How California Enabled Tesla By Forcing Competitors To Subsidize A Losing Business Model, by Tyler Durden

Elon Musk seems to exercise a Rasputin-like hold on the minds of many politicians and bureaucrats. From Tyler Durden at zerohedge.com:

It is no great surprise that Tesla hemorrhages cash.  As we pointed out last month when they reported Q2 earnings, making products that actually generate a return on capital for shareholders isn’t a strong suit of the Silicon Valley powerhouse.  In fact, Elon Musk managed to burn through a record $1.2 billion of cash in Q2 alone, or roughly $13 million dollars every single day.

But, as Bloomberg points out today, the one ‘product’ which Tesla is actually able to sell for a profit is one which was created out of thin air by the state of California and is perhaps the only reason that Elon Musk even has a business to manage.  Of course we’re talking about the ever controversial “Zero Emission Vehicle” credits which are less of “product” and more of a subsidy provided by Tesla’s competitors, or more accurately the consumers of those competitors who are forced to pay higher prices for their Ford Focus all so Elon Musk can practice digging tunnels.

Tesla Inc. has generated nearly $1 billion in revenue the last five years from an unlikely source: Rival automakers. The payments are part of an unpopular system in California that’s poised to proliferate elsewhere.

California requires that automakers sell electric and other non-polluting vehicles in proportion to their market share. If the manufacturers don’t sell enough of them, they have to purchase credits from competitors like Tesla to make up the difference.

Tesla, which exclusively sells battery-powered models, sold $302.3 million in regulatory credits last year alone. China and the European Union — two of the world’s biggest auto markets — are considering mandates and credit systems similar to California’s. If California is any guide, automakers will resent having to buy from peers, including the electric-car maker led by Elon Musk.

“It really makes them mad that Tesla got so much of a boost out of being the only purely electric car manufacturer out there,” Mary Nichols, the chair of the California Air Resources Board, said in an interview Friday at Bloomberg’s headquarters in New York. “In effect, they helped to finance this upstart company which now has all the glamour.”

To continue reading: How California Enabled Tesla By Forcing Competitors To Subsidize A Losing Business Model

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One response to “How California Enabled Tesla By Forcing Competitors To Subsidize A Losing Business Model, by Tyler Durden

  1. There should be laws banning subsidization. Subsidizing always distort the market, making the three legged horses winning races.

    Like

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