
Elon Musk's companies are fueled by government subsidies - keithly
http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html
======
sandstrom
I don't disagree with the main point, that the three companies has benefited
from subsidies. But it's framed as if this is unique, where in reality you'll
find subsidies in these (and many other) industries.

# Cars

GM, Chrysler etc. bailed out for $85B. Sector subsidized in other ways too.

# Space

Most of the space industry is paid for by various governments (some satellites
are the only exception). NASA is about half of SpaceX revenue, certainly a
large chunk.

# Energy

IMF recently released a report[1], where fossil fuel subsidies are estimated
at $1.9 trillion. Other types of energy are subsidized too, solar in China,
nuclear in France, etc.

[1]
[http://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf](http://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf)

~~~
smoyer
Regarding your comment on energy - I hadn't thought about that but the worst
of the fossil fuel subsidies has to be turning large portions of the corn crop
into ethanol then ruining the performance (and sometimes internal parts) of
our internal combustion engines. It's truly the worst of both worlds!

~~~
mikeash
In my opinion, the worst by far is the implicit subsidy where fossil fuel
users are allowed to pollute without paying for the damage caused by that
pollution. If you accounted for that fully, renewables would be cheaper today.
Coal pollution alone causes something like one million deaths _per year_. It's
like a big war that never stops. That's not even counting the potential deaths
and disruption from climate change.

Fossil fuel users poison our land, air, and water without consequence and
without paying for the damage, but somehow it's the guy making solar panels
and electric cars that everybody complains about.

~~~
smoyer
Until the late '60s or early '70s, no one worried about the pollution so long
as the economic engine was running strong. There were clear days that you
couldn't see half a mile in Pittsburgh PA [1], and entire rivers of volatile
chemicals catching fire [2]. We've done a lot to curb those excesses but I
agree with your primary sentiment. Why pollute at all if we can avoid it?

Interestingly, China's current economic growth is also fueled without
consideration of the environment. You can still travel on coal-fired steam
locomotives ... and they're not historic excursions but rather new technology.

We also have to look at renewable combustibles as some people will claim
they're not dependent on fossil fuels but they're still contributing to carbon
release when burning wood (or wood pellets) as fuel.

[1]
[https://www.google.com/search?q=pittsburgh+steel+mill+smog&b...](https://www.google.com/search?q=pittsburgh+steel+mill+smog&biw=1238&bih=897&tbm=isch&tbo=u&source=univ&sa=X&ei=BTdqVdyXB4uqgwSF-
YDICQ&ved=0CCoQ7Ak)

[2]
[https://www.google.com/search?q=cleveland+river+fire&sa=X&bi...](https://www.google.com/search?q=cleveland+river+fire&sa=X&biw=1238&bih=897&tbm=isch&tbo=u&source=univ&ei=UDdqVce6OMWrNsfzgKAJ&ved=0CB4QsAQ)

------
11thEarlOfMar
IIRC,

\- Tesla re-paid a 495 million government loan 10 years early.[0]

\- Musk personally invested $100 Million in SpaceX

\- Musk personally invested $275 Million in Tesla[1]

[0][http://money.cnn.com/2013/05/22/autos/tesla-loan-
repayment/](http://money.cnn.com/2013/05/22/autos/tesla-loan-repayment/)

[1][http://www.businessinsider.com/elon-musk-
borrows-150-million...](http://www.businessinsider.com/elon-musk-
borrows-150-million-to-buy-tesla-2013-5)

I don't consider Musk to be mooching off of the government. He's put
everything on the line.

~~~
calibraxis
The entreprenurial government takes risks, and once in a while succeeds so
wildly that the company can pay off the loans quickly.

"Tesla’s management knew that if they couldn’t get the government’s money at 3
or 4 percent interest, their next cheapest source of capital would cost 10
times more, a whopping 30 to 40 percent annually. [...] And if the government
had wanted to bargain like a real venture capitalist, Tesla’s desperate need
for cash gave the feds the power to demand options on half the company’s
stock, or more."
([http://www.slate.com/articles/business/moneybox/2013/05/tesl...](http://www.slate.com/articles/business/moneybox/2013/05/tesla_is_worse_than_solyndra_how_the_u_s_government_bungled_its_investment.html))

Important to deflate startup myths: corporate moochers love how government
welfare "socializes the risks and privatizes the rewards."
([http://www.project-syndicate.org/commentary/government-
inves...](http://www.project-syndicate.org/commentary/government-investment-
innovation-by-mariana-mazzucato-2015-04))

------
lordnacho
Any mixed economy is riddled with subsidies. Together with taxation, it skews
incentives from whatever they were without, and redistributes resources in a
way the market would not. (Whether you think that's a good thing is
political.)

\- How many people would be getting degrees without government grants of some
sort?

\- Tax relief on debt is huge for corporations.

\- Tax relief on mortgages is huge for individuals in many countries.

\- Government itself has to spend money in one place and not another.

Of course there is the question of whether he gets more benefit that your
average Joe from the largesse of the government. To that I'd say he does, but
the benefits to everyone else of what he's up to are wide ranging but thinly
spread.

------
danmaz74
TL;DR: "Subsidies are handed out in all kinds of industries, with U.S.
corporations collecting tens of billions of dollars each year [...] and the
incentives for solar panels and electric cars are available to all companies
that sell them.

[...]

But public subsidies for Musk's companies stand out both for the amount,
relative to the size of the companies, and for their dependence on them."

------
kefka
And? So is gasoline and petroleum products. And so is corn products through
ethanol, which is legally mandated to be in fuel at 10% for no good reason.

~~~
adventured
Not a great comparison.

The US doles out $15 to $20 billion annually toward subsidies for fossil
fuels. $4 to $5 billion goes to the oil industry.

Exxon and Chevron paid _$120 billion_ in income taxes in just the last three
years. US oil majors pay among the highest corporate tax rates on earth. Exxon
and Chevron are getting about $1.3 billion in tax breaks per year combined.

~~~
brianobush
Exxon and Chevron paid those taxes on actual earnings. As soon as Tesla starts
profiting, then they will owe taxes as well.

~~~
adventured
Of course, and the point is that the fossil fuel industry in the US more than
pays its own way.

Should the US Govt. stop subsidizing fossil fuels? I think so. However, many
of the subsidies that companies like Exxon or Chevron claim, are general
industrial / manufacturing tax breaks, that are available to any industrial
firms. Those two are doing $600 billion in sales, and claiming $1.3 billion in
tax breaks, it's an almost comically small number compared to the taxes they
pay and the scale of their businesses. I don't think there's any legitimate
gripe to be had with the weight the US oil industry is carrying in terms of
paying a fair sum in taxes.

------
stegosaurus
This is just daft.

Supermarkets are fueled by 'government subsidies'; the poor get welfare and go
off and spend there.

Freight companies are fueled by 'government subsidies'; the roads are hardly
paid for by them solo. Oh, and the supermarkers they are delivering to are
fueled by 'government subsidies'.

My grandfather was a truck driver. He was fueled by...

And so on. The government is supposed to support Good Things (or at least get
out of the way of them). The way that the media seem to be obsessing over
spending recently is really rather silly.

~~~
justinmk
It turns out that when the government draws a bunch of taxes and then spends
it, markets get distorted. Then the government takes credit for anything good
that the markets do with the money, and opportunity cost is ignored because
it's incalculable.

~~~
Brakenshire
One man's market distortion is another man's pricing in of manifest but
indirect costs.

To take an obvious case, it might be very cheap for my neighbour to heat his
house with coal. Then one day laws are introduced which say he has to abide by
emissions standards, and in order to do that, buy an expensive clean-burning
stove, and expensive specially refined low-sulphur coal. If that ends up
making it cheaper to use natural gas instead, no doubt the coal company (and
the neighbour) will say the rules represent an artificial distortion of the
market. But I would say the rules are there prevent him transferring the true
costs of burning cheap coal onto my family (and the other families nearby) and
their health.

------
hackuser
This thread's lack of comments by libertarians is striking. It gives the
impression that some of them (I don't know who) are not opposed to government
taxes and spending in principle, as they often claim, but to government taxes
and spending on things they don't like -- which isn't a principle or argument,
it's just a self-centered complaint.

It reminds me of people who talk about freedom as a principle, but what they
mean is freedom for themselves.

~~~
dnautics
Because it's a pointless argument. The government is so involved in the
economy that marking the point of entry for subsidies is arbitrary and losing
game for libertarians, because a progovernment argument can get as no true
Scotsman on any libertarian position

~~~
dnautics
For example take this jerk Bolden who turned the nasa-spacex relationship into
a measuring contest

[http://gizmodo.com/nasa-says-nobodys-getting-to-mars-
without...](http://gizmodo.com/nasa-says-nobodys-getting-to-mars-without-its-
help-1698709523)

Now we know what he means, that he thinks there's no way that musk will sink
the acrued capital of spacex and go to mars.

But even if he's wrong and elon does just that he's already won the argument
because spacex is a government contractor and there has been government help
nevermind that spaceX has saved NASA so much money

------
api
The entrepreneur who most closely resembles a Rand hero couldn't have done it
without government loans and subsidies. That should tell you something.

Markets do some things very well. Hard core innovation isn't among those
things. If anything, really deep and difficult innovation requires shelter
from market forces, since market forces always pull toward short term thinking
and delivering what people already want. There is never a market for something
genuinely new-- such markets must be bootstrapped.

------
smoyer
I hear a lot of sour grapes in this article ... the only part worth discussing
is whether SolarCity and Tesla Motors can reach self-sufficiency before the
funding is removed.

Governments provide these sort of grants specifically to encourage certain
behaviors. I don't think Musk is the only one pursuing these credits, etc.,
but perhaps he's better at it than most? His only real advantage is that he
doesn't have the baggage (bureaucracy, history, etc) of the entrenched players
... they could, in theory, partake of the same government largess.

~~~
Shivetya
Well the question is, can Tesla survive to make the affordable EV they
promise? Do they even have the cash to build out the factory to support that
car in any volume? Can they find new tax credits to shore up the bottom line;
its been suspected the battery swap station was only for a specific tax credit
and there still is only one station and its operational status is
questionable.

Love Space X, think Solar City is a great idea, but not keen on Tesla simply
because they seem hell bent on having EVs that are not affordable and each
improvement seems aimed at speed performance numbers instead of distance. I
was really hoping the D was going to be for increased range but instead it was
0-60 first and AWD second.

edit: after reading up on the home battery offerings they really aren't that
impressive... I need to dig up the articles that revealed all of its short
comings

~~~
greglindahl
Tesla needs to raise money to make the affordable EV in high volume. Many of
the companies we discuss here are in the same situation.

------
andrewstuart2
Subsidies are sometimes the only way that amazing things like this can happen.
Extremely rare opportunities are often expensive to take advantage of. Without
spreading the cost the way a nation-state can, there might not be enough
people willing to support efforts to, say, get GPS satellites into space and
enable entirely new industries and technologies.

Sure, it might not be with the explicit support of every taxpayer who
contributed, but that will happen in every government just as it will happen
in a family trying to decide where to vacation.

I, for one, hope that subsidies continue to go to those who can take us new
places. As long as it's not purely because it's some congressman's nephew's
new company.

~~~
mempko
Then shouldn't the company be public and beholden to us?

~~~
vonklaus
It is beholden to "us" as much as the us gov't is beholden to us. That is,
somewhat loosely in some situations the counterparty can extract some sort of
its will on the enterprise.

------
declan
I don't think it's a surprise that Tesla would not exist without government
subsidies (I say this as someone who thinks the Model S is an excellent car).
From a piece in today's WSJ:

[http://www.wsj.com/articles/the-savior-elon-
musk-1432938547](http://www.wsj.com/articles/the-savior-elon-musk-1432938547)

 _...Tesla likely might not even exist without a former State Department
official whom Mr. Musk hired to explore “what types of tax credits and rebates
Tesla might be able to drum up around its electric vehicles,” which eventually
would include a $465 million government-backed loan...

In 2017, he plans to introduce his Model 3, a $35,000 car for the middle
class. He expects to sell hundreds of thousands a year. Somehow we doubt he
intends to make it easy for politicians to whip away the $7,500 tax credit
just when somebody besides the rich can benefit from it—in which case the
annual gift from taxpayers will quickly mount to several billion dollars each
year..._

~~~
mikeash
That part about the $7,500 tax credit is rather ignorant. As currently
structured, it's limited in the number of times it can be applied to vehicles
from any given manufacturer. After 200,000 vehicles sold, the credit drops off
rapidly and then disappears altogether. If Tesla succeeds in their goal of
selling hundreds of thousands of Model 3s per year then the credits will
quickly expire for them and the ongoing cost to taxpayers will be zero.

The law could conceivably be changed, but the odds of that seem remote.

------
JulianMorrison
It looks like the government is getting value for money then, compared to
where it usually parks its cash. Thumbs up, good job, carry on.

------
InclinedPlane
In regards to SpaceX that is simply a mischaracterization, they do not receive
subsidies they have contracts with the government. SpaceX received money from
NASA to help develop its Falcon 9 rocket, but this is little different than
other procurement programs, and was just a component of a large ISS cargo
delivery contract, the bulk of which is a straightforward deliver cargo get
paid / don't deliver cargo don't get paid system.

~~~
dylanjermiah
And SpaceX has been profitable for the last 6 years.

------
WalterSear
Good. I hope he gets as much help as possible.

~~~
mempko
Then shouldn't his companies become public where we get the profits instead of
him?

~~~
WalterSear
In an ideal world, there wouldn't be companies, we would all work together. We
don't, and our society is instead organized along capitalist premises. As
such, the government support parts of the market that we feel need
encouragement, and ostensibly stays out of the way otherwise.

You can agree or disagree with the premise, but that's how we do things. There
are many, many vastly more egregious cases of privatizing gains and
socializing losses than electric cars and reinventions of the energy network.

------
vonklaus
Yep, thank god the government (state and federal) are actually investing in
something positive. I am glad there are subsidies for clean energy (production
and consumption) and the development of cost effective space transportation.

When one looks at the Gov't balance sheet, the opportunity cost of these
investments is amazing. The outflow is such a drop in the bucket vs. the
potential (and current) value that is is a fucking no-brainer.

------
manigandham
A lot of the time "subsidies" aren't actually money or help given to companies
but rather what they have decided to not tax.

That's basically saying we could charge you infinity, but since we didnt, you
have infinity subsidy.

Edit: To the downvoters: this is what "incentives" are when considered in tax
terms.

~~~
sanderjd
I think a tax advantage can be considered a subsidy only when others are
actually taxed more due to not receiving it. Nobody is taxed at infinity, so
nobody who isn't charged infinity has received infinity subsidy. On the other
hand, it might make sense to consider things like the mortgage tax deduction
as a subsidy for home ownership, because people without mortgages really are
charged more. All of this is arguable of course, but I think it's in line with
the _spirit_ of the word "subsidy" to think of it this way.

~~~
manigandham
> I think a tax advantage can be considered a subsidy only when others are
> actually taxed more due to not receiving it.

Wouldn't that be everyone? Unless you mean they increase the tax rate for the
others while reducing yours... but net comes out the same.

My point is that there usually isn't a standard to these, the government can
claim all kinds of subsidies because it's saying that's the amount they aren't
charging (even if that amount was never to be charged to begin with).

------
foota
Shocking, government uses tax payer money to invest wisely in the future.

~~~
touristtam
"The payoff for the public would come in the form of major pollution
reductions, but only if solar panels and electric cars break through as viable
mass-market products. For now, both remain niche products for mostly well-
heeled customers."

I don't know. It seems that Tesla is missing an opportunity for building an
empire like Ford did.

~~~
JulianMorrison
Notice how the price of a Tesla car roughly halves at each major iteration?
Now project the line out into the mass-market price range.

~~~
touristtam
Tesla cars are still comparing to BMW serie 3 and AUDI serie 4, but those are
cheaper and easier to refuel.

And an affordable car like the Ford Model-T in today's world market would be
like a Dacia Logan at just over 31k LEI
([http://www.dacia.ro/](http://www.dacia.ro/)) or a FIAT Palio at just over
27k BRL
([http://www.fiat.com.br/carros.html](http://www.fiat.com.br/carros.html)).

------
revelation
_The figure compiled by The Times comprises a variety of government
incentives, including grants, tax breaks, factory construction, discounted
loans and environmental credits that Tesla can sell. It also includes tax
credits and rebates to buyers of solar panels and electric cars._

Right. Along this kind of thinking, we can also add the Iraq war and the
unmentioned trillions in subsidies that accrue when you would actually charge
a market price for environmental damage and add all that to Shells
liabilities.

------
smrtinsert
"He definitely goes where there is government money," said Dan Dolev, an
analyst at Jefferies Equity Research. "That's a great strategy, but the
government will cut you off one day."

As opposed to military spending, where persistent hundreds of billions are
spent without anyone giving a damn.

------
paulsutter
I don't see any reason to get offended by the accusation, regardless of
whether you agree or disagree.

Could anyone make more effective use of tax dollars than Elon Musk? If
anything, allocate more public funds to him.

------
pjkundert
What? Central planners cause unintended consequences with their meddling?

~~~
lkbm
What's unintentional here? This looks like exactly what we want to achieve.

------
SQL2219
see this post.
[https://news.ycombinator.com/item?id=9622250](https://news.ycombinator.com/item?id=9622250)

------
GeneralMayhem
News flash: Policies meant to encourage growth in high-tech clean energy are
encouraging growth in high-tech clean energy!

This isn't the first time this has been trotted out as an indictment of Musk,
and it certainly won't be the last, but it's _really goddamned stupid._

~~~
kiba
If they actually properly price the negative externality into objects like
gasoline, there wouldn't be needs for government subsidies of clean energy.

~~~
iamcurious
That solution is more elegant, but it requires more political finesse.
Measuring the external costs raises many difficult questions. What to do with
that money raises many more (hopefully not as difficult) questions. It is also
a more general solution, which naturally threats more interests. All this
makes it take longer to implement and makes a lot more people interested in
prolonging it even further. Which raises costs and drives the best talent
away, and makes it more likely the project gets killed. Throwing some pocket
change to a few talented individuals and hope for the best is nasty hack, but
sadly we lack skilled and properly motivated politicians to do much better.

------
comrade1
Don't forget the prison labor too.

[http://thefederalist.com/2015/03/04/not-content-with-
enormou...](http://thefederalist.com/2015/03/04/not-content-with-enormous-
taxpayer-subsidies-elon-musk-turned-to-prison-labor-for-cost-savings/)

------
alfl23
This is a very poor interpretation of what actually happens. Elon explained it
better himself in an interview. The gov isn't exactly signing a blank check
for them, instead it's subsidising by allowing tax credit on land, assets and
revenue.

First and foremost, do you really think the American tax payer is doing a
greater favour to Elon than Elon is doing to the entire world by moving the
whole lot of purely eletrical power?

This reporter is an absolute imbecile to use such titles, market pleasing as
they are. If Elon wanted to get rich he would buy an island and sunbathe for
the next 40 years. He's already rich.

With respect to the amount of good done, I urge this reporter in particular to
join TMZ and keep up with the Kardashians.

~~~
droithomme
It's fascinating because literally every single thing you have said is a lie.

Tesla is not profitable and is massively subsidized by its competitors and the
taxpayers. They make a product that causes massive devastation to the
environment through toxic lithium mining, and which is astonishingly expensive
and can only be afforded by the ultra rich, and then only with subsidies paid
for by the poor and middle class. Furthermore, these so-called cars have off
the shelf Panasonic batteries that only last a few years before they have to
be replaced at extravagent cost.

You call the reporter of the truth an "absolute imbecile" because using ad
hominem arguments is the last refuge of a brain dead moron with no facts.

~~~
mikeash
Wow, I really hope this is satire. I don't want to live in a world where
somebody can write that last paragraph seriously.

------
VaedaStrike
He's providing such extremely high value and he could make it without them. If
anything he's redeeming government expenditures that generally have low
returns into something that actually does something amazing.

