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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Blanco Diablo's picture

Elon the ultimate Welfare Queen.

land_of_the_few's picture

The ultimate Welfare Queen could arguably be the MIC. Since it runs on taxpayer dollars it could be called a Socialist enterprise, except this time no-one gets any education or healthcare, just explosions and dead brown people. Command economy and all that, even on-command wars and customers ;)

Endgame Napoleon's picture

What about Caremark and all the other pharma service providers with a big government contract and a "diverse" workforce, eye roll?

land_of_the_few's picture

Sounds scary, probably similar % of wastefulness :D

yogibear's picture

Since Musk gave Trump a big FU, Trump needs to return the favor and cut the government subsidies.

gatorengineer's picture

Elin the cryptojew musk.   Nothing to see here honest...

HRClinton's picture

Elon has passed Warren at the Welfare Buffet table? 

(p.s. Oops, did not see Larz's post below until I posted mine.)

SheHunter's picture

doing what all of us do only on a much larger scale.  chilllllll.....all is good BD.  Perhaps you or I will wake up tomorrow AM with a scheme comparible to Musk's.

larz's picture

Elon musk puts all welfare queens to shame  possibly even worse than Warren buffet. Maybe even worse than the banksters ...

gregga777's picture

Never fear, the Goldman Sachs Feral Reserve System will continue giving free money to extended family member and criminal crony capitalist, Elon Musk, to keep his various Ponzi-Musk schemes afloat.

rejected's picture

Not exactly news here,,,

That's the whole Green supposedly renewable scam.

Take away taxpayer funding and they disappear.

Endgame Napoleon's picture

I agree that the green energy stuff is hyped. But why not have some niche-market products catering to those who think otherwise, especially if the product has other value-added characteristics. Besides aesthetics, isn't it good to have a car that is not dependent on gas stations?

IPA's picture

Just like all the other American car companies? I don't understand what this article is getting at.

HRClinton's picture

Isn't PM suppression / oppression a form of Welfare?

Welfare that benefits... um, I don't know... China, and their seat at the IMF/SDR table?

ShrNfr's picture

Insult to injury that these turdmobiles do not pay state and federal gasoline taxes either. They use the same road, take up the same space, and are as big or bigger assholes as those who drive gasoline cars. They should get nailed to pay for the roads just like the pee-ons.

VWAndy's picture

 Dont forget those batteries are going to be a gigantic disaster the longer this scam goes on.

gregga777's picture

Zero emissions vehicles.

ROTFLMAO (rolling on the floor laughing my a** off).

What a load bull manure.

SheHunter's picture

Methinks you missed a consonant.

ROTFLMFAO is most appropriate.

RMiller's picture

$800k per car? Didn't you know cars were the new houses?

Bay of Pigs's picture

Almost like a bubble isn't it?

s/

Low IQ fan of VVP's picture

Cars are the new houses as you're expected to live in them now.

Glyndwr will return's picture

So do the suckling masses actually have any idea that Tesla was a man who strode the heights of invention with Eddison? Or are they just deduced by the gov funded startup we see today?

silverer's picture

So the question is: Does Trump pull the plug and allow true capitalism to resume? Stay tuned.

Wahooo's picture

Not worth the whining from the left.

viator's picture

The same is true of many other "green" boondoggles.

gatorengineer's picture

I cant think of a green technology that could compete without subsidies

CRM114's picture

There are a grand total of 211 electric vehicles in the whole of Atlantic Canada.

More people get around on horseback than that.

Perhaps the Government should subsidize oats and sugar lumps instead

http://www.fleetcarma.com/ev-sales-canada-2016-final/

VWAndy's picture

 If you take an honest look at electrick cars from craddle to grave there is 0 bennifits long term. The batteries are going to be an issue almost as bad as nuke waste is.

espirit's picture

Especially so if China quits taking our HAZ waste.

...Or they move here, and we move there to inherit what we created.

Dat's Karma.

VWAndy's picture

 So its being dumped into the sea?

Bill of Rights's picture

GM still holds the record for government welfare on an epic level...

44magnum's picture

What about those private banks?

Bill of Rights's picture

Do banks build fucken cars?

Endgame Napoleon's picture

Where did they go after the bailout by U.S. taxpayers?

Answer: China.

It would be fairer to go to Japan. They, at least, put some plants here to employ Americans.

When you bail elites out with tax $$$$$, the first thought is how can we s***w America, while still cashing in?

The only thing about Musk is that, again, he does not seek out the cheapest labor he can find. He tries to build it here.

PrivetHedge's picture

He does underpay his staff though.

RightLineBacker's picture

Understand there are plans to rename GM Obama Motors.

OM!

Hikikomori's picture

"How to Get Other People to Pay for Your New Luxury Car" by Elon Musk.

south40_dreams's picture

Socialized capitalism is a rot gut drink

Longus Dongus's picture

What corporation doesn't get subsidies? Tesla gets a lot less than the oil industry.

Is-Be's picture

Tesla gets a lot less than the oil industry

Shush your mouth. Zerohedge is not ready for the troof. 

Yay! Go big Oil!

 Go big Coal!

Go Big Pharma.!

Go Big Gov!

Go Big MIC!

Woo woo woo.

USA USA USA.

Morons shouldn't be given the vote if they are incapable of looking after their own interests.

VladLenin's picture

That's ok. Elon just got $5M from Space Florida to fix the launch pad his cult members blew up. It's good to be a billionaire.

Deplorable's picture

A few inconvenient truths:

Electric cars run on electricity generated from fossil fuels and some renewable energy, but mostly fossil fuels. That's the secret hidden in plain sight. Most consumers erroneously think Teslas electricity is an independent free power source from the sun using the network of recharging superstations. In reality, the vast majority of Teslas will be recharged every day in the garages of their owners. And thats assuming you have a garage to install your high end charging station in. Where will all those millenials install their charging station if they live in an apartment?  Will they have to run extension cords out their doors to their parking lots hundreds of feet away?

Assuming the majority of Teslas are plugged into the grid for recharging, you've blown your clean energy arguement all to hell, because all you are doing is generating power at a fosssil fuel plant, polluting the environment, and losing a shitload of electrical energy as it passes through the grid and flows into your Tesla throught the 100 foot extension cord going out to you parking lot. I'm sure you will argue that your charging will be done mostly at night when rates are cheaper, but you do realize that you burn the same amount of fossil fuel to charge you Tesla, regardless if it is daytime or nighttime. 

Most of U.S. electricity is generated using fossil fuels. About 65% of this electricity generation was from fossil fuels (coal, natural gas, petroleum, and other gases), about 20% was from nuclear energy, and about 15% was from renewable energy sources (Apr 18, 2017). In 2016, natural gas was the largest energy source for the 4 trillion kilowatthours of electricity generated in the United States.

The transmission and distribution or “T&D” system, then, includes everything between a generation plant and an end-use site. Along the way, some of the energy supplied by the generator is lost due to the resistance of the wires and equipment that the electricity passes through. Most of this energy is converted to heat. Just how much energy is taken up as losses in the T&D system depends greatly on the physical characteristics of the system in question as well as how it is operated. Generally speaking, T&D losses between 6% and 8% are considered normal (Google TDEnergyEff.pdf )

So now your arguement is that you will use the network of Tesla Supercharger stations to charge your car enroute to your destination.  That will work out well when you have half a million Tesla owners competing for space at a handful of charger stations in fixed locations that are off the beaten path between your home and your final destination. Make sure you have a pitchfork in your car so you can deal with all the other owners that are hogging space at the charging stations while they chug a latte at the local Starbucks.  

And lets talk about energy efficiency.  In sure if you had half a brain you would realize the electrical energy transmission seriously degrades as the temperature decreases. This will seriously impact the expected range of a Teslas that is operating in sub zero temperatures in northern states or Canada. I'm sure many of you have had the unfortunate experience of finding your battery dead on your conventional car after a cold winter night.  Well, you can expect that to happen in spades with a gigantic lithium battery, and it will take more than a jump start from a friendly motorist to get you going again.

Here's a new wrinkle for you. AAA is raising premiums on Tesla vehicles by 30% after data showed that owners of Model S and Model X cars filed claims at abnormally high rates, and that those claims cost more compared with other cars in the same class.  AAA’ chief actuary said the insurer noticed the anomaly in its own data before confirming it with data provided by a second source, the Highway Loss Data Institute. Collision damage claims for large luxury vehicles are reported 13 percent more frequently than average, and those claims cost about 50 percent higher than average. The rear-wheel-drive Tesla Model S is involved in 46 percent more claims than average, and those claims cost more than twice the average.

Back to the eco-efficiency argument for a second.  How long do you think it will take before a Teslas battery becomes incapable of holding a charge for more than a few hours.  You may not be aware of this, but a Tesla battery is just a collection of hundreds of battery cells that are equivilent to the battery in you laptop computer. As I type this document, I am doing so on a laptop that I have to permanently connect to its charger because the battery has failed me for the third time since I owned this laptop.  If my battery has died three time in a few short years, how many of those hundreds of battery cells in a Tesla battery pack will also fail in a three year period?  Perhaps you can buy a battery insurance addendum with your AAA policy and roll that cost into the extra 30% for your car insurance to cover this contingency? 

Speaking of batteries, have you given any thought to what you will do with your dead battery pack when you have to replace it every other year?  Lithium is a toxic material, and it should cost a pretty penny to get rid of these batteries and recycle them .  I suppose you could just dump them in San Francisco bay and create a safe zone artifical reef for all the liberals to play in.

Tesla, the biggest example of a bubble stock since pets.com.

Iam Deplorable

TradingTroll's picture

But, but, but

Electricity comes from an outlet

I seen it with my own eyes!

/sarc

RICKYBIRD's picture

Milk comes from the dairy case!

PrivetHedge's picture

"Will they have to run extension cords out their doors to their parking lots hundreds of feet away?"

You say this as if it's a bad idea, but when their Tesla bursts into flames they'll be the ones laughing, whereas the guys who parked theirs in their neat, integrated garage will be the ones crying in a hotel the next nght waiting for the charred remains of their house to be assessed for the insurance.

Is-Be's picture

but when their Tesla bursts into flames they'll be the ones laughing,

I trust that you run an extension cord outside for your toaster.

Because, you know, fire and stuff.

PrivetHedge's picture

When my toaster is off it's off.

When a Tesla is off it's battery still contains a fuel tank full of energy - stopped from disaster by square miles of very thin insulation of which only a tiny bit needs to fail for disaster.

Remember the Samsung phones that burst into flame? A tesla battery is equivalent to aroung 10,000 of those phones neatly stacked together and you're hoping they are all perfect. If only one is faulty, goodbye car, garage, house.

I'll take the toaster thanks.

Is-Be's picture

Remember the Samsung phones that burst into flame? A tesla battery is equivalent to aroung 10,000 of those phones neatly stacked together and you're hoping they are all perfect. If only one is faulty, goodbye car, garage, house.

Wow. And to think that I carry my mobile phone so close to my family jewels!!

And petrol is safe?

One cup of petrol has enough energy to lift one tonne through one kilometer vertically. And all it takes is one itsy bitsy static spark to blow you to kingdom come.

Familiarity breeds contempt.

When somebody expounds the virtues or failings of any viewpoint I always ask "Compared to what?"

For instance the angst about robot drivers safety. "Compared to what?"

Compared to empirical data of wetware driving competence. 

Or AI expert governance compared to say, Hillary at the Helm? Give me the incomparitivly greater resolution of AI.

Its coming. You had better stock up on Valium until the crisis passes.