It's Confirmed: Without Government Subsidies, Tesla Sales Implode

Tyler Durden's picture

According to the latest data from the European Automobile Manufacturers Association (ACEA), sales of Electrically Chargeable Vehicles (which include plug-in hybrids) in Q1 of 2017 were brisk across much of Europe: they rose by 80% Y/Y in eco-friendly Sweden, 78% in Germany, just over 40% in Belgium and grew by roughly 30% across the European Union... but not in Denmark: here sales cratered by over 60% for one simple reason: the government phased out taxpayer subsidies.

As Bloomberg writes, and as Elon Musk knows all too well, the results confirm that "clean-energy vehicles aren’t attractive enough to compete without some form of taxpayer-backed subsidy."

The Denmark case study is emblematic of where the tech/cost curve for clean energy vehicles currently stands, and why for "green" pioneers the continued generosity of governments around the globe is of absolutely critical importance, and also why Trump's recent withdrawal from the Paris Climate Treaty is nothing short of a business model death threat.

To be sure, Denmark's infatuation with green cars is well-known: the country's bicycle-loving people bought 5,298 of them in 2015, more than double the amount sold that year in Italy, which has a population more than 10 times the size of Denmark's. However, those phenomenal sales figures had as much to do with price and convenience as with environmental concerns: electric car dealers were for a long time spared the jaw-dropping import tax of 180 percent that Denmark applies on vehicles fueled by a traditional combustion engine.

Then, in the fall of 2015, everything changed: that's when the government of Prime Minister Lars Lokke Rasmussen announced the progressive phasing out of tax breaks on electric cars, citing budget constraints and the desire to level the playing field. In retrospect the "leveling" effectively nuked the market: the chart below shows the total collapse in sales following the elimination of subsidies.

Nobody was hurt more than Tesla: the company, whose sales were skyrocketing at the time, lobbied against the move, with CEO Musk warning during a visit to Copenhagen that sales would be hit. It wasn't clear if the warning was targeting the government, the people of Denmark, or his own bank account and shareholders, but he was absolutely correct: in 2015 Tesla sold a total of 2,738 cars in Denmark. In 2016 the number dropped by 94% to just 176 units.

The new tax regime "completely killed the market," Laerke Flader, head of the Danish Electric Car Alliance, told Bloomberg.

The punchline: "price really matters." And, by extension, taxpayer subsidies.

What happened next is probably obvious. As Bloomberg explains, while the government’s original plans anticipated to phase out tax breaks from 2016 to 2020, when they would be treated in the same way as fossil fuel-powered cars, on April 18, having taken note of the drop in sales, the government decided to change the rules.

"It’s no secret electrical vehicle sales have been below what we expected a year and a half ago," Tax Minister Karsten Lauritzen said in a statement. "The agreed phase-in has turned out to be hard and that likely halted sales."

 

The new rules mean the transition to a post-subsidy era has been postponed until at least 5,000 new electric cars are sold over the 2016-2018 period. Tax breaks will in any case be progressively eliminated as of 2019, regardless of sales numbers. The plan envisages a 40 percent registration tax minus a 10,000 kroner ($1,500) deduction in 2019, with the tax rising to 65 percent in 2021, 90 percent in 2021 and 100 percent in 2022.

It was unclear if Musk lobbying was behind the parial U-turn, however any hopes for a prompt rebound in sales appear to have been chilled by the Danish government's decision which has "caused confusion, prompting many potential customers to either postpone or desist from their purchases." Meanwhile in generous next door neighbor, Sweden, sales of low or zero emission cars continue to boom thanks to a wide range of subsidies, including a five-year tax break and a 40,000 kronor ($4,600) purchase premium.

According to Flader of the Danish Electric Car Alliance, the Danish electric car industry "doesn't want to invest in a market that may not be there next year. They'd rather invest where conditions are better and predictable long-term." And that means lots and lots of guaranteed taxpayer subsidies. While Flader anticipates a rebound in sales as soon as dealerships are allowed to advertise tax-free prices again, this time the country's raging enthusiasm for all things "green" may be far more muted.

As for Tesla, and its all time high price, what the Danish case study showed just how much of that market cap, which on Friday surpassed BMW, is thanks to government generosity. Take the subsidies away, and sales crash by over 90%.

Should the rest of the world follow in Denmark's example, the same thing would happen to Tesla's market cap, which at last check amount to just over $800,000 per car sold.

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VD's picture

when will Trump pull the "plug" on this corp welfare bullshit? seriously. TSLA is one of the more egregious flaming toxic turd components of this "market".

divingengineer's picture

No shit, why is the government subsidizing $80,000 cars?

TheReplacement's picture

They are not and never have.  They are subsidizing Elon Musk.

not dead yet's picture

Base prices on different Tesla models and sub models range from $68,000 to $138,000 before options. On one forum a guy was bragging how fast his hot Tesla was and said it cost him $160,000.

algol_dog's picture

On the other hand, India is mandating all cars to be electric in 10 years. They're going to force this stuff down everyone's throat sooner or later.

VWAndy's picture

 Yea cuz India is so techno savy? lol

Sy Kloine Bee's picture

They should mandate basic sanitation first.

junction's picture

According to an article in Seeking Alpha, the Tesla is the most energy inefficient and most carbon-producing mass produced car in the USA. 

https://seekingalpha.com/article/1418421-is-the-tesla-model-s-green?page...

Based on the estimated 577g of CO2 emitted for every delivered kWh of electricity, when we total the power consumed by a Tesla Model S while driving, as well as charging losses and idle losses, we calculate that an average Model S sedan effectively emits 394g of CO2 per mile driven (.684 X 577). This is more than a BMW 535 (374g per mile) or a Porsche 911 Carrera (384g of CO2 per mile drive).

---

Adding in our estimated charging and idle losses, the 85 kWh Model S sedan consumes .684 kWh of electricity per mile driven, effectively generating 956mg of sulfur per mile driven (.684 X 1,397) - 688X the effective EPA Tier 2 sulfur content limit. The size of these emissions are staggering: If 20,000 Model S sedans are sold each year, they will effectively release as much SO2 as 13.76 mln new gasoline-powered vehicles - nearly every automobile sold in the United States each year.

---

When the CO2 emitted during the production of the battery pack are incorporated, we believe the total effective CO2 emissions of an 85 kWh Model S sedan are 547g per mile - considerably more than a large SUV, such as a Jeep Grand Cherokee, which emits 443g per mile!

 

 

 

VWAndy's picture

 And at some point the nasty stuff inside is going to get out of those batteries. Either as a liquid or a plasma its really bad.

espirit's picture

Yeah, but by then I'll have converted all my carbon and green credits to Bitcoin.

So suck my electrons...

/s

SILVERGEDDON's picture

Fonestar - is that you, back from the dead ?

TheReplacement's picture

Can't be.  No mention of Satoshi.

Mr. Universe's picture

Another reason in a growing list of reasons proving the World is one big lie. Just like subsidized corn fuel.

SheHunter's picture

When we see thru the lies can we overpower the lies? 

Or are the liars so powerful we see the lies and are helpless.

101 years and counting's picture

so what...who doesnt want to spend $70K for a Honda Accord (thats all a Tesla is) so they can save $25/wk in gas? good god, people are so fucking stupid.

The Mythical Black Jew's picture

In the long run electric cars are ALWAYS better than piece of shit gasoline cars:

-Constant torque

-Silent

-electric motors are exceptionally durable

-Reduced losses due to heat (gasoline engine loses 75 to 80 % in heat, the best combustion engine is in post panamax cargo ships with 100000 hp and 50% efficiency)

-No need for gearboxes

-No need for oil, filters, spark plugs

The combustion engine is dead. People in the future will laugh at it...How could it be used for so much time...

Countrybunkererd's picture

You shouldn't upvote yourself.  It is very bad form.

The Mythical Black Jew's picture

So according to your theory in election day any candidate will vote blank or in the opposition...

SheHunter's picture

Musk is an entrepreneur/business man who, whether you like him or not and whether you see through his scam, or not...deserves great respect.  He is building a stone carpet.  We can laugh, ridicule, analyze...he is doing just fine in spite of us.  I bet he has a great back-up plan in place for the inevitable moment his rule begins to crumble.  For that alone, I respect the man.  Anyone who can mold the system to fit his own best interest has my regards.  We all do the same...albeit on a smaller scale. 

xtremers9's picture

That's because oil prices are low right now. If oil prices rise, will demand for entry-level Teslas rise? You bet. EV's have a lot of advantages over gas guzzlers.

 

But is Tesla way overvalued? Yes. Other automakers are coming out with EV's too. Tesla doesn't exactly have a monopoly.

VWAndy's picture

 Check out VW XL1 its on youtoob. If im getting that kind of mpgs even 10$ a gallon dont matter to me.

adr's picture

You can buy a 50+ mpg gas car for $14k. Yeah, it isn't a match for the Tesla in luxury or performance, but it costs a lot less and consumes less  energy overall. 

On average a Tesla costs between $.06 -  $.16 per mile to drive based on electric rates. 

At $2.40 a gallon my car costs $.06 per mile to drive. Gasoline anywhere under $5.00 costs me less per mile than charging a Tesla thanks to my insane electric rate. 

If you add the higher price and cost of installation a high voltage charging system, the Tesla doesn't make any economic sense. 

Offthebeach's picture

1980's Dodge Omni/Plymouth Horizon were getting near 50 mpg on 4 cylinders.  But then Fed SafetyNazis made them put on weight, and Fed EPA killed the engine Hp, and milage went to high 20's.

 

not dead yet's picture

The Honda CRX and some others would get into the 60 mpg's. Those were doing it on carbs too. If you look at current mpg's of all the 4 cylinders, currently around 33 avg hwy, they are LESS than many V6's made from the early 90's to mid 2000's. Even the mid 2000's Impala SS with a V8 was good for 33 mpg. Todays cars are squeaky clean, not perfect, but the government keeps tightening the emission standards that end up requiring more expensive technology and parts and decrease mileage. IMHO if they relaxed the standards a little to get a huge boost in mileage there would actually be less pollutants emitted overall with considerably less fuel burned. The enviros would never go for this because they consider a compromise a defeat. There are some enviro groups out there that get lots of things done and quickly by working with the other side and doing some compromises that benefit all sides. The hard core enviros, which most groups are, hate the enviros who will compromise even though those groups get more things accomplished with no government involvement.

HRClinton's picture

Queue Soros to short Tesla.

The Real Tony's picture
Arnold Schwarzenegger was among the very first ones to purchase a Tesla. Having that name helped on the waiting list
SloMoe's picture

Hopefully, Musk ends up in an "Eco-Friendly" jail. That would be butter, I guess, instead of Vaseline...

Yamaha's picture

I am tired of supporting Musk and his minions who think they are Saving the environment. Total Bullshit....

CheapBastard's picture

Musk couldn't shake free eco-money (aka taxpayer money) out of Trump and that's the real reason why he walked away from Trump's team.

greenskeeper carl's picture

"Musk couldn't shake free eco-money (aka taxpayer money) out of Trump and that's the real reason why he walked away from Trump's team."

 

Not sure how you are drawing that conclusion. Is he, or is he not, still getting massive taxpayer subsidies for every vehicle he sells? Im not seeing any difference in it since trump took office. He might be slightly more reluctant to ADD moar to the existing subsidies, but he is still feeding at the trough under trump.

not dead yet's picture

Musk gets hundreds of millions of bucks from emission credits every car maker must buy to sell a "polluting" car in California. The state takes it in and then funnels it to Musk. Awhile back Musk felt he was due more and went on a rampage against the state and got more money. Yet as one previous commenter pointed out a Tesla pollutes more than the average car. Last year he got around $350 million if reports are correct.

Endgame Napoleon's picture

Once again, Musk is the only one of these automakers who gives a c**p about keeping jobs in this country. What about the bail-out boys, taking production to China and Mexico? Tesla also lets customers pick their color. The turncoat, offshored automakers do not offer custom colors. They are design authoritarians.

NidStyles's picture

Musk would build out of the country if he could still get the subsidies doing so.

greenskeeper carl's picture

Yep. Why bother offshoring if you are raking in government dough. End these ridiculous subsidies, and watch how fast they leave (if they don't go bankrupt first)

logicalman's picture

He knows he's not saving the environment, but he does know a killer sales pitch when he sees one.

Subsidies are just more of the same - sales pitch to convince you that government is 'doing something about something'.

Combine the two and you get $800,000 market cap per vehicle. That number, by itself, tells you that EVERYTHING is fucked up, not just the auto industry.

 

jimmy12345's picture

No one on this messageboard knows jack about Tesla.   Learn about musk and Tesla instead of just swallowing oil company propaganda.

not dead yet's picture

The one who knows the least facts about Tesla is you Jimmy. The one who knows and spouts the most Tesla propaganda is you.

Socratic Dog's picture

Oh? Know a bit about batteries do you, young fella?

Musk's battery is a bulked up laptop battery. Something like 15,000 18650's (the Li-ion equivalent of a AA alkaline)joined together. Considering that the great weakness in electic vehicles is the battery, he has contributed sweet fuck all to advancing the technology.

Outside of subsidies, EV's sink or swim on the battery technology. Don't laugh at the GM EV1, it's purpose-designed lead acid battery was one of the finest ever built, in my humble opinion. The EV1 battery technology makes Tesla look like Barney Rubble.

HRClinton's picture

Does this mean that if Trump had signed the Paris climate accords, that the subsidies would have kept flowing into electric and hybrid cars?

Or would they have gone straight into the $2000 Indian cars? India's Bovine Motors Works  - iBMW?

SheHunter's picture

Read my post above and stop being vindictive of a person who takes the system by the balls and uses it to their advantage. 

Too-Big-to-Bail's picture

What's a subsidy? it sounds socialist

OverTheHedge's picture

I thought a subsidy was a payment from the government, rather than just not applying tax rules uniformly but if Denmark seriously has a 180% New  vehicle tax, than buying a tax-free tesla would probably be cheaper than buying a standard petrol-powered shopping trolley. Involve government and the market always goes nuts.

greenskeeper carl's picture

Involve government and the IS NO market.

Endgame Napoleon's picture

It is what they give the corporate farmers and a bunch of other businesses. To know the details, we would need to the Swamp Congress' K-Steet BFFs.

logicalman's picture

Subsidies are less about 'isms' more about 'political contributions' AKA bribes.

espirit's picture

Meh, once a week I take the horse to the corner market and sell off my excess 'canned' foods and meats, and pick up those perishables I can't get from the neighbors.

Every month or so I'll run into town on distilled ethanol and pick up the heavyweight items and pay my bills.

 

 

Zepper's picture

And without the Federal Reserve pumping Trillions of dollars into the stock markets and bond markets around the world the world economy would collapse.

And without OPEC and Friends fixing the price of oil over the last years or so, WTI would be trading at $15 barrel.

And without subsidies to feed cows, pigs and chickens, all our grocery stores would only be carrying fruits and vegitables because the costs of buying meat at its original price would be ridiculous. 

The list is long... Nothing suprising about Tesla...

Whats surprising is the fixation with Tesla.

IT IS ALL FIXED! GET IT!?