Charles Lane: Tesla's survival driven by tax subsidies
THESE are trying times for Tesla Motors. Its third-quarter sales and revenue disappointed the markets, causing a sell-off in its high-flying stock. Then a Tesla Model S burst into flames after a collision, the third time that's happened. Chief executive Elon Musk faces "crash and burn" jokes about both his car and his stock.
Tesla might survive this rough patch. Those skeptical of Tesla and the rest of the electric-car industry must acknowledge that Musk's company has built a nifty car and has stayed afloat longer than expected by many short-sellers who bet on its demise.
But Tesla's corporate fate is ultimately less interesting than the fact that so many people, especially progressives, have become so deeply invested in it -politically and psychologically, if not financially.
Tesla epitomizes the mutation of modern American liberalism. Once an ideology whose central concern was the plight of lunch-bucket working stiffs and oppressed minorities, liberalism is increasingly about environmentalism and related "quality of life" issues.
Framing such long-term challenges as climate change in apocalyptic terms, many "blue" Americans focus more on technocratic environmental fixes -solar energy, electric cars - than on practical solutions to the here-and-now issues of the middle class. Instead of coal miners and steelworkers, 21st-century progressives exalt Silicon Valley's young men (and women) in a hurry, urging taxpayer financing for their "green" business plans.
And so a man like Musk - a billionaire financed by Goldman Sachs pushing a flashy, battery-powered car priced upward of $70,000 - shared top billing with former President Bill Clinton and liberal think-tanker John Podesta at a 2012 Clean Energy Summit in Las Vegas hosted by Senate Majority Leader Harry Reid.
This version of green capitalism might be justified if it delivered the public goods it promises. Tesla's trickle-down business plan calls for sales of expensive early models to pave the way for an everyman electric vehicle later this decade.
But even if widely adopted, Teslas would have little impact on climate change as long as drivers have to charge their vehicles from a coal- and natural gas-fired U.S. electric grid. In May, JPMorgan Chase analysts calculated that the Model S's annual fossil fuel "footprint" is bigger than that of a Honda Civic hybrid.
Nor is there a case for electric cars based on their contribution to U.S. energy security. Thanks to increased oil and natural gas production, the country imported only 40 percent of its oil in 2012, down from 60 percent in 2005, according to the Energy Department. That trend is projected to continue.
Indeed, it was already underway on May 5, 2011, when Diarmuid O'Connell, Tesla's vice president of business development, hyperbolically told the House subcommittee on energy and power that "oil . . . is now the source of our greatest vulnerability in terms of both national and economic security."
Nevertheless, Tesla remains deeply dependent on taxpayers. Much has been made of the fact that, last May, the company repaid a 2009 Energy Department soft loan, totaling $465 million, that had enabled it to survive the Great Recession.
As The Washington Post's Steven Mufson reported, Musk capitalized on Tesla's first-quarter profit, its first ever, to engineer a stock offering whose proceeds paid back the government.
That profit, however, was accounted for by $68 million from a California state government program for zero-emissions vehicles, funded by a de facto tax on Tesla's competitors.
Tesla has logged an additional $62 million in such credits since the first quarter. It's also gotten $20 million in grants from the California Energy Commission.
Tesla's income from credits is expected to decline to zero soon, but every Tesla car sold in the United States still qualifies for a $7,500 tax credit - more in states that have their own credits.
Tesla's biggest overseas market is the world's fourth-richest country, Norway, where buyers get an $11,000 tax break plus $8,200 per year in free tolls and other perks, according to Reuters.
Of course, jobs - "green jobs" - are supposed to square the ideological circle for liberals, making taxpayer "investment" in Tesla and other environmentally friendly firms a "win-win" for plutocrats and proletarians.
Tesla employs 2,000 people at good wages. But others would have used the same resources to employ people, perhaps more than 2,000, if the government had not funneled them into Tesla - both directly through loans, emissions credits and tax breaks and indirectly by encouraging private investors to buy stock in a government-favored company.
Tesla's market capitalization, more than $17 billion, represents not only a possible government-aided stock bubble but also a huge societal opportunity cost.
Tesla's Model S is, no doubt, a cool car. Whether it serves any public purpose commensurate with the public resources it has absorbed is another question.
For now, all we know is that Elon Musk, backed by Wall Street and Washington, has built a very efficient machine for the upward distribution of wealth and income.
Lane is a member of The Washington Post's editorial board.