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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Is-Be's picture

 

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

 Are you familiar with chaos theory and Strange attractors?

We are circling a low price attractor. This attractor is weakening.

The fundamentals of chaos theory illustrate that the switch to high priced oil will be sudden, unexpected and jarring.

There will be many people running around saying "Who coulda knowed?"

We've already orbited the high price attractor once.

I'm taking notes. Are you?

0Theorem's picture

the price of bbl is related to lyapunov sets? really?

then you must be seeing a pattern with a frequency in the chaos future set. 

please relay the approximate date :)

Is-Be's picture

It is also a fundamental feature of chaos that it is chaotic.

But patterns emerge.

They can be very beautiful. Do a Google search for chaos images.

A picture is worth a thousand words.

adampeart's picture

You're getting rich off a scam forced on hard working taxpayers. Congratulations you soulless fuck face.

Deplorable's picture

Makes sense to me that someone will spend $80,000 to buy a Tesla and turn it into a taxi to make some spare cash.

Ban KKiller's picture

Yep, I will be wrong until right. See Enron, etc. Madoff, etc. Ponzi, etc. 

Self driving cars....I forecast unforseen consequences and I predict they won't be good ones. 

Have you looked at the financials of Tesla? Or Solar World? Yikes! 

lex parsimoniae's picture

thanks for the research and all, but now can you tell us something we didn't already know?

DemandSider's picture

Faeriedust's comment below is correct, if the experience here in the Twin Cities is any guide. The Twin Cities Rapid Transit system encompassed a huge area and sustained itself with private profit until it ended operation in 1954. Eisenhower's public investments in highways supported the infrastructure and vehicle makers to the detriment of mass transit, and this highway sytem continues to expand today.

The highways and vehicle manufacturers in the U.S.' heydays pre Vietnam were supported by taxing the wealthiest at 70 to 90%, but there isn't the political will today to do that anymore. No democratic country's workers can pay the cost for electric cars as their wages are decimated by Wall Street's outsourcing to Communist China and other state owned systems.

It's obvious that the plan from the elite is to do away with car ownership and expand distributive, self driving ride sharing programs. We'll pay a certain fee every month, with Wall Street's profit built in. It's not the system I would choose, but this is what we will be given.

personal109's picture

Tesla fanboys are like Apple fanboys, both with IQs equal to their shoe sizes. No point in discussing facts with them.

Deplorable's picture

Hackathon Challenge:

Take over a Tesla and do something really creative with it.

Post a video of your expoits and see if you can make it go viral.

Only 1 rule: Make sure no one is harmed. 

 

quesnay's picture

Another subsidy that many don't consider is the 'free' electricity many car electric car owners are getting. Many work places and some government facilities allow people to plug in to charge their cars for free. When the number of people with electric cars is small, this works fine. Companies get to pretend they are environmentally friendly and electric car owners can feel smug about not having to pay for electricity.

Should electric cars become popular though, this 'arrangement' would quickly disappear. When company electric bills sky-rocket, they will quickly change their mind about supporting the freeloaders at the expense of everyone else.

FoggyWorld's picture

Bet they don't get taxed on those "free" rides we are paying for.

Deep Snorkeler's picture

In our fraud-based economy,

there are no real values.

There are only compulsions

to steal, accumulate and

game the system.

Billionaires cannot stop themselves

from plundering the lower castes.

 

 

Making Merica Great Again's picture

Tesla shares are rigged. Stay the fuck away.

Fundies's picture

Shocking news. Watt will they do to generate more interest ?

RightLineBacker's picture

It's the old flim-flam thank you mam.

OccamsCrazor's picture

Same shit would happen here in the US, even though the subsidies aren't as large.  And solar and wind turbines would also not be in existence except for the very green fairy farts, if we eliminated government subsidies on that shit.  

 

Grandad Grumps's picture

So, what! IMO, without bank market-fraud and government (CIA, NSA) subsidies none of the internet 2.0 companies would exist. The whole powers structure of the west is corrupt.

SteveK9's picture

I don't mind subsidies to push this along.  Electric vehicles plus nuclear power is really a bright future for humanity and the environment.  Chevrolet has done an incredible technical job with the Volt and now the Bolt.  To produce and sell ... NOW a legitimate 238-mile range all-electric vehicle is an amazing achievement, one I didn't think we would reach this quickly.  They haven't been as effective at selling them.  But, to reiterate, the widespread acceptance of nuclear power plus EV's is going to reshape the World ... for the better in every way.  Standards of living will improve, the air will be cleaner ... and we can say goobye to the Middle East ... finally.

Xena fobe's picture

Send your check directly to Musk then and the rich Tesla buyers..  You can pry my ICE vehicles out of my cold dead hands. 

desertboy's picture

"That's right folks, step right up!"

Nuclear power; now there's the most subsidized industry in history.

FoggyWorld's picture

We haven't begun to see the total cost of nuclear power but watch as the older, falling apart plants start to get decommissioned.

PrivetHedge's picture

"nuclear power is really a bright future for humanity "

Not sure if serious.

Fancy a holiday in Fukushima?

ToSoft4Truth's picture

GM and Carrier too.  

forestgump227's picture

Zerohedge should write an article and say agricultural sales would implode if government subsidies stop, or that oil sales would implode.

 

What industry is not subsized? 

 

Another trash Tesla bashing article from a website that could not have been more wrong about Tesla. 

I bought Tesla at $28 and am laughing all the way to the bank.

 

Suckers

aloha_snakbar's picture

Then you should be thanking the American taxpayers who support the accidental billionaire welfare recipient, not ridiculing them, dumbass...

desertboy's picture

That's what you tell the people at the end of a pyramid scheme, which in this case, is the American taxpayer.

RightLineBacker's picture

Just look on the bright side.

If the gov subsidies create millions of battery powered autos that require frequent electric recharging then the coal and natural gas industries will boom.

Just as Trump promised.

wide angle tree's picture

My house air conditioner uses lots of clean energy too.

I want a government subsidy.

aloha_snakbar's picture

I heard Ewok Mushk also gets food stamps...

Robert A. Heinlein's picture

It's comfirmed, 80% of people below retirement age on gov subsidies would have to get a job.  

grasha87's picture

Jim Rickards is good on monetary policy, central banking, and geopolitics, but is seriously mistaken on free trade and comparative advantage. Free trade to him is like GOLD to Keynes: a barbarous relic. Here's why he is wrong: https://bunky1787.wordpress.com/2017/06/04/jim-rickards-free-trade-a-bar...

Stolypin's picture

When you figure in fossil fuel energy production and transmission costs to the car recharge station, 

there is no advantage at all using electric cars from an overall system perspective.  

 

personal109's picture

Exactly, but try telling a pee brain Tesla owner that. Their only concern is how good they look to their friends, neighbors or work colleagues owning a 100k car or how much Ponzi hyped tesla stock they own. A bunch of narcissistic assholes.

Mimir's picture

"Their only concern is how good they look to their friends, neighbors or work colleagues "

Do you seriously suggest, that only Tesla owners fit to that profile?

moorewasthebestbond's picture

Government Motors 2.0.

 

Now with extra flammability!

HoyeruNew's picture

and also

Halliburton andLockheed Martin and Boeing and and Blackwater(whatever their name is thse days) and the majority of the Military-Industrial complex companies suckling on the tit of Uncle Sam Yet ZH only mentions Telsa.

half of truth isn't truth, it's STILL propaganda.

PitBullsRule's picture

Lockheed and Boeing are making products for the government that nobody else can make, tesla's products are made by GM, Ford, Nissan, and Toyota, and most of them are better.

Boing_Snap's picture

Gotta wonder what the agenda is with ZH and their constant attacks of Tesla?

With all the largess that governments heap upon war, big oil, big pharma, and corporations in general, ZH is attacking the only government funding that will actually hurt the corporate cabal. The victim of Tesla's strategy is any piston driven engine, and any non-renewable power generation company out there, all of them are corporately controlled by globalist criminals.Tesla's plan to have decentralize power generation, removes the strangleholds the globalists have on us economically in this hydrocarbon based economy.

While any government hand outs keep us away from true capitalism, the reality is that we don't have capitalism right now, and anything that kicks the globalist controllers in the ass is a better use of government largess than feeding the beast as is the norm.

 

VWAndy's picture

 Typical lefty. Claiming victem status in fight club. lol

Boing_Snap's picture

Gotta laugh at the corporate lacky response......lol

There's a good slave.....lol

To note your error I'm a Libertarian....lol

PitBullsRule's picture

But its us tax payers that have to pay for those subsidies, and we're getting screwed because the Tesla driver gets an electric race car, and we still have to pay gas taxes for driving a normal car.  If they could get a Chevy Volt for 1/3 the cost, why are we subsidizing Tesla?  

Boing_Snap's picture

The Volt is a crappy car for starters, it runs the majority of the time on gasoline generation mode.

The thing about Tesla is that it's a complete renewable company, Tesla is more a battery and solar company, than a car company. With affordable Solar roofing tiles coming on line in the near future for Tesla, the average family can reshingle their house for same cost as regular tiles. When they tie in that solar the majority of their fuel and energy costs are eliminated.

Tesla will be breaking open the Trucking industry, with plans for electric trucks, and trains are being spoken about as well. Commercial buildings are also now making it possible for companies to go off grid entirely, with factories becomng power generation sites, and their transportation costs all serviced by electric off grid.

There's alot more to what Tesla is doing than the MSM and ZH are letting on,

Cheers,

yarpos's picture

"The Volt is a crappy car for starters, it runs the majority of the time on gasoline generation mode"

assertions/opinions not equal fact

todays world is full of "good enough" technology,  that is successful despite views of snobs and so called experts in various fields.


desertboy's picture

Oh - a battery company huh?  More like buying Panasonic's batteries and putting them in a box.  Tesla never developed a battery, period.

Boing_Snap's picture

Well maybe you missed it, but the giga factory they're building in Nevada is for batteries....lol

4-7 more are on the way.

Man-o-man these trolls just are as dumb as the day is long......lol

PrivetHedge's picture

Everything Tesla does is 'on the way'

It's a company of hollow promises running a hollow pyramid scheme of shares.

PrivetHedge's picture

The Volt's "gasoline generation mode" is no less efficient than your power stations + electrical distribution network'

And it's always there, right where you need it, in the car.

 

I'd rather have the engine running than a 6 hour wait to charge my Tesla, since Elon is too dumb to have used slot-in battery technology.

Ban KKiller's picture

Solar roofing tiles= economical fuel from algae. Works in the lab, that's it.