Actually, Tesla Receives Almost No Special Support From The Government

JUN 10 2016 BY STEVEN LOVEDAY 39

Tesla Model S Refresh

Tesla Model S Refresh

Although popular opinion tends to think that Tesla’s success may be temporary due to current government support that will soon fade, this is really not the case. Tesla doesn’t receive much direct support from the government, despite the fact that many think company’s with “green” intentions should be heavily supported.

Tesla Model X

Tesla Model X

Tesla pointed out in the annual shareholders meeting how most funding has come from increased revenue and investments gathered from external capital raises. Very little has come from state or federal governments.

Six years ago Tesla did receive a loan from the Department of Energy. This was an incentive included in Bush’s Advanced Vehicle Manufacturing program. However, Tesla repaid the loan nine years ahead of time and due to paying it early, the company had to pay additional prepayment penalties.

ZEV Credits:

Tesla earns zero-emission vehicle credits (ZEV) in California and other states that have adopted California Air Resources Board Standards (CARB). Tesla then sells these credits to other companies that can’t meet the criteria. This has generated $118 million for Tesla over the past 4 quarters, or about 3% of GAAP revenue.  So is ZEV sales ‘plus’ business?  Sure, but also it is an expected part of the “math” on Tesla’s business model, so it can’t be discounted/written off with an asterisk either.

In a little over a year in California alone, Tesla was the biggest seller of ZEV credits at 1,500. This is nearly double any other company. Toyota is cited as the number one purchaser of ZEV credits.

Tax incentives for consumers:

The U.S. government offers an incentive of up to $7,500 for consumers purchasing EVs. This incentive is not exclusive to Tesla or any other company. However, it is subject to limits and Tesla is expected to hit its limit in less than two years, as the Model 3 hits the roads.

While the incentive serves its purpose to attract buyers to “green friendly” purchases, Tesla doesn’t receive any money from the government. Only the consumer directly benefits.

Tesla vehicle prices are standardized worldwide and the company makes no attempt to “up” prices in order to make more money where incentives are available.

Source: The Motley Fool

Categories: Tesla

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39 Comments on "Actually, Tesla Receives Almost No Special Support From The Government"

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Because Tesla solely manufacturers EVs, they disproportionately benefit from government incentives as compared to all other auto manufacturers.

However, if they disproportionately benefit, is that a bad thing? I would argue not. Any manufacturer can avail themselves of these incentives if they so choose. I’m a bit miffed at Tesla for repaying their DOE loan early rather than give warrants to the government (the taxpayers took a risk, so they should receive a reward) but they had the option to avoid giving any up any warrants, as negotiated, and they took it.

They paid their loan off early, and with interest, foo.

You are always miffed at Tesla.

That’s true for direct incentives. When indirect government spending on ICE cars is factored in there is no comparision, the ICE cars get the bulk of funds.

For starters, take at least $1 Trillion wasted on the Iraq war. Add the cost for maintaining security for western oil companies in the mideast, Africa, and S. America. Yep, those ICE makers suckle at the government teat like it’s about to run dry.

They paid out the loan because it would be much more expensive to keep it further, not because of some goodness of their hearts like some silly cult followers believe for real.
There were 3 million stock options assigned to DOE that were possible to cancel by paying early. There were Leverage Ratio restrictions in loan conditions that effectively would had forced default very soon if not repaid.

Who cares their motivations, I think the point was that Tesla was ABLE pay off the loan early

They weren’t dead-beats, UNABLE to avoid bankruptcy (like certain other American car companies) and then go running to the government for billions in bail-outs.

Plus, Tesla’s motivation for playing the load off early seems to amount to sound business sense. Nothing wrong there.

Nothing wrong about paying out loan when it makes business sense, I agree.

Lying about true motives and creating a cult of zealots to pump stock price and repeatedly sell it to naive investors is not so nice. It discredits whole environmental movement, although I understand that “greenwashing” is right and left these days as it pays off.

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Everybody is bored by having to correct over and over your repeated falsehoods.

We’ve covered this multiple times before.

Tesla had NINE MORE YEARS to repay their loan before any of 3 million stock options in their ATVM loan would have been triggered.

Stop the nonsense. The stock options were purely in place in case Tesla defaulted, as an alternative to the DOE liquidating Tesla to collect on the loan. That would have theoretically given Tesla a second chance to survive in case they failed to repay the loans.

You know this. You’ve had this explained to you many times, with links and documentation disproving your claims, all while you never provide any support at all for any of the BS you dump here.

This website isn’t somewhere for you to continually defecate your bullcrap.

Four Electrics said:

“I’m a bit miffed at Tesla for repaying their DOE loan early rather than give warrants to the government…”

As I understand it, Tesla had to pay a penalty to pay off the loan early.

As an American taxpayer and thus one of the money-lenders, that’s what I’d call a “win-win” situation.

Where’s the beef? Oh, you don’t have an actual beef. You’re just making up Tesla bashing B.S. again.

I honestly think they should stop the selling of ZEV credits. Why even bother having them if you can just buy up what you need from Tesla or other companies that conform to the standards??

That seems rather obvious. While the ability to buy ZEV credits may seem to be a way to avoid environmental responsibility, it also reduces the profit on the vehicles you sell.

They also funnel money from those working against the environment to those working for it using a system that costs the taxpayer nothing, whats not to like? Unless your actually going to ban bad practices your next best option is to charge for them.

Bingo! We have a winner. 🙂

Having a market for buying and selling ZEV credits exists as a way to minimize the cost while maximizing the results of meeting environmental targets. It works like this: 1) For example, it might cost Company A $10,000 dollars to achieve the pollution reduction equal to 1 ZEV credit. 2) It might cost Company B $2,000 dollars to achieve that goal, because they do a much better job, or have a better product that they sell more of (mass market savings). If you have a per-company mandate and $5,000 dollar fine, Company A will pay the fine instead of meeting the mandate, and we don’t get the pollution reduction. This is what currently happens with Gas Guzzler taxes and CAFE violations — companies just pay the penalties and/or pass them on to consumers. This just allows the wealthy to pollute endlessly with what they consider pocket change. On the other hand, with a ZEV exchange, 100% or more of the pollution reduction will actually happen, with excess ZEV credits being generated for sale. That is what is happening right now, with excess ZEV credits representing pollution reduction exceeding targets. There is a double benefit in reducing the total cost of… Read more »

Tesla gets a ton of government support. On its web site Tesla reduces the price of a Model S by $10K because of incentives. Plus it can sell the ZEV credits.

More a solution than a problem, hopefully these incentives will expand.

That reflects the effective price of the car not the paid price. If you were to take an amount of money from your savings account to buy the car you would have to take the whole amount.
When you got the tax credit if you put the credit back into savings that would now be the effective amount that Tesla charged for the car. Are you really searching that hard to find fault with Tesla.

That would not be the effective amount that Tesla charged for the car, it would be the effective amount you paid for the car (remember, you originally gave Tesla the “whole amount”).

The difference between this number and the purchase price is the money that the government gives to Tesla.

Tesla gets the full purchase price – they just get part of it from you and part of it from the government, via what is in essence an interest-free short-term loan between you (the lender) and the government (the borrower).

“Tesla doesn’t receive any money from the government. Only the consumer directly benefits.”
What? The $7500 goes from the government to Tesla. The fact that it goes there via the consumer is irrelevant.

Explain?

I thought the *customer* buys at the full price then the *customer* gets the rebate?

Compare that to Oil subsidies where the US Dumberment helps the other ICE bulders by paying ~3.50 per barrel of crude for their products to run.

If Tesla is not selling cars for $7500 more than they would in the absence of the subsidy, they are crazy.

I am no economist, but it seems to me that people are going to buy based on “apparent value”, i.e. the price of the car minus the subsidy, just like we do when we buy gas.

In fact, when I look up the price of a new 90D on Tesla’s website, it says “$89,350”, below which it says “$96,850 cash price before EV incentives”.

This is not a knock on Tesla – they are not a charitable organization. But to say that “Tesla doesn’t receive any money from the government” is either naive or dishonest, and it just makes it easier for the haters to hate.

And oil subsidies, though obscene, are off the point.

RussB said:

“The $7500 goes from the government to Tesla. The fact that it goes there via the consumer is irrelevant.”

Oversimplify much?

The method by which the tax rebates indirectly benefit EV makers is very relevant indeed to the EV revolution. In fact, there has been a lot of talk about how the tax rebate running out is going to affect the strategy for production and sales, for companies like Tesla and GM, and probably Nissan too.

@Pushmi-Pullyu

Straw man much?

The question is not whether the subsidy is good for the “EV revolution”, but whether or not Tesla benefits from the subsidy.

On this question, the route by which the money moves is irrelevant.

You are starting from the assumption that the consumer gets the rebate (full or partial) and that while Tesla pushes the fact you get one, it is not until you file your NEXT year’s taxes and then IF you have enough qualified tax liability.

Tesla charges what they can for the car, if they factor in the rebate then in 2018 the price must drop $7500 for all their cars for that reason alone. I doubt that those affording a Model S will suddenly not if the year after they don’t get $7500 back in their tax liability. If you owe $10,000 in taxes you won’t get any money back, just have to PAY in $2500. Very cool incentive and no you cannot have mine, but in the decision to get Tesla over an i8 or R8, one can say it is a item in the plus collumn, but not the SOLE reason.

@james b

“If you owe $10,000 in taxes you won’t get any money back, just have to PAY in $2500”

If you think that this is any different than paying $10,000 in taxes and getting a check from the government for $7500, I guess I just don’t know what to tell you…

RussB — By that logic, there is nothing different than you owning and driving a gas car, and you being subsidized by having the gov’t pay for the oil wars and health impacts of your gas car, instead of you paying for it yourself as an added gas car owner’s tax. By your logic, that is a pass-through too.

Heck, by that logic, the gov’t should be refunding me a huge tax credit EVERY YEAR for all the money they won’t have to spend because I personally don’t use gas that causes those gov’t expenditures.

If you are going to play that game, you can’t pretend it is just EV’s. Because oil industry subsidies given to the oil industry should come out of gas car driver’s pockets too, and yet I pay taxes that essentially fund those subsidies too.

Relax, mate. – I never attacked the idea of EV subsidies. Nor did I attack Tesla. I only said that this article is bunk because it says that Tesla doesn’t benefit from EV subsidies when they clearly do.

RussB – Following that logic, food stamps are a subsidy to the food industry, and all military spending is just a huge subsidy to the military industrial complex.

@Nix

Both of those are indeed subsidies, and I don’t think any reasonable person would argue that they do not benefit the food industry and military-industrial complex.

Whether they also benefit anyone else is, in the scope of the “Tesla doesn’t benefit” argument laid out in the article, irrelevant.

If the premise of the article had been “EV subsidies – everybody wins”, then I would not have had this objection.

If we want a real, reasonable debate, we need to call out the fanboys as well as the haters.

RussB — Then according to your logic, then every company paying people wages is “subsidizing” the food industry, because just like food assistance, wages are used to buy food.

Again, off the point.

We can quibble about the definition of a subsidy, but the entirety of my point is that, contrary to what the article states, Tesla certainly benefits from the EV “subsidy” or, if you prefer, the “money that the government gives to people when they buy a Tesla”. Any way you slice it, Tesla benefits from this money, and to say otherwise is, again, either naive or dishonest.

scott franco (No M3 FAUX GRILL!)

California spends a lot of money to clean up its air, including convertion to NG generation, special gas formulations, and resultant higher cost to consumers of those products. Tesla produces no emissions, and runs their manufacturing using mostly low emission California power.

Thus the CA government, at least, gets financial advantages that are not accounted for in the above overview.

Meh. Tesla does get a good amount of support . . . but for a GOOD REASON. We need to move away from oil since we don’t have much cheap oil left in this country, it spews toxic pollutants, and it spews massive amounts of climate-changing greenhouse gases.

when gasoline ceases to spew any toxic pollutants and climate-changing greenhouse gases, then we can eliminate all the EV incentives. But not a day sooner.

I thought Tesla got their primary support from Wall Street. If they are worried that this support is somewhat fickle, it would be in the back of my mind also.

Almost every major move Tesla does involves getting huge additional sums from them. Nice work if you can get it, as the song goes.

You appear to be complaining about Tesla being able to borrow large amounts of money from Wall Street investors and bankers. Is that right?

Why is this a bad thing, Bill? Should Tesla look elsewhere for the capital it needs to grow; other places which will charge higher interest? Or perhaps you think Tesla shouldn’t be able to borrow enough to grow the company… that company growth should be limited to the slow pace that their profit margin alone would allow?

Come on, spit it out. Tell us what your beef is here.

Personally, I’d like to see Tesla grow a lot faster than it is. The company currently seems poised to grow to at least the size of Ford Motors. In a perfect world, that should happen in just a couple of years, instead of the probably 10 years or so it’s actually gonna take.

Humm, didnt think I’d trigger a modedit, guess it doesn’t like clown.

The article forgot about those Gigafactory subsidies (tax breaks and direct subsidies) in/from Nevada.
Sure these are not a Tesla exclusive, but they still help build the Gigafactory cheaper and earlier thereby making Tesla more competitive.

Not a penny of income from ZEV credits come from the Government.

Every ZEV credit they have sold have been purchased by other car makers, not from the gov’t, and not a single penny ever will come from the gov’t.

It is an exchange between car makers, not money from the gov’t.

The problem is really who controls the conversation. Whether or not Tesla gets money from the Fed is far less significant – though very exciting and a popular topic, than there real horror of oil subsidies. How long must we prop up that pathetic position? Why am I paying to support that industry? And when will the oil companies pay that back? Well obvious not a loan – its a gift, but gee.

Wrong. Gigafactory receives some form of incentives and/or tax breaks from some level of government. That’s why they chose Nevada.