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Wall Street Journal: Taxpayers grossly oversubsidize Elon Musk’s electric cars

23 February 2015
The WSJ’s opinion editors examine the numbers for Tesla Motors—and blow a whistle.

The Wall Street Journal stirred some mid-February skepticism about the ambitions, pronouncements, and, above all, taxpayer subsidies of Elon Musk, the celebrated entrepreneur whose Tesla Motors manufactures electric cars.

Under the headline “The Tesla paradox: Visions of a $700 billion market cap but still living off subsidies,” a WSJ editorial cites Musk’s claim that his organization will become the world’s most valuable company. Then it asks: “Why does Tesla, which is already valued at about $27 billion, still need so much taxpayer welfare?”

The editors quantify their complaint:

Because it produces only electric cars, Tesla receives excess “credits” for complying with federal fuel-efficiency standards and state zero-emission vehicle (ZEV) mandates, notably in California. Tesla can then hawk its surplus credits to auto makers that fail to meet the government rules. Last year Tesla made a roughly $150 million killing from selling ZEV credits. That’s up from $130 million in 2013, $32 million in 2012, and $3 million in 2011. All told in 2014 Tesla sold about $216 million in credits, equal to about 7% of its auto sales.

Those government subsidies come on top of a $7,500 federal tax credit for each electric car sale and state rebates. Nevada and California have also bestowed upward of $1.5 billion in tax breaks on Tesla.

The editorial concludes by declaring that although capitalism needs visionaries, “its reputation suffers when companies worth billions soak middle-class taxpayers for profits.”

The online version contains a link to a 3-minute video analysis “on how Elon Musk’s battery-powered car company is propped up by government subsidies.” In the end, two commentators agree that Musk is a new P. T. Barnum. Wikipedia summarizes the 19th century’s Phineas Taylor Barnum as “an American showman and businessman remembered for promoting celebrated hoaxes and for founding the Barnum & Bailey Circus.” The entry notes that although “Barnum was also an author, publisher, philanthropist, and for some time a politician, he said of himself, ‘I am a showman by profession . . . and all the gilding shall make nothing else of me,’ and his personal aim was ‘to put money in his own coffers.’”

On 20 February, the WSJ printed three letters responding to the editorial.

* Walter Lacz Jr of Morris Plains, New Jersey, points out that the actual emissions situation for supposedly zero-emissions electric cars can’t actually be assessed without accounting for the power plants that supply the energy.  He calls for Tesla owners to pay “a carbon tax on the fossil fuels burned at the power plants, a nuclear-waste disposal fee and a road-use tax as well.”

* Daniel Barbeau of Vienna, Virginia, calls it “fundamentally immoral” that as “car companies like Ford, Toyota and Honda pass the costs of state zero-emission mandate credits onto consumers via higher automobile prices, buyers of lower-end Tauruses, Camrys and Civics effectively subsidize buyers of Tesla’s luxury products, such as the $70,000 Model S.” He adds, “To borrow the language of the left, this is a classic example of a wealth transfer from the middle class to the ‘one percent.’”

* Michael T. Hoeker of Arlington, Virginia, emphasizes that the “only fair targets of [the editors’] criticism of ZEV credit market manipulation and tax transfers to Tesla’s already well-off customers are the federal and state governments which created them” and that Musk, “on the other hand, is simply an aggressive, visionary—and so far successful—capitalist.”

The editorial appeared on 13 February. Five days later, USA Today published Bjørn Lomborg’s op-ed “Electric car benefits? Just myths” with this thumbnail summary: “It is time to stop our green worship of the electric car. It costs us a fortune, cuts little CO2 and surprisingly kills almost twice the number of people compared with regular gasoline cars.” Lomborg calls it a “bad deal” for American taxpayers to “spend up to $7,500 in tax breaks for less than $27 of climate benefits.”

Lomborg’s op-ed acknowledges electric-car advocates’ counterarguments, but the WSJ editorial, video, and letters don’t.


Steven T. Corneliussen, a media analyst for the American Institute of Physics, monitors three national newspapers, the weeklies Nature and Science, and occasionally other publications. He has published op-eds in the Washington Post and other newspapers, has written for NASA's history program, and is a science writer at a particle-accelerator laboratory.

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