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GM, FCA strike a deal with Tesla that consumers subsidize

Jamie L. LaReau, Detroit Free Press on

Published in Automotive News

DETROIT -- General Motors is hedging its bets to meet national emissions standards by turning to Tesla Inc. as insurance of sorts.

People who buy gasoline-powered cars ultimately foot the bill.

GM and Fiat Chrysler Automobiles disclosed to the state of Delaware earlier this year that they have reached agreements to buy federal greenhouse gas credits from electric carmaker Tesla, Bloomberg first reported.

Selling those credits has been a key for Tesla's revenue for years. But it's the first time automakers have openly acknowledged they rely on Tesla to help them meet increasing U.S. environmental regulations. Tesla has reported almost $2 billion in revenue from the sale of regulatory credits since 2010, Bloomberg reported.

But this revelation should open consumers' eyes that every gasoline-powered car they buy subsidizes Tesla's existence, say industry observers.

"Last year, competing automakers paid Tesla $420 million to buy absolution because they were unable to meet the emissions mandate," said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers. "Every Tesla is sold at a loss, but that loss is subsidized by Chevy drivers and others by a couple thousand dollars."

 

Consumer subsidy

Appleton said if people understood how the industry works, they'd be "embarrassed to drive a Tesla because their neighbor would say, 'When are you going to thank me for subsidizing that high-tech piece of status symbol you drive?'"

Appleton said by dividing $420 million by the 250,000 cars Tesla sold in the United States last year, every Tesla comes with a $1,680 subsidy paid by other car buyers.

"And that's just the beginning," said Appleton. "A $100,000 Tesla avoids $6,625 in state sales tax and last year that same car came with a $7,500 federal tax credit. In other words, Tesla buyers helped themselves to a nearly $16,000 subsidy, resulting in higher taxes and higher car prices for everyone else. Oh, and let's not forget, Tesla owners pay no gas tax to support the roads they travel."

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