Tesla’s chief executive Elon Musk has spent the past few weeks positioning himself as a libertarian hero.
An opponent of lockdown policies in response to coronavirus, he has cast efforts to restrict people’s movements to limit transmission as an assault on civil liberties by a government grown too powerful.
With messages like “FREE AMERICA NOW” and calling lockdowns “fascist,” you might imagine the tech executive and entrepreneur has always been an advocate for small government.
Piqued by the coronavirus row, he has even threatened to move his factory away from California, known for its greater use of regulation, to a more free-and-easy state like Texas or Nevada.
But Tesla’s business was built on the back of government subsidies, and still relies on regulatory credits, a product of green energy regulations, for some of its income.
California’s green energy policies, regarded as an onerous drag on business and a waste of money by politicians and lobbyists including President Donald Trump, have supported Musk’s business and helped carry it to the point it now reaches – a successful, profitable, publicly-traded carmaker.
No doubt, this is a significant feat, and one not achieved by any other US company since Ford. But it is hard to argue that it could possibly have been done without government help – and especially the help of the state it is now threatening to leave.
In the first quarter of this year, Tesla made $16m – its first-ever first-quarter profit. Of its $5.1bn in revenue, $354m came from regulatory credits – almost 7pc of the total, a record level.
These credits are sold to other car manufacturers, who use them to offset their sale of polluting vehicles to comply with states’ emissions requirements – a policy pioneered and managed by green-conscious California.
Over the years Tesla has made hundreds of millions of dollars from the credits, including almost $600m last year. In a note this week, analysts from Deutsche Bank said Tesla’s investor relations chief Martin Viecha told them that revenue from these credits would be “considerably higher” in 2020.
Over the years California’s green energy policies have been instrumental to Tesla’s business in the state, with incentives and subsidies on the cars themselves, as well as charging, solar panels, and powerwalls.
For Tesla, as with other companies, regulation cuts both ways. Despite lobbying from several automakers, the US federal government, led by climate-change sceptic Mr Trump, has failed to extend a tax credit for buyers of electric vehicles, and the White House has signalled that it could cancel the scheme altogether.
The $7,500 subsidy only exists for the first 200,000 cars a company sells, though, and Tesla hit that cap last year, meaning subsidies finished at the end of 2019.
These incentives aren’t irrelevant to the company’s bottom line. The ending of the federal scheme is among factors Tesla pointed to as one of the reasons for its first-quarter loss in 2019.
Tesla’s Nevada and Buffalo, New York factories were built with local incentives totalling more than $2bn, and in Buffalo the company has had its lease and property taxes heavily subsidised.
In climate-conscious Europe, incentives have contributed to Tesla’s popularity in countries such as Norway, where electric cars are excluded from a 25pc VAT charge imposed on other vehicles, and the Netherlands, which exempts electric cars from purchase and motor vehicle taxes.
The company recently cut prices on its cheapest car, the most basic Model 3, in order to continue to qualify for Chinese subsidies, which only apply to cars costing less than 300,000 yuan (£34,000).
Tesla’s new Berlin factory was announced last October, a week after the German government said it would boost its own subsidy for electric car buyers. In February German newspaper Der Speigel reported that the company had applied for government funding for the construction of the facility, money which could be worth more than €100m (£88.45m).