June 24th, 2018

Will the Tesla actually make a difference?

By Letter to the Editor on April 19, 2017.

It has been reported that Tesla’s market capitalization is now the highest of all automakers, even higher than General Motors. This news will be bragging rights for the environmentalists for Tesla is the emerging U.S. manufacturer of the electric car. An analysis in the Los Angeles Times (2015-05-30) helps to explain the business success of Tesla.

Elon Musk, the leading entrepreneur in Tesla, “…has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.” His strategy has been to build a public-private financing model. The model includes government incentives — grants, tax breaks, factory construction, discounted loans and environmental credits to sell. And, it also includes tax credits and rebates to buyers. Large sums of private capital have also been invested.

His three companies have received government support estimated at $4.9 billion. Nevada has provided $1.3 billion in incentives to help build a massive battery factory near Reno. The company has collected more than $517 million from the sale of environmental credits.

Tesla buyers get a federal income tax credit of $7,500 and a California rebate of $2,500. The federal credit is capped at 200,000 cars. California has set income limits on buyers seeking the state rebate. To date, the buyers have qualified for an estimated federal incentive of $ 284 million and have collected $38 million in state rebates. Tesla owners have an average annual household income of $320,000. The current Tesla model sells for about $100,000. The timing of building a less expensive model of $35,000 to $40,000 is uncertain.

Musk was asked if the Tesla would actually make a difference to global carbon emissions. His response was, “Énot muchÉ” and “Éthey (the buyers) are helping to pay for the development of the low-cost family car.”

Larry Samcoe

Medicine Hat

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