By Phil Kerpen
On January 19 Tesla’s general counsel Todd Maron participated in a panel discussion at the Federal Trade Commission on reforming the laws governing state automotive markets and casually made a jaw-dropping claim: “we make money from one thing: car sales and car sales alone.” The truth is exactly the opposite.
The company has always lost money on every vehicle sold, making its money by participating in government programs, most significantly by selling California Zero Emissions Vehicle credits. And declining oil prices have made the case for electric cars less connected to economic reality than ever.
Last year I laid out the case that Tesla is more in the business of harvesting prodigious subsidies from governments than in selling vehicles in an article at National Review.
A year later Tesla’s prospects for succeeding on actual economic merit look even dimmer. The price of oil has collapsed, and gasoline has followed it down from nearly four dollars a gallon to below two and headed towards one. As Charles Lane observed in the Washington Post, the market for electric cars – despite massive subsidies – has just not developed:
“Now the 2015 car-sale data are in; time to review the bidding. Americans bought a record 17.5 million passenger vehicles in the United States, of which 116,548 — 0.67 percent — were either plug-in hybrids or all-electrics, according to insideevs.com. That was about 6,500 fewer than in 2014.”
Lane noted about Tesla specifically:
“Tesla did sell 50,580 vehicles worldwide in 2015, just within the 50,000-to-52,000 range that Musk promised investors. Skeptics note, though, that this is a trivial percentage of the global market, and that Tesla’s achievements generally have taken longer than initially promised. Tesla owes its survival to subsidies from taxpayers, who are usually less well-heeled than its plutocratic customers; this Silicon Valley start-up has gotten $4.9 billion in state and federal support over the past decade, according to a May 30 Los Angeles Times report.”
So when Tesla runs to the Federal Trade Commission asking them to up-end the automotive market claiming they make their money selling cars, we should be skeptical. When they suggest that their company, which exists only because of government, is a champion of the free market, we should push back. And when they claim, as they did as the same event that “it is imperative that gas powered cars get completely replaced by electric vehicles,” we should watch them very carefully – and hold onto our wallets.
By Phil Kerpen