(c) 2021, The Washington Post – Faiz Siddiqui
President Joe Biden held a pompous event on the South Lawn of the White House last month to announce an ambitious goal: to make half of all new passenger vehicle sales from electric cars, plug-in hybrids or fuel cell vehicles. by the year 2030.
But a key person from the industry was not present. Elon Musk and the leading electric car company Tesla had not been invited to the festivities.
For Tesla, this may spell the end of a long honeymoon with the government, during which the company was buoyed by federal tax incentives that led to increased sales, along with emission policy compliance credits that resulted in profits and relatively little oversight, all of which allowed him to develop new technology and put it in the hands of consumers without much concern about regulators meddling.
The most recent hit came this month. House Democrats introduced a proposal to allow about $ 4,500 in additional incentives for consumers to purchase new electric cars – on the condition that they are made by unionized factories in the United States. Tesla is the only one of the big automakers in the US whose production is not unionized.
The House Ways and Means Committee is expected to discuss the portion of the bill concerning electric vehicles and green energy proposals on Wednesday.
The proposal prompted Musk, Tesla’s chief executive, to speak on his preferred medium, Twitter, about the apparent snub of recent days.
“This is written by the lobbyists of Ford and UAW, at the same time that they produce their electric car in Mexico,” he wrote in response to a tweet accusing lawmakers of “targeting a single company.” “It’s not clear to me how this helps taxpaying Americans,” Musk said.
The company is now on a different playing field, having had close relationships with the last two administrations. But what’s happening is also part of a general twist on how big tech companies and Silicon Valley are dealt with, which have seen increased regulations, public criticism and general scrutiny under the Biden administration.
Tesla, in particular, is used to being hyped and even pampered by a government eager to flaunt Silicon Valley ingenuity and the spirit of innovation that springs from a friendly environment with little regulation. President Barack Obama visited Musk-owned space rocket construction company SpaceX in 2010. Musk spoke with President Donald Trump, the Washington Post reported, and even welcomed his support when he decided to reopen the Tesla factory. in Fremont, California, in the middle of lockdowns from the coronavirus last year.
The same month Musk was ignored at the Biden event, the National Highway Traffic Safety Administration (NHTSA) opened an investigation into the driver assistance program. by Tesla, known as Autopilot, in connection with about a dozen crashes involving vehicles stopped for emergencies. Tesla has faced scrutiny in relation to a technology that has been little regulated until-now and its connection with the death of drivers due to the operation of the system and the warnings that it causes inattention on the part of who is driving.
The Ways and Means Committee is about to advance a bill that would increase the tax incentive for those who buy new electric vehicles to $ 7,500 – plus $ 4,500 if they are assembled in unionized factories in the United States. (An additional $ 500 would be available if the battery cells, and at least half of the vehicle’s components, are made domestically.)
Erin Hatch Thomas, communications director for the House Ways and Means Committee, said the proposal simply reflects the views of the committee.
“The Democratic Caucus strongly values both workers’ rights and America’s manufacturing industry, and both benefit from this proposal,” she said.
Still, the House bill, according to analysts and officials, puts pressure on the automakers Musk attacked in his tweet. Ford, for example, assembles its electric Mach-E SUVs in Mexico, so the vehicle would not qualify for the additional $ 4,500 in incentives unless Ford brings production to one of its factories in the US, officials said.
General Motors did not immediately provide a comment, and Tesla did not respond to a request for comment.
Tesla has previously benefited from government programs designed to stimulate demand for electric cars and help companies adopt green technologies. For example, consumers received a federal tax credit of $ 7,500 for the first 200,000 vehicles Tesla sold in the country, an option that quickly sold out as consumers received up to $ 10,000 with the combination of all incentives in California, which provided your own benefits.
The initial incentives were part of a Great Recession program designed to stimulate the development of electric and plug-in hybrids.
Tesla also sells the regulatory credits to other automakers, such as Chrysler’s parent company Stellantis, and that allows it to increase its quarterly profits. The credit system is the result of a combined work of the state, the federal government and even international measures designed to reduce the emissions generated by vehicles.
Here’s how it works: automakers must meet certain emission limits and are penalized if they don’t. Because Tesla exclusively sells electric cars, it can easily meet those emission limits and can build on its achievements through a credit system. You can then sell your excess credit to other automakers that are not meeting your limits on their own. A dramatic example of how Tesla uses this system to its advantage is as follows: Tesla reported a total profit of $ 331 million in the third quarter of 2020. Without the $ 397 million it raised through the sale of its regulatory credits that same quarter, the company reportedly reported losses.
Tesla has benefited dramatically from the regulatory landscape that has worked in its favor, analysts say, but now faces a different scenario.
Dan Ives, an analyst with Wedbush Securities, said the company is heading into new and uncertain waters.
“Tesla is defending its turf but at the same time has a strong and growing headwind as tax incentives increasingly benefit companies like GM, Ford or others that are highly unionized,” he said. “And Tesla is rowing against the tide, judging by the way the bill is currently worded.”
Musk has long opposed Tesla’s unionization, and the company has been accused of unfair labor practices over conditions at its Fremont assembly plant. Tesla was found to have unfairly threatened workers with losing their stock options if they organized a union and also fired an employee for engaging in legally permitted union activities.
Musk’s response to the coronavirus drew fresh criticism. Tesla encountered opposition when it initially left its plant open at the beginning of the lockdown orders, and reopened before the orders expired. Tesla even issued layoff notes for workers who chose to stay home rather than return to work, the Post reported, despite promises by the company that they would not be punished.
Meanwhile, Tesla has recently challenged regulators even more by launching a program called “Comprehensive Autopilot,” allowing some test drivers to use the technology in a beta period, believing it capable of things it does not provide.
Musk himself admitted that the program is not fully ready, describing the current version as “not very good”, while indicating that Tesla should make “the Integral Autopilot work”. Government research on Autopilot calls for more regulations on this technology, which is an extension of the tools and applications that allow you to navigate city streets and other locations previously limited only to the program. The California Department of Motor Vehicles, which regulates motor vehicles in the state, has put Tesla “under review” for the “Comprehensive Autopilot” nomenclature, the LA Times reported in May.
Ives described concerns about the Integral Autopilot as “a black eye” for the company.
“I believe that for the first time in a few years Tesla is having, at the same time, competition in the supply chain and road safety problems that have come to light; and therefore Musk and company must navigate murky waters: it is a critical time, “he said.
Ross Gerber, a Tesla investor close to the company who has spoken with Musk, believes that the failure to establish relationships with the Biden administration was a strategic mistake on the part of the CEO. The administration was poised to provide millions in inventories for electric vehicles and green energy, both essential areas for Musk, but the Tesla boss took a defensive stance.
“If Tesla supports Biden, yes [Musk] I would have supported Biden, I would have been very supportive of the administration and Biden would have done anything to help Tesla, ”Gerber said.
This failure falls to Musk, he added.
“I think he just played his cards wrong and now it’s hurting him,” Gerber said. “This is the cost.”
Author Information:
Faiz Siddiqui is a reporter for the Washington Post’s technology team. Its coverage includes Silicon Valley giants, new mobility businesses and companies that make electric vehicles and autopilots.
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