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California Taxpayers May Be on the Hook to Bailout Tesla

by Jeff Powers, published

Tesla may soon be saved by California -- and its taxpayers.

The State Assembly passed a bill, AB 1184, to increase subsidizes for electric car purchases to $3 billion over the next 7 years. The bill favors manufacturers that make electric-only cars, like Tesla, over companies that sell hybrids.

And there is no bigger electric-only company than Tesla, which means it may soon get a major bailout courtesy of the California taxpayer.

Let me explain.

Tesla will soon hit the limit on the federal tax rebates. These rebates are good for the first 200,000 EVs sold in the US by the manufacturer beginning in December. But that rebate is expected to vaporize in weeks once Tesla's highly-anticipated Model 3 is released, so that’s where Californians come in.

If it wasn’t for the Golden State, Tesla would be in serious trouble. Investors love Tesla, even though the company has lost money every year it's existed, and the company's stock skyrocketed when the new subsidies passed the Assembly.

California State Senator Andy Vidak, a Republican, said of the bill:

“The Tesla Model 3 would be tough to sell without the federal $7,500. But this new bill would push Californian taxpayers into filling the void. It would be a godsend for Tesla.” - Andy Vidak

In California, home of the largest EV market in the US, EV sales have only risen 0.4% since 2012. And that’s with a rebate after the purchase of plug-in electric or fuel cell vehicles ranging between $1,500 and $5,000, depending on the type of vehicle and the income of the buyer.

According to Mercury News, this is how the new taxpayer-funded bill would work:

“The [California Air Resources Board] would determine the size of a rebate based on equalizing the cost of an EV and a comparable gas-powered car. For example, a new, $40,000 electric vehicle might have the same features as a $25,000 gas-powered car. The EV buyer would receive a $7,500 federal rebate, and the state would kick in an additional $7,500 to even out the bottom line.”

So get this, a $100,000 Tesla could have the same features as a $65,000 gas-powered car. The rebate would cover the difference, minus the federal rebate (so $27,500). And because rebates for Teslas will soon be gone, the program would cover the entire difference – $35,000.

Democratic Assemblymember Phil Ting of San Francisco introduced the bill which went before the Senate Appropriations Committee Monday.

The bill also calls for “investing $500 million per year in cap and trade program funds set aside to ensure that disadvantaged communities, school and transit buses, and freight benefit from the transportation electrification.”

There is no word on what will happen if those funds dry up.

Photo Credit: AuKirk /

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