Published on December 23rd, 2018 | by Carolyn Fortuna0
Tesla & The Taxpayer — #Pravduh About Subsidies
December 23rd, 2018 by Carolyn Fortuna
In a mid-December Eurasia Review op-ed piece, Allan C. Brownfeld critiqued Tesla as being little more than “Elon Musks’s [sic] Taxpayer-Funded Gravy Train.” Is this accurate? Is Tesla using taxpayer dollars to create a series of businesses? And, if so, are any of the contracts, incentives, or loans of which Tesla has taken advantage illegal or unethical? Let’s play “Tesla and the Taxpayer: True or False” to figure this out, shall we?
According to Brownfeld, “Elon Musk and his corporate empire, much of it financed by taxpayer dollars, is very much in the news. Most of it is not good. And it may be getting worse.”
Accusations percolate within Brownfeld’s statements:
- “much of it financed by taxpayer dollars,”
- “most of it is not good,”
- “may be getting worse.”
His logical assertions move from taxes as questionable business capital to assumed fiscal problems within Tesla to speculation that Tesla’s future is uncertain. Are these assertions true? To what extent — if any — have federal taxes assisted with Tesla’s “very questionable record when it comes to truth and honesty?”
Tesla & the Taxpayer: True or False?
It’s a matter of public record that Tesla is an all-electric car company and has associated auto manufacturing and battery factories. As part of its sustainable energy ecosystem, Tesla manufactures the Powerwall, Powerpack, and solar roofs.
Elon Musk also leads Space Exploration Technologies (SpaceX), where he oversees the development and manufacturing of advanced rockets and spacecraft for missions to and beyond Earth’s orbit. Musk is one of the founders of Neuralink as well, which is developing ultra-high-bandwidth brain-machine interfaces to connect humans and computers, and the The Boring Company, which has a goal to increase tunneling speed and drop costs by a factor of 10 or more.
Which of the following statements about Tesla is true or false?
- Tesla spends $1 million annually on Washington lobbyists. T or F?
- Tesla has received $280 million in federal tax incentives. T or F?
- SpaceX has received over $5 billion in government support. T or F?
- The state of New York hasn’t seen the 1,500 jobs it signed up for in exchange for $750 million. T or F?
Brownfield’s argument seems to come down to Tesla “has over promised and under delivered.” Let’s see.
True or False? Tesla Spends $1 Million Annually on Washington Lobbyists
True. According to opensecrets.org, Tesla’s total declared lobbying expenditures for 2018 were $700,000, and this investigative site says another $355,00 can be traced to Tesla, although those expenditures have not yet been reported by the company. The $1 million figure that Brownfield cited is also accurate for 2017.
So, what’s Tesla lobbying for with this cash? Some of the 2018 legislation for which Tesla has advocated includes the Truck Technology Parity Act, the SELF DRIVE Act, the Department of Transportation Appropriations Act, the Fuel Economy Harmonization Act, the Energy Storage Tax Incentive and Deployment Act, and the Electric Credit Access Ready at Sale Act. Each of these seems to be consistent with Tesla’s business goals to accelerate the world’s transition to sustainable energy. Tesla is intent on creating a business climate in which people don’t need to compromise to drive electric.
And what about other automakers? Do they have comparable lobbying expenditures to Tesla?
- General Motors: $6,140,000
- Ford Motor Co $3,240,730
- Daimler AG $1,280,000
- Alliance of Automobile Manufacturers $6,860,000
So, Tesla is in good company when it comes to lobbying efforts, and, indeed, is at the lower end.
And what about fossil fuel companies that support the auto industry? In 2015, the International Monetary Fund (IMF) reported that fossil fuel companies are benefiting from global subsidies of $5.3 trillion (£3.4 trillion) a year, equivalent to $10 million per minute every day. Check out this graphic below for 2018! Although the oil and gas industry lobbying is only partially devoted to the automobile industry, it’s still mind-blowing!
True or False? Tesla Has Received $280 Million in Federal Tax Incentives
False — It’s hard to figure exactly where Brownfeld got this number. He explains in roundabout fashion that the number includes “a $7,500 federal tax break and millions more in state rebates and development fees.”
Maybe he means the federal electric vehicle (EV) tax credit? But it applies to the first 200,000 electric vehicles sold by a manufacturer and is, thereafter, phased out. Also, the tax credit doesn’t go to Tesla — it is part of the customer’s total equation when considering purchasing an EV.
The Washington Post has reported that Tesla “has relied heavily on a California zero-emissions scheme that in 2017 amounted to a $280 million subsidy.” Maybe that’s what Brownfeld was suggesting. The Post’s word choices certainly are filled with negative connotations (“relied heavily,” “scheme,” amounted to”), and those ideas are open for debate. But for the sake of brevity, California did not write its legislation to benefit Tesla, and other auto manufacturers surely could have taken advantage of the California zero-emissions opportunity that was waiting there for them.
Dear Mr. Brownfeld: California is a state, and its legislation in not part of a federal agenda. So, Tesla did not receive $280 million in federal tax incentives.
Here’s a federal incentive of which Tesla did take part: In January 2010, the Department of Energy issued a $465 million loan to Tesla Motors to produce specially designed, all-electric plug-in vehicles and to develop a manufacturing facility in Fremont, California to produce battery packs, electric motors, and other powertrain components for powering specially designed all-electric vehicles. The DoE acknowledges:
“Tesla created more than 1,500 jobs at its ATVM-supported facilities. The Department of Energy’s investment in Tesla supports the commercial-scale deployment of advanced technologies that help keep American auto manufacturers competitive in the growing global market for advanced vehicles. Tesla is now the largest automotive employer in California and Fremont is becoming a hub of advanced technology manufacturing. Tesla has manufactured vehicles at ATVM-supported facilities that are estimated to save 5,870,000 gallons of gasoline and prevent 52,000 metric tons of carbon dioxide emissions annually.”
Tesla paid off the loan 9 years earlier than required, as we reported 5½ years ago.
True or False? SpaceX has Received over $5 Billion in Government Support
First of all, let’s recognize that SpaceX is a completely separate company from Tesla. Anyhow, Mr. Brownfeld brought it up, so we’ll cover it.
In March 2018, the US Air Force awarded SpaceX with a new $291 million contract. It also awarded ULA $355 million in contracts. That’s according to CNBC. And SpaceX broke its own record for the most orbital rocket launches by a single company in a year, according to Business Insider. In 2018, Elon Musk’s aerospace company achieved 20 successful launches. Those missions sent dozens of payloads into orbit, debuted two experimental Starlink internet satellites, and shot a car past the orbit of Mars. Does it seem to you that the taxpayers — in an era of privatization of former government divisions — got its money’s worth?
Brownfeld insists that SpaceX rockets “are far less reliable than many of its competitors.” He quotes the Department of Defense Inspector General and NASA’s Aerospace Safety Advisory Council, which has compiled “33 significant non-conformities.”
I read through that NASA report, and it seems as if, acting from previous findings, SpaceX was able to recreate a buckle event during a COPV test. Using the data, SpaceX modified its helium loading configuration, process, and controls to ensure that the COPVs would not be exposed to these identified conditions and, accepting any residual risk, successfully resumed commercial launches with the existing COPV design. SpaceX didn’t stop there, however. To further improve safety and reduce the risk for missions with crew onboard, SpaceX redesigned the COPV so NASA could test and characterize the behavior of the new COPV in the cryogenic oxygen environment.
Why is all this important? This is the most critical step in clearing the COPV for human space flight, as it allows NASA and SpaceX to identify the credible failure mechanisms, hazard scenarios and controls, as well as understand the safety margins on the system (p. 16). SpaceX is part of NASA’s effort to have people able to travel in space. Of course, it makes sense that constant reevaluation and updates would need to occur.
True or False? State of New York Hasn’t Seen the 1,500 Jobs in Exchange for $750 Million
True — but the contractual end date isn’t in sight yet, either. Brownfeld cites a Bloomberg Business News report from November 2018 about Tesla’s Buffalo solar factory. Saying that “only a relative handful of jobs have been created, and New York officials are expressing dismay,” Brownfeld looks to Raymond Walter, a Republican in the New York State Assembly, who says he is concerned that the state “has too many eggs in the Tesla basket, which doesn’t seem like a very strong basket.” As I say to my undergrads, where’s the data to make that claim?
Our own Kyle Field counters the claim of doom and despair after press toured Tesla’s Buffalo Gigafactory, saying, “Tesla is on track with its hiring requirements and is, in fact, slightly ahead of the hiring milestones that were built into the $750 million tax incentive package that lured SolarCity to build its Solar Gigafactory in the state.”
Bloomberg News goes on to say this is “a familiar playbook for Musk, start with wild promises followed by product delays, production hell, shareholder anger and finally, hopefully, redemption.” What Brownfeld fails to mention is another quote in Bloomberg News: “Musk assumed an optimistic note in a recent earnings call, boasting of his ‘best quarter ever for solar” in terms of profitability, while assuring shareholders that Tesla would accelerate Solar Roof production in 2019. If he’s right, he’ll vindicate Cuomo’s bet on the company and maybe even make Buffalo great again.” The distaste for appropriating a horrible allusion aside, the article concludes on a note of balance, adding that tech companies may lose the confidence of local governments if Tesla’s New York solar ventures fail. So it’s a, “we’ll see, won’t we?” attitude.
Yes, Tesla must employ 1,460 workers at the facility by 2020 as part of the ramp up to 5,000 employees in the state within 10 years. These targets will definitely test the solar division of Tesla, one that is under redesign and substantial internal examination. As with the Model 3 production, it seems likely a balance of automation and human labor will stimulate the production of its Solar Roof Tiles in quantity and quality to meet rising consumer demand.
Tesla & the Taxpayer Synthesis
“Patriotism is often the cry extolled when morally questionable acts are advocated by those in power.”
— Chelsea Manning, activist and whistleblower
Almost all of the supposed Tesla subsidization suggested by Brownfeld has occurred as part of broad programs available to essentially every qualified company out there. Brownfeld, a former U.S. Senate staffer and consultant to the Vice President, neglected to mention The Boring Company in his diatribe, which is privately funded, and its individual projects are privately funded as well.
Brownfeld, a freelance author and contributing editor of The St. Croix Review (which “acquaints readers with a wide spectrum of conservative thought”), ended his “Elon Musks’s [sic] Taxpayer-Funded Gravy Train” article on a somber note. “Time will tell, but in the interim, the government should put its cozy relationship with Musk on a long, if not permanent, hiatus.”
Tesla has been ahead of schedule on the deliverables of its Nevada Gigafactory, and was ahead of schedule paying back a federal government loan (other automakers also got loans from that governmental program). Tesla has put traditional car companies like GM and Ford in catch-up mode, and is now worth more than both of them. Tesla has shown it can profitably make a mass-market car at scale. It is an American success story in the business world that should theoretically get high praise from Republicans and Democrats alike.
The conservatives who are at risk of losing hegemonic control of the global energy sector will likely continue to produce ample negative targeted messaging about Tesla, which often neglects to include many important facts and chooses language specifically intended to discredit Tesla without foundation. The war on Tesla may be here for a while longer.
Our own Zachary Shahan captured it well in October as he tried to understand why large members of the media are participating in The Tesla Smear and why so many reporters and editors are acting as pawns of billionaire short sellers, the oil industry, and the broader auto industry. His analysis suggests that media animus like Brownfeld’s rants may become more rare as Tesla communicates its whole story to reporters who are “strapped for time and continuously being fed buffets of short-seller talking points.” Fingers crossed.