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Businesses Government The Almighty Buck

How Elon Musk's Growing Empire is Fueled By Government Subsidies 356

theodp writes: By the Los Angeles Times' reckoning, Elon Musk's Tesla Motors, SolarCity, and SpaceX together have benefited from an estimated $4.9 billion in government support. The figure compiled by The Times, explains reporter Jerry Hirsch, 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. "He definitely goes where there is government money," said an equity research analyst. "Musk and his companies' investors enjoy most of the financial upside of the government support, while taxpayers shoulder the cost," Hirsch adds. "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." And as Musk moves into a new industry — battery-based home energy storage — Hirsch notes Tesla has already secured a commitment of $126 million in California subsidies to companies developing energy storage technology.
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How Elon Musk's Growing Empire is Fueled By Government Subsidies

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  • by queazocotal ( 915608 ) on Sunday May 31, 2015 @08:27AM (#49808667)

    Employing mainly Americans, manufacturing in America.

    • by kurkosdr ( 2378710 ) on Sunday May 31, 2015 @09:33AM (#49808887)
      Also, much less than the incentives oil companies get. They buy a scarce resource (crude oil reserves) from the government for a fixed cost, instead of a "percentage of sales to customers" cost (as it would certainly happen if the government acted as a seller looking after the bottom line). But this scheme is so well hidden most people have no idea it even exists.
    • by goombah99 ( 560566 ) on Sunday May 31, 2015 @11:23AM (#49809293)

      Subsidies are policy implementation devices. When people take the subsidies under the condition the subsidies are offered the result is that something the government wants to happen happens. Theoretically its an inexpensive way to get things done without the government doing it and assuring private investment in the outcome. (so there's vested interest in successes and usually commercialization).

      Just because one guy happens to feed at the trough isn't a problem neccessarily. It could be. But that's why you have oversight.

    • by whoever57 ( 658626 ) on Sunday May 31, 2015 @11:29AM (#49809315) Journal

      Another way to descript this would be:

      Elon Musk structures his businesses to support government priorities.

    • but but "muh markets".

      for the people who'd rather we loose our jobs to the chineese.

  • by ColdWetDog ( 752185 ) on Sunday May 31, 2015 @08:27AM (#49808669) Homepage

    "Because that's where the money is."

    Duh....

  • by Anonymous Coward on Sunday May 31, 2015 @08:27AM (#49808671)

    They forgot the benefit that it gets us out of the Middle East. That sandtrap is a massive waste of resources that I hate is being subsidized.

    • Re: (Score:2, Informative)

      by DerekLyons ( 302214 )

      They forgot the benefit that it gets us out of the Middle East. That sandtrap is a massive waste of resources that I hate is being subsidized.

      If only the Middle East were our main source of oil... it isn't [eia.gov].* And even with the shift to electric vehicles and solar power, petrochemicals are still vitally important industrial feedstocks, and thus a stable Middle East is still of prime economic interest to the West.

      • by haruchai ( 17472 )

        "Stable Middle East" - How did the Iraq invasion help that goal? Since the '73 oil embargo, how much has it cost the USA in lives & dollars to "stabilize" the Middle East?

      • They forgot the benefit that it gets us out of the Middle East. That sandtrap is a massive waste of resources that I hate is being subsidized.

        If only the Middle East were our main source of oil... it isn't [eia.gov].* And even with the shift to electric vehicles and solar power, petrochemicals are still vitally important industrial feedstocks, and thus a stable Middle East is still of prime economic interest to the West.

        If we quit burning oil/nat gas, America will not need to import any oil. We have plenty for all of the other uses.

    • by TWX ( 665546 ) on Sunday May 31, 2015 @10:29AM (#49809073)
      It also helps to make it easier to change our energy infrastructure. When fossil-fuel-powered cars first debuted there were no gas stations. There were at-best stables where horses and mules could be groomed and fed and where wagons could be mended if necessary. Gas stations had to be built as the demand for gasoline and other fossil fuels for automobiles grew.

      To an extent that's where we are now for electric vehicles, especially those that wish to travel outside of their home range. Homes themselves need charging stations with heavier gauge wiring to most effectively charge the cars, and we need service points with chargers to recharge the cars on roadtrips. That means there needs to be enough electric cars on the road, using similar enough technology, to justify the cost to install the charging stations both at home and in public. This is a snowballing effect, the more places to charge, the more that electric cars become viable to the average car buyer, and the more electric cars on the road, the more people and businesses willing to make the investment for electric car infrastructure.

      In the end, we shift the primary source of automotive pollution from the end-car to power generation, aka, power plants. Sure, there are still fossil-fuel power plants that pollute, but it's a lot easier to regulate hundreds or even thousands of power plants than it is to regulate hundreds of millions of cars, and unlike cars, power plants have found themselves subject to end-of-life if they do not meet increasingly strong emissions standards, while cars only have to meet the standards in-effect when they were manufactured, some as far back as 1967. Suddenly the car owner no longer as to go wait in line for a Department of Environmental Quality sniffer test or has to worry about the financial cost to simply make the vehicle clean enough to pass such a test.
  • by Anonymous Coward on Sunday May 31, 2015 @08:30AM (#49808677)

    So we have a brilliant industrialist creating new pathways that we will all benefit from. In this case I hope the government gives him even more money. We need these technologies and a support system to actually conquer some of the issues that now confront us.

  • by Anonymous Coward

    A grant, yes, but not a tax break. Just because you are getting fucked by taxes doesn't mean the other guy who isn't is being subsidized.

    • by Sique ( 173459 ) on Sunday May 31, 2015 @09:49AM (#49808925) Homepage
      A tax break is considered a subsidy in all international trade agreements.
  • by mark_reh ( 2015546 ) on Sunday May 31, 2015 @08:31AM (#49808683) Journal

    Big companies get subsidies in the form of tax breaks all the time.

    They bitch about taxes, get a deal, then they bitch because the schools aren't churning out worker robots with the necessary skills- schools that would be funded by the taxes the big corps aren't paying.

    • Schools are paid for by property taxes. That makes up a tiny, tiny fraction of tax break incentives given out to companies. And the parents who work at a company getting a property tax break buy homes in the area with their salaries.

    • by MightyYar ( 622222 ) on Sunday May 31, 2015 @09:30AM (#49808875)

      Education is extremely well-funded in the US. We are, depending on how you measure, either #1 or #2 in the world. Funding is very uneven and the money is often not spent well. But you cannot say we don't fund education adequately. Reform is the answer, not more money.

      • by Gryle ( 933382 )
        Is that measured in total dollars or dollars-per-student? Most of the stats I've seen put the US down around 10th in the developed world in terms of dollars-per-student.
        • A (very) eye opening thing was when a friend who is a teacher advised me to google salaries for my local state / local school district.

          Teachers salaries are public record (although usually you'll find the public record is updated after a few years, so you might just now see salaries for 2012 online).

          And the interesting thing, while junior teachers might make $10 an hour (which is barely livable), senior teachers will be salaried at $150k+ per year.

          And, on top of that: they only work 9 months out of the year

          • by stomv ( 80392 ) on Sunday May 31, 2015 @11:02AM (#49809211) Homepage

            And the interesting thing, while junior teachers might make $10 an hour (which is barely livable), senior teachers will be salaried at $150k+ per year.

            Oh cut the crap. High level school administrators in wealthy communities in the Northeast, Chicagoland, or West Coast might get $150k/yr. Teachers don't. You state that your eyes were opened with the help of a friend and google? Put up or shut up. Link to some teachers making $150k/yr. Open our eyes. Until then, I'll just know that you're just making things up -- I review my own (rather wealthy) town's budget every year; our teachers don't sniff that kind of wage.

            • In my area the go up to the 90s in pay (five years ago anyway).

              That's 15 years working with a doctorate.

              Teachers work about 210 days, vs 240 for a typical worker in a good job ( three weeks off and a week of holidays)

              Starting pay was 28.

        • by MightyYar ( 622222 ) on Sunday May 31, 2015 @12:05PM (#49809435)

          10th would be pretty good - better than average. It certainly would not explain the chronic underperformance. The US government says we are only below Switzerland, Norway, and Austria by one measure and only behind the Swiss by another measure. [ed.gov]

          In any case, the meme of "Americans don't invest in education" is a faulty one. We just don't invest our dollars very well.

  • Governments should support future growth business. It promotes the economy and improves mankind. If Musk is taking advantage of that and taking on the risk of being the first; that to me sounds like good business. Good for Musk, good for the globe.
  • So what? (Score:4, Insightful)

    by Simulant ( 528590 ) on Sunday May 31, 2015 @08:43AM (#49808711) Journal
    We want him to succeed. That's why those incentives exist.

    If you want to complain about government largess to corporate America, there is no shortage of other, far more dubious, targets...
  • That's a good thing (Score:5, Informative)

    by laird ( 2705 ) <lairdp@gmail.TWAINcom minus author> on Sunday May 31, 2015 @08:48AM (#49808731) Journal

    If the people pass laws to promote businesses investing in developing new capabilities (e.g. space flight) then we WANT companies to do that work and thus get those grants, tax breaks, etc. That's how the airline industry got launched in the US, for example - huge government subsidies (airports, air traffic control system) and contracts (for mail delivery) that jump started the US airline industry, which was IMO a brilliant investment, because transportation doesn't just benefit the company providing transportation, it benefits everyone who uses transportation. Highways were another brilliant investment, funding construction companies and thus jobs, and creating a national road system that everyone benefits from.

    The subsidies/grants/tax breaks that I object to are the ones that go to mature, profitable industries that don't need any support because they should be able to survive on their own. Oil companies and sports teams are just the most blatant examples. Agri-business corporations don't need subsidies, either - the farming grants should be reserved for the few percent of farmers who are independent, small family farms, and right now the money all goes to huge, profitable corporations that have huge resources and don't need the money, and relatively little to the small farms that need the support to survive the ups-and-downs of farming.

  • by Quinn_Inuit ( 760445 ) <Quinn_Inuit.yahoo@com> on Sunday May 31, 2015 @08:49AM (#49808735)

    The oil industry periodically requires wars to secure its supplies, and a lot of its profits accrue to countries with interests inimical to those of the U.S. To give you an idea, Operation Desert Storm cost $104 billion [cnn.com] in nominal 2014 dollars. From a strictly cost/benefit perspective, the U.S. is underfunding these companies.

    • It's not just the money. Don't forget about all lives that are lost in wars. And people suffering from air pollution caused by burning fossil fuels.

  • by cheesybagel ( 670288 ) on Sunday May 31, 2015 @08:51AM (#49808739)

    Loans that were fully paid back (e.g. the one Tesla got). Space launches for the government that are *cheaper* than the other launch services the government is using. You can't call it a subsidy when they are selling the government a service.

    Most of the other clean tax subsidies are given to the clients (e.g. SolarCity, Tesla) not to Musk's companies directly. If they are that rich, as the author claims they are, I think they would still buy the cars to make a kind of fashion statement even if there was no tax break at all.

    As for the tax breaks he gets for building that factory its no different from what any other company doing a similar activity would get. Yes I know its crap but its the world goes.

    • Most of the other clean tax subsidies are given to the clients (e.g. SolarCity, Tesla) not to Musk's companies directly.

      On the contrary - SolarCity retains the tax breaks and the subsidies. They even counsel against the "buy it outright" option because "you'll need an accountant specializing in energy credits and taxes". (Read "our business model is based on being an unregulated utility and utterly depends on monthly cashflow from leases".)

  • Rather spending that type of money on the bazillions pointless DOD contract where it doens't trickle down but simply trickles away, it goes to a guy and his various crews that actually get shit done. And manufactures mostly domestically. I don't see a problem here.

  • so what? (Score:5, Insightful)

    by O('_')O_Bush ( 1162487 ) on Sunday May 31, 2015 @08:57AM (#49808763)
    Those tax breaks and subsidies were set up to encourage advancement in those areas by offering an economic incentive. Musk just did exactly what the government was handing out money for people to do... advance those areas.
  • In at least one way or another, the vast majority of private companies pushing ground-breaking technologies have relied on a higher than typical level of government support because, sorry, the free market just can't solve these sorts of hard problems on its own. This is how things are *supposed* to work--let both government and private enterprise play their role. Musk is always really transparent about this.

    However perhaps one good thing about articles like this is that they should quiet down the liber
  • More stupidity (Score:5, Informative)

    by cheesybagel ( 670288 ) on Sunday May 31, 2015 @09:03AM (#49808783)

    In a 2008 blog post, Musk laid out a plan: After the sports car, Tesla would produce a sedan costing "half the $89k price point of the Tesla Roadster and the third model will be even more affordable."

    In fact, the second model now typically sells for $100,000, and the much-delayed third model, the Model X sport utility, is expected to sell for a similar price. Timing on a less expensive model — maybe $35,000 or $40,000, after subsidies — remains uncertain.

    The Roaster cost more than $89k. That was the value without subsidies. The article is comparing the price of the cheapest model of the Roaster (with subsidies) to the price of the most expensive Model S (without subsidies). Well DUH.

    The Model X isn't the third model Musk was talking about. The third model SEDAN is supposedly to be called the Model 3 and unlike what the author said it's planned to be launch in 2017. YMMW. They need the battery factory to be finished so they'll have batteries cheap enough for the Model 3.

  • by Anonymous Coward on Sunday May 31, 2015 @09:24AM (#49808839)

    SourceForge, the code repository site owned by Slashdot Media, has apparently seized control of the account hosting GIMP for Windows on the service, according to e-mails and discussions amongst members of the GIMP community—locking out GIMP's lead Windows developer. And now anyone downloading the Windows version of the open source image editing tool from SourceForge gets the software wrapped in an installer replete with advertisements.

    Link to original source [arstechnica.com]
    The GIMP developers aren't happy at all about this. They say that Sourceforge impersonated the GIMP developers, and abused the trademarks owned by the GNOME foundation [gnome.org]

  • How large were the bail outs to failures such as LTCM and recently to the all banks and car companies after the last financial crash?

    Tritium

    • That's exactly what I was about to post. The other car companies were bailed out, as well as banks. At least Elon is doing something with great potential.

  • by 140Mandak262Jamuna ( 970587 ) on Sunday May 31, 2015 @09:35AM (#49808893) Journal
    .. to what what industries get out of government. Heck, some oil tycoons saw the first gulf war where USA kicked Saddam out of Kuwait, and figured it would be a cakewalk to kick him out of Baghdad and install some puppets and get all the oil in Iraq on the cheap. Got two oil men elected as POTUS and VPOTUS, launched a smoke and mirrors campaign and got us into a war that has taken 1 trillion and counting. If the gamble paid off, they would have gained a few billion dollars. But it didn't, but they didn't lose 1 trillion dollars we, the taxpayers did.

    Compared to the shenanigans of the coal and oil businesses, even if it is true, this 5 billion is nothing. But most likely it is a hit piece commissioned by the same people who brought you the Iraq war. That one was expansion attempt. Now they are defending the home turf, public utilities using gas and coal. Entrenched monopolies who have never faced competition, lightly regulated by revolving door politicians, lobbyists and company men.

  • Ayn (Score:4, Funny)

    by PopeRatzo ( 965947 ) on Sunday May 31, 2015 @09:57AM (#49808965) Journal

    So, it turns out that John Galt is kind of a moocher.

    Who could have guessed?

  • ... is that there's so many to choose from. Noam Chomsky even makes a pretty plausivle case that big business in US depends on the government $$$ since, like, forever. Without comparing subsidies and their spread over various industries, this article ranges from stating the obvious to a hit piece .
  • by Imagix ( 695350 ) on Sunday May 31, 2015 @11:55AM (#49809405)
    And this is a problem how? Don't those subsidies exist precisely to encourage the development of these sorts of technologies? The government (and theoretically, by extension: the people) decided that to encourage the development of greener technologies and/or space technologies, they would provide various bits of assistance to companies, as well as consumers buying into said technologies. Musk appears to be successful in developing these technologies. Now people are complaining that he got government subsidies? Bah. We, the people get the benefit of these new emerging technologies, and Musk gets to make some money doing it so that these emerging technologies exist. Win-win scenario. The subsidies will go away at some point as the technologies become more mainstream.
  • Its a sad fact that most businesses receive "subsidies" (IE less taxes) for behavior desired by the government, the larger the business the more "subsidies" they can usually take advantage of. Take this how you will, but its less an issue of those who are actually utilizing their rights under the law and more about a government that employs such a convoluted tax law to begin with.

    • Spot on. We should NOT have variable taxes. Just a simple %. And as to subsidies, all of them should be limited time and designed to only start an industry.
  • Under a Republican administrator, Elon Musk will find himself under indictment and his corporate empire will crumble.

    This article is laying the groundwork for that.

    • These are subsidies that gov offers. He has not stolen anything.
      In addition, Kock broths get more than that EACH YEAR. Do you think that the neo-cons are going after them? And no, the tea-party will not be going after Musk OR kock brothers. As such, the GOP will be split on this.
  • by vinn ( 4370 ) on Sunday May 31, 2015 @12:01PM (#49809427) Homepage Journal
    So all of Elon's companies get $5b in subsidies? The oil industry in the US get $37.5 billion in subsidies a year, including $21 billion for production and exploration. That's a far worse proposition for this country.
  • unfettered capitalism is all about?
  • So many ppl are polarized about him. They either hate him because he is successful, or they love him because he is innovative. Look at how fast these postings have jumped.
  • It's no different than what the other car companies are doing. They get tax breaks and investments from various levels of governments to build factories, retool a line, or even just keep a shift. I think that the money would be better invested in giving the employees training and loans for starting their own companies instead of giving the money to the Big 3 auto makers.

    But I think the biggest offenders are the sports teams that threaten to leave to another city unless they get a new stadium or arena buil

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