Time To End Elon Musk’s Marketplace Mirage

On Jan. 10, just weeks after word got out that the Air Force will not support SpaceX’s reusable rockets without further analyzing the company’s performance, the Wall Street Journal reported that Elon Musk’s company is cutting its workforce by 10%.

While the Air Force’s announcement could have played a contributing role in its decision, SpaceX already seemed to have massive cash problems as it was, with Bloomberg noting in November that SpaceX may have had negative earnings for its then-most recent period when excluding customer prepay totals.

The clear lesson here is that government subsidization of private companies, while sometimes providing temporary relief and comfort, is rarely effective in the long run.

Like stubborn backyard weeds, market realities always come back home to roost, no matter how often they are ignored, chopped up, or suppressed by policymakers.

Yet, in a clear case of the blind leading the blind, Tesla — run by the same man who is currently watching his government-supported aerospace company falter — is lobbying the federal government to maintain the $7,500 electric vehicle tax break for its luxury vehicle buyers, which is currently being phased out.

Taxpayers have seen this movie before, and they don’t want to see it again.

As SpaceX has recently demonstrated to the American people, Elon Musk seems to have a penchant for creating businesses that are completely dependent on the government and likely wouldn’t exist without taxpayers’ help. Tesla is of no exception.

Tesla’s Tax Credits

Tesla buyers claimed over half of 2018’s total EV tax credits. And yet, even with the EV credit in place, the company has a track record of failing to make money.

Tesla has only been profitable three quarters in its entire history, and, according to data compiled by Bloomberg, burns over $7,430 every minute. This summer, it slashed its workforce by 9%.

Why should taxpayers continue to throw life vests to a private company that is barely capable of standing on its own?

In other areas of the world, Tesla’s presence faded soon after the government took away its incentives. When Denmark phased out its EV credit in 2015-2016, Tesla car registrations dropped by close to 95%.

Sales plummeted to zero in Hong Kong when the country trimmed down its electric vehicle tax subsidies. All this data underscores the scope of the market disturbance caused by the existence of this tax credit.

Picking Winners Vs. Losers

As the old saying goes, when the government picks winners and losers, it pays to be one of the winners. It is just as ineffective with cars as it is with rockets.

Unquestionably, Elon Musk is a true innovator with powerful ideas; however, that does not mean Washington should put his thoughts and products on a pedestal or protect them from feeling everyday market pressures.

Consumer choice and buying power, not government subsidies and aid, should dictate which companies thrive and falter in the marketplace.

As shown through SpaceX’s struggles, the laws of supply and demand will ultimately prevail even when they are repressed by the heavy hand of government.

When dealing with Tesla, the White House must, for the sake of American taxpayers, finally come to recognize this reality and ignore its EV credit lobbying calls.

The company’s artificial marketplace has lasted for long enough.

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