What’s Up With The Myths About Tesla Government Subsidies?

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There has been so much misinformation published about Tesla and Elon Musk over the years that there are numerous people who spend much of their day, almost every day, debunking such misinformation and defending, ironically, one of the most valuable companies on Earth and one of the richest people in the history of the world. Do Tesla and Elon Musk, which have seen so much worldly success, really need all of these volunteer defenders?

Well, considering that they mostly converse with themselves and other hardcore Tesla/Elon fans (because that’s the social media world we all live in), it may all be for little more than entertainment. Also, I have seldom seen anyone cross from the “I hate Elon & Tesla” realm to “Oh, I see, he’s really trying to help the world and Tesla is one of the most influential cleantech/climate solutions companies in the world.” For the most part, I have dropped trying to change minds on these topics. Now that Tesla is worth more than something like 7 or 8 top auto companies combined (I haven’t checked in a while, but that’s almost certainly still the case) and is comfortably cash flow positive, it just feels like Tesla’s respected well enough by a portion of the world for what it’s achieving. Plus, the culture around Tesla often feels like it has switched from representing David in the David vs. Goliath fable to representing Goliath — or from fighting arrogant gearheads to becoming arrogant electronheads. Rather than underdogs struggling in tandem for a noble mission, much of the “war” now involves punching down*.

Nonetheless, the electric car transition is far from over, Tesla is still the clear leader in the industry and critical to a quick transition, almost everyone I’ve ever met at Tesla (Elon included) has clearly been in it for the mission (which, in short, is to save the world while having fun), and there are certain Tesla smears still lingering or running wild that I find particularly irritating, unnerving, and surprising — smears that have been unleashed strategically and routinely throughout the past decade. One of those is the smear that Tesla is basically a subsidy glutton that sucks up billions upon billions of dollars of government subsidies and undeservedly makes a few people rich (Elon Musk most of all) on that gluttonous subsidy-sucking behavior. I’m going to address that topic in this piece.

Sometimes these claims or insinuations are paired with other absurd claims. One article from the past year claimed that “Musk’s growing footprint in [Texas] is just the latest step in his lifelong mission, which he’s long since accomplished, to get unimaginably rich by maximally gaming the government’s largesse.” Anyone who has spent a half an hour learning about Elon Musk should know that this claim is totally ridiculous. That is so counter to Elon’s focus, mission, and life goals that it’s genuinely laughable. But the author seemed to believe it. Many people to think Elon is chasing money, which is so far from the truth that it’s hard to understand how anyone could come to that conclusion except by looking at the fact that he’s extremely wealthy. (Notably, his wealth is almost entirely embedded in the shares he owns of the companies he has led for more than a decade — and it keeps rising because those companies keep succeeding at such a high level. He poured every last drop of the riches he earned from PayPal into these companies when they were on the verge of death. I’m not at all saying the dramatic wealth inequality in this country is fair or good — I’m convinced it is not — but when you look at Elon’s case specifically, essentially all of his wealth is in shares of his companies and if his companies collapsed, he’d be broke.)

I’m not sure who I’m going to reach with this piece, and I’m quite likely to irritate both people who are obsessed with Elon and seem to think he can do no wrong as well as people who hate him, but let’s roll through a few of the odd and misguided attacks on Tesla with regards to subsidies, because I think this is an important topic and the myths or misunderstandings around Tesla subsidies seem to have far more than 9 lives.

1.) One of the most prominent subsidies Tesla has ever gotten was a $465 million Advanced Technology Vehicles Manufacturing (ATVM) loan.

The ATVM loan program was specifically created to try to incentive development of zero-emission vehicles. A couple of legacy automakers (Ford and Nissan) got loans, and a couple of EV startups (Tesla and Fisker Automotive) got loans. Several other EV startups didn’t qualify for loans.

Ford has never repaid its loan. Nissan repaid its loan in 2017. Tesla repaid its loan in 2013, 9 years early. Fisker defaulted and went bankrupt.

Ford’s loan was for $5.937 billion. Nissan’s was $1.448 billion. Tesla’s was $0.465 billion. Fisker’s was $0.529 billion. (Also, note that the US federal government spent $50.35 billion bailing out GM around that time, and $17.6 billion bailing out Fiat-Chrysler.)

So, tell me, which of these companies — all trying or supposedly trying to advance zero-emission electric vehicles — grubbed public money and which one actually fulfilled the mission of the program while also paying pack the loan super early?

The fact that anyone references this loan as a stain on Tesla’s status either didn’t look into the history of this at all or is being extremely disingenuous and trying to smear Tesla out of some sort of bias.

Ironically, it was long the right wing of US politics that used this as something to attack Tesla over, but somehow members of the left wing have taken it up in recent years as an anti-Tesla talking point — even though everything about this loan and what it has achieved with regards to Tesla are things that progressives should love, cheer, and celebrate. The fact that it has somehow switched from a right-wing attack argument to a left-wing attack argument shows how effective a good smear campaign can be at getting politicos to lose track of their priorities and policy preferences.

In summary, this long-repaid ATVM loan is an example of an extremely efficient, effective government program that helped stimulate the growth of one of the most successful companies of the past decade, a company that is 100% focused on developing solutions to the climate crisis and air pollution. It’s a top success story of the Obama years that smart Democrats should routinely use to highlight why such policies rock and why Democratic priorities are great for the economy.

Also, though, let’s be clear — a $465 million loan paid back after 3 years, 9 years early, did not make Tesla into the gigantic corporation it is today. It was part of the story, an important part of the story, and it may have helped keep Tesla alive at a critical time, but it is certainly not the sole cause of Tesla’s success. It is also probably the most effective $465 million — with the best ROI — the US federal government ever spent to advance climate solutions, so it’s a bit absurd that anyone on the left would ever act like it was something other than what it was — a huge Democratic success story that did exactly what it was supposed to do very efficiently. Fisker didn’t stay alive for long, Nissan did relatively little with the money, and Ford did even less with the money and hasn’t even paid it back, but Tesla made the program a giant success story that should be on the awards wall of Democratic politicians.

2.) Regulatory credits

This is a similar one. Ideally, we’d just require automakers to build more zero-electric vehicles and genuinely try to sell them — or pay big fines. Though, “outs” are almost always put into such policies to help poor, struggling corporate laggards. Automakers that “just can’t” sell enough zero-emission electric vehicles (tear) can pay other automakers that are selling more ZEVs than they need to sell and get some “credits.” Naturally, Tesla sells more ZEVs than it is required to sell, since it sells 100% ZEVs. So, it’s easy for legacy automakers to turn to this little guy and buy some credits whenever they need to. Some people call these regulatory credits “a loophole,” but a) it’s on the other automakers to sell what they should sell, not Tesla; b) Elon has explained that the other automakers are really getting off like bandits with the calculus here; c) it’s not a “loophole” when this is a core element of how the market is set up; d) yes, companies that lead on climate solutions get some financial rewards from systems set up to push the industry to implement climate solutions.

Again, this is a matter that should have progressives’ full support. No one on the political left should be upset that a 100% cleantech company is making money by leading on cleantech while other companies slugglishly lag behind — and none should be looking at this specific system as a “subsidy.” This is a market. It’s a market that rewards cleantech leaders because this is absolutely critical for our future and Democrats and Republicans came together to create this ZEV market. (Side note: China used this model, consulting with a Chinese-American professor at a California university, to create its own ZEV market.)

3.) State & local incentives for factories Tesla built or is building

Another area where Tesla has been criticized for getting subsidies is that it has negotiated various subsidies for building large factories in a a few locations. Typically, these are subsidies that get doled out by the city or state over the course of years or decades (like tax exclusions). Like it or not, this is how the world works. If a large employer is possibly going to come in and create thousands or tens of thousands of jobs for a region, along with all the resulting economic activity, governments there try to sweeten the pot so that the company doesn’t go elsewhere. Expecting Tesla to be the only large company that brings a factory to a city or state without getting any local incentives is disingenuous and odd.

Also, frankly, the more money Tesla saves, the more it can put into building and selling more clean electric cars, solar panels, and renewable energy–supportive batteries. That’s beneficial for society as a whole.

4.) PPP support & Musk’s tweets about government bailout money

This is another case of a manufactured scandal or, in the best scenario, misunderstanding. Tesla got PPP loans from the federal government. This is completely unsurprising since Tesla had to shut down production during COVID-19 related government shutdowns and lost a lot of revenue as a result. It qualified for PPP money and got PPP money.

Separately, but somewhat related, at some point after the first round of government stimulus, Musk tweeted that “another government stimulus package is not in the best interests of the people imo.” He quickly followed that up by explaining that he fully supported sending individuals money directly, but that the complicated, obese government stimulus system was leading to corruption and money being wasted on corporations and people who didn’t need it. Musk got slammed for this by taking the first part out of context (that said, Musk also did something sort of stupid here by setting himself up for cherry picking, and his reply adding the extra points was never going to be seen nearly as much as the first part because of how Twitter works). Critics acted like he didn’t want the little guy to get any relief — and I expect a lot of that was truly a misunderstanding. Ironically, just a day later and in following days, Bernie Sanders, Robert Reich, and a bunch of other prominent Democrats were saying the same thing: that Republicans and the Trump admin were using the stimulus system to make their rich friends richer while barely helping the little guy & gal. Just sending individuals more money would have been more helpful, and that’s what Elon supported. In fact, he has long argued for UBI (Universal Basic Income).

Again, looking at everything in context, this is a faux scandal. But one thing I’ve learned over the years covering Tesla as well as following politics too closely, one faux scandal after another faux scandal over the course of years creates a narrative that convinces passersby that a company or person is hugely corrupt and evil. Hillary Clinton suffered from this kind of thing — a whole quarter-century smear campaign was very effective. Elon and Tesla have suffered from about a decade of smear campaigns*. I don’t expect to solve the problem, but I have learned that it’s better to try to clear things up than just assume most people will figure it out.

5.) EV tax credits for consumers

I’m not sure how much this is used in claims that Tesla lives off of government subsidies, but from time to time some people do bring up the $7,500 federal tax credit for zero-emission vehicles as well as subsidies in other countries. So, let’s just point out that these tax credits don’t go to Tesla at all. These are for the buyers. Also, Tesla is basically being penalized by this program at this point — for being a leader. Tesla crossed the key 200,000 vehicle landmark for this program and then had the subsidies phased out for its buyers. GM crossed it a bit later and is in the same boat now. All other automakers now have an extra boost in the EV market because their EV buyers can get this credit while Tesla and GM EV buyers cannot. So, you can cut $7,500 (or less if you don’t have that much to pay in taxes) off of the cost of any non-Tesla, non-GM EV in the USA and that EV competes with a Tesla or GM EV that gets no such “discount.”

There are similar incentives around the world. Again, though, we have these incentives for a reason — because we need to sell more ZEVs in order to save our climate. They are there to accelerate the transition to zero-emissions vehicles. The fact that Tesla is 100% a cleantech company shouldn’t be a strike against it, and Elon Musk was working to bring this company to life and help save the world long before these subsidies were on the table for EV buyers.

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*There have been a number of rather notable political missteps or unfortunate statements from Elon that have made the whole arena of discussion around him a complicated mess. Frankly, I don’t think Elon follows politics very closely (where would he even have the time for that?), yet I think he’s been cleverly persuaded into some statements and opinions that were anti-democratic, anti-science, and stemmed from much more nefarious motives (of others) than he realized. They didn’t relate to Tesla, SpaceX, or his core work, but they made the antagonistic focus many people have on him a whole different ball game and one that has even made coverage of Tesla significantly more complicated and sometimes difficult. Needless to say, the world was simpler pre-2020, and pre-2017. As much as I have found some uninformed and misinformed comments problematic, that doesn’t change anything above regarding Tesla and government subsidies.

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Related: Is Tesla Subsidized? What’s The Truth About Claims Tesla, SpaceX, & Elon Musk Wealth Only Exist Because Of Subsidies?