Middle class bearing Tesla subsidy

H. Sterling Burnett

When the sale of its 200,000th vehicle occurs later this year, Tesla buyers will no longer be able to claim a $7,500-per-vehicle federal tax credit for purchasing one. But fear not! California’s climate-crazy legislature is coming to the rescue.

Gov. Jerry Brown and state legislators plan to pass a $3 billion electric vehicle (EVs) subsidy to replace the soon-to-end federal rebate. Under California’s generous program, electric vehicle buyers could soon receive up to $40,000 to buy’s Tesla’s most expensive models.

Despite the federal government having provided a $465 million low-interest loan for Tesla to develop a cheap electric vehicle in 2009 and the billions of dollars in tax credits given to buyers, Tesla has continued to turn out $110,000 luxury cars designed for and marketed to millionaires. Those buyers obviously could afford to pay the full freight for their vehicles but instead took money from the poor and middle-income households to fund their “green lifestyle” purchases.

The first EVs were created as early as 1828, 50 years before Germany’s Karl Benz put the first gasoline powered vehicles on the road. Contrary to popular belief, EVs were never new, orphan technologies meriting government support to get off the ground. Gasoline-powered cars won out in the marketplace more than 100 years ago because they were comparatively more affordable, powerful, comfortable, reliable, and could go long distances between fueling — a combination of factors EVs can’t match to this day, despite the billions received in government support.

Spurred by the Obama administration’s focus on climate change, government began pushing the uncompetitive technology once again in 2009, but in 2016, only 159,333 EVs were sold in the U.S. — less than one-tenth of 1 percent of vehicles sold nationwide. Tesla sold less than 47,000 of its $100,000-plus cars during that period.

Aside from receiving substantial federal tax credits and a massive government low-interest loan, Tesla and its wealthy customers also benefit from other subsidies given at the expense of everyone else, including state tax incentives and free charging stations. A 2015 study from researchers at the University of California at Berkeley and National Bureau of Economic Research found the richest 20 percent of Americans received 90 percent of the hundreds of millions of dollars given in taxpayer subsidies for EVs.

The future of Tesla is far from assured. It misses its sales and production targets each year. Even with government support, Tesla consistently loses hundreds of millions of dollars annually, and Tesla has already warned there could be manufacturing delays of its relatively low-cost $30,000 to $50,000 Model 3, which could result in customers not receiving their cars for years.

While California may keep Tesla in business for a little while longer, its lifeline to Tesla can’t change that even if one believes humans are causing climate change, subsidizing billionaire Tesla CEO Elon Musk’s electric-car dreams does little to reduce carbon dioxide. The switch to EVs simply shifts emissions from the tailpipe to the smoke stack. California’s tax credit for Tesla is welfare for the well-to-do, and it’s time to end it.

H. Sterling Burnett is a research fellow on energy and the environment at The Heartland Institute.