Guest essay by Eric Worrall
Tesla share prices have crashed in the wake of news that President Trump’s Republican administration is introducing a bill to abolish Federal tax credits for electric cars worth $7,500 per vehicle.
Tesla share crash amid Republican bid to kill off electric car tax break
Didn’t help that the automaker’s financial results also sucked
By Kieren McCarthy in San Francisco 2 Nov 2017 at 18:47
Tesla’s share price took a dive Thursday morning as Republicans in Congress revealed they were planning to kill off a US federal tax credit for electric vehicles.
The proposed House tax bill calls for an immediate repeal of the $7,500-per-vehicle credit: something that would have an immediate knock-on impact for Tesla given that it only produces electric cars.
Its share price fell more than seven per cent to about $296 apiece from Wednesday’s $321. The draft law emerged as the Elon-Musk-led automaker announced its worst-ever quarter, recording a $671m loss and admitting it had not met its production target for its new Model 3 car, producing just 220 of them against its 1,500 target.
Economists believe that the tax credit is a key driver for electric car sales, and cite the example of when the state of Georgia cut its $5,000 tax credit and saw sales of electric cars slump from 1,400 a month to just 100 a month in response.
…
Scrapping the leccy car deal will increase US tax revenues by $4bn, it is estimated. That’s a good saving seeing as the Republicans are desperate to balance America’s books while cutting things like the corporate tax rate.
…
Read more: https://www.theregister.co.uk/2017/11/02/tesla_share_price_drop_tax_break/
Its a little early to call the end of Tesla – Elon Musk over the years has demonstrated a rare genius for wheedling corporate welfare out of green politicians. Tesla shares have regained some of the ground they lost.
But this move could be the start of a larger trend. As I predicted in October, generous green subsidies are an obvious soft target for cash strapped governments.
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Elon Musk dumped all his Tesla shares recently, like a month ago
Does that count as insider trading? Is insider trading legal in the USA?
Don’t believe it without a credible reference. Musk is clearly not in it for the money. He bet all his money from the sale of Paypal on SpaceX and Tesla and nearly lost it all in 2008.
Quote from Business Insider “Musk has said several times that when Tesla first launched he actually expected the company to fail, so he originally provided all of the money himself, refusing to take money from investors.”
“I thought the probability of success was so low that I provided all of the money. All of the money just came from me personally. I didn’t want to ask people, other investors for money if I thought we were going to die because I thought we were. I invested entirely the money that I got from PayPal, all of that got invested into Tesla, Solar City and SpaceX,” (http://uk.businessinsider.com/elon-musk-shares-the-miracle-that-saved-tesla-2015-12?r=US&IR=T)
Anytime someone tells you they are not in it for the money, that is the strongest indicator that they are in it for the money.
“He bet all his money”
Do you mean , “all his accumulated government subsidies.” ?
In 2012 Tesla shares were about $30 and it was at one point the most shorted stock on the NASDAQ. I took unseemly pleasure in the thought of all those squeals of pain from folk aiming to profit from someone else’s failure when it went up by a factor of 10
I for one would love to see Tesla and anything else connected with the subsidy sucker, Enron Muskrat, crash and burn.
So you’re basically cheer leading the downfall of an innovative company that employs circa 25000 Americans? You’re a particularly vile piece of excrement aren’t you?
I feel sorry for workers who were deceived into thinking they had job security. The subsidies must be abolished, the damage they do to the wider economy is intolerable. But there is no doubt removing the subsidies is disruptive and painful for people whose livelihoods depended on those subsidies. This in my opinion has to be considered part of the harm which accrues whenever some idiot politician thinks they know better than the market.
Nobody likes getting the pink slip. But these folks know know that they are doomed. So better slowly walk away now instead of running later – stampedes kill.
Eric…Do you have any follow up to this article from Lefty Financial Commentator …BusinessInsider.
‘It looks like the state of California is bailing out Tesla
Wolf Richter, Wolf Street Jul. 17, 2017’
…The California State Assembly passed a $3-billion subsidy program for electric vehicles, dwarfing the existing program. The bill is now in the state Senate. If passed, it will head to Governor Jerry Brown, who has not yet indicated if he’d sign what is ostensibly an effort to put EV sales into high gear, but below the surface appears to be a Tesla bailout…This is how the taxpayer-funded rebates in the “California Electric Vehicle Initiative” (AB1184) would work, according to the Mercury News:…
…The [California Air Resources Board] would determine the size of a rebate based on equalizing the cost of an EV and a comparable gas-powered car. For example, a new, $40,000 electric vehicle might have the same features as a $25,000 gas-powered car. The EV buyer would receive a $7,500 federal rebate, and the state would kick in an additional $7,500 to even out the bottom line…and for instance, a $100,000 Tesla might be deemed to have the same features as a $65,000 gas-powered car. The rebate would cover the difference, minus the federal rebate (so $27,500). Because rebates for Teslas will soon be gone, the program would cover the entire difference – $35,000. This is where Senator Vidak ( Republican critic) got his “$30,000 to $40,000.”
That last sentence that California may cover the whole 35,000 dollar difference. Come On!
I know its Brown and California but if that was passed they may as well just give Musk the actual keys to Treasury. That would make Tesla the Approved (and Financed) State Car.
Any updates from our California readers?
I am not a fan of subsidies either but in this case they apply only to the first 200,000 vehicles sold (each manufacturer gets its own 200,000) after which they are phased out. See my comment above.
rovingbroker,
Noted.
And in California?
Do the Moonbeams power the state?
Or just grow socialistically straight (Ref – EU) cucumbers?
Auto
Fossil fuels are subsidized to the tune of 0.6 trillion dollars a year in the US alone. Frankly I’d rather my tax dollars spent at home rather than propping up the Saudi and Venezuela governments but perhaps you and your readers feel differently?
That 600 billion is based on the Social Cost of Carbon claims, which are the next thing to imaginary.
Bruce, when communicating numbers, one must posses a sense of proportion. You would have us believe that fossil fuels would get a SUBSIDY of about 3.2% of the entire US GDP. Not.
Bruce, those “subsidies” are nothing other than tax breaks, the same or similar to tax breaks that every other company in the country gets.
Why don’t you try learning something.
Dave, the standard moron line is that if it weren’t for our need to defend the middle east, we wouldn’t need a military at all. Therefor the entire cost of the military is a subsidy to big oil.
Then they add in every tax break the oil companies use. Either oil companies are unique in that they are not allowed to have tax breaks, or all money belongs to the government and by allowing you to keep some, the government is subsidizing you.
In order to calibrate your personal antipathies to something objectively measurable, care to name a more ‘vile piece of excrement’ than a businessman ripping off his profit from the shared cookie jar.
Easy peasy.
A union ripping off it members by selling out to management for a good old kick-back.
A politician selling a 20% of a nation’s resource to the enemy.
All green left progressives.
Socialists.
Do you need more?
Bruce @ur momisugly November 4, 2017 2:15 am:
You are a concrete-head (in both the literal conceptual and material metaphorical senses of concrete) aren’t you? Have you any idea of all the jobs which were lost, or worse, never existed, because of all the capital diverted to subsidy whores / regulation exploiters like Musk? Capital which otherwise could have gone to create jobs producing things to improve the lives of the great mass of those workers rather than virtue signal gilding a handful of plutocrats and their sycophants. It almost certainly won’t penetrate your dense skull, but for the benefit of others who may read this, I suggest a search on “what is seen and what is not seen”.
Fossil fuels are subsidized to the tune of 0.6 trillion dollars a year in the US alone. Frankly I’d rather my tax dollars spent at home rather than propping up the Saudi and Venezuela governments but obviously you feel differently.
And, just how are “we” propping up the (socialist-communist Venezuelan government? US isn’t buying oil from them, and they can’t sell enough to anybody to feed their people.
Just what are these “subsidies”? The same depreciation every other company on assets in the democrat-written code since the 1917 income tax was rammed through by them for Wilson? That total depreciation isn’t 2/3 of a trillion dollars, except in your propaganda machine (er, college class).
Bruce, is there any lie so stupid that you won’t buy into it?
Are innovations that don’t pay off worth the public money?
I feel sorry for the taxpayers who have paid billions of dollars in subsidies.
If you choose to work for a company that is dependent on government subsidies, then you need to remember that elections have consequences. One of those consequences is that the subsidies will come to an end, and you will be out of a job!
The only thing innovative about the company is how good it is at farming for subsidies.
Those 25000 will find work at other companies as other companies take up the slack produced by Tesla’s bankruptcy.
Heck, a good many of them could end up keeping their jobs as other companies buy Tesla assets.
The vile piece of excrement is you Bruce.
If you work for Tesla you destroy real jobs, Bruce, you numbskull.
Basing a business on a subsidy is problematic.
Altough very profitable, at least in the beginning. Cut subsidies on solar and wind energy and the owners of these plants and machines will soon find themselves in pretty hot water – but can’t get out w/o declaring bankruptcy. I expect that to happen with Tesla within 30 months…
Typo: missing ‘h’, although.
I for one can’t wait to see Tesla go bankrupt and take its Scalextric cars with it. Electric cars were abandoned in the 1890s as a bad idea and nothing has changed.
That isn’t exactly accurate. Electric cars were not ‘abandoned as a bad idea’. In 1910 38% of cars were electrics. What killed electrics was the development of electric starters & mufflers, as well as an expanded road infrastructure, making gasoline powered cars cheaper and more practical. An additional issue was Edison’s insistence on the use of nickel-iron batteries which proved to have a high internal resistance that made them incapable of powering a vehicle under certain circumstances.
There are abundant conspiracy theories about ‘Big Oil’ burning Edison’s lab and ‘bribing’ Henry Ford to kill the electric car.
http://mashable.com/2015/07/20/early-electric-cars/#3i2MdBPXUPqS
There are also conspiracy theories about tire companies killing early mass transit and a gunman on the grassy knoll.
Ordinary Americans are proud to see their tax dollars used to subsidize elites and preening greenies. We’re stronger together! Now back to regular programming…
EVERYBODY is getting this wrong, except Barrons. Tesla was already very close to losing their $7500 tax credit when they hit 200,000 EVs delivered, which would happen early next year – the credit is phased out – half $7500 for 2 quarters then half that for 2 quarters, then totally gone. I half expected Elon Musk to argue that the credit should be phased out altogether. Tesla Motors should be jumping for joy at the elimination of the credit- if extended, that would mean they would have to compete with the 120-odd EVs that automakers will start selling within the next 3 years – almost ALL of those dozens of automakers (except GM & Nissan) would have their 200,000 unit tax credits available, which provide them with a $7500 price advantage over anything Tesla sells. Tesla shares DID NOT crash as a result of the tax credit news. It crashed because of its much worse than expected losses, its cash burn rate, and another 3 month delay in Model 3 production rates.
Yes, exactly. But the tax issue is also a convenient distraction for Tesla to deflect attention from their poor performance. -Two gifts in one.
You can argue against the tax credit in two ways : one – it is lousy because it used taxes of hamburger flippers to help pay for millionaires’ second (or third) car. Or , you could argue based on the original intent of the law, which was NOT to subsidize EV buyers per se, but was intended to make EVs profitable (well, at least not big losers) so that automakers would create electric cars.
With more than 120 electric cars announced by the major world’s automakers , to go on sale within the next 3 years, no one can argue that the goal of the tax credit law has not been realized.
It probably helped achieve the goal, but the MAJOR cause of the vast improvement in the competitiveness of electric cars was due to one, and only one thing: the enormous price reductions of lithium batteries over the past 5 years, and, secondly, their comcommittant improvement in recharge times. Roughly five years ago, a large battery pack cost roughly $40,000+ or $600 per kWhr. Today the cost is around $150 per kWhr. And recharge rates have improved as well.
Tesla’s superchargers can recharge to 80% in about 30 minutes. Just recently Porsche announced that their CCS Combo 350KW chargers can recharge their upcoming Mission e electric car (out in 2018 or 2019) in less than half that – under 15 minutes. That charging rate, which will get even better, since CCS protocol is upgraded to 500KW as well, eliminates any concerns about
recharging slowing you down (while on trips). It also makes owning an EV when you have no ability to recharge at home, much, much easier to live with..
BZ Arthur, general I do not expect useful information. In this case I learned something new.
It’s not the job of the government to make start up companies profitable.
If they can’t survive on their own, let some left wing billionaire pick up the tab.
The super charges destroy battery life.
You can either charge fast, or have your batteries last 5 years.
You can’t have both.
I have already posted it several times. The cancellation of subsidies is just the last drop that makes the pot overflowing. Tesla was previously sentenced to death: a collapsed production, incapable CEOs, and last but not least an erratic chief executive. A mixture that would over-salt the food of every cook. It was a mistake to bring Tesla to stock exchange anyway: government support to find buyers for electric vehicles at all and supercapitalism on stock exchanges do not fit. There, a company has to gain on their own feet, otherwise it is a treat for the sharks.
Musk will be careful not to throw his own money after the lost one. Lately, he’s more likely to fancy flying to Mars than to drive his Tesla cars.
When Republicans move to lower taxes for the rich, it’s bad. When Republicans move to discontinue subsidies for the rich, that’s bad. Common denominator: Republicans are bad. Vote for Democrats, the party of Jim Crow.
Jim the crow….? In the land of unlimited possibilities, are vultures called crows?
https://en.wikipedia.org/wiki/Jim_Crow_laws
The reason why the government had to pass laws limiting the where blacks could do business, was because businesses were more interested in the color of their patrons dollar than they were the color of their patrons skin.
Large aircraft such as the 747 have a fuel capacity of 63,000 gal of jet fuel. This represents about 8.1 billion Btu of energy. Converting this into kW-h gives 2.4 million kW-h. At a conversion efficiency of 60% for NG, this converts into 4 million kW-h. Converting this into scf of NG you get 13,324,260 scf.
There is no way for any battery technology to pack this much energy for sustained flight. Liquid hydrocarbon fuels are the most energy dense fuel and therefore well suited for aircraft use. This has been studied a number of times and there is no substitute for liquid fuel.
There are ways to make renewable liquid fuels, but they all suffer from lower conversion efficiencies than from petroleum crude oil. This is mostly due to the need to convert solids or gases into liquids. Any change in state of a material consumes energy, and in the case of biomass conversions, it is a lot of energy which make overall energy efficiency low.
So as long as there is crude available, aircraft will fly on liquid fuel.
In my fictional world, I envision a material that can store the necessary quantities of energy as latent heat in a reversible phase change. The material costs nearly nothing to produce and solves the energy problem for the entire world. Since everyone has, ah, “free energy”, we now address what this means for human civilization and culture.
Just go straight to anti-matter.
Where can I buy lithium futures?
Trump’s presence has increased economic expectations and along with his policies has pushed unemployment down to 4.1%. The stock markets are well into record territory and still rising.
Chopping off the fat from ridiculous regressive programs, lopping off thousands of economy – killing regulations on industry, infrastructure projects, fossil fuel production, access to resources on federal lands and rebalancing fairness in international agreements will show the neo-left 5th column still in government, like the аррагатснiкs who calculate the cost-benefit of government policy, and the lapdog MSM where the tax cut money will come from! It’s not a zero sum game after all. it’s… errm.. like business. Wealth can be created!! (and wisely managed).
So what kind of ‘experience’ in government were y’all thinking that the Pres should have? That of Nancy Pelorosaurus?
http://www.nhm.ac.uk/discover/dino-directory/pelorosaurus.html
No, the share price dropped because Tesla’s quarterly report and the deteriorating updates on Model 3 production ramp up were considerably worse than Wall St. expected. Note that the stock was doing badly in after hours trading after their report came out but before the news about the tax change was known.
On the other hand, early elimination of the tax deduction should actually help Tesla. Since the deduction ends after the first 200,000 cars a given manufacture sells and since Tesla has sold far more electric cars than their competitors, but in much higher end models that are less price sensitive, if the current rebate continues as is, Tesla will soon be in the position of having to sell their most price sensitive and largest market model with a $7500 price handicap relative to their newly emerging competitors. If the deduction is eliminated now, they get a reprieve from that handicap. It’s bad news for GM, VW, Nissan, etc. though.
The conveniently (for Tesla) timed news about the tax change was just an opportunity to deflect blame for the souring Wall St. mood from their poor financial and production performance.
That’s not a crash, it’s a 10% drop, which improved to a 6% drop.
Stock price is dependent on how they improve from delivering 1/4 of 1% of orders in a year which is their current pace(260 Model 3 in the last quarter) to 100% of orders which is the predicted rate for sometime in 2018.
Look at the 1 year and 5 year trend. This article is very much like the abuse of numbers done by climate alarmists.
There seems to be some confusion between having an idea and having a good idea.
For example, an idea proclaimed in luxury car advertising is comfort and handling. The last new car we purchased to replace the family mini-van was a 2007 Corolla. It handles just fine and my wife thinks it is a luxury car.
The car is green too! That’s the color. I still think we deserve a $7500 tax credit.
I think BEV are a good idea for countries that import 100% of oil and get a large share of electricity from nuclear. France and South Korea are example that also export nuke plants.
It is in their national interest to subsidize BEV. It is not in the interest of the US.
France and S. Korea are also small countries.
speaking of subsidies, can you
start making fossil fuel producers and
consumers pay for the damage
done by their pollution?
it’s about $200 billion a year now, lots
of it in health care.
i mean, everyone here wants a truly
free market, right?
Scraping the barrel there crackers, that line’s been done to death and won’t fly. What is the cost in human misery and premature death of denying people access to cheap energy?
“it’s about $200 billion a year now, ”
Stop yapping such total and absolute balderdash. !!
Tell us you are NOT a fossil fuel user…..
You really are a child-minded HYPOCRITE !
What pollution?
The exhaust of most cars in most cities is cleaner than the ambient air.
The CO2 they put out is good for the planet.
Eric…Further to my posting. The bill in California was The (AB1184).
California’s ‘Tesla’ Bill Dies In State Senate…
Sep 5th 2017 From SeekingAlpha. Donn Bailey.
The “Tesla” bill is done…Intended as a boost to BEV sales in California, it went too far in support of one company.
With no new changes, current programs will offer only minor support for EVs.
The California Senate on Friday enacted changes to the proposed legislation that effectively ended the bill….When the wording was reworked to include all electric vehicles with BEVs heavily favored in the calculations, it was dubbed the “Tesla” (NASDAQ:TSLA) bill…
Incentives for zero emission vehicles (ZEV) play a major role in pushing buyers toward further adoption of EVs….Hong Kong allowed a tax credit program heavily favored toward pricey EVs such as Tesla’s Model S and X to end on March 31, 2017. Tesla’s April sales in Hong Kong were reported as zero, none.
In the state of Georgia the end of a $5,000 state tax credit in July 2015 pushed EV sales off a cliff. Sales dropped from 1,426 registrations in July to 242 the following month, a decline of 83%. Efforts to revive the credit has been unsuccessful to date. Such rich tax credits favor the wealthy and that angers many legislators for better incentive distribution. At one time, Georgia had the second highest number of electric vehicles behind California with about 25,000 at the end of 2016……..The issue in California on AB 1184 really seems to have come down to why should a state incentive be geared toward a company producing a very limited number of vehicles representing a very small number of recipients. Had the program been approved, $500 million annually could have been shared by as few as 33,000 buyers receiving the maximum of about $15,000. Buyers could have purchased a $35,000 Model 3 for about $20,000, the cost of an ICE Honda Civic…
Tesla increasingly talks about how much money their vehicles save over gas guzzling ICE vehicles. Why are those savings not enough to justify a purchase? By mid-year 2018 Tesla buyers will be facing a 50% reduction in the current $7,500 federal tax credit just as Model 3 production is approaching full steam….When companies like General Motors (GM) just delivered a record 328,425 units in China in August (bringing their 2017 through August total to 2.38 million units) without incentives, why are U.S. taxpayers providing $7,500 incentives to a company with total global deliveries of less than 80,000…This should be the point in time where logic returns and the Tesla share price falls to where it should be when compared to power house companies like GM that sell millions of vehicles and make billions of dollars in profits.
A Tesla Owner Speaks
By Eric Peters
Eric Peters Autos
November 4, 2017
https://www.lewrockwell.com/2017/11/eric-peters/a-tesla-owner-speaks/
I’m not an owner but there’s a tesla in my area — ugly and unimpressive.