The Truth about Tesla Motors

During a January 19th panel discussion at the Federal Trade Commission (FTC), Tesla Motors general counsel Todd Maron said: “We make money from one thing: car sales and car sales alone.” In reality, electric vehicle (EV) manufacturer Tesla Motors loses more than $4,000 on every car it sells on a “full-cost” basis (keep in mind that some of Tesla’s costs are heavily subsidized). Tesla’s losses per vehicle are even greater using generally accepted accounting principles. CNBC and Reuters explained:

Tesla reports its finances in a different way from the Detroit automakers. Using the generally accepted accounting principles, or GAAP, used by GM or Ford, Tesla’s operating losses per vehicle have steadily widened to $14,758 from $3,794 in the second quarter of 2014.

Instead of making money from car sales, Tesla survives by participating in many government subsidy programs. One lucrative program is California’s zero-emission vehicle (ZEV) credit program. Phil Kerpen explained how the program works:

ZEV credits are a mandate dreamed up by the bureaucrats at the California Air Resources Board (CARB), which requires manufacturers to build and dealers to sell an arbitrary number of “zero-emission” vehicles each year. . . . Tesla’s Model S generates four credits per unit sold. This means the company can sell $20,000 in ZEV credits to other manufacturers for each Model S sold—a cost borne by purchasers of other cars.

ZEV credits, pioneered in California, have spread to nine other states. Tesla has collected more than $517 million from competing automakers by selling ZEV credits to those who fail to sell enough zero-emissions cars to meet arbitrary mandates.

Charles Lane of the Washington Post said: “Tesla owes its survival to subsidies from taxpayers, who are usually less well-heeled than its plutocratic customers.” The average household income of Tesla owners is $320,000, according to Strategic Visions, a consumer research company.

Tesla buyers have also raked in $38 million in California government rebates (they receive a $2,500 rebate for each Tesla bought) and $284 million in federal tax incentives (they receive a $7,500 federal tax credit for each purchased Tesla).

The Los Angeles Times calculated that Elon Musk’s three companies, Tesla Motors, SolarCity, and SpaceX, combined have received a staggering $4.9 billion in government support over the past decade. As Kerpen noted: “Every time a Tesla is sold . . . average Americans are on the hook for at least $30,000 in federal and state subsidies” that go to wealthy Tesla owners. This is crony capitalism at its worst.

Tesla is in the business of capturing government subsidies, not making cars that people actually buy. At the same FTC panel, Tesla’s Maron said: “It’s imperative are replaced entirely by electric vehicles.” What’s the plan for achieving this? Buried in its 2013 annual report Tesla admitted: “Our growth depends in part on the availability and amounts of government subsidies and economic incentives.”

Regular production electrics and hybrids will not require the removal of the body to get at the battery. The arrays will not cost 50% or more of the cost of the car itself. The life of the batteries will be more than 3 years, and most will have substantial warranties (crafted by a team of engineers and actuarials that have more data than you and I) that will cover the cost of unexpected or early failures.

Saying an Ariel Atom (http://www.arielatom.com/) is harder on tires, more expensive to service, and less practical than a Honda civic, is all correct. But doesn't really make the argument that there are no good alternatives for a daily grocery getter.

The government-backed REVE electric car and wind power project said on its website Tuesday that 2010 sales are at least up 15 from last year when just one was sold.

The Industry Ministry's plan was to have 2,000 electric cars on the road by the end of 2010 and 20,000 electrical and hybrid vehicles operating the following year.

In April, Prime Minister Jose Luis Rodriguez Zapatero announced the government would invest €590 million ($775 million) in promoting and developing production of electric cars over the next two years.

The plan was a key element of the government's strategy to try to help the economy.