Tesla Motors Inc. (NASDAQ:TSLA) CEO Elon Musk was on the defensive on Monday after a Los Angeles Time story showed that his firms have gotten $4.9 billion in US government grants. Musk said that “If you add up all the subsidies that SolarCity and Tesla get, it is 1/1000 of what the oil and gas industry get in a single year.”
The CEO added that if he wanted government aid he would have gone into those industries. A report from the International Energy Agency showed that fossil fuels enjoyed $550 billion every year. That compares with a total of $120 billion for green energy sources.
Rush Limbaugh commented on the firm’s use of subsidies on Monday afternoon. The radio personality said that the story proves that “this proves is that none of what Elon Musk is doing is sustainable without some entity willing to give him $5 billion.”
He may be right for the time being. The firm will have to head back to the capital markets in order to pile on debt or sell new equity.
Tesla Motors hits out at unfair subsidies
Tesla Motors has never denied that it gets a lot of help from states in order to make its green business work, but the firm is not a fan of the idea that only those firms get subsidies.
Musk set forth his idea about what grants are for “What the incentives do is they are catalysts. They improve the rate at which a certain thing happens,” he told Power Lunch on CNBC.
Mr. Musk also cleared up some of the numbers that were used. “The $1.3 billion that Nevada may wind up awarding Tesla is actually spread out over 20 years,” he said.
Musk followed his discussion of the subsidies with a little bit of info on his hopes for the future of Tesla Motors. The CEO said that “the need to achieve economies with scale prevent us from coming out with a compelling, low-cost electric car right now.”
The CEO expects to put a mid-range car on the road in 2017.
Tesla Motors competes with fossil fuels
The massive grants that fossil fuels get across the world make the cash that goes to Tesla Motors look tiny, and Elon Musk would love to be able to get that sort of cash from the state. The firm’s most recent earnings report showed a high level of cash burn in the first quarter.
Adam Jonas of Morgan Stanley said of that report that “Cash burn was eye watering, raising the stakes for an on-time and good quality Model X launch.”
Tesla Motors needs to get cash from somewhere in order to keep itself afloat, but it won’t be able to go to the state for anything like $550 billion in support.
The CEO will have to, once again, find “some entity” willing to give him billions. This time around, however, it’s likely to be a private funder rather than a government one. Mr. Limbaugh may be alright with that sort of behavior.