Elon Musk Strikes Back: LA Times article attacking Tesla and SolarCity 'fundamentally incorrect'

Elon Musk with robots
CC BY 2.0 Wikimedia

"If I cared about subsidies, I would have entered the oil and gas industry," said Elon Musk, the CEO of Tesla Motors and SpaceX, and the chairman of SolarCity.

A recent Los Angeles Times article supposedly investigated how much government subsidies the Musk empire (Tesla, SpaceX, SolarCity) is receiving, and the numbers in that article are pretty big. The general impression that one is left with after reading it is that Musk goes where there's government money to be had, that his success is largely dependent on the taxpayer, and that without it, most of what he's doing might not be possible.

The fuzzy math and insinuations obviously got to Musk, because he called CNBC and tried to debunk the piece on live television. I'll let you be the judge of whether he was successful, and i'll share more of my thoughts below.

The first thing to note is the very common tendency with journalists of going for the biggest number possible, so looking at multi-decade incentives as if they were all received upfront (without discounting the amount back to the present) makes for big headlines, but that's not realistic economically. If we did that for the oil & gas & coal industries, we'd probably get numbers in the trillions of dollars (easily, especially if we look at indirect subsidies, including military protection which still costs taxpayers a lot).

Tesla battery Gigafactory in Nevada© Tesla

Musk makes that point well when he says that all the help that all his companies have gotten, are getting, and will get in the future remains 1/1000th of what the oil industry gets in a single year. But the other point, which he makes about the Gigafactory, but which could also be made about Tesla's Fremont Factory or SpaceX's factory near Los Angeles, or about SolarCity's future solar panel gigafactory in the state of New York, is the positive economic benefits that the taxpayers get in return for their initial help.

An important point is also made about the Zero-Emission-Vehicle (ZEV) credits. None of the money there comes from the government. It's "other automakers who are unwilling to make electric cars" who are buying some from Tesla to meet their quotas.

The Gigafactory in Nevada will create over 6,000 direct jobs and around 16,000 of indirect one. All these people, as well as Tesla, will pay taxes and and help the state's economy. The government will get way more back than it invested, and as solar and electric cars help displace fossil fuels and reduce pollution, there will be other benefits (economics and environmental) that shouldn't be underestimated. He even points out that the financial rating agency Moody's increased Nevada's credit rating after the Gigafactory deal, meaning that Nevada actually got more out of the deal than it put in.

Tesla Model S© Tesla Motors Events

Musk is also very that the incentives that his companies are getting are "helpful", but not "necessary". They are a catalyst; they increase the rate of something, which would happen otherwise, but slower. If they were necessary, it wouldn't have been possible for Tesla to pay back its loans (which were guaranteed by the government, helping Tesla get lower interest rates) 9 years ahead of schedule.

As for SpaceX, well... Attacking this company on a financial basis is crazy. SpaceX is making launching satellites and astronauts to space much, much cheaper. And if they succeed at making their reusable rocket and kill the disposable rocket market, they'll reduce the cost by orders of magnitude compared to what the giant defense contractors are charging the US taxpayers. This is a very good investment that will not only vastly increase the U.S. technological capacity (including the ability to launch scientific satellites and probes to better understand our planet and the universe), but it'll save taxpayers money.

The fact is, it took a lot of time to a lot of industrialists to build the current system. If we want to change it to something else (solar power, electric cars, etc), it won't happen magically, we need other industrialists (or old ones who change their businesses) to help build that new infrastructure. Musk is trying to do some of that. He's fighting large incumbent industries who receive a lot of help, and back when those companies started they have incentives too. So I think it's only fair that things like electric cars, battery factories, solar power, etc, get some help too. I'd also be in favor of removing all fossil fuel subsidies and phasing out renewable subsidies as the industry matures.

Via CNBC, Mashable

Elon Musk Strikes Back: LA Times article attacking Tesla and SolarCity 'fundamentally incorrect'
Musk called CNBC to defend his companies against accusations of being too dependent from government subsidies.

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