Bad Times for EVs – Good Times for Tesla

  • February 13, 2024

You’ve probably heard that the EV “market” isn’t doing so well; but it’s been doing great for Tesla.

Elon Musk’s battery powered vehicle company took in (earned in this context is akin to using ask in the context of government demanding the payment of contributions to Social Security) just shy of $2 billion dollars last year extorting money for “credits” bought under duress by other car companies that haven’t manufactured enough battery powered devices of their own to meet the “zero emissions” regulatory quotas laid down by the government.

Buying “credits” from Tesla – which manufacturers only battery powered devices – is how these other manufacturers make up the difference.

It’s easier – and cheaper for them – than building enough battery powered devices of their own to meet their quota. Of course, they’re not paying for that. You and everyone else who doesn’t buy a battery powered device is paying for it. The cost of buying those “credits” is folded into the price of new vehicles that aren’t devices, but which do sell.

For more, courtesy of the cost of the “credits.” But the price is still worth not being stuck (literally) with a device.

Tesla has taken in just shy of $10 billion since 2009 via extorting these credits from car companies that make what sells rather than devices made to meet quotas. In this way, Tesla has used the coercive power of the regulatory apparat not only to enrich itself but also to impoverish the manufacturers of alternatives to Tesla’s battery powered devices. These latter have fewer resources to invest in designing new vehicles, having spent them on “credits” for not having made their quota of devices. It’s one of the reasons why there are fewer new vehicles – as opposed to new devices – coming onto the “market,” which is in air fingers quotation marks for the same reason that “vaccine,” in the contest of MRNa drugs, ought always to be bracketed in air fingers quotation marks.

But not many people outside the car business – who don’t understand the way the regulatory apparat works – have any idea this extortion/winnowing is going on. They have been led to believe that battery powered devices are merely the “latest thing,” not unlike the way CDs were back in the ’90s. A natural evolution of technology from something not-as-good to something better.

In fact, the situation with battery powered devices – what are styled EVs – is more like what the situation would have been if the manufacturers of CDs were obliged to buy “credits” from the manufacturers of compact discs, for not making enough cassette tapes to meet their compliance quota.

Of course, the government did not impose cassette tape quotas – and people were free to buy CDs instead. That’s what you call a market.

Tesla depends on the government to create its antithesis – a kind of economic Golem that is controlled by a few big players who have the money and political swag to stomp the market under their feet.

It is unlikely Tesla would have had the resources to manufacture more than the handful of Frankenstein devices – Lotus sports cars converted into EVs – that were its original offerings, absent the “zero emissions” quotas vehicle manufacturers have been obliged to meet. Or buy “credits” from Tesla for not meeting them. This provided the seed capital Tesla needed to manufacture its own devices, such as the Model 3 – with resources extracted from other manufacturers who didn’t need to rely on quotas (or extortion) to earn money.

Tesla has also enjoyed ballistic stock valuation, which seems to some to be a market endorsement of Tesla’s business. Rather, it is evidence of the success of Tesla’s grift. The market valuation of Tesla is predicated almost entirely on the “market” for devices created by the elimination of the market for vehicles that are not devices. That is to say, the value of Tesla stock correlates with the assumption that people will have to buy what the government is requiring be sold. There is also trendiness factor involved, just the same as was true of the meteoric rise in value of Apple Computer stock, back in the day when Apple was new and very trendy.

But Apple didn’t rely on quotas or the suppression of alternatives to its products. Tesla did – and still does.

We don’t manage the business with the assumption that regulatory credits will contribute in a significant way to the future,” Tesla’s then-CFO Zachary Kirkhorn said during a July 2020 earnings call. “It will continue for some period of time, but eventually this stream of regulatory credits will reduce.”

Yes. Once Tesla has sucked the remaining life out of its rivals. Once there are no longer alternatives to devices – Teslas or otherwise – because the entire industry has been forced by a combination of regulations and quotas to manufacture nothing other than devices.

At which point, Tesla will have the “market” it has always wanted.

. . .

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