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How Does Musk's Government Funding Compare To Competitors? 216

Posted by Soulskill from the all-about-the-benjamins dept.
Rei writes: We recently discussed an article in the LA Times complaining about how Elon Musk has built his corporate empires — Solar City, Tesla Motors and SpaceX — on the back of government subsidies. However, how does the funding compare in context to various competitors? USC professor Greg Autry breaks it down, noting among other things that SpaceX's competitors have benefited from decades of tremendous government money and a launch monopoly, while the Volt receives — on a percentage basis — 2 1/2 times greater subsidy than a Model S, and was developed on the government's dime.
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How Does Musk's Government Funding Compare To Competitors? More

How Does Musk's Government Funding Compare To Competitors?

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  • Lies, Damn lies and Statistics (Score:5, Insightful)

    by jklovanc ( 1603149 ) on Friday June 05, 2015 @01:17PM (#49850131)

    while the Volt receives — on a percentage basis — 2 1/2 times greater subsidy than a Model S, and was developed on the government's dime.

    Maybe that is because a Model S costs 2.4 times that of a Volt. On a per vehicle basis they are almost the same.

    • Re: (Score:3)

      by jo_ham ( 604554 )

      Well, it was no different to the way the hit piece was worded - it considered money that Tesla *customers* could receive as tax breaks for Tesla in order to inflate the numbers and make it sound worse.

      Understanding is a three-edged sword: your side, their side and the truth. -Kosh

    • Re:Lies, Damn lies and Statistics (Score:4, Informative)

      by catchblue22 ( 1004569 ) on Friday June 05, 2015 @02:43PM (#49851099) Homepage

      The oil industry receives far larger subsidies per year [priceofoil.org] than Musk is accused of receiving over three companies and many years. And some of the "subsidies" Musk is accused of receiving consisted of loans that were paid back with interest.

      • Yes, the construction related to oil production does get construction related tax credits and deductions. Investments in the oil industry get investment related credits and deductions. The military spends a lot of money on fuel...

        These things are not "oil subsidies" any more than the IRS subsidizes the paper industry by requiring so many damn forms.

        • That's right folks; oil subsidies aren't actually oil subsidies; remember, you heard it here first! ;)

        • Re: (Score:3, Informative)

          by mspohr ( 589790 )

          The IMF just published a comprehensive study of fossil fuel subsidies. They about to $5 trillion a year (world-wide) which is 6.5% of global GDP.
          http://www.imf.org/external/np... [imf.org]

          As Elon has stated: "If I was interested in subsidies, I'd go into the oil business".

          • That report includes all "energy subsidies" which includes subsidies for electricity production through green technology.

            Where the energy product is non-traded, like electricity, the supply cost is the price at which the domestic producer recovers costs, including a normal return to capital.

          • "As Elon has stated: "If I was interested in subsidies, I'd go into the oil business"."

            Did he really said that? If yes, he is much more full of shit I first tought and you believe him?

      • Re: (Score:3)

        by Straif ( 172656 )

        A lot of the "subsidies" the anti-fossil fuels sites use to bump up their numbers are actually just standard business practices used by everyone to spread costs over years. It's like patent trolling where they just add "claimed by the fossil fuel industry" instead of "on the internet" to the end of standard tax right offs to claim it's a special subsidy received by oil companies.

        That's not to say there aren't some oil/gas specific subsidies but according to the CBO that number is approximately $3.2 billion

      • The oil industry contributes $1.2 Trillion [api.org] to the US economy. The subsidies of $52 Million are 4.3% of that. Testa get a lot more subsidies than that. Context is everything.

        • Re: (Score:2)

          by mspohr ( 589790 )

          The IMF calculates world fossil fuel subsidies at $5 trillion a year (6.5% of GDP).
          http://www.imf.org/external/np... [imf.org]

          Context IS everything.

          • That page talks about energy subsidies which include subsidies to "green" energy production.

            Where the energy product is non-traded, like electricity, the supply cost is the price at which the domestic producer recovers costs, including a normal return to capital.

    • Re: (Score:2)

      by haruchai ( 17472 )

      But why does the Volt need a subsidy at all?
      It's a GM car - a company that has made hundreds of millions of autos in all shapes in sizes, including the all-electric EV1.
      The Model S is the FIRST car Tesla has built from scratch and had to learn every bit of the auto business, including supply chain management.

      Does GM still need help with that, after all these decades?

  • Pointless study (Score:5, Informative)

    by phantomfive ( 622387 ) on Friday June 05, 2015 @01:22PM (#49850179) Journal
    No one cares how he compares to competition. There are two broad groups of people on this:

    1) People think it's fine for the government to subsidize some industry.
    2) People who think the government should not subsidize industry.

    The people in group #1 think it's good that the Tesla and Volt got government funding. The people in group #2 oppose funding of both Tesla and Volt. So a study like this will change no one's opinion (and from the author's writing, it is clear that is what he's trying to do).
    • I would add:

      3. People who think the government should not subsidize luxury items, i.e, cars with a base price of $70,000.

      • 3. People who think the government should not subsidize luxury items, i.e, cars with a base price of $70,000.

        Sure. Do you think any of those people changed their opinion after reading this article?

      • Re: (Score:3)

        by ranton ( 36917 )

        I would add:
        3. People who think the government should not subsidize luxury items, i.e, cars with a base price of $70,000.

        In most cases it is best for the government to subsidize projects when they are still luxury items, since that is where tomorrow's consumer products start out. By the time they have moved from luxury to consumer products, there is less need for subsidies.

        • Re:Pointless study (Score:4, Insightful)

          by cahuenga ( 3493791 ) on Friday June 05, 2015 @02:06PM (#49850649)
          A Volt already starts at less than half the price Tesla S. I would suggest you go look at an S. Tesla's expense is not due to some idea of an infant technology, it's built like a luxury car.

          • That's because luxury cars have higher profit margins than economy cars.

            Basically, Elon and Tesla are 'hiding' some of the additional expense of the car - IE the battery, low production numbers, new assembly line, in the luxury items. Government subsidies are nice, but don't eliminate ALL of said extra expenses. As a result, a BMW in the same price range probably has a higher profit margin that a Model S.

            It's only 'infant' in that automation hasn't reached the level of standard cars, and there's still a l

          • A Volt isn't new tech, Toyota have had a hybrid for years so a Volt is not breaking any new ground plus they already have manufacturing plants. So i would hope its half the price.
      • How many people could afford mobile phones when they first came out?

    • Re: (Score:2)

      by njnnja ( 2833511 )

      I think you could be in group #1 and think that it is marginally acceptable to subsidize a $40,000 vehicle that is being sold as a practical alternative mode of transportation while not finding it at all acceptable to subsidize an $80,000 luxury car. Of course, that is the opposite of what the author is getting at.

      • I think you could be in group #1 and think that it is marginally acceptable to subsidize a $40,000 vehicle that is being sold as a practical alternative mode of transportation while not finding it at all acceptable to subsidize an $80,000 luxury car.

        Personally, I don't consider a $40K car to be a "practical alternative mode of transportation". PAMOT (to acronym this phrase) would seem to imply "practical for the average guy". Off the top of my head, I don't know many "average guys" who buy $40K cars....

        • A $40k EV is roughly equivalent to a $30k traditional gasoline vehicle once you factor in the cost of gasoline, and the extra maintenance it requires.

          That's Chevy Impala, Buick Regal, Ford Taurus, BMW 2&3 series, Toyota Avalon range. Call it 'upper middle class' cars.

    • Re: (Score:2)

      by suutar ( 1860506 )

      But there's also subgroup 2A, which realizes that Tesla's competitors get subsidized too, and group 2B, which doesn't until they see something explaining it.

      • Do you think this study will affect the opinion of anyone in those subgroups?

        • Re: (Score:2)

          by kqs ( 1038910 )

          No, but just because someone doesn't want to learn doesn't mean you should give up trying to teach them. Fact-checking sites will never stop politicians and businesspeople from lying, but that doesn't mean we should stop calling out lies. Doctors cannot save everyone's lives, but that doesn't mean they should stop trying.

          • You misunderstood. The reason it won't change their opinion is because the 'study' doesn't address the reasons the beliefs are based on. It's a complete miss, from a logical standpoint.

        • Re: (Score:2)

          by suutar ( 1860506 )

          Possibly; there's sure to be some in there who are merely ignorant due to lack of information or lack of thinking about it. There are others who will reject the information, but they don't make up the entirety of the group.

          • Possibly; there's sure to be some in there who are merely ignorant due to lack of information or lack of thinking about it.

            No. It won't change their opinion because the study doesn't address the reasons of their belief. As mentioned earlier, if someone opposes government funding of industry, they are going to oppose government funding of Tesla, whether the competitors get funded or not.

    • Re: (Score:2)

      by Loopy ( 41728 )

      There are two broad groups of people on this:

      1) People think it's fine for the government to subsidize some industry.
      2) People who think the government should not subsidize industry.

      Uh, nope. As someone lumped into your purported "group 2," there is a group 3: people who think government subsidies should have accountability, transparency, and strict rules against any subsidies going to someone related to a sitting member of any of the three branches of government.

      It's not that "gubmint BAD!" it's inefficien

      • Uh, nope. As someone lumped into your purported "group 2," there is a group 3: people who think government subsidies should have accountability, transparency, and strict rules against any subsidies going to someone related to a sitting member of any of the three branches of government.

        You fit in group 1.

    • 1) People who think it's fine for government to hand out taxpayer money to donors.
      2) People who pay taxes.

    • To be fair, when it comes to SpaceX I doubt any of category 2 have any concept of how much money has been funneled to the old guard launch services over the years. And not just money, but also R&D, no-bid contracts, communications services for launches, etc, etc. It's probably 10-20x more than SpaceX will ever receive and most people probably believe the answer is 0.

      • tbh I haven't heard anyone complain that SpaceX got government money, either. the only thing I've heard from people who get outraged over that kind of thing is that it's good to have a private company doing that kind of thing.

    • Re: (Score:2)

      by Macdude ( 23507 )

      What you're missing is most people think it's fine for the government to subsidize certain industries but not others. The argument isn't over subsidize or don't subsidize, it's what to subsidize.

      Even died in the wool small government radicals still think the military industrial complex should be subsidized.

      • What you're missing is most people think it's fine for the government to subsidize certain industries but not others

        Those people fit into #1.

    • 0) People who think the government should subsidize *THEIR* industry.

  • Subsidies in the form of tax write-offs (Score:4, Insightful)

    by QuietLagoon ( 813062 ) on Friday June 05, 2015 @01:25PM (#49850203)
    If you really want to look at government subsidies, look at how much, or more correctly, how little huge companies pay in income taxes.

    .
    For instance, General Electric is always whining about taxes, yet pays a small percentage of revenue in taxes. It's an example of a corporation that is focused on taking, not giving.

    So if you want to complain about excessive government subsidies, don't just look at one industry.

  • Article is Disingenuous, Author is Biased (Score:4, Interesting)

    by eepok ( 545733 ) on Friday June 05, 2015 @01:30PM (#49850233) Homepage
    You can read the whole article (and you should), but here are some nice excerpts.

    FTA: On the electric car front, the Chevy Volt is the most significant U.S. competitor to Musk's Tesla Model S...

    Meanwhile, Volt was developed during Uncle Sam's bailout of "Government Motors" with $30 billion. That's more than six times the number that got Mr. Hirsch so worked up! Though GM touts that they've "repaid" the government, Treasury reports that the government lost more than $11 billion on that dubious deal.

    The Model S is not comparable to the Volt. The Volt is a plug-in hybrid (not an EV) cludge to meet the requirements of a bail out. The Nissan Leaf is a better comparison and it blows the Model S out of the water in its effects on the market. But, the author wants to hamstring a stronger comparison by requiring that the company be American.

    Additionally, a bail out deal and subsidy are not comparable. A bail out deal your mom throwing you a few hundred bucks because your business failed, rent needs to be paid, and you have to go visit her to pick up the check. A subsidy is your mom throwing you a few hundred bucks to start up or expand your business. One's there to save your as with some nominal requirements and the other is there to help you profit. Musk has taken both for Tesla.

    FTA: The most polite response I can offer to the critics is: Get over it. Find something more productive to do than condemning success. If you insist on continuing to carp, do your research first and hit the right targets. Otherwise you will continue to sound jealous and misinformed.

    Wow, internet tough guy, huh?

    Oh, and this isn't the only time this guy has white-knighted for Musk. He's actually a bit of a fanboy, so don't let his professorship lull you into a false sense of academic separation:

    http://www.huffingtonpost.com/... [huffingtonpost.com] "Disclosure: Dr. Autry currently owns Tesla stock."
    https://twitter.com/gregwautry [twitter.com]
    https://www.facebook.com/gregw... [facebook.com]
    http://www.forbes.com/sites/re... [forbes.com]

    • Re: (Score:3)

      by radl33t ( 900691 )
      It has nothing to do with Musk. But fighting the assault of ideologues and hypocrites who benefit greatly from government subsidies while advocating against them for others. Government subsidies built America. They will build future America or the future America will falter. Deal with it.

  • Seems pointless point to me. What am I missing? (Score:5, Insightful)

    by aussersterne ( 212916 ) on Friday June 05, 2015 @02:40PM (#49851047) Homepage

    The reason we use government funding to incentivize things is because we as a public want people to do/build/invent/fix those things and are willing to pay for that to happen.

    So Elon Musk comes along and says he will and then he does. And then we pay him what, as a public, we planned to pay (via those incentives) to whoever did them.

    Seems like everything is going according to plan, for all involved, and that we're lucky enough to have found something of a one-stop-shop for incentivized work that few others are willing to take on, but that seems to really move the needle on tech progress for something other than consumer electronics gadgets.

    Win/win all around. Smells like right wing paranoia and demagoguery to me in here.

    • The reason we use government funding to incentivize things is because we as a public want people to do/build/invent/fix those things and are willing to pay for that to happen.

      The way I look at it, it's much more honest to complain about the government offering subsidies than it is to complain about a company taking them.

      Might Tesla Motors fail without the subsidies? Early on, certainly. Today? Perhaps not so much, but removing them will probably delay Musk's efforts to bring out a EV at around the $40k price point. Remember, a $40k EV ends up costing about the same as a $30k gasoline automobile getting 30 mpg*.

      *Average 15k miles/year, $4/gallon = $2k/year. Over 5 years = $1

  • You cannot lay the $11B lost by the government at GM's feet.

    GM underwent a debt-for-equity swap. This happens when the debt holders feel the company would be better off with less debt and if they convert the debt to equity (ownership) they can share in that improvement.

    Once the debt-for-equity swap occurs, it is on the shareholder to decide whether to hold to break even (or make money) or to liquidate the equity at a loss. The government decided for political reasons to take the loss. If the government had

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