Electric cars, solar power, and space flight. Entrepreneur and designer Elon Musk has made himself a billionaire using innovation and design to leapfrog the competition and he did it with seldom mentioned silent partners: state and federal government.
According to the LA Times, Musk’s companies have reaped an estimated $4.9 billion in government subsidies.
Tesla Motors Inc., SolarCity Corp. and Space Exploration Technologies Corp., known as SpaceX, have benefited from subsidies granted by various levels of government agencies which have, in turn, made Musk a very rich man.
“He definitely goes where there is government money,” explained analyst Dan Dolev of Jefferies Equity Research. “That’s a great strategy, but the government will cut you off one day.”
An analysis by the Times shows that SolarCity will pay $1 a year to lease a $759-million solar panel factory built by the state on New York in Buffalo. Additionally the company is in line to receive property taxes exemptions that will save them another $260 million.
With the federal government paying 30 percent of the cost of solar panel installations via grants and tax credits, SolarCity gets an added boost in sales indirectly from the feds, in addition to direct grants the company received from the Treasury Department amounting to $497.5 million
Overall, SolarCity has cost the taxpayers $1.5 billion since 2006.
Musk’s automobile line, Tesla, is in line to receive $1.3 billion in incentives from the state of Nevada to help build a massive battery factory near Reno. That will help the bottom line of the car company that is already reaping $517 million by selling environmental credits to automakers who don’t sell enough zero-emission cars to meet mandates set by California and other states.
SpaceX, Musk’s aerospace company, received about $20 million in economic development subsidies from Texas to build a launch facility in the state, which is small change compared to the $5.5 billion in government contracts the company has garnered from NASA and the U.S. Air Force.
While Musk’s publicly held companies also attract plenty of private investment dollars, their attractiveness to investors can be attributed in part to the government subsidies that help prop up their financial performance.
After a decade in business, SolarCity and Tesla continue to report net losses, but Musk — who owns about $10 billion in stock in both companies — has personally benefited from their soaring stocks attributed in large part to the government subsidies.
Since SpaceX is privately held, it is unclear how much the rocket company has added to Musk’s personal bottom line.
While taxpayers shoulder the some of the burden of Musk’s companies, they also reap the befits of his innovations, in the form of major pollution reductions, as more solar panels are installed and electric cars grab a greater market share away from internal combustion engines.