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Tesla Motors Inc (TSLA) Seeks $106M Tax Relief, Porsche Slams Ludicrous Mode

Tesla Motors Inc (TSLA) Tesla Model 3

Tesla Motors was in the news last month after it sold $1.7B worth of stock in order to finance expansions plans for the Model 3. Now, the firm is asking California for tax breaks of $106M towards its goal of building a mass-market EV. Elon Musk and the management team had expected to record between 100k and 200k reservations for the Model 3 but the firm now has close to 400K preorders for the car.

Tesla Motors Inc (TSLA) Tesla Model 3

The explosion of preorders has forced Musk to shift his production timeline forward in order to meet the demand. Before the debut of the Model 3, Tesla had planned to deliver 500K cars (Model S, Model X, and Model 3) by 2020. However, the explosion of orders has forced the firm to target 500K cars by 2018 and 1M cars by 2020.

Tesla needs all the help it can get

Tesla Motors is out seeking tax breaks again and it won’t be long before critics start shouting that Elon Musk is a billionaire welfare king. In the next couple of hours, Tesla bears, shorts, and critics will be out screaming blue murder. However, it is worthy of note that the firm would pay back with thousands well-paying jobs.

Scaling an automobile business is much different from scaling a software business. With software, you’ll mostly be copying code but with cars, you have to invest in tooling, assembly, and production facilities. Now, Tesla plans to spend about $1.26B on expanding its Fremont factory to accommodate the Model 3. The firm is asking for sales tax breaks on the cost of the equipment it needs to buy to outfit the assembly line. California had originally approved a $90M tax break for the firm when it started building the Fremont factory.

California legislators will do well to abolish sales tax on manufacturing and they’ll be surprised at the ease with which the state will attract and retain manufacturing and production lines. The production lines will offer thousands of well-paying jobs to residents and those workers will pay taxes on their incomes. More so, those workers will have more disposable income with which they will patronize local businesses that will also pay taxes.

Porsche engineers throw shade at Tesla

In other news, an engineer at Porsche has said that Tesla Motors should eat the humble pie and stop boasting about the Ludicrous Mode in its cars. Ludicrous Mode is an upgrade that allows Tesla’s Model S to go from 0 to 60 mph is an incredible 2.8 seconds. Porsche is working on a Mission E electric car, and its engineers believe that the Mission E is the perfect example of performance in EVs and that Ludicrous Mode is a sham.

The Porsche engineer noted that “The thing about [Tesla’s] Ludicrous mode is that it’s a façade… Two launches saps the whole battery. That won’t be the case with the Mission E. You’ll be able to run it hard, over and over; the battery will not overheat, the power control module will not overheat, and the seats will not suck.”

What the engineer is saying in essence is that Ludicrous Mode is not a consistent performance feature because you can’t launch ludicrous more than 2 times before you sap the battery. Ludicrous Mode seems to work like nitro booster in car races – except that you can only use it twice.  A benchmark test by Car & Driver also noted that Tesla’s “maximum acceleration is available only when the battery’s state of charge is above 95 percent and ‘max battery performance mode’ is set on the control screen.” 

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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