Elon Musk has entered into a Twitter debate with Existential Comics, a political-satire website with 197,000 Twitter followers. On May 11, Existential Comics claimed that libertarian support for Musk is misplaced because his ventures receive substantial funding from the U.S. government. Musk disputed the allegations, arguing his companies are actually subsidized less than his competitors. He ended the discussion by blocking Existential Comics.
Here are the claims that require fact checking:
Claim 1: Competing automakers in the United States receive more taxpayer money than Tesla.
Elon Musk tweeted: “Our giant auto co competitors have much greater access to incentives than Tesla, which means Tesla has prospered in spite of gov’t subsidies, not because of them” (“Incentives” are tax breaks and subsidies typically used by state and local governments to lure in businesses and the jobs that come with them.)
Elon later tweeted a 2015 article from The Guardian, which states that “fossil fuel companies are benefiting from global subsidies of $5.3tn (£3.4tn) a year, equivalent to $10m a minute every day, according to a startling new estimate by the International Monetary Fund.”
Musk’s argument is generally true, according to data from Good Jobs First, a U.S. non-profit that describes itself as helping “public officials seeking to make economic development subsidies more accountable and effective.” The group tallied grants, tax credits, loan guarantees, loans, and bailouts from both state and federal sources.
Current total subsidies for U.S. carmakers are listed below. Sums include available data for federal awards (from 2000 to the present) and state awards (most statistics since 2010, but some as early as 1992). They also include future tax credits promised over the next 20 years by the state of Nevada, covering Tesla’s battery factory.
In total, Tesla has received or been promised fewer grants and tax credits than Ford and GM, but more than Fiat Chrysler. However, when loans, loan guarantees, and bailouts are considered, all three major U.S. carmakers have received vastly more government money than Tesla.
Total grants and tax credits: $3.5 billion
Total loans, loan guarantees, and bailout assistance: $0.5 billion
Total grants and tax credits: $2.2 billion
Total loans, loan guarantees, and bailout assistance: $17.6 billion
Total grants and tax credits: $6 billion
Total loans, loan guarantees, and bailout assistance: $50.3 billion
Total grants and tax credits: $4 billion
Total loans, loan guarantees, and bailout assistance: $27.6 billion
Subsidy for the rich
Conservative columnist Phil Kerpen criticized Tesla in the National Review for creating a “transfer of wealth to a rich hobbyist” every time a model was sold. Tesla Motors produces a premium electric car. In terms of wealth, an estimated 90 percent of electric car consumers are in the top 20 percentile, according to a 2015 study from the Energy Institute at Haas at Berkeley University. While the average income is roughly $56,000 in the United States, the average income of a Tesla owner is $320,000, according to the Los Angeles Times.
Germany briefly removed Tesla from its list of electric cars that qualified for subsidies, citing the high price of the vehicle.
The Los Angeles Times story, which was disputed by Elon Musk, cites a study from Strategic Visions, but did not include a link to the study paper. Include Strategic Visions study when located).
Electric cars may contribute more to pollution-related illnesses than gas-powered vehicles
In the Twitter exchange, Musk points to a study from the International Monetary Fund that determined that the fossil fuel industry receives $5.3 trillion worldwide, every year, from government. Roughly half of this figure are medical costs that come from treating illness related to air pollution associated with burning fossil fuels. Authors of the study argue that taxpayers ultimately pay for treating those who become sick from coal and other fossil fuels, payments that effectively act as a subsidy for oil and gas companies.
However, gas-powered cars in the United States contribute little to these health costs, which are largely driven by the use of coal. With most cars running on gasoline, the health impacts of traditional auto emissions are less costly than the global picture offered in the IMF study (Green Cars Report).
Claim 2: The U.S. government invested more money in Tesla and SpaceX than Elon Musk did. Yet the government has no voice in corporate decisions.
Existential Comics tweeted: “The government invested more money in Tesla & SpaceX than you, by far. They have no voting shares because you sell off over inflated stocks to keep the public from having a say in your run your publicly funded companies.”
Existential Comics is generally correct. It’s true that government agencies have invested more total dollars in Tesla and SpaceX than Musk has personally. But, comparing Musk’s personal financial contributions with the U.S. government fails to account for private equity groups, such as Alphabet and Fidelity Investments, which have invested more than a billion dollars combined in Tesla Motors. As for SpaceX, the majority of taxpayer funding is in the form of contracts instead of subsidies, meaning the government is hiring SpaceX.
Tesla: As stated, according to the Good Jobs First study, Tesla Motors has received $3.5 billion in subsidies, including government tax breaks. Musk had invested $70 million of his own money in the company as of 2012, according to Investors’ Business Daily (need to confirm source).
Musk has famously not accepted salary from Tesla and says he won’t do so until the company reaches $100 billion in market capitalization, meaning its value on the NASDAQ stock exchange. If and when it does reach this financial threshold, Musk could see a windfall of $55.9 billion (Bloomberg).
SpaceX: It’s more difficult to calculate the finances of SpaceX because it’s a privately held company, and thus not required to list its earnings. Because the funding of SpaceX is less transparent, media outlets consistently refer back to an article in The Los Angeles Times claiming Musk ventures have received $4.9 billion in government subsidies. Musk disputes the characterization made in The Los Angeles Times story as one-sided.
But based off what we know, and using The Los Angeles Times story as little as possible, Existential Comics claim is partly true. Forbes reported in April 2018 that Musk invested roughly $100 million of his own money in SpaceX, while NASA and the U.S. Air Force allocated at least $5.5. billion to various SpaceX ventures, according to The Los Angeles Times.
Much of that taxpayer money has come in the form of contracts. The Wall Street Journal estimated that 70 percent of SpaceX contracts come from the U.S. government. An op-ed in Ars Technica said NASA internal documents put the figure at 85 percent.
The Air Force, in particular, is beginning to award SpaceX contracts typically reserved for the United Launch Alliance, the joint venture of Lockheed Martin and Boeing. In March 2018, the U.S. Air Force entered into a $290 million contract with SpaceX to launch three GPS satellites by 2020, according to The Wall Street Journal.
SpaceX has also received considerable investment from private equity firms. Fidelity Investments invested $400 million in April 2018. This was on top of the billion dollars Fidelity invested alongside Alphabet Inc. in 2015 (Forbes). Alphabet secured a 7.5% stake in SpaceX in that deal, according to the Motley Fool, an investment blog.
Better than the alternative?
Musk presents SpaceX as a taxpayer-reliant business that’s vastly more cost-effective than the alternative. He’s criticized the United Launch Alliance, SpaceX’s competition for space contracts, for receiving around $1 billion from the U.S. Air Force regardless of how many rockets the company launches (Futurism). A SpaceX launch costs roughly $70 million less than the service ULA provides (Tech Crunch).
SpaceX’s annual budget is between $800 and $900 million, a figure cited in 2015 by Ashlee Vance in his biography of Musk (The Motley Fool). The Wall Street Journal reported that SpaceX was barely managing this budget after obtaining internal SpaceX documents that showed the company had a profit margin of about 0.2 percent in 2015, leaving the company vulnerable to an accident or bad year. But business tides have shifted for SpaceX, with the successful launch of the Falcon Heavy in February apparently persuading the government to award the space company more lucrative contracts.
Fox News Business calculated that SpaceX earned roughly $1.15 billion in revenue after launching 16 rockets between January and November 2017.
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