Tesla's Having The Worst Day Ever As GOP Tax Plan Calls For Axing Electric Car Credit

Tyler Durden's picture

Tesla may be officially having the worst day ever.  One day after announcing its worst quarter in history, in which it burned a record $1.4 billion in cash (which is about $15.5 million every single day, btw)...

...a couple of GOP Representatives had to come along and propose a tax bill that would eliminate a key component on Tesla's business plan: taxpayer subsidies.  As SF Gate notes, each electric vehicle purchased in the U.S. is currently eligible for a $7,500 tax credit...a credit that has long served to artificially prop up a business that would likely not exist but for the generosity of taxpayers.

Tesla Inc., General Motors Co. and other major carmakers pushing to boost U.S. electric car sales were dealt a blow by House Republicans who on Thursday proposed eliminating a $7,500 per vehicle tax credit that has helped stoke early demand for the still small segment of the U.S. auto market.

 

If adopted, the repeal would take effect after the 2017 tax year, according to a summary of the bill released Thursday by the House Ways and Means Committee as part of a sweeping overhaul of the U.S. tax code that would eliminate some deductions and cut the corporate tax rate to 20 percent. The Senate is crafting its own version.

 

Automakers from Detroit to Yokohama are betting big on an electric future with plans to spend billions of dollars on new pure-electric models to be rolled out in the coming years despite limited sales to date. Availability of the credit has been capped at the first 200,000 qualifying vehicles sold by each manufacturer. No automaker has reached that cap yet.

Elon

Of course, it's not just Tesla that would be impacted by such a move as lower-end electric vehicles, like the Chevy Bolt and Nissan Leaf, target a consumer base that is even more dependent on tax subsidies to purchase vehicles that are not economically viable on a standalone basis and, quite ironically we might add, actually create more pollution than combustion-engine vehicles.

“That will stop any electric vehicle market in the U.S., apart from sales of the highly expensive Tesla Model S,” said Xavier Mosquet, senior partner at consultant Boston Consulting Group, who authored a study on the growth of battery powered vehicles. “There’s no Tesla 3, no Bolt, no Leaf in a market without incentives.”

 

Eliminating the credit will also impact other carmakers offering electric vehicles such as GM and Nissan Motor Co. Ltd., which according to the Alliance of Automobile Manufacturers collectively offer more than 30 electric vehicle models in the U.S. market. Carmakers are under pressure to sell vehicles in higher volumes each year under an electric car sales mandate administered by regulators in California. Ten other states also follow that policy.

 

That puts the auto industry "in the middle between contradictory government policies," Alliance spokeswoman Gloria Bergquist said in a statement.

 

"There is no question that the elimination of the federal electric vehicle tax credit will impact the choices of prospective buyers and make the electric vehicle mandate in 10 states -- about a third of the market -- even more difficult to meet,"said Bergquist, whose trade association represents a dozen automakers including GM, Ford Motor Co. and Volkswagen AG.

All that said, we're quite certain that Tesla will be able to call on the state of California to ramp up their so-called "Zero-Emission Vehicle (ZEV)" scam credits even more to help them offset this additional cash burn.

I'm referring to zero-emission vehicle, or ZEV, credits. California and several other states require that a certain proportion of the vehicles sold by an automaker emit no greenhouse gases. These cars earn the automaker credits, and if they don't have enough to meet their quota, they can buy extra ones from someone who does. As Tesla only makes vehicles that run on batteries and emit nothing, it usually has a surplus for sale.

 

The profit margin on these is very high, perhaps 95 percent. The implied $95 million of profit equates to about 58 cents a share. Tesla reported a loss of $1.33 per share this week -- beating the consensus forecast by 55 cents.

 

This isn't the only time ZEV credits have played a big role for Tesla. Looking back to early 2013, selling credits has given Tesla's earnings extra oomph in many quarters, likely taking them above consensus forecasts in some (on an implied basis, assuming that 95 percent margin):

But, until then...Tesla shareholders are not happy...

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El Oregonian's picture

A-n-n-n-nd POOF! It's gone....

IH8OBAMA's picture

I would like to put a Tesla on autopilot and drive it up Obama's ass.

 

Looney's picture

 

There’s a simple reason why Tesla’s production numbers are so dismal – the Tesla Plant was built to “look gewd” on camera, but without the slightest idea how a real-life production functions.

Here’s my old post from way back.

“There are Robots and there are Robots.

Amazon has thousands of small robots that can be easily replaced if they break down.

Tesla’s humongous robots are not as easily replaceable or repairable.

Replacing a hydraulics-driven part on heavy machinery takes a lot of time and effort.

Yesterday, I watched a documentary about Tesla’s plant – they don’t talk about it – but those huge robots are packed so tightly (and there are no redundancies) that a broken robot would need to be removed from the base, moved out, and replaced with another one. Meanwhile, the whole assembly line grinds to a halt.”

Looney

ParticularlyStupidHumanoid's picture

The headline should be "GOP SAVES THE ELIO!"

Escrava Isaura's picture

It’s clearly obvious that this tax plan is dead on arrival.

So will be Trump at the next election.

How can you be so sure?

Easy.

Health care ‘direct’ employment: 12,440,670

https://www.kff.org/other/state-indicator/total-health-care-employment/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

 

RAT005's picture

I admire the Elio and suggest subsidies be no more than what applies to a basic Prius. Battery operated vehicles only work in specific tightly defined uses where the battery is closely designed for the job. Like a shuttle bus or trolley and then powering the line is usually better yet.

 

Trying to make a battery bank as versatile as a fuel tank will never work.

Escrava Isaura's picture

I understand that.

But neither having kids can work in a finite planet……Unless the oldest we get is around 40.

 

 

 

VZ58's picture

Keep dreaming the dream little Braziliero. Meanwhile life passes you in the slow lane...

bamawatson's picture

....in urinal at rest area

Arnold's picture

I love the Elio.

https://www.eliomotors.com/
https://jalopnik.com/elio-motors-is-looking-to-raise-100-million-to-keep...
https://jalopnik.com/elio-motors-faces-500-000-fine-in-louisiana-for-vio...

No SUV survivability.
Limited visibility.
Most dangerous of all, self serviceable.

I bought my last Triumph two wheeler for about the same price.

ParticularlyStupidHumanoid's picture

You may not be aware of it, but SUV don't have semi-truck survivability.

John Kerry-Heinz's picture

Holy sh*t, check out the Net Change in the weekly and monthly Call options vs. Puts.  DEMOLISHED.

www.worryforme.com/temp/TSLA-OPTION-NIGHTMARE.JPG

 

davinci7_gis's picture

It's really easy to know if a company is or is going to be successful:

Check out how how many people (or systems) are using the product.

Look at how many cars are on the road today and tell me how many of them are running on electricity.

Now the day that they produce a viable, cheap fuel cell, that will be a different case all together!

Wrenching Away's picture

Fuel cells are neat and all, but who pays to build out a hydrogen refueling infrastructure?

gatorengineer's picture

Theres a dirty little secret that is supressed.  They have fuel cells that run on Nat gas....

Freddie's picture

Free Fed fiat money from the Rothschild Federal Reserve.  Elon is a chosunite.

Winston Churchill's picture

Its more fundamental than that.Money is a representation of energy at its base.

If they're not sellable without a large energy subsidy before running costs,the whole concept is

flawed.Not electric vehicles as was used in the past in low mileage,low speed milk float type

uses, or golf carts etc, but there in no free lunch with energy,just humans pitifull attempts

to manipulate it via fiat. Hard science vs. the pseudo science of economics.Just eroei applied

to something apart from oil, but those figures are scary as hell as well.Zirp and nirp are, and will

be ,directly related to declining eroei of oil.The current "cost" should not be in USD but in net joules per barrel.

Math doesn't lie,economists do.

Jethro Dull's picture

Yes, Second law of Thermodynamics is a bitch. This thing goes nuclear on way or another eventually even with ZIRP.

Escrava Isaura's picture

davinci7_gis : It's really easy to know if a company is or is going to be successful

Really?

How do you think we have the computer? The internet?

If it wasn’t for state capitalism ‘subsidies’ we wouldn’t have had the transistor, even less a computer. Forget the satellites.

Capitalism it totally unworkable, because some products and services can take 10 to 40 years to be developed and be profitable.

No private sector can wait this long. They will be bankrupted.

 

Overfed's picture

You're so full of shit. The government didn't invent, nor did it subsidize the invention of, the transistor or the computer.

Escrava Isaura's picture

Really?

In 1940’s, 1950’s, 60’s, 70’s, 80’s, and even in the 90’s all paid and subsidized by the government and the Pentagon.

MIT and many others universities got grants to teach engineers, built the facilities, and then built the first computers.

Internet was an extension of government and corporation’s communications systems that allowed people to communicate from diverse locations.    

 

Basic Science Can't Survive without Government Funding

 

not dead yet's picture

The government did invent the GPS which most people today can't live without. A great many inventions were created by the Defense, I mean War, Department. The government backed projects that private industry could not afford like most of the dams for flood control that give off cheap electricity and water for irrigation and human consumption. It was the government that supplied the money that created the space industry and the technology. You think Musk boy and the rest now getting into the rocket business would be there without the governments money creating all the tech and suppliers? Most of your drug companies that marketed new drugs for which we pay through the nose were invented with government money while claiming otherwise to justify raping the consumer. It was the government that electrified America outside the cities and towns which created huge numbers of jobs to electrify the farms and which increased and made safer food production. It was the government first through US Highways, passable roads between cities and towns up until then were almost non existent, and eventually created the Interstate System along with states and counties financing roads that put America on wheels.  All projects private enterprise could only do peacemeal if at all because there was no profit in them. Government haters, and the government gives them many reasons to hate them, blind themselves to the fact that govenrnment has spent your money to do great things that private enterprise could not do. The government planted the seed and private enterprise took over and created jobs, wealth, prosperity, and profits that fueled R&D for future advancements. Yet if the government were to collect royalties on the GPS it invented the clowns would be coming out of the woodwork foaming at the mouth about government "taxing".

daemon's picture

"The government didn't invent, nor did it subsidize the invention of, the transistor or the computer."

Interestingly, according to this article : https://en.wikipedia.org/wiki/History_of_the_transistor

" Legal papers from the Bell Labs patent show that William Shockley and a co-worker at Bell Labs, Gerald Pearson, had built operational versions from Lilienfeld's patents, yet they never referenced this work in any of their later research papers or historical articles.[3] "

Now , Julius Edgar Lilienfeld did much of his work in the university of Leipzig.

 

As for the computer, whether it be in Germany, England or the USA, it's invention and early development was greatly subsidized by governments ( WW2 ).

webmatex's picture

If it wasn’t for state capitalism ‘subsidies’ we wouldn’t have had the transistor, even less a computer.

 

Then again if we consider the number of patents which will never be used due to deep government interests were probably about even.

Good tech = bad

bad tech = good

No Time for Fishing's picture

As smart as Elon is I'm sure he bought Robots that don't break. 

I woke up's picture

Kill the ethanol subsidy too

mkkby's picture

The only welfare I want to see Musk collecting is the kind dirt poor people use to get groceries.

Ethanol and HFCS is bad too. Artificially putting too many acres (spraying the shit out if it with monsanto poison) into corn that's not needed for food.

Parabolic Sine's picture

Trouble in longville it seems.

gatorengineer's picture

Remember the old Spy vs Spy game, well this is the updated version Kike vs Kike....

Ntoxic8ingWave's picture

CO2 levels follow temperature, go do some actual research you global warming nuts.

Mike in GA's picture

The global warming nuts are waaaay past actual research, remember - "the science is settled!". 

Now they're into devising punishments for us settled-climate-science-challengers and would have banned free speech on the subject had Trump not been elected.

halcyon's picture

Finally.

Now squeeze Tesla's credit line and see Musk squirm.

 

Mark Urbo's picture

Butt fuck that POS Obama Leftist in the ass ~ take Tesla OUT !

Mark Urbo's picture

Butt fuck that POS Obama Leftist in the ass ~ take Tesla OUT !

Captain Nemo de Erehwon's picture

What?!? No more subsidies for new-age billionaires? Well, maybe the tax-break will make-up for that ...

Mark Urbo's picture

Tesla is BS

Electric vehicles are BS !

Burn it all down...

PlayMoney's picture

They already lose about $15k per car. So whats $22,500 per car? Just another endless round of fundraising. Easy for a wall street darling.

not dead yet's picture

The tax credit goes to the buyer not Tesla. Every gallon of gas you buy has taxes included which build and maintain the roads. Drivers of electrics pay nothing to drive on the roads. Both are major subsidies for the well to do. Every time we see an electric we should stop them and make them pay for using our roads.

A few months back Musk the lying, thieving, welfare junkie said they should end the $7500 subsidy because it was hurting Tesla not helping. What a load of bull. That and direct subsidies are the only thing keeping him in business and he knows it. This lying POS knows he's nearing the end of his gravy train as he reaches the limit while most of his competition has a long way to go before they reach the end of the buyer subsidies so he's pushing to end them for everyone for his benefit. When Musk was told to piss off when he wanted business from the government for Space X suddenly he got it. There is also a lot of competition for that business, for instance Jeff Bezos Blue Origin and Richard Bransons Virgin Galactic, so there is a bill languishing in CONgress to limit the competition which would benefit Space X immensely. Which means these congressman are doing Musks bidding not looking out for the taxpayers by ending the $7500 buyer subsidy. With Musks track record of throwing tantrums and getting what he wants it makes one wonder what kind of dirt he has on lots of politicians to get them to do his bidding. If the bill passes you can bet the end date will coincide with the calculated date Tesla will reach it's limit.

jimmy12345's picture

Gasoline powered cars produce more pollution than EV's.  The more EV's on the road, the less your gasoline will cost.  The more EV's on the road the less money the USA will send to Saudi Arabia and Iran which are big backers or radical Islam.  The more EV's on the road, they fewer Americans will need to die in the Middle East to ensure America's hold on the world oils supply.  Musk is trying to help the world, the Alt-Right is trying to desroy it.

DisorderlyConduct's picture

Oh please. Musk is trying to make a buck. And there's nothing wrong with that.

If he wasn't making coin on this deal he wouldn't be doing it. But don't pretend this is some noble quest for him - you can't possibly be that dumb.

jimmy12345's picture

Lol, Startup car companies have an extremely high failure rate so if Musk was trying to make money he would have stayed in the web space.   The stated goal of Tesla is to accelarate the adoption electric vehicles by several years.   Additionally, Tesla lets anyone use it patents free of charge.  Musk said that he wouldn't have started the company if the big automakers were serious about electric vehicles.  You should read the biography about Elon Musk or watch many of his interviews on youtube.   You obviously know very little about Musk.

jimmy12345's picture

Axing the tax credit will help Tesla since Tesla will it the 200,000 car cap this year.   Keeping the tax credit only helps the EV of other car companies.  Trump must be a Tesla fan!!!!