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Very negative WSJ Opinion article today

Not sure who authored it. Most of the facts are right but greatly biased against Tesla for taking advantage of government incentives. Since these incentives have been around and available to all, i am not sure why the criticism is targeted at Elon for taking advantage of them rather than the government for creating them. Interesting that every time someone tries to badmouth Tesla the stock goes up...

Some people attack Tesla saying it relies on government tax rebate to sell cars. What they forgot to mention is ICE cars got much bigger government subsides in terms of trillions of dollars and thousand of solder's and civilian's life for the fuel they needed to run.

But then check this out:

http://blogs.wsj.com/corporate-intelligence/2013/05/24/california-love-f...

Pretty balanced piece.

The conservatives know that with the loan paid back their window to use government incentives to criticise Tesla is rapidly closing, now we are seeing the last frantic ramblings of a group desperately flailing to not have their whole raison d'être to be shown as a falsehood.

@amir - can you post the text of the article for those of us who don't subscribe? Thanks.

It's a pretty bad article. Not worth your time to read it even. But here it is:

The Other Government Motors
Tesla by the numbers: How taxpayers made an electric car company

The list of the Obama Administration's industrial policy failures is long, from Solyndra to Fisker Automotive. But now we are hearing that one success redeems them all: Tesla Motors TSLA +4.79% . Tesla's share price has soared this year on rave reviews for its electric car, growing sales and its first quarterly profit.

Rarely noted is how much this profit is a function of government subsidy and coercion. So let's take apart Tesla by the numbers, if only to give our reader-taxpayers a better sense of what they've paid to make Tesla's owners rich.

The decade-old Tesla debuted its first product, the Roadster, in 2006. With a base price of $109,000, it was discontinued before it hit 2,500 sales. Tesla introduced its Model S a year ago and had sold an estimated 9,650 at a bargain $70,000 through April. By contrast, Ford sold 168,843 F-series pickup trucks in the first quarter alone.

Tesla wouldn't have sold even that many cars without the extraordinary help of government. In 2009 the company received a $465 million Obama loan guarantee, supplemented last year by a $10 million grant from the California Energy Commission.

That money has underwritten Tesla's engineering and manufacturing, but federal and state governments also subsidize the purchase of Tesla products. Any U.S. buyer of a Tesla car qualifies for a $7,500 federal tax credit, while states like Colorado throw in up to $6,000 more in state income-tax credits. Taxpayers pay first so Tesla can build the cars and again to help the wealthy buy them.

These subsidies are important enough to Tesla that its website features an "Incentives" section directing buyers where to look for their states' electric-vehicle benefits—rebates, free parking, exemptions from state sales tax, use of high-occupancy lanes, and the like. Buyers from states that offer no incentives get this Tesla message: "Want to help make EV [electric vehicle] incentives a reality in your area? Encourage your local or state representative by calling or sending them a letter."

Tesla's biggest windfall has been the cash payments it extracts from rival car makers (and their customers), via its sale of zero-emission credits. A number of states including California require that traditional car makers reach certain production quotas of zero-emission vehicles—or to purchase credits if they cannot. Tesla is a main supplier.

A Morgan Stanley MS +0.41% report in April said Tesla made $40.5 million on credits in 2012, and that it could collect $250 million in 2013. Tesla acknowledged in a recent SEC filing that emissions credit sales hit $85 million in 2013's first quarter alone—15% of its revenue, and the only reason it made a profit.

Take away the credits and Tesla lost $53 million in the first quarter, or $10,000 per car sold. California's zero-emission credits provided $67.9 million to the company in the first quarter, and the combination of that state's credits and federal and local incentives can add up to $45,000 per Tesla sold, according to an analysis by the Los Angeles Times.

One irony is that rival car makers—even those making electric hybrids or gasoline subcompacts—don't get the same benefit from zero-emissions mandates. As environmentalist Bjorn Lomborg notes, manufacturing and charging electric cars over their life cycle can produce more carbon than small, gas-powered vehicles. Yet Tesla is cashing in because of the policy bias for fully-electric cars.

Another irony is that the main beneficiaries of this electric-car largesse belong to—well, the 1%. Tesla co-founder Elon Musk is already a successful entrepreneur, and his estimated net worth has soared past $4 billion thanks to the IPOs of Tesla and Solar City (a separate operation that received a $344 million federal loan guarantee).

Also realizing Tesla IPO windfalls are the elite of Silicon Valley venture capital: the Westly Group (whose principal, Steve Westly, is an Obama campaign bundler), Draper Fisher Jurvetson, and VantagePoint Venture Partners. Other paupers in the Tesla venture include or have included Daimler, Fidelity Investments, Google co-founders Sergey Brin and Larry Page, Hyatt heir Nick Pritzker, and former eBay president Jeff Skoll. The state-owned Abu Dhabi Water & Electricity Authority last year booked a $113 million profit selling its share of Tesla. You're welcome.

Tesla isn't oblivious to the politics of all this, and on Wednesday it said it had fully repaid its government loan. That's good, since Tesla's long-term prospects are far from certain. The major auto makers will soon have their own zero-emissions vehicles, which Mr. Musk says will end Tesla's credits boom by year end. Analysts are also warning that Tesla has yet to show it can sell its very pricey car to a mass market.

***
Tesla's investors claim this taxpayer support is worth it if it creates a new electric-car company, and for them it is. But such a success must still be measured against other taxpayer losses and misallocated capital.

And even if Tesla's cars do sell, the policy question is why billionaires in California couldn't have financed the business themselves. Why should middle-class taxpayers whose incomes are falling still pay to subsidize the purchase of cars that only the affluent can afford, and then partly as a gesture of their superior environmental virtue? When does the rest of America get its return on Tesla's profits?

Ha! That article was SO biased that many readers would concluded Tesla has something real here, so they bought TSLA today....up 4.69%.
Thanks, WSJ!

Looks the author shorted TSLA when it was 35.

Sorry about it bud. Your loss our gain.

Haters of EV's are either going to come around to at least accepting them as a viable solution or they are going to continue hating because they are latching on to the past. Not to quote a commercial but when British Airways says the way forward is not to hold on to the past they had a good point. If you want technology to go forward you need to let go of the past issues and embrace the future.

WSJ is owned by NewsCorp, the same company that owns Fox News and that owned News of the World in Britain (the one that hacked murder victims' phones). It's also the same company that started Star Magazine, so you can see the kind of high quality journalism background we're talking about. WSJ is becoming more and more a partisan propaganda organisation like Fox News (it's still honest enough to be considered news, but getting worse all the time). All the Newscorp news organisations seem to find conclusions they want first, then work backwards from there. Honest ones like WSJ usually abandon the conclusion if they can't back it up with legitimate facts, whereas companies like Fox just use questionable sources, or just use opinion as if they were fact.

Folks, I'm the last one to defend the WSJ, but isn't this labeled an opinion article? Editorial or op-ed, this is not put forward as news.

@DouglasR

This is an Opinion piece, but I think everyone is objecting because of the "news pieces" that usually flow from WSJ (negative on EV) are mirrored by the very conservative "opinion" which are . . . negative on EV.

The WSJ is a Rupert Murdoch owned paper. 'Nough said.

Its actually amazing at how many people try to criticize Tesla for using government money. Most of the time, people are misinformed and think Tesla got the money without it being a loan, and they also never know that Tesla has paid back most of it (and now ALL of it) in record time.

Bottom line, people are stupid, and post opinions without doing any research, and label it as fact. Happens all the time, and other people end up believing that's how it actually is...

I was glad to get the $2,500 from California and I'm looking forward to my $7,500 credit on my next tax return, but I'm curious about how many of you owners would not have bought if the incentives weren't there. I don't know if the incentives will exist when the all-wheel X comes out, but my wife will have one on the East Coast as long as the charger network comes through.

I am waiting for my refund from california also. the $2500 only makes up about half the sales tax I paid on the car. California doesn't lose money on this deal. I was in no hurry to trade cars. the one I sold to Carmax only had 45000 miles. Carmax will need to collect sales tax on that deal to when they resell it. Lools like a good deal for Ca.

The incentives were created to motivate all automakers to develop zero emission offerings, not just nubees.

Any automaker could have decided to move early into this space, and would now be collecting credits rather than paying fees. They chose not to. So in the next year or two, Tesla will have extra income, and the laggards will have extra expense.

Tesla is the existence proof that it was possible to make a great car emission-free. The other guys didn't do it because they didn't want to. That's when a societal incentive can attract innovators without vested interests. That's precisely what happened.

Many entrants, (Fisker, Coda, etc.) wanted to make viable EV's and had the opportunity to earn these same credits. But they failed to deliver. Motivating private competitors to invent needed changes was the objective of the law, and as Tesla evidences, it produced a winner that solved the problem.

Tesla delivered, and has earned this prize. That is as it should be.

Consider whether any new automaker fielding a gas car could have been profitable in its very first year, and outsold Lexus 2 to 1. They wouldn't. Tesla has pulled off an amazing performance.

This is not environmental pork that can't exist without subsidy. This company is not merely viable, it's aggressive. The only thing the government incentives did was accelerate it. Which was the point.

Now we have choices we didn't have before. Early. Great choices, that by any informed measure are clearly superior. It's one of the rare cases where a government used tax dollars very efficiently.

Nothing succeeds like success.

If you look at the material, underlying value that is actually being created, it transcends conservative vs. liberal ideology. Whatever your political views, everyone can appreciate the benefits of a novel solution that actually works.

Reasonably good post, but overstates the case. "That's when a societal incentive can attract innovators without vested interests. That's precisely what happened." Not really; the incentives didn't induce Tesla (Musk) to get into the biz, or develop EV tech. He did it for his own reasons, and California is fortunate to be along for the ride.

@Brian H
Succint. Go California!

Brian - Elon definitely didn't do it for the incentive. But they certaiinly helped him make the business case to get it done.

This is kind of hilarious.

You know something is happening, but you don't know what is, do you.. WSJ?

The WSJ got most things right. If Tesla was booking $20,000 per car in ZEV and Greenhouse Gas credits in the first quarter, that goes a long way toward making us wonder if it can be a profitable company over the next few years. Elon says they will reach 25% gross margin and not depend on ZEV credits by the end of 2013. But if they do, and if their average per-vehicle selling price is $80,000, then they will be just barely profitable.

Objective1 - cant argue with the numbers, the credits pushed profitability into earlier quarters.

But I'm very optimistic. It is always the case that production startup efficiency is terrible compared to the steady state.

I think as the EV credit passes, they won't need it to show good numbers.

There will only be 1 full year of production at full bore come Q4. A perspective to keep in mind.

This long list of failures suspiciously only ever mentions Fisker and Solendra. The always go "from Fisker to Solendra" like every other alphabet in between contains a failure. The truth: The failure rate of this government programs is lower than that of most VC firms.

Bias and intellectual dishonesty is the order of the day with these Conservative hacks.

The same people who claimed the government incentives were a waste of money - Mitt R., who went 1 for 2 on that one during the debates - now complain that b/c a company made good use of the incentives, they don't count. ?????

As long time subscriber to WSJ I have learned to ignore the opinion pages in their entirety and only read the hard business news (and soft news in weekend edition which I do enjoy). Though the paper is becoming more slanted and strident and suspect hard business news is also sometimes being slanted.

the point that other mfrs dont benefit if they build EVs is silly. they get to avoid paying tesla or nissan. same cash flow as getting paid for the credit.

The $7,500 tax credit obviously helps Nissan and GM enormously with their EV products, but I have a hard time thinking most Tesla buyers would shun Model S over a relatively paltry 10%-odd subsidy.

I'm not even sure if, if push came to shove, Elon couldn't have raised the money for Model S development from private markets.

The government subsidy obviously made things a bit easier, but I'm unconvinced they were necessary to make Tesla work ...

On the other hand, of all the recipients of the Federal aid, Tesla was in my opinion by far the most deserving. If we have to have subsidies, give 'em to Elon Musk and he will actually deliver a viable product.

D

Yeah, we can argue and pick apart this article but it's just some bitter butter nut who shorted the stock and is pissed that he feel's like the DotCom Bubble burst on him all over again!

Burn big oil, burn... EV's are going create a lot of wealth and take it away from oil companies and very corrupt,unstable nations. Big oil, the days of ruining the environment for your gain are coming to an end.


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