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Elon Musk's companies are fueled by government subsidies

118 points by keithly 11y ago

JulianMorrison 11y ago
It looks like the government is getting value for money then, compared to where it usually parks its cash. Thumbs up, good job, carry on.
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InclinedPlane 11y ago
In regards to SpaceX that is simply a mischaracterization, they do not receive subsidies they have contracts with the government. SpaceX received money from NASA to help develop its Falcon 9 rocket, but this is little different than other procurement programs, and was just a component of a large ISS cargo delivery contract, the bulk of which is a straightforward deliver cargo get paid / don't deliver cargo don't get paid system.
- dylanjermiah 11y ago
  And SpaceX has been profitable for the last 6 years.
kefka 11y ago
And? So is gasoline and petroleum products. And so is corn products through ethanol, which is legally mandated to be in fuel at 10% for no good reason.
- adventured 11y ago
  Not a great comparison. The US doles out $15 to $20 billion annually toward subsidies for fossil fuels. $4 to $5 billion goes to the oil industry. Exxon and Chevron paid $120 billion in income taxes in just the last three years. US oil majors pay among the highest corporate tax rates on earth. Exxon and Chevron are getting about $1.3 billion in tax breaks per year combined.
  - brianobush 11y ago
    Exxon and Chevron paid those taxes on actual earnings. As soon as Tesla starts profiting, then they will owe taxes as well.
    - adventured 11y ago
      Of course, and the point is that the fossil fuel industry in the US more than pays its own way. Should the US Govt. stop subsidizing fossil fuels? I think so. However, many of the subsidies that companies like Exxon or Chevron claim, are general industrial / manufacturing tax breaks, that are available to any industrial firms. Those two are doing $600 billion in sales, and claiming $1.3 billion in tax breaks, it's an almost comically small number compared to the taxes they pay and the scale of their businesses. I don't think there's any legitimate gripe to be had with the weight the US oil industry is carrying in terms of paying a fair sum in taxes.
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  - revelation 11y ago
    So, what is the environment worth? Cause that seems awfully cheap.
    - adventured 11y ago
      The US environment overall is doing extraordinarily well in fact. And it's not cheap, the EPA is one of the toughest environmental regulators, which has helped lead to a dramatic improvement in US environmental quality in the last 40 years. What's having a functioning economy worth? Are we going to pretend that we could have had a US economy, with ~50% of global manufacturing in 1965, running on solar and wind? No? Then it's obviously understood that the renewable shift inherently requires vast, prior energy systems. What was battery technology like in 1965 or 1985? Let's say we had deployed an all-nuclear infrastructure (built courtesy of what? fossil fuels of course). What would that have done for electric cars? Nothing, we haven't had the ability to build practical electric cars until the last decade, due to huge improvements in batteries. We still have horrible batteries for the home. Even Tesla's Powerwall does not (yet) work as a practical battery for the home, according to their own statements on the matter. The US could have done a lot better. There's just no sense in pretending that you get from there to here, without a massive fossil fuel industry.
- ElComradio 11y ago
  A thousand wrongs don't make a right.
GeneralMayhem 11y ago
News flash: Policies meant to encourage growth in high-tech clean energy are encouraging growth in high-tech clean energy! This isn't the first time this has been trotted out as an indictment of Musk, and it certainly won't be the last, but it's really goddamned stupid.
- kiba 11y ago
  If they actually properly price the negative externality into objects like gasoline, there wouldn't be needs for government subsidies of clean energy.
  - iamcurious 11y ago
    That solution is more elegant, but it requires more political finesse. Measuring the external costs raises many difficult questions. What to do with that money raises many more (hopefully not as difficult) questions. It is also a more general solution, which naturally threats more interests. All this makes it take longer to implement and makes a lot more people interested in prolonging it even further. Which raises costs and drives the best talent away, and makes it more likely the project gets killed. Throwing some pocket change to a few talented individuals and hope for the best is nasty hack, but sadly we lack skilled and properly motivated politicians to do much better.
  - GeneralMayhem 11y ago
    And in that magical world I probably have a mansion in the Hamptons.
WalterSear 11y ago
Good. I hope he gets as much help as possible.
- mempko 11y ago
  Then shouldn't his companies become public where we get the profits instead of him?
  - WalterSear 11y ago
    In an ideal world, there wouldn't be companies, we would all work together. We don't, and our society is instead organized along capitalist premises. As such, the government support parts of the market that we feel need encouragement, and ostensibly stays out of the way otherwise. You can agree or disagree with the premise, but that's how we do things. There are many, many vastly more egregious cases of privatizing gains and socializing losses than electric cars and reinventions of the energy network.
pjkundert 11y ago
What? Central planners cause unintended consequences with their meddling?
- lkbm 11y ago
  What's unintentional here? This looks like exactly what we want to achieve.
smoyer 11y ago
I hear a lot of sour grapes in this article ... the only part worth discussing is whether SolarCity and Tesla Motors can reach self-sufficiency before the funding is removed. Governments provide these sort of grants specifically to encourage certain behaviors. I don't think Musk is the only one pursuing these credits, etc., but perhaps he's better at it than most? His only real advantage is that he doesn't have the baggage (bureaucracy, history, etc) of the entrenched players ... they could, in theory, partake of the same government largess.
- Shivetya 11y ago
  Well the question is, can Tesla survive to make the affordable EV they promise? Do they even have the cash to build out the factory to support that car in any volume? Can they find new tax credits to shore up the bottom line; its been suspected the battery swap station was only for a specific tax credit and there still is only one station and its operational status is questionable. Love Space X, think Solar City is a great idea, but not keen on Tesla simply because they seem hell bent on having EVs that are not affordable and each improvement seems aimed at speed performance numbers instead of distance. I was really hoping the D was going to be for increased range but instead it was 0-60 first and AWD second. edit: after reading up on the home battery offerings they really aren't that impressive... I need to dig up the articles that revealed all of its short comings
  - greglindahl 11y ago
    Tesla needs to raise money to make the affordable EV in high volume. Many of the companies we discuss here are in the same situation.
alfl23 11y ago
This is a very poor interpretation of what actually happens. Elon explained it better himself in an interview. The gov isn't exactly signing a blank check for them, instead it's subsidising by allowing tax credit on land, assets and revenue. First and foremost, do you really think the American tax payer is doing a greater favour to Elon than Elon is doing to the entire world by moving the whole lot of purely eletrical power? This reporter is an absolute imbecile to use such titles, market pleasing as they are. If Elon wanted to get rich he would buy an island and sunbathe for the next 40 years. He's already rich. With respect to the amount of good done, I urge this reporter in particular to join TMZ and keep up with the Kardashians.
- noobermin 11y ago
  Indeed. I'd rather have billions go to Elon who will turn it into awesome technology, as his companies have, than have it go to defense contractors who will turn it into another plane that can't fly.
  - verbin217 11y ago
    You had me at defense contractors. Successful or not it wouldn't create a net benefit for humanity or even the subset of it our government is ostensibly serving.
  - __z 11y ago
    Things that have their origins in defense: GPS Siri The Internet Tor Not saying pork isn't a huge problem but saying no awesome technology comes out of defense spending is untrue.
- droithomme 11y ago
  It's fascinating because literally every single thing you have said is a lie. Tesla is not profitable and is massively subsidized by its competitors and the taxpayers. They make a product that causes massive devastation to the environment through toxic lithium mining, and which is astonishingly expensive and can only be afforded by the ultra rich, and then only with subsidies paid for by the poor and middle class. Furthermore, these so-called cars have off the shelf Panasonic batteries that only last a few years before they have to be replaced at extravagent cost. You call the reporter of the truth an "absolute imbecile" because using ad hominem arguments is the last refuge of a brain dead moron with no facts.
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danmaz74 11y ago
TL;DR: "Subsidies are handed out in all kinds of industries, with U.S. corporations collecting tens of billions of dollars each year [...] and the incentives for solar panels and electric cars are available to all companies that sell them. [...] But public subsidies for Musk's companies stand out both for the amount, relative to the size of the companies, and for their dependence on them."
manigandham 11y ago
A lot of the time "subsidies" aren't actually money or help given to companies but rather what they have decided to not tax. That's basically saying we could charge you infinity, but since we didnt, you have infinity subsidy. Edit: To the downvoters: this is what "incentives" are when considered in tax terms.
- iamcurious 11y ago
  There is also a matter of finance. When that money is given and with what strings attached. But even if you are right, if the competition is taxed more than you it brings into question how competitive you actually are.
- sanderjd 11y ago
  I think a tax advantage can be considered a subsidy only when others are actually taxed more due to not receiving it. Nobody is taxed at infinity, so nobody who isn't charged infinity has received infinity subsidy. On the other hand, it might make sense to consider things like the mortgage tax deduction as a subsidy for home ownership, because people without mortgages really are charged more. All of this is arguable of course, but I think it's in line with the spirit of the word "subsidy" to think of it this way.
  - manigandham 11y ago
    > I think a tax advantage can be considered a subsidy only when others are actually taxed more due to not receiving it. Wouldn't that be everyone? Unless you mean they increase the tax rate for the others while reducing yours... but net comes out the same. My point is that there usually isn't a standard to these, the government can claim all kinds of subsidies because it's saying that's the amount they aren't charging (even if that amount was never to be charged to begin with).
stegosaurus 11y ago
This is just daft. Supermarkets are fueled by 'government subsidies'; the poor get welfare and go off and spend there. Freight companies are fueled by 'government subsidies'; the roads are hardly paid for by them solo. Oh, and the supermarkers they are delivering to are fueled by 'government subsidies'. My grandfather was a truck driver. He was fueled by... And so on. The government is supposed to support Good Things (or at least get out of the way of them). The way that the media seem to be obsessing over spending recently is really rather silly.
- justinmk 11y ago
  It turns out that when the government draws a bunch of taxes and then spends it, markets get distorted. Then the government takes credit for anything good that the markets do with the money, and opportunity cost is ignored because it's incalculable.
  - Brakenshire 11y ago
    One man's market distortion is another man's pricing in of manifest but indirect costs. To take an obvious case, it might be very cheap for my neighbour to heat his house with coal. Then one day laws are introduced which say he has to abide by emissions standards, and in order to do that, buy an expensive clean-burning stove, and expensive specially refined low-sulphur coal. If that ends up making it cheaper to use natural gas instead, no doubt the coal company (and the neighbour) will say the rules represent an artificial distortion of the market. But I would say the rules are there prevent him transferring the true costs of burning cheap coal onto my family (and the other families nearby) and their health.
  - wfo 11y ago
    Government spending distorts the market towards 'things that are good for citizens' and away from 'things that are good for the owning class', you mean. And your second phrase is exactly backwards; the government funds research no corporation would ever be able to fund because it isn't profit-maximizing, and when all that public funding inevitably reaches a breakthrough that's good for businesses and people alike the profits are subsequently privatized giving the public sector no credit.
11thEarlOfMar 11y ago
IIRC, - Tesla re-paid a 495 million government loan 10 years early.[0] - Musk personally invested $100 Million in SpaceX - Musk personally invested $275 Million in Tesla[1] [0]http://money.cnn.com/2013/05/22/autos/tesla-loan-repayment/ http://money.cnn.com/2013/05/22/autos/tesla-loan-repayment/ [1]http://www.businessinsider.com/elon-musk-borrows-150-million-to-buy-tesla-2013-5 http://www.businessinsider.com/elon-musk-borrows-150-million... I don't consider Musk to be mooching off of the government. He's put everything on the line.
- hackuser 11y ago
  > He's put everything on the line. I don't think that justifies it. Every business has investors. Some also receive large amounts of government subsidy. Per the article, some of Musk's businesses are in the latter category, for good or ill. (I won't try to define or debate "mooching".)
- jusben1369 11y ago
  Well Elon would be more inclined to invest his own money the less risk that existed. Government subsidies definitely reduce risk. (Just pointing out that this doesn't refute the articles claim)
- calibraxis 11y ago
  The entreprenurial government takes risks, and once in a while succeeds so wildly that the company can pay off the loans quickly. "Tesla’s management knew that if they couldn’t get the government’s money at 3 or 4 percent interest, their next cheapest source of capital would cost 10 times more, a whopping 30 to 40 percent annually. [...] And if the government had wanted to bargain like a real venture capitalist, Tesla’s desperate need for cash gave the feds the power to demand options on half the company’s stock, or more." (http://www.slate.com/articles/business/moneybox/2013/05/tesla_is_worse_than_solyndra_how_the_u_s_government_bungled_its_investment.html http://www.slate.com/articles/business/moneybox/2013/05/tesl...) Important to deflate startup myths: corporate moochers love how government welfare "socializes the risks and privatizes the rewards." (http://www.project-syndicate.org/commentary/government-investment-innovation-by-mariana-mazzucato-2015-04 http://www.project-syndicate.org/commentary/government-inves...)
revelation 11y ago
The figure compiled by The Times comprises a variety of government incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars. Right. Along this kind of thinking, we can also add the Iraq war and the unmentioned trillions in subsidies that accrue when you would actually charge a market price for environmental damage and add all that to Shells liabilities.
sandstrom 11y ago
I don't disagree with the main point, that the three companies has benefited from subsidies. But it's framed as if this is unique, where in reality you'll find subsidies in these (and many other) industries. # Cars GM, Chrysler etc. bailed out for $85B. Sector subsidized in other ways too. # Space Most of the space industry is paid for by various governments (some satellites are the only exception). NASA is about half of SpaceX revenue, certainly a large chunk. # Energy IMF recently released a report[1], where fossil fuel subsidies are estimated at $1.9 trillion. Other types of energy are subsidized too, solar in China, nuclear in France, etc. [1] http://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf http://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf
- smoyer 11y ago
  Regarding your comment on energy - I hadn't thought about that but the worst of the fossil fuel subsidies has to be turning large portions of the corn crop into ethanol then ruining the performance (and sometimes internal parts) of our internal combustion engines. It's truly the worst of both worlds!
  - mikeash 11y ago
    In my opinion, the worst by far is the implicit subsidy where fossil fuel users are allowed to pollute without paying for the damage caused by that pollution. If you accounted for that fully, renewables would be cheaper today. Coal pollution alone causes something like one million deaths per year. It's like a big war that never stops. That's not even counting the potential deaths and disruption from climate change. Fossil fuel users poison our land, air, and water without consequence and without paying for the damage, but somehow it's the guy making solar panels and electric cars that everybody complains about.
    - smoyer 11y ago
      Until the late '60s or early '70s, no one worried about the pollution so long as the economic engine was running strong. There were clear days that you couldn't see half a mile in Pittsburgh PA [1], and entire rivers of volatile chemicals catching fire [2]. We've done a lot to curb those excesses but I agree with your primary sentiment. Why pollute at all if we can avoid it? Interestingly, China's current economic growth is also fueled without consideration of the environment. You can still travel on coal-fired steam locomotives ... and they're not historic excursions but rather new technology. We also have to look at renewable combustibles as some people will claim they're not dependent on fossil fuels but they're still contributing to carbon release when burning wood (or wood pellets) as fuel. [1] https://www.google.com/search?q=pittsburgh+steel+mill+smog&biw=1238&bih=897&tbm=isch&tbo=u&source=univ&sa=X&ei=BTdqVdyXB4uqgwSF-YDICQ&ved=0CCoQ7Ak https://www.google.com/search?q=pittsburgh+steel+mill+smog&b... [2] https://www.google.com/search?q=cleveland+river+fire&sa=X&biw=1238&bih=897&tbm=isch&tbo=u&source=univ&ei=UDdqVce6OMWrNsfzgKAJ&ved=0CB4QsAQ https://www.google.com/search?q=cleveland+river+fire&sa=X&bi...
foota 11y ago
Shocking, government uses tax payer money to invest wisely in the future.
- touristtam 11y ago
  "The payoff for the public would come in the form of major pollution reductions, but only if solar panels and electric cars break through as viable mass-market products. For now, both remain niche products for mostly well-heeled customers." I don't know. It seems that Tesla is missing an opportunity for building an empire like Ford did.
  - foota 11y ago
    I'm not an expert on the history of Ford, but I imagine that their cars also started off as a luxury item and only after obtaining some market share were they able to build the massively efficient production lines that they are famous for?
    - touristtam 11y ago
      True. Apparently Ford started his first car company as a luxury product (that was at the very early 20th century) and it was later purchased and renamed Cadillac. But I would argue that a convergence of event allowing Ford to become a major car manufacturer include the introduction of an affordable model early in the history of the company. Considering the opposition to Tesla from the top 10 world car manufacturer, there will be no significant market share gain until the price can make the cheaper Tesla model an alternative to equivalent market leaders, and possibly introducing a compact car with the same aim.
  - JulianMorrison 11y ago
    Notice how the price of a Tesla car roughly halves at each major iteration? Now project the line out into the mass-market price range.
    - touristtam 11y ago
declan 11y ago
I don't think it's a surprise that Tesla would not exist without government subsidies (I say this as someone who thinks the Model S is an excellent car). From a piece in today's WSJ: http://www.wsj.com/articles/the-savior-elon-musk-1432938547 http://www.wsj.com/articles/the-savior-elon-musk-1432938547 ...Tesla likely might not even exist without a former State Department official whom Mr. Musk hired to explore “what types of tax credits and rebates Tesla might be able to drum up around its electric vehicles,” which eventually would include a $465 million government-backed loan... In 2017, he plans to introduce his Model 3, a $35,000 car for the middle class. He expects to sell hundreds of thousands a year. Somehow we doubt he intends to make it easy for politicians to whip away the $7,500 tax credit just when somebody besides the rich can benefit from it—in which case the annual gift from taxpayers will quickly mount to several billion dollars each year...
- mikeash 11y ago
  That part about the $7,500 tax credit is rather ignorant. As currently structured, it's limited in the number of times it can be applied to vehicles from any given manufacturer. After 200,000 vehicles sold, the credit drops off rapidly and then disappears altogether. If Tesla succeeds in their goal of selling hundreds of thousands of Model 3s per year then the credits will quickly expire for them and the ongoing cost to taxpayers will be zero. The law could conceivably be changed, but the odds of that seem remote.
comrade1 11y ago
Don't forget the prison labor too. http://thefederalist.com/2015/03/04/not-content-with-enormous-taxpayer-subsidies-elon-musk-turned-to-prison-labor-for-cost-savings/ http://thefederalist.com/2015/03/04/not-content-with-enormou...
lordnacho 11y ago
Any mixed economy is riddled with subsidies. Together with taxation, it skews incentives from whatever they were without, and redistributes resources in a way the market would not. (Whether you think that's a good thing is political.) - How many people would be getting degrees without government grants of some sort? - Tax relief on debt is huge for corporations. - Tax relief on mortgages is huge for individuals in many countries. - Government itself has to spend money in one place and not another. Of course there is the question of whether he gets more benefit that your average Joe from the largesse of the government. To that I'd say he does, but the benefits to everyone else of what he's up to are wide ranging but thinly spread.
VaedaStrike 11y ago
He's providing such extremely high value and he could make it without them. If anything he's redeeming government expenditures that generally have low returns into something that actually does something amazing.
api 11y ago
The entrepreneur who most closely resembles a Rand hero couldn't have done it without government loans and subsidies. That should tell you something. Markets do some things very well. Hard core innovation isn't among those things. If anything, really deep and difficult innovation requires shelter from market forces, since market forces always pull toward short term thinking and delivering what people already want. There is never a market for something genuinely new-- such markets must be bootstrapped.
SQL2219 11y ago
see this post. https://news.ycombinator.com/item?id=9622250 https://news.ycombinator.com/item?id=9622250
andrewstuart2 11y ago
Subsidies are sometimes the only way that amazing things like this can happen. Extremely rare opportunities are often expensive to take advantage of. Without spreading the cost the way a nation-state can, there might not be enough people willing to support efforts to, say, get GPS satellites into space and enable entirely new industries and technologies. Sure, it might not be with the explicit support of every taxpayer who contributed, but that will happen in every government just as it will happen in a family trying to decide where to vacation. I, for one, hope that subsidies continue to go to those who can take us new places. As long as it's not purely because it's some congressman's nephew's new company.
- mempko 11y ago
  Then shouldn't the company be public and beholden to us?
  - vonklaus 11y ago
    It is beholden to "us" as much as the us gov't is beholden to us. That is, somewhat loosely in some situations the counterparty can extract some sort of its will on the enterprise.
hackuser 11y ago
This thread's lack of comments by libertarians is striking. It gives the impression that some of them (I don't know who) are not opposed to government taxes and spending in principle, as they often claim, but to government taxes and spending on things they don't like -- which isn't a principle or argument, it's just a self-centered complaint. It reminds me of people who talk about freedom as a principle, but what they mean is freedom for themselves.
- Daishiman 11y ago
  Because liberatrians are self-centered, they just look for a moral narrative to justify it to others.
  - dnautics 11y ago
    Socialists are self-centered. They demand things that they want from other people. To the extent that they want government to pay to take care of others, it's because they don't want to reach into their own pockets and pay help out themselves and "rich people" are seen as a collective resource to which somehow they are morally entitled to. Libertarians, by contrast, are permissive to selfishness, which means they tolerate, say objectivists, but when they act in pro-social fashion they mean it because its their time and their money they're putting forward. Perhaps I experience selection bias, but I know many libertarians who volunteer to build homes for the needy, feed the poor, and have set up organizations to support homeless camps. By contrast, a smaller fraction of the liberals I know would ever do such things; that's the provenance of the state.
    - Daishiman 11y ago
      No, it's because, honestly, educated people who understand how governments work know that economies of scale are necessary to implement effective policies that help the poor. Charity is nice and all, but most charity is tremendously inefficient, and cannot, sustainably, work on the sorts of multi-decade efforts that are needed by people with real issues to create effective change. It's great that people volunteer on home building and feeding, but again: if you want to end child malnutrition, have effective school lunches in poor areas. There's not enough volunteers in the planet to do that effectively.
vonklaus 11y ago
Yep, thank god the government (state and federal) are actually investing in something positive. I am glad there are subsidies for clean energy (production and consumption) and the development of cost effective space transportation. When one looks at the Gov't balance sheet, the opportunity cost of these investments is amazing. The outflow is such a drop in the bucket vs. the potential (and current) value that is is a fucking no-brainer.
coliveira 11y ago
The main problem of Tesla is that they are interested in creating luxury cars that happen to be electric. I don't have any good feelings towards companies that target the ultra-rich, specially when they use public money for funding. Now, I know they say that they plan to create popular car, but who knows if that will ever be real? Even the CEO has changed his mind about the business several times. I would rather buy a Prius or a Leaf than subsidize this luxury car company.
smrtinsert 11y ago
"He definitely goes where there is government money," said Dan Dolev, an analyst at Jefferies Equity Research. "That's a great strategy, but the government will cut you off one day." As opposed to military spending, where persistent hundreds of billions are spent without anyone giving a damn.
paulsutter 11y ago
I don't see any reason to get offended by the accusation, regardless of whether you agree or disagree. Could anyone make more effective use of tax dollars than Elon Musk? If anything, allocate more public funds to him.

118 points by keithly 11y ago

It looks like the government is getting value for money then, compared to where it usually parks its cash. Thumbs up, good job, carry on.

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InclinedPlane 11y ago

In regards to SpaceX that is simply a mischaracterization, they do not receive subsidies they have contracts with the government. SpaceX received money from NASA to help develop its Falcon 9 rocket, but this is little different than other procurement programs, and was just a component of a large ISS cargo delivery contract, the bulk of which is a straightforward deliver cargo get paid / don't deliver cargo don't get paid system.

dylanjermiah 11y ago
And SpaceX has been profitable for the last 6 years.

kefka 11y ago

And? So is gasoline and petroleum products. And so is corn products through ethanol, which is legally mandated to be in fuel at 10% for no good reason.

adventured 11y ago
Not a great comparison. The US doles out $15 to $20 billion annually toward subsidies for fossil fuels. $4 to $5 billion goes to the oil industry. Exxon and Chevron paid $120 billion in income taxes in just the last three years. US oil majors pay among the highest corporate tax rates on earth. Exxon and Chevron are getting about $1.3 billion in tax breaks per year combined.
- brianobush 11y ago
  Exxon and Chevron paid those taxes on actual earnings. As soon as Tesla starts profiting, then they will owe taxes as well.
  - adventured 11y ago
    Of course, and the point is that the fossil fuel industry in the US more than pays its own way. Should the US Govt. stop subsidizing fossil fuels? I think so. However, many of the subsidies that companies like Exxon or Chevron claim, are general industrial / manufacturing tax breaks, that are available to any industrial firms. Those two are doing $600 billion in sales, and claiming $1.3 billion in tax breaks, it's an almost comically small number compared to the taxes they pay and the scale of their businesses. I don't think there's any legitimate gripe to be had with the weight the US oil industry is carrying in terms of paying a fair sum in taxes.
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- revelation 11y ago
  So, what is the environment worth? Cause that seems awfully cheap.
  - adventured 11y ago
    The US environment overall is doing extraordinarily well in fact. And it's not cheap, the EPA is one of the toughest environmental regulators, which has helped lead to a dramatic improvement in US environmental quality in the last 40 years. What's having a functioning economy worth? Are we going to pretend that we could have had a US economy, with ~50% of global manufacturing in 1965, running on solar and wind? No? Then it's obviously understood that the renewable shift inherently requires vast, prior energy systems. What was battery technology like in 1965 or 1985? Let's say we had deployed an all-nuclear infrastructure (built courtesy of what? fossil fuels of course). What would that have done for electric cars? Nothing, we haven't had the ability to build practical electric cars until the last decade, due to huge improvements in batteries. We still have horrible batteries for the home. Even Tesla's Powerwall does not (yet) work as a practical battery for the home, according to their own statements on the matter. The US could have done a lot better. There's just no sense in pretending that you get from there to here, without a massive fossil fuel industry.
ElComradio 11y ago
A thousand wrongs don't make a right.

GeneralMayhem 11y ago

News flash: Policies meant to encourage growth in high-tech clean energy are encouraging growth in high-tech clean energy! This isn't the first time this has been trotted out as an indictment of Musk, and it certainly won't be the last, but it's really goddamned stupid.

kiba 11y ago
If they actually properly price the negative externality into objects like gasoline, there wouldn't be needs for government subsidies of clean energy.
- iamcurious 11y ago
  That solution is more elegant, but it requires more political finesse. Measuring the external costs raises many difficult questions. What to do with that money raises many more (hopefully not as difficult) questions. It is also a more general solution, which naturally threats more interests. All this makes it take longer to implement and makes a lot more people interested in prolonging it even further. Which raises costs and drives the best talent away, and makes it more likely the project gets killed. Throwing some pocket change to a few talented individuals and hope for the best is nasty hack, but sadly we lack skilled and properly motivated politicians to do much better.
- GeneralMayhem 11y ago
  And in that magical world I probably have a mansion in the Hamptons.

WalterSear 11y ago

Good. I hope he gets as much help as possible.

mempko 11y ago
Then shouldn't his companies become public where we get the profits instead of him?
- WalterSear 11y ago
  In an ideal world, there wouldn't be companies, we would all work together. We don't, and our society is instead organized along capitalist premises. As such, the government support parts of the market that we feel need encouragement, and ostensibly stays out of the way otherwise. You can agree or disagree with the premise, but that's how we do things. There are many, many vastly more egregious cases of privatizing gains and socializing losses than electric cars and reinventions of the energy network.

pjkundert 11y ago

What? Central planners cause unintended consequences with their meddling?

lkbm 11y ago
What's unintentional here? This looks like exactly what we want to achieve.

smoyer 11y ago

I hear a lot of sour grapes in this article ... the only part worth discussing is whether SolarCity and Tesla Motors can reach self-sufficiency before the funding is removed. Governments provide these sort of grants specifically to encourage certain behaviors. I don't think Musk is the only one pursuing these credits, etc., but perhaps he's better at it than most? His only real advantage is that he doesn't have the baggage (bureaucracy, history, etc) of the entrenched players ... they could, in theory, partake of the same government largess.

Shivetya 11y ago
Well the question is, can Tesla survive to make the affordable EV they promise? Do they even have the cash to build out the factory to support that car in any volume? Can they find new tax credits to shore up the bottom line; its been suspected the battery swap station was only for a specific tax credit and there still is only one station and its operational status is questionable. Love Space X, think Solar City is a great idea, but not keen on Tesla simply because they seem hell bent on having EVs that are not affordable and each improvement seems aimed at speed performance numbers instead of distance. I was really hoping the D was going to be for increased range but instead it was 0-60 first and AWD second. edit: after reading up on the home battery offerings they really aren't that impressive... I need to dig up the articles that revealed all of its short comings
- greglindahl 11y ago
  Tesla needs to raise money to make the affordable EV in high volume. Many of the companies we discuss here are in the same situation.

alfl23 11y ago

This is a very poor interpretation of what actually happens. Elon explained it better himself in an interview. The gov isn't exactly signing a blank check for them, instead it's subsidising by allowing tax credit on land, assets and revenue. First and foremost, do you really think the American tax payer is doing a greater favour to Elon than Elon is doing to the entire world by moving the whole lot of purely eletrical power? This reporter is an absolute imbecile to use such titles, market pleasing as they are. If Elon wanted to get rich he would buy an island and sunbathe for the next 40 years. He's already rich. With respect to the amount of good done, I urge this reporter in particular to join TMZ and keep up with the Kardashians.

noobermin 11y ago
Indeed. I'd rather have billions go to Elon who will turn it into awesome technology, as his companies have, than have it go to defense contractors who will turn it into another plane that can't fly.
- verbin217 11y ago
  You had me at defense contractors. Successful or not it wouldn't create a net benefit for humanity or even the subset of it our government is ostensibly serving.
- __z 11y ago
  Things that have their origins in defense: GPS Siri The Internet Tor Not saying pork isn't a huge problem but saying no awesome technology comes out of defense spending is untrue.
droithomme 11y ago
It's fascinating because literally every single thing you have said is a lie. Tesla is not profitable and is massively subsidized by its competitors and the taxpayers. They make a product that causes massive devastation to the environment through toxic lithium mining, and which is astonishingly expensive and can only be afforded by the ultra rich, and then only with subsidies paid for by the poor and middle class. Furthermore, these so-called cars have off the shelf Panasonic batteries that only last a few years before they have to be replaced at extravagent cost. You call the reporter of the truth an "absolute imbecile" because using ad hominem arguments is the last refuge of a brain dead moron with no facts.

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danmaz74 11y ago

TL;DR: "Subsidies are handed out in all kinds of industries, with U.S. corporations collecting tens of billions of dollars each year [...] and the incentives for solar panels and electric cars are available to all companies that sell them. [...] But public subsidies for Musk's companies stand out both for the amount, relative to the size of the companies, and for their dependence on them."

manigandham 11y ago

A lot of the time "subsidies" aren't actually money or help given to companies but rather what they have decided to not tax. That's basically saying we could charge you infinity, but since we didnt, you have infinity subsidy. Edit: To the downvoters: this is what "incentives" are when considered in tax terms.

iamcurious 11y ago
There is also a matter of finance. When that money is given and with what strings attached. But even if you are right, if the competition is taxed more than you it brings into question how competitive you actually are.
sanderjd 11y ago
I think a tax advantage can be considered a subsidy only when others are actually taxed more due to not receiving it. Nobody is taxed at infinity, so nobody who isn't charged infinity has received infinity subsidy. On the other hand, it might make sense to consider things like the mortgage tax deduction as a subsidy for home ownership, because people without mortgages really are charged more. All of this is arguable of course, but I think it's in line with the spirit of the word "subsidy" to think of it this way.
- manigandham 11y ago
  > I think a tax advantage can be considered a subsidy only when others are actually taxed more due to not receiving it. Wouldn't that be everyone? Unless you mean they increase the tax rate for the others while reducing yours... but net comes out the same. My point is that there usually isn't a standard to these, the government can claim all kinds of subsidies because it's saying that's the amount they aren't charging (even if that amount was never to be charged to begin with).

stegosaurus 11y ago

This is just daft. Supermarkets are fueled by 'government subsidies'; the poor get welfare and go off and spend there. Freight companies are fueled by 'government subsidies'; the roads are hardly paid for by them solo. Oh, and the supermarkers they are delivering to are fueled by 'government subsidies'. My grandfather was a truck driver. He was fueled by... And so on. The government is supposed to support Good Things (or at least get out of the way of them). The way that the media seem to be obsessing over spending recently is really rather silly.

justinmk 11y ago
It turns out that when the government draws a bunch of taxes and then spends it, markets get distorted. Then the government takes credit for anything good that the markets do with the money, and opportunity cost is ignored because it's incalculable.
- Brakenshire 11y ago
  One man's market distortion is another man's pricing in of manifest but indirect costs. To take an obvious case, it might be very cheap for my neighbour to heat his house with coal. Then one day laws are introduced which say he has to abide by emissions standards, and in order to do that, buy an expensive clean-burning stove, and expensive specially refined low-sulphur coal. If that ends up making it cheaper to use natural gas instead, no doubt the coal company (and the neighbour) will say the rules represent an artificial distortion of the market. But I would say the rules are there prevent him transferring the true costs of burning cheap coal onto my family (and the other families nearby) and their health.
- wfo 11y ago
  Government spending distorts the market towards 'things that are good for citizens' and away from 'things that are good for the owning class', you mean. And your second phrase is exactly backwards; the government funds research no corporation would ever be able to fund because it isn't profit-maximizing, and when all that public funding inevitably reaches a breakthrough that's good for businesses and people alike the profits are subsequently privatized giving the public sector no credit.

11thEarlOfMar 11y ago

IIRC, - Tesla re-paid a 495 million government loan 10 years early.[0] - Musk personally invested $100 Million in SpaceX - Musk personally invested $275 Million in Tesla[1] [0]http://money.cnn.com/2013/05/22/autos/tesla-loan-repayment/ http://money.cnn.com/2013/05/22/autos/tesla-loan-repayment/ [1]http://www.businessinsider.com/elon-musk-borrows-150-million-to-buy-tesla-2013-5 http://www.businessinsider.com/elon-musk-borrows-150-million... I don't consider Musk to be mooching off of the government. He's put everything on the line.

hackuser 11y ago
> He's put everything on the line. I don't think that justifies it. Every business has investors. Some also receive large amounts of government subsidy. Per the article, some of Musk's businesses are in the latter category, for good or ill. (I won't try to define or debate "mooching".)
jusben1369 11y ago
Well Elon would be more inclined to invest his own money the less risk that existed. Government subsidies definitely reduce risk. (Just pointing out that this doesn't refute the articles claim)
calibraxis 11y ago
The entreprenurial government takes risks, and once in a while succeeds so wildly that the company can pay off the loans quickly. "Tesla’s management knew that if they couldn’t get the government’s money at 3 or 4 percent interest, their next cheapest source of capital would cost 10 times more, a whopping 30 to 40 percent annually. [...] And if the government had wanted to bargain like a real venture capitalist, Tesla’s desperate need for cash gave the feds the power to demand options on half the company’s stock, or more." (http://www.slate.com/articles/business/moneybox/2013/05/tesla_is_worse_than_solyndra_how_the_u_s_government_bungled_its_investment.html http://www.slate.com/articles/business/moneybox/2013/05/tesl...) Important to deflate startup myths: corporate moochers love how government welfare "socializes the risks and privatizes the rewards." (http://www.project-syndicate.org/commentary/government-investment-innovation-by-mariana-mazzucato-2015-04 http://www.project-syndicate.org/commentary/government-inves...)

revelation 11y ago

The figure compiled by The Times comprises a variety of government incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars. Right. Along this kind of thinking, we can also add the Iraq war and the unmentioned trillions in subsidies that accrue when you would actually charge a market price for environmental damage and add all that to Shells liabilities.

sandstrom 11y ago

I don't disagree with the main point, that the three companies has benefited from subsidies. But it's framed as if this is unique, where in reality you'll find subsidies in these (and many other) industries. # Cars GM, Chrysler etc. bailed out for $85B. Sector subsidized in other ways too. # Space Most of the space industry is paid for by various governments (some satellites are the only exception). NASA is about half of SpaceX revenue, certainly a large chunk. # Energy IMF recently released a report[1], where fossil fuel subsidies are estimated at $1.9 trillion. Other types of energy are subsidized too, solar in China, nuclear in France, etc. [1] http://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf http://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf

smoyer 11y ago
Regarding your comment on energy - I hadn't thought about that but the worst of the fossil fuel subsidies has to be turning large portions of the corn crop into ethanol then ruining the performance (and sometimes internal parts) of our internal combustion engines. It's truly the worst of both worlds!
- mikeash 11y ago
  In my opinion, the worst by far is the implicit subsidy where fossil fuel users are allowed to pollute without paying for the damage caused by that pollution. If you accounted for that fully, renewables would be cheaper today. Coal pollution alone causes something like one million deaths per year. It's like a big war that never stops. That's not even counting the potential deaths and disruption from climate change. Fossil fuel users poison our land, air, and water without consequence and without paying for the damage, but somehow it's the guy making solar panels and electric cars that everybody complains about.
  - smoyer 11y ago
    Until the late '60s or early '70s, no one worried about the pollution so long as the economic engine was running strong. There were clear days that you couldn't see half a mile in Pittsburgh PA [1], and entire rivers of volatile chemicals catching fire [2]. We've done a lot to curb those excesses but I agree with your primary sentiment. Why pollute at all if we can avoid it? Interestingly, China's current economic growth is also fueled without consideration of the environment. You can still travel on coal-fired steam locomotives ... and they're not historic excursions but rather new technology. We also have to look at renewable combustibles as some people will claim they're not dependent on fossil fuels but they're still contributing to carbon release when burning wood (or wood pellets) as fuel. [1] https://www.google.com/search?q=pittsburgh+steel+mill+smog&biw=1238&bih=897&tbm=isch&tbo=u&source=univ&sa=X&ei=BTdqVdyXB4uqgwSF-YDICQ&ved=0CCoQ7Ak https://www.google.com/search?q=pittsburgh+steel+mill+smog&b... [2] https://www.google.com/search?q=cleveland+river+fire&sa=X&biw=1238&bih=897&tbm=isch&tbo=u&source=univ&ei=UDdqVce6OMWrNsfzgKAJ&ved=0CB4QsAQ https://www.google.com/search?q=cleveland+river+fire&sa=X&bi...

foota 11y ago

Shocking, government uses tax payer money to invest wisely in the future.

touristtam 11y ago
"The payoff for the public would come in the form of major pollution reductions, but only if solar panels and electric cars break through as viable mass-market products. For now, both remain niche products for mostly well-heeled customers." I don't know. It seems that Tesla is missing an opportunity for building an empire like Ford did.
- foota 11y ago
  I'm not an expert on the history of Ford, but I imagine that their cars also started off as a luxury item and only after obtaining some market share were they able to build the massively efficient production lines that they are famous for?
  - touristtam 11y ago
    True. Apparently Ford started his first car company as a luxury product (that was at the very early 20th century) and it was later purchased and renamed Cadillac. But I would argue that a convergence of event allowing Ford to become a major car manufacturer include the introduction of an affordable model early in the history of the company. Considering the opposition to Tesla from the top 10 world car manufacturer, there will be no significant market share gain until the price can make the cheaper Tesla model an alternative to equivalent market leaders, and possibly introducing a compact car with the same aim.
- JulianMorrison 11y ago
  Notice how the price of a Tesla car roughly halves at each major iteration? Now project the line out into the mass-market price range.
  - touristtam 11y ago

declan 11y ago

I don't think it's a surprise that Tesla would not exist without government subsidies (I say this as someone who thinks the Model S is an excellent car). From a piece in today's WSJ: http://www.wsj.com/articles/the-savior-elon-musk-1432938547 http://www.wsj.com/articles/the-savior-elon-musk-1432938547 ...Tesla likely might not even exist without a former State Department official whom Mr. Musk hired to explore “what types of tax credits and rebates Tesla might be able to drum up around its electric vehicles,” which eventually would include a $465 million government-backed loan... In 2017, he plans to introduce his Model 3, a $35,000 car for the middle class. He expects to sell hundreds of thousands a year. Somehow we doubt he intends to make it easy for politicians to whip away the $7,500 tax credit just when somebody besides the rich can benefit from it—in which case the annual gift from taxpayers will quickly mount to several billion dollars each year...

mikeash 11y ago
That part about the $7,500 tax credit is rather ignorant. As currently structured, it's limited in the number of times it can be applied to vehicles from any given manufacturer. After 200,000 vehicles sold, the credit drops off rapidly and then disappears altogether. If Tesla succeeds in their goal of selling hundreds of thousands of Model 3s per year then the credits will quickly expire for them and the ongoing cost to taxpayers will be zero. The law could conceivably be changed, but the odds of that seem remote.

comrade1 11y ago

Don't forget the prison labor too. http://thefederalist.com/2015/03/04/not-content-with-enormous-taxpayer-subsidies-elon-musk-turned-to-prison-labor-for-cost-savings/ http://thefederalist.com/2015/03/04/not-content-with-enormou...

lordnacho 11y ago

Any mixed economy is riddled with subsidies. Together with taxation, it skews incentives from whatever they were without, and redistributes resources in a way the market would not. (Whether you think that's a good thing is political.) - How many people would be getting degrees without government grants of some sort? - Tax relief on debt is huge for corporations. - Tax relief on mortgages is huge for individuals in many countries. - Government itself has to spend money in one place and not another. Of course there is the question of whether he gets more benefit that your average Joe from the largesse of the government. To that I'd say he does, but the benefits to everyone else of what he's up to are wide ranging but thinly spread.

VaedaStrike 11y ago

He's providing such extremely high value and he could make it without them. If anything he's redeeming government expenditures that generally have low returns into something that actually does something amazing.

api 11y ago

The entrepreneur who most closely resembles a Rand hero couldn't have done it without government loans and subsidies. That should tell you something. Markets do some things very well. Hard core innovation isn't among those things. If anything, really deep and difficult innovation requires shelter from market forces, since market forces always pull toward short term thinking and delivering what people already want. There is never a market for something genuinely new-- such markets must be bootstrapped.

SQL2219 11y ago

see this post. https://news.ycombinator.com/item?id=9622250 https://news.ycombinator.com/item?id=9622250

andrewstuart2 11y ago

Subsidies are sometimes the only way that amazing things like this can happen. Extremely rare opportunities are often expensive to take advantage of. Without spreading the cost the way a nation-state can, there might not be enough people willing to support efforts to, say, get GPS satellites into space and enable entirely new industries and technologies. Sure, it might not be with the explicit support of every taxpayer who contributed, but that will happen in every government just as it will happen in a family trying to decide where to vacation. I, for one, hope that subsidies continue to go to those who can take us new places. As long as it's not purely because it's some congressman's nephew's new company.

mempko 11y ago
Then shouldn't the company be public and beholden to us?
- vonklaus 11y ago
  It is beholden to "us" as much as the us gov't is beholden to us. That is, somewhat loosely in some situations the counterparty can extract some sort of its will on the enterprise.

hackuser 11y ago

This thread's lack of comments by libertarians is striking. It gives the impression that some of them (I don't know who) are not opposed to government taxes and spending in principle, as they often claim, but to government taxes and spending on things they don't like -- which isn't a principle or argument, it's just a self-centered complaint. It reminds me of people who talk about freedom as a principle, but what they mean is freedom for themselves.

Daishiman 11y ago
Because liberatrians are self-centered, they just look for a moral narrative to justify it to others.
- dnautics 11y ago
  Socialists are self-centered. They demand things that they want from other people. To the extent that they want government to pay to take care of others, it's because they don't want to reach into their own pockets and pay help out themselves and "rich people" are seen as a collective resource to which somehow they are morally entitled to. Libertarians, by contrast, are permissive to selfishness, which means they tolerate, say objectivists, but when they act in pro-social fashion they mean it because its their time and their money they're putting forward. Perhaps I experience selection bias, but I know many libertarians who volunteer to build homes for the needy, feed the poor, and have set up organizations to support homeless camps. By contrast, a smaller fraction of the liberals I know would ever do such things; that's the provenance of the state.
  - Daishiman 11y ago
    No, it's because, honestly, educated people who understand how governments work know that economies of scale are necessary to implement effective policies that help the poor. Charity is nice and all, but most charity is tremendously inefficient, and cannot, sustainably, work on the sorts of multi-decade efforts that are needed by people with real issues to create effective change. It's great that people volunteer on home building and feeding, but again: if you want to end child malnutrition, have effective school lunches in poor areas. There's not enough volunteers in the planet to do that effectively.

vonklaus 11y ago

Yep, thank god the government (state and federal) are actually investing in something positive. I am glad there are subsidies for clean energy (production and consumption) and the development of cost effective space transportation. When one looks at the Gov't balance sheet, the opportunity cost of these investments is amazing. The outflow is such a drop in the bucket vs. the potential (and current) value that is is a fucking no-brainer.

coliveira 11y ago

The main problem of Tesla is that they are interested in creating luxury cars that happen to be electric. I don't have any good feelings towards companies that target the ultra-rich, specially when they use public money for funding. Now, I know they say that they plan to create popular car, but who knows if that will ever be real? Even the CEO has changed his mind about the business several times. I would rather buy a Prius or a Leaf than subsidize this luxury car company.

smrtinsert 11y ago

"He definitely goes where there is government money," said Dan Dolev, an analyst at Jefferies Equity Research. "That's a great strategy, but the government will cut you off one day." As opposed to military spending, where persistent hundreds of billions are spent without anyone giving a damn.

paulsutter 11y ago

I don't see any reason to get offended by the accusation, regardless of whether you agree or disagree. Could anyone make more effective use of tax dollars than Elon Musk? If anything, allocate more public funds to him.