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.
FoggyWorld's picture

Right now those roofing tiles cost more than two and a half times what today's do.   How many Americans do you think will be able to pay for his gorgeous roofs that will cost $55,000 and up?

He prices things for very top percent and we should not be subsidizing things for ultra wealthy people.  The Chinese will rip him off and not ask for US government subsidies and the concept of film for solar will end up in We the People's hands.   And he isn't the only person working on this concept.

 

zvzzt's picture

Fair enough points and I think even most would probably agree. Still, major subsidies (and especially for large corps.) is corrupting. Even if the recipient has noble ideas (or long-term strategic benefits, such as a decreased economic elasticity to MENA), it is a very slippery slope to get on to - too slippery as fas as I am concerned. My two cents of course. 

desertboy's picture

So highly governement-subsidized "green" luxury goods for the well-to-do from a VC darling company are a payback for the little guy?  

Centerist's picture

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.

TSLA is one of the biggest examples of the corporate cabal.  Subsidizing any business is wrong, and TSLA is one of the best examples of why subsidies need to go away.

Tesla's plan to have decentralize power generation, removes the strangleholds the globalists have on us economically in this hydrocarbon based economy.

Tesla's power stations rely on power derived from hydrocarbons.  No "renewable" energy source actually renews itself.  Hydrocarbons create them and renew them.

anything that kicks the globalist controllers in the ass is a better use of government largess than feeding the beast as is the norm.

...which is exactly why subsidies to TSLA need ended.

Arrest Hillary's picture

We are equal opportunity .... gasohol sucks, Obamacare sucks, Tesla sucks .... it's funny .... Tesla was  supposedly a victim of evil Capitalism .... so let's honor him with a failed government program ?

PitBullsRule's picture

Maybe if he put pedals in that thing, the Danes would go for it.

yarpos's picture

The real measure will probably come next year.  Many sales would have been brought forward if the govt telegraphed the subsidy cessation well in advance.  Anyone vaguely intersted would have jumped while they could get their snouts in the subsidy trough.  Next year will reveal the true market interest.

JailBanksters's picture

Subidies = Corporate Welfare

The same thing would/will happen in the USA one day.

Subsidies means you "can" have Higher Wages and Lower Priced Goods, with subsidies paid to Corporations from your Taxes from your Higher Wages.

The USA is one of most susidized countries on the Planet, Food, Power, Oil, Gas, General Motors, Wal-Mart, DOW even Goldman Sachs gets subsidized.

Love competition, but when you can't compete and you have to Subsidize, well that's Capitalism.

You can't have Capitalism with Capital, and you can't have Capitol without Savers, and you can't have Savers without Employee's, and you can't have  Employee's without Jobs.

In effect subsidies is the worst political tool ever invented, and when it fails it will fail spectacularly.

 

 

Sandmann's picture

Denmark is in the EU.....it CANNOT levy a 180% import tax..........it is a REGISTRATION TAX.

tuetenueggel's picture

It´s all the same, the name of the child in not important. Tax is tax.

Debugas's picture

not just tesla - the whole world economy is on life support by the money printing

if not for the money printing the demand would fall at least in half on average ( not significant on basic necessities and huge fall for everything non essencial )

 

everyone in power with brains knows it

pparalegal's picture

What's this. The Danes backing off forced comrade socialism is good for you no matter what it costs?  This is a terrible omen. Who's next to get unfunded? I hear red alert sirens in Antifa gay pride feminist race baiting progressive land.

 

Silverado91's picture

Time to SHORT Tesla in the stock market. There's money to be made. And Elon isn't happy about it...

Anteater's picture

Coal Burners and Congress Critters outcapitalized Detroit.

And now the Orange Don can accept unlimited grift,

in return for 'goods and services', ha, ha, ha.

Yes, folks, America is on the MOVE!!

south40_dreams's picture

A tesla is a ticking lithium time bomb waiting to pollute some toxic waste dump thats worse than anything an internal combustion motor could cause.  I love how the supposedly earth friendly climate change crowd conveniently ignores this.  Heavy metals are the worst kind of polution.

Robert of Ottawa's picture

Lithium is the lightest metal Pratt. Howver, I do agree with the sentiment.

south40_dreams's picture

Look into the ingredients mixed into these batteries

custard's picture

I always say that if Companies can't produce something themselves without TAXPAYER assistance then they shouldn't be in business. The executives at Tesla are becoming wealthy at YOUR expense. Time to shut down ALL subsidies.

Last of the Middle Class's picture

GM shouldn't even exist from the crap they have sold and the scam they pulled in '08

 

Last of the Middle Class's picture

GM shouldn't even exist from the crap they have sold and the scam they pulled in '08

 

ludwigvmises's picture

Who will buy all those Elon Musk biographies when this pig implodes?

PrivetHedge's picture

Will it implodes? Elon has all the hallmarks of a government man working for a government financed company.

He has been chosen to be 'The One'.

The fact that deep down he's a narrow sighted simpleton who has never made any profit on his vanity projects is irrelevant, this really does appear to be a national man running a national company. He gets WAY more support than a normal CEO of a normal corporation.

My over-reaching view of him was set when he demonstrated a total lack of knowledge about the relation of a planet's magnetic field and it's atmosphere. Even an 11 year old with a casual interest should have known that.

Last of the Middle Class's picture

And with government intervention into Amazon's massive  price fixing and sourcing policy, they too will fail. What else is new? Is there anyone on the planet that isn't aware that is what the war against Trump is all about? Owning the Washington Post producing massive amounts of anti Trump propaganda? Ummm anyone anyone?

 

Last of the Middle Class's picture

Was watching Nat Geo the other night and Elon had launched his Mars Rocket. All the supposedly engineers were just tearful with joy as he rushed outside the bunker and breathlessly watched the rocket disappear into the sky. A father watching a baby being born. It was vile propaganda and turned my stomach to watch it put Musk on the "father of all space exploration" throne. Massive mind bending for more government money. If you can't spot the carney in that SOB you ain't looking. LMFAO~!

overmedicatedundersexed's picture

so how is tesla different from the "socialist model"?

how is it different from the Elite NWO..wealth and power in fewer and fewer hands.

crime even very big crime is still crime

solyndra on steroids

IENTJ's picture

I am truly sorry about TESLA ... Sorry about your device, Musk ...

https://youtu.be/trwN4NRIcw0

 

IENTJ's picture

SOLAR CITY == CIRCUIT CITY

archie bird's picture

As soon as the gub'mint pulls the plugs on coal, gas, oil, nuclear subsidies THEN they can pull the plug on electric car technology.  Until then, all you hypocrites crabbing about Elon and his attempt to save the world...can STFU

any_mouse's picture

Those who are out to save the world are not to be trusted.

You a buddy of Musk? You are on first name basis?

Please, end all government interference. Even if it means a Musk won't be able to get funding and tax dollars for his dreams of glory.

Nuclear was subsidized to produce weapons grade waste. Different beast.

Tax breaks and subsidies for coal, gas, oil, more profits for John D Rockefeller and the true owners of the government. Slave labor camps and Rockefeller's company towns had a thin veil of separation. Company scrip.

Crony Capitalism, corporate government partnerships, need to end.

Just because bad entities exists doesn't mean we must allow promotion of new entities by the same government.

SummerSausage's picture

What you mislabel as "subsidies" for gas, coal are actually depletion allowances that every company mining natural resources takes.

Subsidies are what "green energy" gets - wages people worked for confiscated by the government and handed over to special interests of their choosing.

Lefties are liars.

hedge4Gain's picture

Tesla is a government bate and switch, I want my tax dollars back.  Tesla is an illusion created by Obama and Elon Musk.  Donald J Trump should pull the government funding not only from Tesla but ethanol, solar  and wind energy all of these so called green energy sources that do more damage to the environment through their cycle of device creation - energy production - end of life waste.  The illusion of free and clean energy is it true bait-and-switch illusion created by our government to line the left wing Pockets with tax dollars.

Umh's picture

The "cycle of device creation" gave us CFLs in the stores just before affordable LEDS. My wife bought a couple of decades of CFLs. I wonder how many CFLs with their mecury content have ended up in landfills already.

Sapere aude's picture

Yes, and its not just on Tesla. It's on renewable subsidies too.

 

The UK was a prime example of abject stupidity the other day when it announced that for a few hours, renewables were producing a record 50% of the generated power...because it was windy and sunny!

They also announced this very misleading comment about it caused the spot price of electricity to drop by 10X...

It may have done, but it didnt drop for the Government who actually paid more than 10X that at up to 48p per unit, guaranteeed and index linked for the next 25 years!

For them it was abject stupidity costing millions, but again where that cost is never included in any comparison costs.

Then when you read it, it was from nuclear, wind, renewables and wood burners, but where the recent report comments that wood burners are not the green devices we were once led to believe.

Nuclear can hardly be described as green energy or renewable....its more like a dustbowl yellow, the colour all living things are turned to with nuclear waste and where there is still no safe solution for storing the toxic crap that comes out of it.

 

Then you read the story again, and it was only the production at mid day.

Then in another article the National Grid suggests UK produces over 70% of its electricity using renewables...WRONG.

In any event producing 70pc using renewables where the owners of that are being paid up to 48p a unit for what could have been bought in the market for 4.8p as the spot prices fell, doesn't seem a good deal for UK taxpayers, as instead of saving on the spot price for just energy purchased at that mid day price, UK taxpayers are paying through the nose for the subsidies where even if the spot price changes, their commitment doesnt

 

 

 

sheikurbootie's picture

Not to be Capt Obvious....have you every driven on European streets?  The town roads a really fucking small.  The average European drives a little piece of shit micro car. 

The subsides paid it forward and sucked buyers from later to buy now.

flrzero's picture

Denmark is a special case because of very high car taxes. First you pay 25% VAT and then 105% on the value (with VAT) up to ~14,000 EUR. Then you pay 150% on the remainder. It was 180% until 2015.

So, for example, a loaded Mazda 6 costs about $80,000 and the entry level Mercedes S class is about $220,000. Until recently (end 2015) one could buy a Tesla, nominally a comparable luxury car to a Mercedes S, at a favorable price. (Personally, I would much prefer both the Mazda and the Mercedes.) Starting in 2016 they phased in full taxation by charging 20% of the full tax in 2016, 40% in 2017, and so forth. However, in April they decided to retroactively allow 5000 tax free electric cars to be sold going back the beginning of 2017. Not only Teslas but also cheaper electric car sales have plummeted.

Norway also has very high taxes following a more complex formula including emissions, engine size, etc. But I think there is no VAT on electric cars and there are other benefits like the use of car pool lanes, no tolls/congestion fees, etc.

flrzero's picture

Denmark is a special case because of very high car taxes. First you pay 25% VAT and then 105% on the value (with VAT) up to ~14,000 EUR. Then you pay 150% on the remainder. It was 180% until 2015.

So, for example, a loaded Mazda 6 costs about $80,000 and the entry level Mercedes S class is about $220,000. Until recently (end 2015) one could buy a Tesla, nominally a comparable luxury car to a Mercedes S, at a favorable price. (Personally, I would much prefer both the Mazda and the Mercedes.) Starting in 2016 they phased in full taxation by charging 20% of the full tax in 2016, 40% in 2017, and so forth. However, in April they decided to retroactively allow 5000 tax free electric cars to be sold going back the beginning of 2017. Not only Teslas but also cheaper electric car sales have plummeted.

Norway also has very high taxes following a more complex formula including emissions, engine size, etc. But I think there is no VAT on electric cars and there are other benefits like the use of car pool lanes, no tolls/congestion fees, etc.

Kefeer's picture

We call that "getting screwed"; and this is exactly how they will force this electric crap upon the masses..making a real car (one you want) unaffordable.

Froman's picture

Tesla is a scam.  Musk will bank billions of taxpayer funds and the Tesla will go the way of the Edsell.  The Japanese auto makers have already developed a hydrogen fuel cell that can be mass produced.  Honda's first version (Honda Clarity) is already being marketed and sold.  The hydrogen fuel cells makes far more sense from a practical and environmental standpoint than Musk's over priced glorified golf carts especially in the United States where there has been a lack of any serious investment in the electical grid for the past 50 years or more.  

Kefeer's picture

Most of us on ZH already were aware of this, but it will not change since "green" is the new playing field of corruption for the globalists.  

wholy1's picture

Musk:  a parasitic, wall st pretty-boy, financial fraudster contributing WHAT to REAL P-R-O-D-U-C-T-I-V-E enterprise?  How about . . .  NUTH'N / NADA / ZILCH !  Whoever "it" ultimately bilks probably deserves it.

JOE BUDTZ's picture

We've had electric cars since the very early 1900s, and they never took hold except for some very special purposes.

The key problem is this: even today, there are no good batteries.

Not only is the huge battery for one of these cars very heavy - draining its capacity to perform and also wearing out tires and road surfaces faster (not exactly green, by the way) - but the charge held cannot in any way compare to the energy in a tank of gasoline or even diesel.

We just are not there technologically yet.

 

grasha87's picture

Jim Rickards has been attacking comparative advantage and free trade in his new book The Road to Ruin, but here is why he's mistaken:

https://bunky1787.wordpress.com/2017/06/04/jim-rickards-free-trade-a-bar...