How Tesla Motors Really Makes Money… From Taxpayers

musk-obama

Tesla’s announcement that it had paid back its government loan made it sound like at least one of Obama’s crony capitalist Green Energy boondoggles was working the way it was supposed to.

Finally at least one green energy company wasn’t drinking the blood of taxpayers in its corporate offices and was actually making money selling things. It was the dawn of a new age.

Except it wasn’t.

The latest round of Tesla wonderment came when it reported its first quarterly profit earlier this month. TSLA stock darned near doubled in a week.  Musk then borrowed $150 million from Goldman Sachs (shocking!) and floated a cool billion in new stock and long-term debt.  That’s how we—the taxpayers—were repaid.

Tesla didn’t generate a profit by selling sexy cars, but rather by selling sleazy emissions “credits,” mandated by the state of California’s electric vehicle requirements.  The competition, like Honda,  doesn’t have a mass market plug-in to meet the mandate and therefore must buy the credits from Tesla, the only company that does. The bill for last quarter was $68 million.

Absent this shakedown of potential car buyers, Tesla would have lost $57 million, or $11,400 per car. As the company sold 5,000 cars in the quarter, though, $13,600 per car was paid by other manufacturers, who are going to pass at least some of that cost on to buyers of their products. Folks in the new car market are likely paying a bit more than simply the direct tax subsidy.

Tesla isn’t actually making money selling cars. It’s making money from crony capitalist taxes of people who buy cars from other companies. And even the customers who buy its cars get paid with taxpayer money.

First, there’s the $7500 taxback bonus that every buyer gets and every taxpayer pays.  Then there are generous state subsidies ($2500 in California, $4000 in Illinois—the bluer the state, the more the taxpayers get gouged), all paid to people forking out $63K (plus taxes) for the base version, to roughly $100K for the really quick one.

Tesla is still turning a profit, not from customers, but from money being seized from taxpayers to compensate its customers for buying Tesla.

  • HermitLion

    That's just depressing, because there I was, thinking at least one company does it right; and infuriating, because of the way money is stolen from other people…

    Thanks for bringing the truth out yet again, Mr. Greenfield.

    • Daniel Greenfield

      It's a Forbes article, so I can't take the credit, but if they were doing things right, they wouldn't have needed the government cash

    • Weapon

      The money is not "stolen" from other people. How it works is this. California has something called ZEV credits and every time a manufacturer makes a EV, Hybrid or efficient gas vehicle, they receive ZEV credits. A manufacturer is required to reach a certain amount of ZEV credits to sell their cars in California.

      For those companies who do not have enough ZEV credits have the option of buying ZEV credits from their competitors. Tesla is generating a lot of ZEV credits from making only EVs. If Tesla did not sell ZEV credits, the manufacturers would still need to get those credits. As Tesla is flooding the market with large amounts of ZEV credits, the price of ZEV credits are dropping tremendously. So without Tesla, the manufacturers who do not generate enough credits would be paying much more.

      That said, the ZEV credits cost is is no way passed on to the consumer. The manufacturers just take it as a hit as part of the cost of doing business and write it off as an expense. The reason for this is simple, many manufacturers are already hitting their ZEV quotas just fine. And if you increase the price of your car, then you risk losing sales to competitors. The ZEV market is said to dry up by end of this year.

      Tesla also does not need the ZEV credits to be profitable as they are increasing their gross margins through economies of scale and refining their process.

      • HermitLion

        That's a long long way to say stolen from other people.

        Here's the part you should've read before commenting:
        "First, there’s the $7500 taxback bonus that every buyer gets and every taxpayer pays. Then there are generous state subsidies ($2500 in California, $4000 in Illinois—the bluer the state, the more the taxpayers get gouged), all paid to people forking out $63K (plus taxes) for the base version, to roughly $100K for the really quick one."

        And then there's the fact that the cost is ALWAYS passed on to the consumer, so kindly cut the BS.

        • Weapon

          First of all, the tax credit is a none refundable tax credit. Which means that if say you pay 3000$ in taxes. You will now be liable for 0 taxes. You will not receive a rebate from the government, only a discount on the taxes you owe. 2nd of all, the rebate goes to the person, not Tesla. 3rd of all, there is a limitation per manufacturer on that tax credit, once a certain amount of cars are sold, the none refundable tax credit will dry up. 4th of all, the price of the car is irrelevant, the credit is based on the size of the battery. So whether you buy a 27k chevy spark or a 100k Tesla, the rebate is the same.

          As far as your comment of the cost is always passed down to the consumer is inaccurate. It depends on what your dealing with. If this were say a tax, then they could have added it as a surcharge. But it is not a tax, it is up to the manufacturer to buy zev credits or not. Thus is they wanted to raise it, they would have to increase MSRP. And if they did that, it would put them at a disadvantage against competitors who do meet their quotas.(most manufacturers do meet them). The costs of ZEV credits are overall insignificant to the manufacturers.

          • HermitLion

            How much does the Tesla cost, again? 100K? Yeah, the price doesn't get to the consumer at all. I think I'll order 3 right now.

            How do you think the government affords to run itself, if it's letting some people avoid taxation? By taxing OTHER people.

            So, fail and fail, but good effort on voting down my replies. If only that could make the Tesla competitive WITHOUT COERCION.

          • Weapon

            So your saying people who buy 60-100k cars are not consumers? Again, the tax credit goes to the consumer, not Tesla. And again the price of the car is irrelevant. If you bought a 27k chevy spark you get the same 7.5k credit that someone who bought an 100k tesla gets. If you want a lower priced Tesla, wait till the Gen III.

            The government lets everyone avoid taxation via loopholes in the tax code. If your saying we should plug up those loopholes, I agree with you. But I don't see why your blaming Tesla for this as they have nothing to do with it.

  • ron

    ??? My comment got deleted before it even went up. Ahhhhh, it must have been because I previously put up a really crazy rant before

  • ron

    Anyway, I'm backing up Hermit, thanks for bringing this up Sultan. I also believed in this company and had a fantasy that it was something different.

    The truth hurts, but that's because it's valuable.

    • jeffhre

      The truth hurts because it can force us to change how we look at stuff, which changes what we believe about the world. And nobody wants to go through that. Tesla made $68 million selling credits for zero emissions cars in California (which will end for this year for Tesla as carmakers make more efficient cars) and about $460 million building cars(check this exact number, too lazy to look up right now). This summer Tesla will begin exporting cars to Europe and Asia. The cars in the US will run on US sourced electricity, lowering the amount of oil we import from countries like Saudi Arabia and Venezuela.

      Re: Crony Capitalists. (Avert your eyes if you really enjoy the crony capitalists stories)

      The subsidies for EV's were written by a Republican senator from Tennessee, approved by a Republican congress and signed by George W. Bush to lower US trade deficits by replacing foreign oil with US sourced electricity. Replacing foreign oil with US made electricity will ultimately lower tax burdens beyond the payroll, sales and corporate taxes paid, plus jobs created, by EV makers.

      • Doggwood

        "The subsidies for EV's were written by a Republican senator from Tennessee, approved by a Republican congress and signed by George W. Bush to lower US trade deficits by replacing foreign oil with US sourced electricity. Replacing foreign oil with US made electricity will ultimately lower tax burdens beyond the payroll, sales and corporate taxes paid, plus jobs created, by EV makers."

        Just because something was done by Republicans doesn't mean it's good or should be rubber-stamped by "conservatives". Indeed, that's the reason the budget went to hell under GWB; the Republican water-carriers didn't raise objections because the offense was being perpetrated by the home team. Seems that most people in Washington lose sight of any goal beyond jockeying for power, and to hell with the country.

        I certainly applaud the general goals of securing American energy independence and utilizing renewable resources. This serves to bolster ecological and economic and national security needs; something for everyone! But the devil is in the details. The subsidies tend to mask wastage. If we pay many thousands of dollars of public money to save one thousand dollars of personal oil consumption, we've taken more resources out of the system than we've put into it. The resources that went into making those batteries must be weighed against the savings, but we hide that. The politicians just trumpet one end of the equation and we all feel good, but we haven't solved any fundamental problems and are still broke. Got to look at the big picture!

        Bottom line is the Tesla is a luxury car for rich people, and we're not going to improve the ecology or save the nation by pouring public money into it.

  • Mark

    Greenfield literally stole this article, almost word for word from Forbes.
    http://www.forbes.com/sites/patrickmichaels/2013/

    • Daniel Greenfield

      It's a blog post that links to and quotes the Forbes article.

    • HermitLion

      If quoting is stealing, then call me a thief:
      "Intellect is invisible to the man who has none" – Arthur Schopenhauer.

    • Rob

      You don't understand the word "literally" very well, do you?

  • JHC

    Are you kidding me, you RIGHT WING, NUT??? People like you will take this COUNTRY BACKWARDS, to pre industrial revolution. Ah, but maybe that is what you want…

    • HermitLion

      That's a very deep, and thoughtful argument. Thanks for enlightening us on how wishful thinking somehow constitutes progress.

    • CJL

      Are you saying that the RIGHT WING will take the country backwards…..to pre industrial revolution?????? OK, so that's why you call yourself a PROGRESSIVE….so you can take us to the rosy future of socialism, communism, totalitarianism and fascism????? Not to mention Islamism, the most backward of them all.

      • UCSPanther

        Environmentalism, don't forget environmentalism. The environmentalist movement is a modern day luddite movement in itself.

    • UCSPanther

      I suppose throwing out the proven technology of the internal combustion engine and replacing it with unproven and unreliable technology is a step forward in your socialist worldview, eh?

      Typical modern luddite.

      You environmentalists probably won't be happy until we are back in the stone age, where we cannot even use iron because the process of smelting and forging it releases greenhouse gases. Now who is the one wanting to step a technological step back now?

    • F.K. Juliano

      Typical leftist hysteria in lieu of an actual response, since none is possible. I'm surprised you didn't call criticism of Tesla's shenanigans "blasphemy".

  • UCSPanther

    Just to troll any environmental whackos here:
    https://www.youtube.com/watch?v=vrbF3vqtXko

    The beautiful site of a smoky and noisy fairbanks morse opposed piston genset.

  • SuicidePrevention

    Other car companies have long enjoyed the subsidy of the taxpayer-financed interstate highway system
    launched under Eisenhower. The also benefited from the destruction of competing infrastructure –
    streetcars and railways. (Though lucky Daniel Greenfield can still ride the subway.) Moreover, any car company could have looked at the emerging regulatory environment 5 years ago and developed electric cars accordingly. In fact, some others did, eg. the Nissan Leaf and GM Volt.
    It seems that Tesla just did it better. If the price of gasoline goes higher in coming decades,
    we'll be thankful that good electric cars are available. And even if you don't drive one, if you have lungs
    you'll still benefit, assuming most the electricity to power them comes from solar, wind and hydro, and not
    from coal.

    • HermitLion

      Don't forget unicorn beams. They can power the entire world, if only we can sing the lollypop song in perfect sync with an old Karaoke machine.

      By the way, how many super-expensive Teslas, which are paid for by tax-money (that is, money taken by force from the productive population) , do you own? Let me guess, it's a number between zero and null.

      • Garn

        HermitLion,
        Let me quote someone near and dear to your heart, “That's a very deep, and thoughtful argument. Thanks for enlightening us”. People like Weapon and jeffhre write very informative responses, and instead of continuing to defend your position you jump to statements like “Don’t forget unicorn beams”. I’ll assume this means you have no argument against their logic?
        BTW, Thanks Weapon and jeffhre. I actually learned a little more about how these credits work. I always assumed there was more to how they work than usually gets talked about. I guess they wouldn’t make as good of a story if the truth got out there. :)
        Garn

        • HermitLion

          Logic… yes, Garn, which logic exactly? That non-existent power sources can power the country? That wishful thinking doesn't somehow makes non-viable, non-competitive technology viable, and that not exploiting current technology somehow provides you with the power to refine or invent new technologies?

          So, yes, unicorn beams, which are the same things that are used for the 'carbon credits' scam – everyone who thinks there's a meal for free is either eating on someone else's expense, or denies having the food taken from his own plate.

          Please, by all means, feel enlightened. If feelings could power cars, you'd be able to use a Hummer.

          Next time you quote me, make sure you have more than feelings to back you up.

      • SuicidePrevention

        I know that my above comment about electric cars tilts to optimism, but if your
        premise is that fossil fuels are forever, then you dwell in fantasyland.Fossil fuels are finite. The worldwide price of oil has gone up, because the
        cheap, easy-to-extract oil is gone. (It would be more accurate to say that it has been burned
        leaving the residue of 400 ppm CO2.). Battery technology has improved, but not enough yet
        for mass market electric cars to be affordable and convenient. Another doubling of energy density
        and halving of cost might be enough to make them competitive without subsidy. Of course
        rising oil prices also help the comparison. What's your proposal: nuclear fusion powered cars? Ha Ha.

        • HermitLion

          Where do you think your electricity comes from??? Fossil fuels.

          It takes exploitation of current technologies, to be able to invent new ones.

          • Weapon

            To answer your question. Based on 2012 numbers for the entire USA:

            37% – coal
            32% – NG
            19% – nuclear
            12% – renewable energy

            Based on data for last 4 years, coal is going down, NG and renewable energy is going up.

            Who said there is anything wrong with exploiting current technologies? There is nothing wrong with exploiting current technologies but that doesn't mean we should not push for newer and better technologies.

        • Rob

          "Fossil fuels are finite."
          In the very, very long term, yes.
          In the next few centuries, no, they're effectively infinite. Proven reserves are larger now than at any time in recorded history. Like all Lefties, you don't understand how resources, scarcity, human ingenuity, and technology interact with each other.

    • UCSPanther

      Your name is an irony. If we listened to you luddites, we would in effect be consigning ourselves to a new dark age, and in effect, committing suicide as a society.

      • SuicidePrevention

        No irony in my name. Fossil fuels are finite.

        • HermitLion

          And you need to use them today, in order to stay in the game long enough to compete in the market tomorrow.

          This car is not competitive, not profitable, and not a viable alternative. If it were, it would NOT need to use the government in order to cheat the system.

        • UCSPanther

          The best use for an electric car in my books is to cut them up, load them into a rail gondola and ship them to the smelter, the same fate that is in store for any useless industrial equipment.

          I ain't giving up any of my internal combustion engines just because you environmentalists say so.

          • Weapon

            It is very interesting that you feel violated if your ICE car is taken away yet have no problem taking away EVs from others.

            How about letting people who want EVs have their EVs and you can keep your ICE car? Why must there be so much hate on these things when clearly they can co-exist? Just like when cars came out in the first place, did people take away other people's horses? People still ride horses to this day.

            Even if 99% of the cars on the road will be EVs in the future, you can still ride your ICE car. Nobody is going to take it away from you.

    • Roy Dzigli

      An interesting little fact is that the highway systems (the paved roads anyway) were initially funded by the car companies. They were called seed roads. And probably as is sort of the Tesla paradigm the first govenment funded Highways were built through car company coercion of corrupted government officials. but thats just a guess.
      My thing is that I loath Al Gore. He just gives me the creeps. Like something that evolved out of primordial dumpster juice. There's always something sketchy about any kind of polotician and the ones that succeed are the sketchiest of all.

  • HermitLion

    Sorry, Daniel, looks like all the people who never bought a Tesla must believe it is economically competitive, in order to feel good about themselves.

    You just can't beat such solid, reasonable, convincing arguments. Now excuse me while I try to capture some moonbeams for my feelings based power plant.

  • SuicidePrevention

    Elon Musk is indeed a modern day Nikola Tesla – the inventor of alternating current electricity transmission.
    In addition to Tesla, he founded (or cofounded) Paypal, SpaceX (which docked with the space station) and SolarCity. Here's Tesla's stock price chart: http://finance.yahoo.com/echarts?s=TSLA+Interacti
    John Galt is fiction. Musk is real.

    • Edward Cline

      Yeah, Musk is "real," and proves that even innovators can be racketeers.

  • Roy Dzigli

    So these Tesla cars are Coal powered? Where exactly does the electricity come from when they plug into a wall socket? Hydro power? Environmentalists want to get rid of damns. Nuclear? Here again………. goes without saying thats no good for environazi's. Solar? I don't think so.
    What exactly are they thinking? The Tesla goes what? 100 miles on a charge?
    This is Alice in Wonderland stuff.
    This actually happened: A dog crapped on my lawn and the owner didn't pick it up so I put a little sign on it that said "Free". The little pile disapeared. I don't know what that has to do with Tesla other than both stories being about crap.
    Best regards,Roy

    • Weapon

      "So these Tesla cars are Coal powered? "

      It depends where you live. Coal accounts for around 37% of the grid by US average in all states combined. But again it depends where you live. Example, 10 states have 90% of their power from renewable energy.(renewable energy as of 2012 is around 12% of the grid for all states combined).

      the Tesla superchargers are powered by solar.

      "Where exactly does the electricity come from when they plug into a wall socket? Hydro power?"

      Again, depends where you charge and your circumstances. If you lease a solar panel on your roof, it can be fully solar but if you don't then it depends on your local grid.

      "What exactly are they thinking? The Tesla goes what? 100 miles on a charge? "

      Depends on conditions like all things but the 85kwh model s has epa rating of 265 miles. (maybe your confusing the Tesla for some other EV?)

      "This is Alice in Wonderland stuff. "

      Actually it is more of advancement in science. Tesla's technology is years ahead of the other EVs as they spent 10 years designing an EV from the ground up. The biggest reason why most EVs are junk are because most manufacturers just took a car, stuck a battery in it and called it a day. It is hard to really explain, the only way to explain it is you need to test drive one. Everything you have known about EVs or cars in general will change. Even people who hated EVs have a complete change of mind after driving a Tesla Model S.

      Simply put, forget all positive and negative things you ever heard about it. It is not even about the environment. Just test drive one, that is the only way to understand.

      • NotATeslaEmploy

        Sounds like someone is trying to make a sale.
        I guess disclosing that you are somehow affiliated with a company that you're promoting here, would be against that company's policy – what with them also lying about the way they make profits.

        The market will decide if your car is 'the future', or another pipe dream. So far, Tesla is cheating the market, through the government, and no amount of mental gymnastics on your part is going to turn that around.

      • Roy Dzigli

        Thanks for the info. Never stop inputing data. Whats the chain of supply for solar panels and their impact on the environment? So Tesla's could be coal powered or solar or hydro or nuclear?
        At this juncture they seem like a rich kids toy funded by taxpayers but that's only one viewpoint.
        They're sexy cars anyway. I live in Silicon Valley and count at least 3 a day on 280. Who designed them? They look like De Tomasto's or other Italian designed cars. Have you seen the Jagiar Type F? Whew! Best looking thing ever.(Excluding certain super models) Hell my Great grandmother owned a Detroit Electric in 1915. I saw a Tesla at a filling station in the De Young Museum parking garage so that one was a grid parasite anyway. We taxpayers subsidizing rich mens toys is "Alice in Wonderland" Not the tech. Regards,Roy

  • bix2246

    Scumbags….all of them.

  • mark

    Don’t worry poor little frontpagek, those buying this car (and likeminded individuals) are the same ones paying the taxes used for the subsidies. All the mouth-breathers complaining about the tax dollars being spent on clean energy initiatives aren’t really that burdened with high taxes.These incentives aren’t Tesla Motors incentives, they’re available to anyone selling cars. It’s not their fault they built a better car.Thankfully those who share your opinion will be gone shortly or to busy finding the correct size for your incontinence diaper to bother the rest of us. But hey, way to sound like you’re not an oil company shill! Good job!

  • Fernandes

    It’s funny how you do math.What about the sales tax of the cars? In many states this will cancel out the tax rebate.What about the corporate tax Tesla pays?What about the 3000+ employees that pay tax and spend their earnings?What about the many companies Tesla pays to manufacture parts and the tax those companies and employees pay?Maybe you need to learn a bit about how our economy works before writing ignorant articles such as this.

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  • tom Gambeski

    Refreshing to read the truth about another Obama green company ,soon to be,failure.
    There is money being made,primarily by a handful of crony capitalists,individual investors should beware.

  • Keef Wivaneff

    Seems that I can RESERVE a Tesla https://www.teslamotors.com/en_AU/own#/model-s

    Delivery….real soon

    Oh dear….I’m afraid I smell a rat!

    Model S configurations are distinguished by a combination of range and horsepower. The entry-level version comes with a 60 kWh battery rated for 208 miles of range and a motor rated at 302 horsepower; it starts at $62,400. An additional $10,000 steps you up to an 85 kWh battery with 265 miles of rated range and 362 hp. Another $10,000 on top of that gets you the “P85″ model, with the same battery and range but featuring an updated drive inverter that bumps the power up to 416 hp. Finally, $6,500 on top of that buys the “P85+” performance package, which adds a great deal of suspension tuning and some upgraded tires.

    M’kay….. 303 Horsepower….awesome!

    85Kw-H = 303 Hp for about TEN MINUTES!!

    What’s that I smell????
    (a clue….it is not roses…but it helps them to grow)

    • awhellno

      As much as I don’t care about Tesla, that’s not a valid point… cars would never operate at max HP continuously, not even on the autobahn.

  • Keef Wivaneff

    Does the phrase “pedal to the metal” ring a bell?
    Why buy a PERFORMANCE CAR if you intend to drive like a granny?