Little do they know…
With Tesla’s federal tax credit set to drop to only $1,875 this July after the automaker surpassed the incentive’s sales threshold last year, fans and holders of the EV maker’s stock are worried that demand for Elon Musk’s cars will soon start to drop. Thankfully, they shouldn’t worry so much because the Detroit Free Press is reporting that Tesla is still receiving a hefty subsidy for each electric car it sells.
And while Tesla wouldn’t be getting this subsidy without government regulation, it’s actually being paid for by customers who buy gasoline-powered cars from General Motors, FCA, and likely a few other automakers. The news follows a disclosure both of those manufacturers made to the state of Delaware, which revealed that General Motors and FCA have reached an agreement to buy federal greenhouse gas credits from the California-based carmaker.
But that strategy has been going on for years. In fact, Tesla has reported about $2 billion in revenue from the sale of greenhouse gas credits since 2010. What’s different now is that this is the first time larger automakers have disclosed it publicly.
But this business model is making some members of the auto industry pretty unhappy. One of them is Jim Appleton, the president of the New Jersey Coalition of Automotive Retailers. The businesses he represents all bank on keeping prices of gasoline cars low for consumers, and as an advocate for dealerships (which can’t even sell Teslas given that the automaker owns its retail locations), he’s not happy that Tesla is cutting into margins without dealerships getting a slice.
"Last year, competing automakers paid Tesla $420 million to buy absolution because they were unable to meet the emissions mandate," said Appleton. "Every Tesla is sold at a loss, but that loss is subsidized by Chevy drivers and others by a couple thousand dollars.”
Appleton even did the math, figuring that each of the 250,000 cars Tesla sold last year came with a $1,680 subsidy when considering the $420 million the company got from selling credits.
"And that’s just the beginning," said Appleton. "A $100,000 Tesla avoids $6,625 in state sales tax and last year that same car came with a $7,500 federal tax credit. In other words, Tesla buyers helped themselves to a nearly $16,000 subsidy, resulting in higher taxes and higher car prices for everyone else. Oh, and let’s not forget, Tesla owners pay no gas tax to support the roads they travel.”
And though it’s obvious that Appleton was never a Model 3 preorder holder, GM and FCA are actually happy with their agreement with Tesla, but mainly because their hands are tied. That’s because consumer demand for EVs is not in line with EV sales that regulations require. For that, automakers can only blame booming truck and SUV sales.