California offers Tax Breaks to help sell $70,000 Tesla Model S

Posted by PITHOCRATES - December 22nd, 2013

Week in Review

Electric cars aren’t selling anywhere near enough to make them a profitable business.  Because they just won’t do for you what gasoline will do for you.  Let you carry lots of stuff over great distances.  Because the electric car is so less of a car as a gasoline-powered car governments bribe manufacturers to build them.  And people to buy them.  Just so rich people can have these toys (see California Is Giving Tesla Another Huge Tax Break. Good Move. by Will Oremus posted 12/19/2013 on Slate).

This is going to drive the Tesla-haters crazy. The luxury electric-car maker is getting a huge new tax break from California, SFGate reports. The state will let it off the hook for sales and use taxes on some $415 million in new equipment it’s purchasing in order to expand production of the Model S at its Bay Area factory. That amounts to a $34.7 million tax break to produce more of a vehicle whose sticker price starts above $70,000…

So, in fact, it isn’t Tesla per se that’s getting special treatment from the state. It’s the clean-tech industry in general, which California is very keen to promote…

More broadly, whatever sense a tax on the purchase of manufacturing equipment might once have made for California, it’s patently counterproductive in the context of clean-tech startups in the 21st century. Add to that some of the highest income and sales taxes in the nation, and it’s no wonder California is worried about companies like Tesla picking up stakes and heading elsewhere. Businessweek notes that new manufacturing jobs in the state have risen less than 1 percent since 2010, compared with nearly 5 percent nationally. Gov. Jerry Brown has been chipping away at the tax already, and Tesla is just the latest example.

Nor is the deal likely to burden the state’s taxpayers. Tesla’s Model S is in huge demand, and the company has been scrambling since its launch to ramp up production.

No.  The Model S is not in huge demand.  Demand may be up for the car.  But if the demand was ‘huge’ like every other popular car that sold well you wouldn’t need subsidies or tax breaks to build and sell them.  For cars in high demand are often the cars with the greatest profit in their selling price.  Because people want them so much that they are willing to pay these higher prices.  SUVs and pickup trucks were these kinds of vehicles.  And before gas prices spiked they were the lifeblood of manufacturers.  Because people paid more for these than they would for the sedans at the time.  Which is when the imports took over that segment.

People like SUVs and pickup trucks because they are big.  They carry a lot of people.  And a lot of stuff.  Even pull campers and boats.  The ideal vehicle for the family vacation.  Something the electric car just sucks at.  For any extra weight just sucks away charge time.  Limiting your range.  Which takes all the fun out of going on vacation.  And makes it a little scary.  For there is nothing worse than having a car that doesn’t move anymore in a strange place far from home.

But if you’re still convinced that tax breaks to big manufacturers are unfair and wrong, you might want to train your ire on a state a little further north, which just offered an all-time record $8.7 billion in tax breaks to a company that manufactures perhaps the least-green transportation technology of all. The worst part: Boeing might just move out anyway.

There is a bit of a difference between Tesla and Boeing.  Boeing employs a great many more people than Tesla.  And they’re all union workers ‘further north’.  Hence part of the reason for the tax breaks.  To help them compete with their high labor costs against the heavily subsidized Airbus.  Also, Boeing leads U.S. exports.  And is about the biggest component in U.S. GDP figures.  So while tax breaks and subsidies are abhorrent at least Boeing gives us something for theirs.  Unlike clean-tech industries.  That receive huge government subsidies and tax breaks.  Only to go bankrupt (Solyndra, Fisker, etc.) a short time later.  Tesla is the exception to the rule.  Because its founder, Elon Musk, is a billionaire who spends his own money.  A lot of it.  Unlike the other failed clean-tech start-ups.

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The Government Spends up to $250,000 per Chevy Volt Sale, but we choose GM’s Full-size Pickup Trucks

Posted by PITHOCRATES - December 24th, 2011

Week in Review

The Chevy Volt may not be flying out the door but GM’s full-size pickup trucks are (see GM sets 21-week idle at truck plants for factory updates by Craig Trudell, Bloomberg News, posted 12/23/2011 on The Detroit News).

The largest U.S. automaker has said it boosted profit this year by building supply of Chevrolet Silverado and GMC Sierra trucks, two of its most profitable models. GM is idling pickup factories for updates and renovations so that they’re able to assemble the automaker’s next-generation trucks…

GM had 202,720 full-size pickups in inventory at the end of November, 105 days supply on a selling-day basis, the company said Dec. 1. The company has said it’s targeting year-end inventory of about 200,000 full-size pickups, or about 90 days supply.

Note that GM’s most profitable vehicles are two full-size pickup trucks.  And if you do the math that 105 days of inventory equals about 58,000 trucks sold each month.  And that’s with no government incentives or rebates.  Because the government hates these trucks.

Compare that to the car of GM’s future.  The Chevy Volt.  How many are they hoping to sell?  About 10,000.  In one year.  And at a cost to taxpayers of about $250,000 per Chevy Volt.

People want full-size pickup trucks.  They don’t want the Chevy Volt.  Yet our government will pay a quarter of a million dollars per Volt to help make us buy what we don’t want.

What’s wrong with this picture?

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