May 18th 2019

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Articles from this issue:

COVER STORY Green energy policies freeze out the poor

EDITORIAL Religious freedom will be suffocated if ALP elected

FEDERAL ELECTION Majors fling barrels of pork in the way of disillusioned voters

CANBERRA OBSERVED If independents rule in House, stability is a goner

SOCIETY 'Ladies Wanted' flyers lure women into porn

CULTURE AND SOCIETY The last of his tribe

ECONOMICS Trading in the toxic legacy of neoliberalism

TECHNOLOGY The wheels come off Tesla's electric dream

HISTORY OF SCIENCE Faith and reason and Father Stanley Jaki Part 1

STATE POLITICS Notes from the hustings

A TRIBUTE TO LES MURRAY A man of the Word: the poet and the Logos

MUSIC Workhorse themes: Sonic sub-rhythms

CINEMA Avengers: Endgame: Marvellous final chapter

BOOK REVIEW The left has our schools in bondage

BOOK REVIEW Philosopher hits all the right notes

OBITUARY Bob Hawke: astute politician; flawed policies


EDITORIAL How Scott Morrison routed Labor, the Greens, GetUp and the left media

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The wheels come off Tesla's electric dream

by Peter Westmore

News Weekly, May 18, 2019

After years of over-promising and under-delivering, America’s latest technology darling, Tesla, now has a highly uncertain future.

Tesla’s chief executive, Elon Musk, has promised that his electric cars will revolutionise transportation: first through emission-free transportation; then, through self-driving Teslas which would change the way people live and do business.

The dream was always based on hype, which Musk provided in spades.

Tesla is holding deposits for its electric semi-truck,
though it is not yet in production.

At its simplest, electric cars are not “emissions-free”, if only because it takes huge amounts of energy to manufacture electric vehicles, including their high-tech batteries. Further, the power that drives them comes from the electricity grid, which, in Australia at least, is predominantly powered by so-called “dirty” carbon-emitting coal.

The environmentalists, who are besotted by Tesla cars, and government regulators in the world’s largest markets, the United States, the European Union and China, take none of this into account, and have thrown massive subsidies at electric vehicles, including Teslas, as part of their push for “zero-emissions vehicles”.

While the subsidies continue to flow into Tesla’s coffers, and Wall Street investors have bought into the Tesla dream in the hope of making huge profits, Tesla’s own performance is starting to separate the dream from reality.


For years, Musk promised that Tesla was on the verge of huge profits. Late last year, it seemed that, after accumulating losses of billions of dollars, Tesla was on the brink of profitability. At least, that is how Musk sold it.

In October last year, in the face of growing shareholder unease, Musk said he had “aspirations” that Tesla would post positive net income and cash flow “for all quarters going forward”.

As recently as last January, when the auto industry reported a decline in Tesla sales, Musk told analysts he was “optimistic” about a first-quarter profit, following a $US139 million ($A200 million) profit in the December quarter.

“Not by a lot, but I’m optimistic about being profitable in Q1 and for all quarters going forward,” he said then, as reported in the Los Angeles Times (April 24, 2019)

However, the last quarterly sales figures were a shocker. According to Tesla itself, the company recorded a loss of $US702 million ($A1 billion) in the first quarter of 2019. Even more alarming, in the first quarter, revenue fell 41 per cent to $US3.7 billion from $US6.3 billion in the previous quarter, a far steeper drop than expected, for sales of all its electric-cars – the Model S, the Model X and the Model 3.

Of particular concern was the failure of the budget-priced Model 3, which Musk had promised to sell for $US35,000.

According to Musk forecasts, the company should have been selling 500,000 Tesla Model 3s annually, by the end of 2018, instead of the 146,000 it reported.

Tesla’s business model is based on both government subsidies and the willingness of wealthy investors to buy into Elon Musk’s dream of a fossil-fuel free future.

In the U.S., the EU and in China, there are direct subsidies for purchases of electric cars. Until the end of 2018, there was a U.S. federal tax credit of $US7,500 (over $A10,000) for every electric vehicle purchased. It was reduced to half that figure in 2019, and will be removed at the end of the year.

Additionally, several U.S. states, including California, the largest state, have established what are known as “zero-emissions vehicle mandates”. The way it works is that the state requires carmakers to sell a set number of non-polluting vehicles. Those that fall short can buy credits from other automakers, such as Tesla, which have surplus credits.

Since 2008, Tesla has sold more than $US1.3 billion ($A1.9 billion) in regula­tory credits. In 2017, the company deli­vered 103,181 cars globally but earned $US360 million ($A500 million) from selling these emission credits, or roughly $US3,500 ($A5,000) per car.

An additional source of income comes from Tesla’s customers. Tesla cars are paid for up front, and since Tesla sells its cars direct, without relying on a dealer network, customer deposits are cash payments that essentially serve as interest-free loans – and these loans can stretch on for years.

In fact, most of those who have put down deposits on Tesla vehicles have yet to obtain one.

Tesla is holding customer deposits for two vehicles that aren’t even in production yet: an electric semi-truck ($US20,000 deposit) and a next-generation roadster (either $US50,000 down or the $US250,000 retail price paid up front to reserve a limited edition).

The company is sitting on a staggering $US985 million ($A1.4 billion) in customer deposits as at the end of March 2019.

Why do people continue to invest in Tesla? In part, because they have bought into Musk’s utopian vision of a fossil-fuel free world, led by Tesla.

The other is all to do with making money. Tesla was floated in 2010, raising $US225 million. Despite the recent fall in its share price, its value is still over $US30 billion. And Elon Musk holds 22 per cent of the stock.

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