The true amount of Tesla’s federal subsidies: zero

Posted on December 19, 2016 by Matt Pressman

Guest Blog Post: Charles Morris is the Senior Editor of Charged, the magazine of electric vehicles, for which he writes a daily blog and regular print articles. He's also written five books including Tesla Motors: How Elon Musk and Company Made Electric Cars Cool, and Sparked the Next Tech Revolution.

Since its founding, Tesla has been a constant target of skeptics, bears, trolls, haters, spoilsports, wet blankets and party poopers. Articles targeting the company range from legitimate skepticism to misleading hit pieces to bald-faced lies. And since the US election, as our president-elect details plans to make the federal government into a subsidiary of the oil industry, Tesla’s emboldened enemies have been in rare form. Just a few days ago, Rep. Mark Meadows (R-N.C.) was lobbying Trump and took a swipe at "the Tesla guy" Elon Musk and the subsidies he receives.

 

Above: Tesla Model S in snow (Image: Tesla)

Many of the anti-Tesla arguments center on the supposedly huge amount of financial support that the company has received from the government. The Teslaphobic tend to insist that they aren’t singling Tesla out - they’re against government subsidies for any private company. However, few if any of them mention the government largesse lavished on the Big Three automakers, and on the fossil fuel industry, both of which dwarf the government support Tesla has received. Before getting into that however, let’s clarify just how much federal financial support is currently flowing specifically to Tesla’s automobile business. And the figure is (drumroll, please): nothing.

 

Above: Tesla Model S (Image: Cheat Sheet)

Now, that’s not to say that Tesla hasn’t benefited from a range of government programs - it has. But, contrary to the picture painted by some naysayers, no one from the federal government has been delivering any suitcases full of taxpayer cash to Elon Musk’s private jet (or, if they have, they’ve been quite discreet about it).

An inside look at Tesla's supposed subsidies

Here are the main categories of government goodies that benefit the California carmaker. Few, if any, are specifically targeted at Tesla - they are available to any company that delivers a desired outcome, such as reducing pollution or creating jobs.

  • The 2009 DOE loan. The only direct federal aid Tesla has ever received was a $465 million federal loan under the Advanced Technology Vehicles Manufacturing Loan Program (which it repaid in full nine years early, delivering a profit to taxpayers). In contrast, Ford received $5.9 billion, and Nissan North America got $1.6 billion as part of the 2009 auto industry bailout package.
  • The federal EV tax credit. This is available to any citizen who buys (or leases) a plug-in vehicle from any manufacturer. It will be phased out for each individual automaker as soon as EV sales reach a certain level. For Tesla, this threshold is expected to be reached soon after Model 3 goes into production.
  • SolarCity. Yes, there’s a good argument to be made that Tesla’s new subsidiary is dependent on government subsidies. The 30% federal tax credit for solar installations, combined with various incentives from local governments and utilities, is enough to make solar an economically viable option for many. Of course, this is an indirect subsidy that is available to customers of any solar energy company.
  • ZEV credits. Tesla has made a nice little side business out of selling Zero Emission Vehicle credits to automakers that choose not to sell enough of their own EVs to satisfy the ZEV mandate in California (and 9 other states). While some depict this program as a sneaky rip-off of taxpayer funds, analyses by the LA Times and others have shown that the law is working precisely as intended. Tesla (and Nissan) are profiting because they are the only companies selling substantial numbers of EVs, but the income is available to any automaker. In fact, as Elon Musk recently pointed out, Tesla arguably sees less effective income from ZEV credits than the legacy automakers do, because it sells them at less than face value.
  • State and local incentives. The state of Nevada granted Tesla a substantial package of tax breaks and other goodies in return for locating the Gigafactory in the state. While the total of $1.3 billion is one of the largest incentive packages in the history of the US auto industry, it’s not unprecedented. According to Good Jobs First, Chrysler received $1.3 billion from Michigan, and Nissan scored $1.25 billion from Mississippi. California has also granted Tesla tax breaks and other goodies. Tesla is far from unusual in this regard. State and local governments frequently offer incentives to businesses large and small. As is the case with Tesla’s Nevada score, they usually take the form of tax breaks to be delivered over a period of several years, and they are often contingent on a company delivering on its promises of jobs created.
  • Federal CAFE standards. It isn’t a subsidy, but the federal Corporate Average Fuel Economy standard is the most important federal program that promotes EVs. By requiring automakers to achieve a minimum average fuel economy across their entire fleets, it has the effect of forcing them to produce a certain number of plug-in vehicles. The legacy automakers have made massive efforts to repeal or water down this law and, assuming the incoming administration follows through on its stated plans, this time around they are likely to succeed. Ironically, this could be seen as good news for Tesla - if the Big Three exit the growing plug-in vehicle segment, it will leave Tesla as the only American EV-maker.

An inside look at oil and auto industry subsidies

Now, about those oil and auto industry subsidies. According to Good Jobs First, Ford has received $3.8 billion in state and local subsidies, most of it since 2010, and $27.5 billion in federal loans since 2000. Over a similar time period, GM received $5.2 billion in state and local goodies and over $50 billion in federal loans, while Fiat Chrysler scored $2 billion and $17 billion.

 

Above: Detroit's Big Three receives plenty government support (Image: Autoblog

Government handouts to the energy industry are, by most accounts, orders of magnitude greater. Most oil-producing nations offer a range of financial incentives for fossil fuels at every stage of production (they also support other energy sources, including nuclear and renewables). What’s the total amount? The picture is so complicated that there’s simply no way to arrive at a figure that everyone could agree on. According to an IMF study, the global total ran to around $5.3 trillion in 2015, but this includes “externalities” - estimated costs of the environmental damage caused by fossil fuels - which aren’t direct subsidies.

 

Above: Carbon-emissions from dirty energy sources (Image: Financial Times)

Oil Change International produced a report in November 2015 that considered only benefits for fossil fuel production. It pegged the total at $444 billion per year for the G20 nations, or $20.5 billion for the US. Despite the fact that the G20 pledged in 2009 to reduce oil subsidies, the total increased by 35% over the next six years.

 

Above: The G20 and fossil fuel subsidies (Youtube: Oil Change International)

At the other end of the spectrum, articles from oil industry sources (OilPrice.com, drillinginfo) crunch the numbers in such a way as to show that the oil industry is in fact not subsidized at all, but highly taxed.

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Sources: Seeking Alpha, The Economist, International Business Times

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Posted in climate change, Elon Musk, Tesla, tesla news, TSLA


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