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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
forestgump227's picture

Who gives a shit where the electricy comes from. The model S and model 3 are simply better cars than the gas powered cars.

 

Get that through your thick skull.

Oh yeah, and they have the hardware TO DRIVE THEMSELVES, not that it matters though because they get electricity from coal.

Put your money where your mouth is and short Tesla and you can join the rest of the Tesla short sellers that have jumped off a cliff. 

Is-Be's picture

That's a lot of words to justify your defeatist attitude.

Can you think of no solution to every objection that you raised? 

Really? Are you so bereft of imagination?

What is the big beef about renewables? They are intermittent. What do electric vehicles have? Batteries. 

Lest I fall into the moral trap of the Bigotry of Low Expectations, I am prevented from spoon feeding you any further.

That you got so many up votes reflects poorly on the denizens of Zerohedge.

Oh well. So much for Yankee ingenuity. So disappointing.

Pinefox's picture

Good for Denmark to withdraw the subsidy.  Using Denmark as an example of bike ridership and comparing it to other countries is just ridiculous.  I lived iin Copenhagen for 7 months in 1969 and rode a bike to my traineeship job.  The place is flat as a pancake.  The highest mountain is 604 feet high, shorter than the Space Needle in Seattle.  Copenhagen has a dense population easy to get to things.  Seattle keeps using Denmark as an example of a bike friendly city.  Of course the bureaucrats can't see the elephant in the room here, a hilly topography and rain nine months of the year.  How is it we elect such braindead people to office?

fajensen's picture

The article is fake news. There never was any subsidy, it's just that Electrical cars were originally not taxed at the usual exorbitant, but world-leading-rate, of 280% plus, of course, VAT of 25% applied on top!    

The government could afford to be so "lenient" for years because until the Tesla, all electric cars were basically crap and sales minimal, so no potential revenue was lost.

Of course when Tesla then kicked off, it was like 800 kEUR for a Porsche Cayenne, BMW 7 series or maybe 700 kEUR for Tesla - which doesn't suck gas retailing at about 1.5 EUR per liter (8-9 EUR per US Gallaon) and will leave all pterol cars sucking rubber fumes from it's insane acceleratiom.   

So the government reacts in it's usual way whenever some change is happening or some people are enjoying themselves by putting a stop to it, probably mustly reacting to the whining of whoever sells BMW and Porsche in DK (and also of course to the rule that no pleb having money in a such a barbaric way as earning it, shall ever afford a car nicer than the Minister).  

In Sweden, there is no car-tax. Only the VAT. The Swedes do like the Danes, they buy a car costing the same percentage of disposable income, only, they can afford much nicer cars than the Danes. Including Teslas, the "subsidy" for electrica cars in Sweden is that one saves the 6000 SEK or so annual road tax that a petrol/diesel car with the same performance would cost - one doubts that kind of money really will move the needle a lot for someone who can afford chosing between Tesla or the high-end "fuel-cars".  

Only the Danes must tax everything right to hell. According to Google only Denmark and Russia has a Minster of Taxation everone else can manage with a Minister of Finance, one does wonder why that is so, and if one is not perhaps getting the same results eventually as Russia. 

flrzero's picture

They actually reduced the tax to 150% in 2015..... The history of the tax is that it started as a tariff in the 1920s of about 20%. Then it was progressively increased until it hit 180% in 1977. Then 38 years later they reduce it to 150%.

Deplorable's picture

Lets not forget about the Hyperloop, another subsidized Elon Musk boondoggle:

The hyperloop will will never be scalable to the high capacities that will be required for intercity transit. The construction costs per mile will be astronomical and will never be recouped by passenger fares.  It will absolutely need ongoing federal assistance, just like Amtrack, and will only benefit a few rich people who will reside at each end of the tubes.

Hyperloop for the rich:

http://techstory.in/wp-content/uploads/2016/05/0510_hyperloop.jpg

Hyperloop for the common man: 

http://projectavalon.net/forum4/attachment.php?s=c6d6a1ea605c01d78d54cc1...

VWAndy's picture

 Hyperloop? Well to start with each car will need to be kinda like a spaceship. Secondly if any big leak happens say a battery explodes everyone in that toob section is dead. Think of a spitball stuck to a wall.

Deplorable's picture

Talk about an overpriced solution to move a few millionaires around the traffic congestion. Putting a handful of people in a capsule and sending them through a tube at the speed of sound works great for one group of travelers at a time. There is no way they can manage a hundred mile long pipe filled with a handfull of people in pods every mile apart. They will also need parallel tubes to manage incoming and outgoing traffic. Doubles the cost of construction and they will have to constantly build new tunnels to expand capacity.  Putting more pods in a tube will not increase capacity because the physics and energy needed to move more mass through a single tube is an exponentially increasing constraint. 

Posa's picture

What a bunch of stale fossils you are Deplorable. Transcontinental hyperloop systems for passengers and freight will be the ultimate transit systems replacing obsolete air and surface transit for centuries ahead. Lop off half the Pentagon budget and let's get going with those repurposed dollars... lots of people will be employed in the design and construction while adding to productive capacity...

Electric cars hold no allure for me until nuclear fusion energy can produce electricity at .5 cents kWHr... which may not be long from now.

espirit's picture

Release the Hydrogen Ions from Aluminum and we got us a clean burning fuel, except for the waste heat that will help counteract the coming Ice Age.

Deplorable's picture

Fusion power ranks up there with that flying car I've been promised for the past 40 years.....Ain't gonna happen.

Might as well bet on Flux Capacitors!

Posa's picture

Ignorant nonsense.. For sure, The tokomak designs are going nowhere. that's true... but there are many new designs under development that are privately funded... the best bet seems to be a microfirm call LPPFusion in New Jersey. They use a deign first formulated in the Sixties called focus fusion.

An explanation is found here:

https://vimeo.com/album/4523162/video/211492763

Currently LPPFusion is #5 on the fusion leader board... however, theLPPFusion is only now iimplementing the final design, and materials (beryllium   electrodes)... then later this year the pB11 fuel will be loaded ino the reactor... very good chance this will put LPPFusion over the top achieving net energy output... every other reactor in front of them has long-ago peaked and  plateaued.. But thanks for the comment... glad to see you're up on the latest.

http://lppfusion.com/wp-content/uploads/2016/05/ntauT-chart.png (The LPPFusion device is FF-1)... by the way many of the other reactors cost hundereds of millions, if not billions to design and construct... the FF-1 total cost to date is about $5M... $2.5 M needed to finalize the project

Deplorable's picture

So tell me how much energy this reactor can generate.....I doubt if it is close to break even, which is a far cry from powering the grid in the near future.  

Fusion as a power source is never going to happen. Not because it can’t, because it won’t. Because no matter how hard you try, it’s always going to cost more than the solutions we already have.

We will both be long dead before fusion becomes an economic reality. 

Posa's picture

You sound like the clods who assured us aircraft would always be too heavy to fly... until the Wright Bros proved them wrong... If we were talking about tokomaks you'd have a case... but we're not... But what do you know? you have no idea what you're talking about...

If you actually read the link you'd see how close the FF-1 is to net energy. The FF-1 has achieved two of the three Lawson crityeria for fusion (temperature in the billions of degrees sustained for a few nanseconds requyired for the reaction)... the final step is achieving fusion density... that's been pretty much understoof an solves... the bellyrium electrodes in an improved configuration will be tested this smmer... by then we'll have a pretty good idea whether it works or not..

We won't have to wait decades. Likely it will work based on performance to date and resolution of the outstanding barries (impurities knocked off the elctrodes).

Deplorable's picture

Read this and you will see how economics plays in the future development of fusion power:

And don't tell me it's an old article, because the principle of economics still applies.

https://matter2energy.wordpress.com/2012/10/26/why-fusion-will-never-hap...

 

Posa's picture

The article is worthless (wind is not cheaper than nuclear power when a backup system is costed into the wind power rates) ... and doubly inapplicable for the FF-1 Dense Plasma Focus configuration...

Again your determined igorance is appalling... the FF-1 is not powered by tritium... It's a hydrogen-boron mixture... It's aneutronic (no nuclear waste)... it's direct generation of electricity via induction-transformer system... it's highly compact and will generate electricty on a distributed 5 MW outoput (though higher wattage can be achieved by parallel deployment)...for these reasons a FF-1 type reactor will generate electricity at exceedingly cheap rates.

 

desertboy's picture

"net energy" is an abused term in fusion research, since it does not profess to address the expense (which represents additional energy) of extracting the energy in excess of that expended.

Posa's picture

The projected costs for this reactor yield electric power wholesale prices as half a penny/ kWhr... current US average is 12 cents... this form requires no turbines or boilers... direct generation of energy via ion beams... hydrogen and boron fuel are abundant and cheap.. this process is aneutronic

Deplorable's picture

Transcontinental Hyperloops? Talk about an overpriced solution to move a few millionaires around the country. Putting a handful of people in a capsule and sending them through a tube at the speed of sound works great for one group of travelers at a time. A transcontinental tube will have to have stops every 100 miles of so at intermediate destinations. There is no way they can manage a hundred mile long pipe filled with a handfull of people in pods every mile apart. They will also need parallel tubes to manage incoming and outgoing traffic. Doubles the cost of construction and they will have to constantly build new tunnels to expand capacity.  Putting more pods in a tube will not increase capacity because the physics and energy needed to move more mass through a single tube is an exponentially increasing constraint.   

Posa's picture

How do you know the costs?

In any case the infrastructure for this centuries long project at first would be subsidized and as bonds amortized, a market price will be fixed...there are lots of ways to configure such as system... there might be "express tracks" for direct service to the coasts... with branches North and South at appropriate intervals on shorter "local" racks... Some branches would connect to surface transit for shorter trips from a HUB...so for example, in NYC there would be a West Coast express that branches N-S in a place like Sacramento. There would also be a direct line South stopping at DC, Charlotte, Atl, Orlando Miami. Also direct line to KC which branches N-S to the Plains states and the SW...  Something like that.

You haven't thought this through and already you want to kill the idea... what ever happened to the American pioneering spirit? Jeez...

Deplorable's picture

You said it in a nutshell "for this centuries long project".....I rest my case. 

Posa's picture

Hey Scrooge: the infrastructure will "serve" for centuries..

RichardParker's picture

 It will absolutely need ongoing federal assistance.

What did you expect?

Just about every business model that Musk proposes requires billions of dollars in government subsidies and/or the government is a customer.

passerby's picture

um.. who knows...maybe hydrogen

Ban KKiller's picture

Not fond of the Tesla owners I have met so far...

Ponzi thy name is Musk. 

I Write Code's picture

If Tesla comes out with an all-electric dope-smoking prostitute Denmark will buy them all.

Lost in translation's picture

Had a colleague tell me a few weeks ago, "I like Musk, I admire him. He's the Thomas Edison of our time!"

Ummm... ok.

Peterman333's picture

Thomas Edison's genius was hard work, Musk may work hard or not, don't know much about him but one thing for sure Edison didn't have gubbmint cheese flowing into his early organization. He had to hustle and build one thing that he might sell such as a stock ticker machine, take that money invest it in his next project. He said he never wanted to invent anything that he couldn't sell and make a profit on. 

He didn't say, I'll build a bunch of solar panels which won't be profitable now or ever and gubbmint cheese will make it profitable.

Peterman333's picture

Edison also said "the average German is as dumb as a cow." Nothing related to this article, I just always found it funny. Edison was of Dutch descent.

Reaper's picture

earnings/price = zero Increasing the scale cannot lower the cars' price. All hype, no earnings.

chimerikan's picture

confused about the headline - couldn't this also be the result of lack of confidence in the taxation amounts moving forward? whenever there is a price increase, or anticipated interest raise, consumer behavior can be moved forward - so sales that would normally happen in the future are done quicker as they could be expected to cost more in the future. a way to "save."

conversely, sales following this event during unstable times can be depressed, with no "real" change in normal demand.

so while all those things mentioned in the article may be accurate, i would expect human nature taking hold. uncertainty leads to waiting, the end of certainty (of of a lower price), leads to increased sales now, removing those buyers gt the market who would have purxheded later but sped things up

so perhaps another instance of no "there" there...

RICKYBIRD's picture

Elon Musk has seen the future of the coal-powered Tesla, and it is goobermint subsidies.

smacker's picture

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

Wotsa problem?

To any socialist.gov this is a successful company ;-)

Let it Go's picture

Enough about Tesla being worth more than Ford and all the other automobile producers that have many times its market share. Buying stock in Tesla is the same as going to a casino, it will end with you being most likely a goat rather than a hero.

Do not rule out the possibility that once the aura surrounding Tesla leaves, reality may wash over those so eagerly awaiting their new toys.  If the actual Model 3 fails to tantalize buyers or leaves them underwhelmed it could be all over. More on this subject in the article below.

http://brucewilds.blogspot.com/2017/05/owning-tesla-could-suddenly-become.html

Is-Be's picture

Do not rule out the possibility that once the aura surrounding Tesla leaves

My son bought a Japanese all electric vehicle several years ago.

He is still pleased with himself. No buyer's regret.

Two matters arising

1) Japanese don't grizzle. They just get the job done.

2) My people, ( western civilization) have become fat and lazy. They sit in their mom's basement making excuses for why it is just all too hard.

Same goes for ANY new technology. They just bury it at the patent office.

You are on notice, fatso. 

Down voters welcome.

painlord-2k's picture

Commenters here never read the PDF linked in the article, with the overview of the subsides of various Europenas countries.
Nor they get the size of Danmark and the fact it share borders with Sweden and Germany. 
The place is pretty small.
Copenhagen (the capital) is a bridge from Sweden (a lot of workers go up and down the bridge every day) to Norrebro (the second or third city of Sweden - a lot of Muslims too).
Both Germany and Sweden kept the subsides when Danmark took them away.
One of the subsides is just 4.000 € discount on the price (in both Germany and Sweden). After VAT probably is 5.000 € of difference in price.

Given the majority of the people with enough money to buy a Tesla will live in the capital and the capital is, maybe, half an hour from the dealership in Sweden, what do you think will happen? People raise their fucking asses and go to buy the car in Sweden or Germany. Or they pay someone to get the car to them.

Save 5.000€, pay 500€ to the driver to get you the car, total saving 4500€. The driver get the family to see the Little Mermaid in Copenhangen and then pay the tickers for the train to go back home. The second time it cost less.

or just, maybe, take the car in leasing from Germany or Sweden and detract the expenses from your taxes.

I Write Code's picture

Assuming that's all true and good to know, but it doesn't change the argument.

painlord-2k's picture

Commenters here never read the PDF linked in the article, with the overview of the subsides of various Europenas countries.
Nor they get the size of Danmark and the fact it share borders with Sweden and Germany. 
The place is pretty small.
Copenhagen (the capital) is a bridge from Sweden (a lot of workers go up and down the bridge every day) to Norrebro (the second or third city of Sweden - a lot of Muslims too).
Both Germany and Sweden kept the subsides when Danmark took them away.
One of the subsides is just 4.000 € discount on the price (in both Germany and Sweden). After VAT probably is 5.000 € of difference in price.

Given the majority of the people with enough money to buy a Tesla will live in the capital and the capital is, maybe, half an hour from the dealership in Sweden, what do you think will happen? People raise their fucking asses and go to buy the car in Sweden or Germany. Or they pay someone to get the car to them.

Save 5.000€, pay 500€ to the driver to get you the car, total saving 4500€. The driver get the family to see the Little Mermaid in Copenhangen and then pay the tickers for the train to go back home. The second time it cost less.

or just, maybe, take the car in leasing from Germany or Sweden and detract the expenses from your taxes.

Faeriedust's picture

"Developed" national governments have been subsidizing the auto industry, and the oil industry, for the last century.  Frankly, Tesla is far from the only company that would collapse without subsidies.  Does anybody remember the Chrysler bailout?  The GM bailout?  Care to take a close look at relationships between Toyota, Honda, Mitsubishi, and the Japanese government?

Given that the entire field is rotten with subsidies, it's not surprising that anyone who is suddenly caught without one folds.  It remains to us to decide how government should distribute the goodies.  As subsidies go, those that help develop new technologies as opposed to propping up dying industries are surely somewhat preferable.

Miss Informed's picture

J P Morgan, Bank of America?

charlewar's picture

Tesla=Enron
Musk=Lay

Is-Be's picture

An amusing and clever cartoon.

It must have occurred to you that we are communicating via satellites.

There is going to be a need to clean up the trash in the useful orbits. This is where EM drive de- orbiters are going to be useful.

Removing trash will be an externality to the satellite companies. So you must anticipate that you will have to pick up the tab.

You feel the bile rising in your throat? You do realize that we are communicating via satellites?

jimmy12345's picture

Tesla would still succeed without government subsides and the federal tax credit for buyers  of Tesla vehicles runs out in 2018 (there is only a tax credit on the first 200k sold by an automaker), so subsides actually hurt the competitive position of Tesla.   Elon started goal of Tesla was to accelerate the advent of EV because big automakers didn't want to develop EV's.  The Tesla Model 3 is coming out in July at $35k and is a gorgeous vehicle and will sell millions of units in USA without subsides and Elon will create hundreds of thousands of jobs in America.  The oil companies are sponsoring a smear campaign against Elon, but it only gives him more press.   EV's are inevitable since battery keep getting better and prices keep coming down.

Central Ohio's picture

Not sure of your premise that Tesla would succeed without government subsidies.  Net Income for the last year has been negative, debt has grown exponentially, cash from operating activities is not impressive.  A good investment because the stock is fashionable, not financial performance.

If it has done well for you, great.  

adampeart's picture

Meanwhile Elio motors can't squeeze a penny out of the government for it's 83 mpg $7500 gas burner. Guess Elio's lobbying(bribing) budget isn't quite big enough to compete with Musky. The issue at hand isn't how far you can go on a single charge, it's how long it takes to get charged. So long as people can't drive an ev coast to coast (or outside city limits and back) they will never be competitive in the marketplace without continual hosing of the taxpayers.

forestgump227's picture

The daily Tesla bashing article from zerohedge. The US auto companies like GM and Chrysler weree bailed out in 2008. 

 

As far as I am concerned this is just leveling the playing field.

 

The value of a stock is based just as much on your future sales as it is your current sales. Something the people at zerohedge clearly do not understand as the have been wrong about Tesla since it was $28 a share.

 

Also Tesla will destroy Uber with a fleet of self driving Taxi's, I would not expect the retards on this website to Understand that though.

 

As someone who invested in Tesla at $28 a share all I have to say is I told you.

 

Get fucked 

lex parsimoniae's picture

reminds me of that time I got a call from a broker saying oil would "definitely go higher than $200/barrel"

Careful Junior, it's not profit until you've sold it