Who doesn't like government subsidies? Usually, the government is fond of taxing our income in one way or another. But sometimes they also aid some citizens and industries by giving them subsidies or discounts.
And who would have a problem with lapping up these benefits?
The answer is Elon Musk. Yes, the Technoking of Tesla recently said in an interview with the Wall Street Journal that the government should cancel all subsidies.
What’s even more interesting is that Tesla is a huge beneficiary of these subsidies. So why is it putting its own foot to the axe?
The Richest Man's POV
The US' President Joe Biden has introduced a new bill worth almost $2 trillion that has several measures to boost the country's infrastructure.
But Musk's problem is with a specific section of the bill that was added to increase the adoption of electric vehicles (EV). The provision will give EV buyers a $7,500 tax credit (amount which can be deducted from taxes). If the EV is made by union workers, they will get an extra $4,500 tax credit and if it is made using parts manufactured in the US, they will get another $500 tax credit.
All in all, users can save over $12,000 if they buy the right car. Sounds like a win-win, right? You save the environment and you save money.
But many users are still not into EVs as they're afraid the car will run out of charge and leave them stranded. To cure this phobia, Biden's bill contains $7.5 billion to build more charging stations.
So, what's Musk's problem with this? Well, he feels the bill is too ambitious and will increase the federal government's already massive debt.
And secondly, he feels that by adding these subsidies the government is interfering in the corporate sector. "The role of government should be that of like a referee, but not a player on the field,” he said. He feels the government should “get out of the way and not impede progress.”
But you know what's strange? Much of Tesla's current success has come from government subsidies.
You see, in the last few years, many countries have been trying to boost EV production and adoption to reduce emissions. And for this, they have introduced several subsidies and incentives.
In the US, Tesla got an easy loan from the Energy Department in 2010. It also received $1.3 billion from Nevada to build a battery factory and millions of dollars in regulatory credits from states like California.
In just the first quarter of 2021, Tesla got $518 million in regulatory credits (which it can sell for 100% profit). In fact, until June 2021, Tesla hadn't managed to make a profit without the help of these regulatory credits.
The government also gave consumers $7,500 in tax credits, which made the expensive Teslas a little more affordable for customers. Tesla enjoyed this benefit till 2018, but after that year it had sold more than 200,000 vehicles and so the tax credit was no longer applicable.
And that's just in the US. Even in countries like Denmark, Hong Kong, Germany, China and many others, Tesla has benefitted from the incentives that EV producers get and the subsidies that consumers get.
These concessions have played a massive role in making Tesla the $1 trillion giant that it now is. So, has Tesla forgotten its humble beginnings? Is Musk too rich for subsidies now?
Not really. The company has asked the Indian government for subsidies so it can enter the Indian market. So, what's going on?
Business Means War
Musk knows exactly how important these subsidies are and which is why he doesn't want other companies to benefit from them.
When Tesla started out, it was one of the few EV companies out there and it hardly faced any competition. But now the world has realised that EVs are the future and many legacy automakers are now entering the EV market as well.
Tesla will have a hard time competing with these automakers as is. But the newfound subsidies will give some of these automakers a major advantage over Tesla. You see, some of these companies like General Motors, Ford, and Chrysler are unionised.
This means buying a car from these companies will get users a bigger discount (an additional $4,500 tax credits). Plus, some of these companies also use more US-made products than Tesla, which means another additional discount.
This, along with the fact that GM and Ford are already household names for years now, may turn the tide in their favour. Tesla may no longer be the "it" EV company.
And Tesla is not the only car company that has had a problem with these subsidies. Other companies like Toyota have also opposed the US' government's preferential treatment for unionised companies and companies using American parts.
But the infrastructure bill is not like crypto. Its future will not change based on Musk's statements. The US House of Representatives has already passed the bill. And though it faces opposition in the Senate, most experts believe some version of the bill will definitely become law.
The ladder that Tesla used to climb the walls of success is now becoming easier to climb. And now it wants to destroy this very ladder for its competitors. Had Tesla not taken subsidies, it would have still made sense. But is this hypocritical stance justified?
Who are you really Mr. Musk? Someone who is hungry for power? Or someone who wants a better world for all?
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Brilliant article and I have to appreciate the writer, 2 statements caught my eyes. One is a funnier one and the other is an excellent question.
1. But the infrastructure bill is not like crypto. Its future will not change based on Musk's statements 🤣🤣
2. Who are you really Mr. Musk? Someone who is hungry for power? Or someone who wants a better world for all?
This single question is questioning whole Musk's idea of EV, bec everytime he says i want a better and a clean world...but then why is he dng all this.
Definitely a thought provoking question.
Pls let us know the answer if u find one..
Want to appreciate the writer and editor again!
For FIRST 3 & REST.... ALWAYS DIFFERENT TREATMENT AND INCENTIVES....