, the Cal.-based company also will bring back the Roadster, its very first model, as a convertible.
Mr. Musk had telegraphed Tesla’s future products several times before, most notably in last summer’s “Master Plan, Part Deux.” With the Model 3 already aimed at catapulting Tesla from niche player to higher-volume automaker, the manifesto went a step further, with Musk laying out a vision to “cover the major forms of terrestrial transport.”

“Team has done an amazing job,” Mr. Musk tweeted on Thursday, referring to the semi truck. “Seriously next level.”

Analysts quickly speculated Mr. Musk may have been alluding to the semi’s self-driving capabilities. The auto industry has adopted a five-level system for measuring autonomous proficiency, with the highest-level systems being capable of all driving-related tasks.

More Going On

“It’s at least a semi-autonomous truck,” Ben Kallo, an analyst at Robert W. Baird & Co., said by phone. “The important thing is that while everyone is focused on the Model 3, there are a lot of other projects going on at Tesla.”

Tesla declined to comment beyond Musk’s tweets. Its shares climbed 2.4 percent to close at $304 in New York, valuing the company at about $49.6-billion. Tesla’s market capitalization briefly passed General Motors Co. earlier this week.

After burning through $970 million in the fourth quarter, Tesla has forecast as much as $2.5-billion in capital expenditures during the first half of 2017. The company raised about $1.4 -through a stock and debt offering last month.

James Albertine, an analyst at Consumer Edge Research, called Musk’s tweets potentially exciting for investors, as the products are ways Tesla can extend into new markets and leverage prior investments.

“We continue to believe Tesla would have to come back to the markets to raise capital in the future, but we think the concept of scalability tomorrow helps to defend the rate of cash burn today,” Mr. Albertine wrote in a report Thursday.

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