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http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html#page=1

Los Angeles entrepreneur Elon Musk has built a multibillion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space.

And he's built those companies with the help of billions in government subsidies.

Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, together have benefited from an estimated $4.9 billion in government support, according to data compiled by The Times. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot start-ups.

"He definitely goes where there is government money," said Dan Dolev, an analyst at Jefferies Equity Research. "That's a great strategy, but the government will cut you off one day."


The figure compiled by The Times comprises a variety of government incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars.

A looming question is whether the companies are moving toward self-sufficiency — as Dolev believes — and whether they can slash development costs before the public largesse ends.

Tesla and SolarCity continue to report net losses after a decade in business, but the stocks of both companies have soared on their potential; Musk's stake in the firms alone is worth about $10 billion. (SpaceX, a private company, does not publicly report financial performance.)

Musk and his companies' investors enjoy most of the financial upside of the government support, while taxpayers shoulder the cost.

New York state is spending $750 million to build a solar panel factory in Buffalo for SolarCity. The San Mateo, Calif.-based company will lease the plant for $1 a year. It will not pay property taxes for a decade, which would otherwise total an estimated $260 million.

The federal government also provides grants or tax credits to cover 30% of the cost of solar installations. SolarCity reported receiving $497.5 million in direct grants from the Treasury Department.

Elon Musk's companies benefit from subsidies
SpaceX, Elon Musk’s rocket company, cut a deal for about $20 million in subsidies from Texas to build a launch facility there. (Brian van der Brug, Los Angeles Times)
That figure, however, doesn't capture the full value of the government's support.

Since 2006, SolarCity has installed systems for 217,595 customers, according to a corporate filing. If each paid the current average price for a residential system — about $23,000, according to the Union of Concerned Scientists — the cost to the government would total about $1.5 billion, which would include the Treasury grants paid to SolarCity.

Nevada has agreed to provide Tesla with $1.3 billion in incentives to help build a massive battery factory near Reno.

The Palo Alto company has also collected more than $517 million from competing automakers by selling environmental credits. In a regulatory system pioneered by California and adopted by nine other states, automakers must buy the credits if they fail to sell enough zero-emissions cars to meet mandates. The tally also includes some federal environmental credits.

I love Elon Musk as much as the next guy but sometimes, some of my libertarian friends are so insufferable when it comes to him. They are always 'why let the government do this when Elon Musk can do it with newer tech', etc. It is especially insufferable when it comes to the hyperloop and the California High Speed rail. Actually, I see it on GAF all the time too.

edit: Just to be clear, I think what Musk is doing is fantastic, and what the government is doing in investing with him is great. Great use of government funds and more should be poured in his general direction and others like it.

 

[Unknown Soldier]

The California High Speed Rail is a bad joke though. I would rather let Musk muck around with hyperloop than whatever the hell California is pretending to do at the moment.

 

[Prototype]

The rich using taxpayer money to get richer. Nothing new here. At the end of the day Musk is no different from any other wealthy person or corporation.

 

[JaggedSac]

Didn't he build his fortune on PayPal?

 

[sprsk]

The rich using taxpayer money to get richer. Nothing new here. At the end of the day Musk is no different from any other wealthy person or corporation.

Except the fact hes using government money in ways to better the future of the human race. In ways our government in its current state could never do even.

Thank god someone is doing something productive with our tax dollars.

 

[Daria]

at least we're giving a lot of money that's being used for the greater good of everybody

 

[NYCmetsfan]

So do most companies that do a lot of r and d

Edit: this is mostly about tax credits for investment from states? Why is he being singled out? This has been happening for years its nothing special and I'm confused why this was written now. These programs are if anything expanding not decreasing. I figured it was more about gov contracts

 

[Gentleman Jack]

at least we're giving a lot of money that's being used for the greater good of everybody

'everybody' == people who can afford $70k cars.

 

[SRG01]

You can say this about any company that works off of military contracts...

 

[numble]

Except the fact hes using government money in ways to better the future of the human race. In ways our government in its current state could never do even.

Thank god someone is doing something productive with our tax dollars.

So when states are competing to give tax breaks for his companies to build factories in their state, it should be encouraged race to the top? It's likely the facilities would still be built with 50% of the tax breaks received.

 

[TheLostBigBoss]

'everybody' == people who can afford $70k cars.

Which is leading to the release of a $35K (before EV tax cuts) car in 2017.

These things, they take time. Even then, EV cars are already at what projected costs were in 2020, we're ahead of the game.

 

[Daria]

'everybody' == people who can afford $70k cars.

and then $35k and 10 years from now we'll have entry market electric cars for >$20k? at the end goal it's improving so much

 

[sprsk]

'everybody' == people who can afford $70k cars.

So you think the price of all this tech will never go down in price or be used in different ways beyond cars?

They're just gonna make rich people cars forever?

 

[golem]

The government offers these incentives not just to line the pockets of billionaires (haha) but to push their own agendas-- whether it be clean energy, job creation, etc etc.

 

[NYCmetsfan]

I'd much rather they right articles blasting retail giants and sports owners from receiving these subsidies rather than good manufacturing jobs.

 

[entremet]

Didn't he build his fortune on PayPal?

A good amount, but he didn't use his whole personal fortune to start his other companies.

That's a fool's move.

That's why you get investors.

 

[Par Score]

No man is an island.

At least this corporate welfare is going toward a Billionaire who seems to be trying to improve the world, rather than destroy it for a quick buck.

 

[Ace Harding]

Musk's companies are far from being alone in taking some sort of subsidy. Tax breaks to promote economic development are handed out like candy. Auto industry. Farms. Defense industry. Healthcare industry. The government supports just about every industry in some fashion.

 

[antonz]

The Man is using his wealth and Government investment to do things for the betterment of everyone. Elon Musk is frankly what we need more of as far as billionaires etc.

Sure he isn't losing all his money doing this stuff but what he is doing benefits everyone long term. The man is committed and he is creating opportunities

 

[Quixzlizx]

Better that Elon Musk gets tax incentives over some Fortune 500 behemoth that will just pocket the money and move it offshore.

 

[Prototype]

'everybody' == people who can afford $70k cars.

.
Edit. Or space flights, I'll likely never be able to afford.

I see the posts about the prices coming down. That'll be nice when they do, but part of that will take many, many more e cars on the road and we'll need the electric infrastructure to charge cars being widespread before it becomes anywhere close to a viable alternative. At minimum another decade, probably longer.

 

[Elfforkusu]

So?

Innovation is expensive and should be subsidized by government investment.

Also, no fucking kidding wrt SpaceX. Who do you think is buying rocket rides, the circus?

 

[enzo_gt]

man uses consciously budgeted government incentives to develop environmentally and economically advantageous alternatives in industries staring at a doomsday clock metered by the Earth's resources to one day become sustainable

the horror

 

[BertramCooper]

Beats spending government $$$ on boondoggle sports stadiums.

 

[Jonnax]

.
Edit. Or space flights, I'll likely never be able to afford.

I see the posts about the prices coming down. That'll be nice when they do, but part of that will take many, many more e cars on the road and we'll need the electric infrastructure to charge cars being widespread before it becomes anywhere close to a viable alternative. At minimum another decade, probably longer.

That's how new technology works. The TV wasn't cheap when it was first made but today everyone has one. If the first steps aren't taken then we'll just stay where we are.

 

[i_am_ben]

Musk actually seems to be delivering some results for the money the Government is giving him.

I'd be more concerned with all the bottom feeder companies who are collecting government funds but aren't delivering anything or are delivering very poor results. A lot of the people running these companies are straight up crooks.

 

[sfedai0]

Without subsidy, companies like Tesla would never be able to have any sort of traction, nor have the ability to innovate and create jobs.

 

[entremet]

Beats spending government $$$ on boondoggle sports stadiums.

Yep. That's the real travesty.

 

[The Technomancer]

So do most companies that do a lot of r and d

Edit: this is mostly about tax credits for investment from states? Why is he being singled out? This has been happening for years its nothing special and I'm confused why this was written now. These programs are if anything expanding not decreasing. I figured it was more about gov contracts

I think its written as a contrast to the "look at how well these private solutions are working" people, as someone else mentioned

 

[antonz]

Musk actually seems to be delivering some results for the money the Government is giving him.

I'd be more concerned with all the bottom feeder companies who are collecting government funds but aren't delivering anything or are delivering very poor results. A lot of the people running these companies are straight up crooks.

This is another fantastic point. Musk actually delivers. How much money has the government thrown around as corporate welfare to companies that never deliver or even intended to deliver in the first place.

His rocket work Alone will enable NASA to do much more with its current budget levels then ever before. Instead of spending billions over and over building single use rocket systems we will be able to spend a fraction of that on multiple use rocket systems

 

[East Lake]

I'm surprised that you know libertarians that even defend anything about his business. I find usually the combination of state subsidy (what about the free market!) + green technology (would surely fail without gov't!) is too much for them to handle.

It's also worth noting Elon spends very heavily, and that it's a good thing. Making cars and rockets requires more investment than typical silicon valley business and he's also unusual in that while other executives at GM or other large corps are pressured to extract value from their business through stock buybacks and cutting R&D, he is adding value to his companies through heavy spending and building things like the giga factory.

 

[PlayALLtheGames]

The rich using taxpayer money to get richer. Nothing new here. At the end of the day Musk is no different from any other wealthy person or corporation.

In what sense? I'd say that he's different; he's making things that are good for society.

 

[Ecotic]

Infant industries with high future potential to bring benefits to a country survive on government subsidies until they can achieve economies of scale and experience, and develop a large, mature base of suppliers that give them bulk and repeat order discounts.

This isn't new, take Airbus. Europe wanted a highly beneficial airline company for themselves like Boeing. It survived off government subsidies for years until it could compete with Boeing.

 

[makingmusic476]

At this point, Tesla is looking like it'll be more of a battery company than an EV company, and I expect that to become a very large business for it in the near future.

SolarCity is rapidly nearing a point where it can subsist entirely on its own. It's already the leading installer of residential solar panels in the country, and its movement towards manufacturing and future use of Tesla's Powerwalls will ensure it continues to be a leader in that market.

Space X is the only one that seems like it might continue as a government subsidized corporation making tools of questionable value, but I'm pretty okay with lots of government funds being put towards space exploration.

 

[Ke0]

This people don't take into account that some of the money Musk gets from the American government is contracts as replacement for government entities, point in case SpaceX does a lot of Nasa's heavy lifting for launches and stuff now.

 

[Tuck]

I'm ok with government subsidies for stuff like this. Wouldn't get off the ground without em.

 

[VariantX]

I'm perfectly happy with musk getting the money if he succeeds, well have more affordable space exploration, electric cars will become cheaper and practical for everyone, and we may end up with better battery tech in the long run because of electric vehicles.

 

[duderon]

This is largely bullshit because Tesla and SpaceX both heavily invest their revenues back into their respective companies for growth.

Tesla receives subsidies in the form of zero emission credits that any company could receive, but few do because you have to actually make a substantial number of electric cars or other zero emission vehicles to get the credits. Tax credits for individuals are open to all manufacturers. Tesla also payed their DOE loan that helped accelerate Model S development back early and in full. None of these are needed to keep the company running. It now generates $1 billion in revenue from car sales a quarter and the ZEV credits are something like $50 million of that billion.

SpaceX has received funding from the government because they are cheap and reliable. The government is SpaceX's client. If there was another private space company that built and launched rockets cheaper than SpaceX they would be getting the government contracts.

If either company did not have bigger goals they would be profitable because the money coming in would not be going to expansion. The whole reason both companies exist is because they have extreme goals to drive industry innovation. There's no point in trying to make them profitable in the near term.

 

[Bob Coffee]

Helping space X do what it does is a good investment of tax dollars I see no problems here.

 

[killer rin]

At least someone is using the money effectively

 

[Ke0]

This is largely bullshit because Tesla and SpaceX both heavily invest their revenues back into their respective companies for growth.

Tesla receives subsidies in the form of zero emission credits that any company could receive, but few do because you have to actually make a substantial number of electric cars or other zero emission vehicles to get the credits. Tax credits for individuals are open to all manufacturers. Tesla also payed their DOE loan that helped accelerate Model S development back early and in full. None of these are needed to keep the company running. It now generates $1 billion in revenue from car sales a quarter and the ZEV credits are something like $50 million of that billion.

SpaceX has received funding from the government because they are cheap and reliable. The government is SpaceX's client. If there was another private space company that built and launched rockets cheaper than SpaceX they would be getting the government contracts.

If either company did not have bigger goals they would be profitable because the money coming in would not be going to expansion. The whole reason both companies exist is because they have extreme goals to drive industry innovation. There's no point in trying to make them profitable in the near term.

This is what I wanted to write, but I was lazy.

 

[Ashodin]

Except the fact hes using government money in ways to better the future of the human race. In ways our government in its current state could never do even.

Thank god someone is doing something productive with our tax dollars.

This so HARD

 

[smokeandmirrors]

Good. Give him more money if he needs it.

 

[TAJ]

Employer-sponsored insurance is heavily subsidized, so pretty much every company is sucking off the government teat in some way.

 

[Htown]

I don't have a problem with this.

 

[Battersea Power Station]

OK, and how much do oil companies and corn farmers depend on government subsidies? I'm not sure if this is supposed to be an exposé or what.

 

[Deleted member 80556]

Considering so much tax payer's money is lost on God knows what, at least this is producing results and very quickly, and to the improvement of society. You don't see that with every company, much less 3 under the care of a person like Musk. It makes it sound as if this was a bad thing.

Yes, it is a potential problem if for some reason the government stops giving them money, but I don't see any reason in the foreseeable future. I found it specially funny that the person interviewed for this part of the news represented a company banking on Tesla failing.

Musk has proved so adept at landing incentives that states now compete to give him money

God damn.

EDIT: Only real problem seems to be that for 2017 the tax credit is going be slashed by 20%, for which they are trying to get the solar panel factory done by then.

 

[deltatheta]

Probably a really good investment on the part of the government. I can't help but smirk a bit at his libertarian fanbase with this knowledge, though.

 

[andthebeatgoeson]

Oh, so like Detroit. Didn't we just bail out our private auto industry because they never adapted?

 

[Nesotenso]

Beats spending government $$$ on boondoggle sports stadiums.

yup