EV Automaker Tesla Makes Profit— Off Taxpayers

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NLPC Associate Fellow Paul Chesser was a guest last night on the Willis Report on Fox Business Network. Here's a transcript:Gerri Willis: Unbelievable story. Well, meanwhile in the electric car world the Tesla company is set to announce the company's first-ever quarterly profit this week, Wednesday. But reportedly what is driving this company into the black are California tax credits. That's right. With more on this, Paul Chesser of the National Legal Policy Center. All right. How is it possible that this company is making money only because of tax credits? Is that your analysis, Paul?

Paul Chesser: Well, that's what it looks like. In California they've got a unique economy in California where they set up these special deals for renewable energy, for electric cars, for manufacturers. And they get these credits. It is likely sort of a minicamp in trade system where the manufacturers of the so-called green cards, the ones that have zero emissions or low emissions, they can get credits and sell those to the big auto manufacturers if you don't want to make those cars. And therefore, they are capping the emissions that they have and the other auto makers can exceed them and therefore if they comply with whatever the mandate is, they buy those credits and therefore come into compliance.

Gerri Willis: So, Tesla looks like it's going to have profit up to the tune of two hundred and fifty million dollars this year. And that's largely thanks to the largess of California taxpayers. California, of course, has some very intense rules about what they want to see in the car market. They want more and more of these cars to be green. Is that going to happen? Is that logical? Can it only happen with a lot of taxpayer help?

Paul Chesser: Well, you know, we have seen a lot of taxpayer help go to a lot of this electric car companies. Both federal and state, and especially in California. Fisker was a California company, basically a competitor of Tesla's in the extreme luxury sedan market. And they are about to go under. Then they have a billion in private investment. In addition to the federal tax subsidies. Tesla's just playing the game -- they're apparently, they're running the company a little better than Fisker did. But Tesla also has taken advantage of this temporary, what I think is a temporary opportunity to capitalize on these short-term credits. Pretty soon as Margaret Thatcher said, you run out of other people's money.

California is about a trillion dollars or ongoing on a trillion dollars in debt, they're only going to be able to do this for so long. So, you know, Tesla might be right now.

Gerri Willis: Well, isn't that just the problem? Paul, isn't that just the problem, that when the government puts out money like that, tax credits or whatever, you know, you talk about individuals trying to score the dough. Boy, let me tell you, companies will jump on that even faster as a way to make money.

Paul Chesser: Right.

Gerri Willis: They understand how that works. It's just corporate cronyism of the worst kind.

Paul Chesser: Well, it distorts the market and then that becomes their goal. I mean we've seen it with the wind and solar energy firms. They just keep coming back because they -- all they're living out of the subsidies. They can't sell their product. They can't sell their service and make money off of it. It's the same thing with the electric vehicle companies. The consumers want gas powered cars that they can refuel quickly and will go a long distance that's still what they want. Electric cars and the batteries don't deliver that and they won't deliver that for a long time.

Gerri Willis: Paul Chesser, thanks for coming back on this show. A pleasure to have you here.

Paul Chesser: Thank you, Gerri.