Democrats choose union over Tesla in California cap-and-trade deal

As reported by the Fresno Bee:

Democratic lawmakers and Gov. Jerry Brown are siding with organized labor in its battle with automaker Tesla, inserting a provision in last-minute legislation to spend $1.5 billion in cap-and-trade money.

The negotiated package largely spends funds on a variety of anti-pollution programs, such as those to retrofit and replace smog-belching big rigs and buses.

But the legislation, amended late Monday to be ready for votes before lawmakers adjourn for the year on Friday, also would inject the state into an increasingly acrimonious union organizing campaign at automaker Tesla’s Fremont plant. Beginning in July 2018, manufacturers that want to be eligible for state zero-emission vehicle rebates – a major driver of Tesla sales – would need to be certified by the state labor secretary “as fair and responsible in the treatment of their workers.”

Clean vehicle rebates have helped put more than 100,000 vehicles on the road. Tesla buyers are eligible for rebates of up to $2,500, but that perk could be imperiled by the legislation’s worker-treatment language. …

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Tesla: 1st Profit in Years, Thanks to California Climate Credits

telsa-elon-muskTesla Motors Inc. (TSLA: NASDAQ) reported this week that revenue nearly doubled in the latest quarter. The all-electric car company reported its first quarterly profit in over three years, thanks to cashing in $139 million of California tax credits that are meant to help combat climate change.

The company reported net income of $21.9 million, or 14 cents per share, for the third quarter ended Sept. 30, the first positive net earnings since the winter quarter of 2013. The profit came despite Wall Street analysts expecting a $0.56 loss. The profit compared to a loss of $229.9 million, or $1.78 per share, for the same quarter last year.

Total revenue more than doubled, to $2.3 billion, and the company’s capital spending came in dramatically below what analysts had expected as Tesla ramped up its infrastructure to begin producing its $35,000 mass-market Model 3 sedan.

Chief Executive Elon Musk stunned analysts on the company’s earnings call by commenting that despite moving from a production plan to produce 90,000 vehicles this year to 500,000 vehicles in 2018, the company’s current plan “does not require any capital raise for the Model 3 at all.”

Breitbart News reported in June that despite Tesla never meeting any of its unit production targets in the last five years, CEO Elon Musk told shareholders that through the magic of “physics-first-principles” he would revolutionize auto industry efficiency by “factors of 10 or even 100 times” to improve production profitability by 1,100 percent. Six weeks later, Tesla reported a nasty loss, and Musk was scorned by the financial press.

Tesla had planned capital spending of $2.25 billion this year. But with only $800 million spent in the first three quarters, Musk expects $1.8 billion in capital expenditure this year.

All this good operating news comes during a quarter when Tesla was hammered by the external environment. The company has been battered by reports of a growing number of injuries, and the death of a Model S driver using Autopilot, the company’s semi-autonomous driving system. Musk is also trying to have Tesla shareholders acquire debt-laden SolarCity (SCTY.O), which he and a number of family members control.

Consumer Reports on October 20 trashed Tesla vehicles in the magazine’s annual review. Although the all-electric Model S sedan earned the equivalent of 84 miles-to-the-gallon in energy consumption, and high marks for driving dynamics, the company was blasted by 1,400 mostly terrible responses from owners that took part in the magazine’s Annual Reliability Survey. The only established brands that Tesla beat were Dodge, Chrysler, Fiat, and Ram.

Some analysts scoffed at Tesla for being profitable due to $139 million proceeds from sales of California zero emission vehicle tax credits. But rival automakers are buying the credits, and essentially taxing their own California customers to avoid selling electric cars.

Tesla stated that at September 30, the company had $3.08 billion in cash and equivalents, compared with $3.25 billion at the end of the second quarter. That was $250 million better than Breitbart News had expected the company to report.

Tesla’s shares initially spiked up by over 6.2 percent on the company’s profit release. But by mid-day trading on October 27, the stock had given back most of that gain.

This piece was originally published by Breitbart.com/California

Tesla Planning Aggressive California Expansion

teslaHigh-flying clean-energy industrialist Elon Musk has doubled down on his production plans in California. Tesla, his auto company, “took a major step toward its ambitious goal of one day building 1 million cars a year by seeking to double the size of its Fremont, Calif., assembly plant,” the Los Angeles Times reported. “Under a long-term zoning proposal submitted to Fremont’s Planning Commission, the electric car maker wants to eventually add 4.6 million square feet of space to its factory’s existing 4.5 million square feet.”

Musk “told analysts this spring that the Palo Alto-based automaker hopes to ramp up annual production to 500,000 vehicles in 2018 and build 1 million vehicles by the end of 2020,” the paper added. “The 2018 goal alone is nearly a tenfold increase from the 50,580 vehicles that Tesla produced last year in Fremont. The automaker has forecast this year’s deliveries at 80,000 to 90,000. Quality problems and production delays plagued the plant early this year and threatened sales plans. But the company said last week that those problems are behind it and that it expects to come close to its forecast for 2016.”

Broad deals

Musk has not hesitated to link up with government resources and opportunities in order to advance his business interests. This month, he aligned SpaceX closely to take advantage of President Obama’s call to use private industry to help bring Americans to Mars. “Within the next two years, private companies will for the first time send astronauts to the International Space Station,” Obama announced. “One of those private companies tasked with ferrying astronauts to the ISS and who will essentially return human spaceflight to American soil in late 2018 is SpaceX,” the Observer noted.

And last month, Musk inked a deal to change the way California backstops its energy needs. “Tesla Motors Inc. will supply 20 megawatts (80 megawatt-hours) of energy storage to Southern California Edison as part of a wider effort to prevent blackouts by replacing fossil-fuel electricity generation with lithium-ion batteries,” Bloomberg reported. “Tesla’s contribution is enough to power about 2,500 homes for a full day, the company said in a blog post on Thursday. But the real significance of the deal is the speed with which lithium-ion battery packs are being deployed,” the site added — “months not years.”

Outracing critics

As Musk has accelerated his increasingly ambitious plans, however, he has attracted a greater share of criticism toward the mechanics of his business operations. “The pressure is now on Tesla for a smooth launch of the relatively affordable Model 3. A quality product pumped out at low cost and high volume is essential to meeting the ambitious goals of the company and its investors, auto analysts say, whereas long delays could threaten the company’s reputation — and survival,” according to the Times.

Meanwhile, wariness has centered separately around SolarCity, a startup run by family members. “The Tesla-SolarCity deal looks so bad on paper that many investors worry it’s simply a bailout of SolarCity, which Musk co-founded and continues to chair,” the MIT Technology Review noted. “While SolarCity dominates the market for leasing, installing, and maintaining solar panels for residences and businesses, it’s racked up more than $2 billion in losses over the past five years. “

“Its business model requires it to raise huge amounts of capital to cover the up-front costs of providing panels for no money down to consumers on multiyear contracts. Since its inception, the company has accumulated more than $3 billion in debt against just $1.5 billion in revenue. Now it is having a harder time convincing people to lend it money.”

What’s more, Musk has had to contend with a rebellion among his own shareholders. “As of earlier this week, seven Tesla stockholders have filed lawsuits against Elon Musk over the proposed acquisition of SolarCity and alleged Musk was in breach of his fiduciary duties for not disclosing the proposed merger properly. Some of these stockholders are asking the judge for an injunction to prevent the merger from going through,” Recode reported. But the two companies have announced the merger is going ahead anyway. “The companies have set the date for their respective shareholders to vote on the $2.6 billion all-stock transaction for Nov. 17.”

This piece was originally published by CalWatchdog.com

Elon Musk May Have Even More Cash To Roll In Thanks To Solar Subsidies

Elon Musk has made millions from government solar panel subsidies, and may have found a way to make even more if rumors Tesla will soon introduce a whole-home battery are true.

Musk, the CEO of Tesla Motors and chairman of solar panel manufacturer SolarCity, set off a wave of anxious speculation Monday when he tweeted that “[a] major new Tesla product line—not a car” would be unveiled on April 30.

Neither Musk nor Tesla have confirmed any details about the new product, but according to The Motley Fool, many observers believe the new product will be a home battery capable of storing electricity produced by solar panels.

Musk told investors during a February conference call Tesla would begin production of a home battery within about six months, and further reinforced expectations with a second tweet, in which he said, “With all that solar power being generated, it almost feels like something is needed to complete the picture …”

Many experts, however, claim much of the reason for all that solar power being generated is that state and federal subsidies make rooftop solar panels affordable in the first place. (RELATED: Solar Industry Demands Extension of Subsidies)

In an op-ed for Townhall, for instance, Ken Blackwell asserts that, “Very few people would install these rooftop solar systems at all if not for the federal tax break that comes with it,” which takes the form of a 30 percent non-refundable tax credit known as the solar investment tax credit.

Even the Solar Energy Industries Association, a national trade group, acknowledges as much on its website, noting that, “the residential and commercial solar ITC has helped annual solar installation grow by over 1,600 percent since the ITC was implemented in 2006.”

Another program that acts as an implicit subsidy for solar is net metering, which requires power companies to purchase excess solar from homeowners at the same price they charge their retail customers. Most states have their own net metering policies, and since 2005, federal law has required all public electric utilities to offer net metering to their solar customers on request.

Electric companies complain that net metering ignores the cost of operating and maintaining power grids, which they say accounts for about one-third of the price they charge for electricity. Because solar customers use the grid whenever they buy or sell power, the utilities argue net metering allows solar users to use the grid as a battery without contributing toward operating costs, forcing them to raise rates on other customers. (RELATED: Low-Income, Minority Households Bear Costs of Solar Subsidies)

According to a study from the University of Colorado at Boulder conducted by Chrystie Burr, “most of the investments in solar power systems wouldn’t have been made without the … upfront subsidy and the residential renewable energy tax credit.”

Similarly, a study by Kenneth Reddix II of the University of North Carolina at Chapel Hill concludes that in California, “over 54 percent of all purchases would have not occurred … in the absence of government subsidies.” (RELATED: Europe’s Green Energy Industry Faces Collapse as Subsidies are Cut)

If Tesla’s new product does turn out to be a home battery, as is widely expected, Musk will stand to profit twice from those subsidies—once from SolarCity’s sales of the subsidized panels, and then again from Tesla’s sale of home batteries to the same customers.

“Elon Musk is making a big play for American solar and all the subsidies that go along with it,” an energy industry consultant told The Daily Caller News Foundation. “If you’re getting millions from the federal government and a subsidized power grid, you might as well keep offering related products.”

Originally published by the Daily Caller News Foundation

Tesla Challenges Dealership Laws in Various States — Including Texas and Arizona

California’s Tesla Motors Inc. is proving as revolutionary in selling cars as making them. It’s challenging states that mandate new cars be sold only through dealerships by pushing to offer its premium electric vehicles directly through company showrooms.

The two sides raced each other recently in a debate sponsored by the Texas Conservative Coalition Research Institute. The verbal drag-race pitted Ricardo Reyes, Tesla’s vice president of communications, against Bill Wolters, president of the Texas Automobile Dealers Association.

Each side maintained the other was upholding a monopoly. Reyes insisted the Texas law, by preventing Tesla from selling cars directly, erected a monopoly consisting of state dealers. Wolters said the opposite was true: That Tesla, by cutting out the dealers and selling cars only by itself, was monopolizing the market.

Interstate Commerce Clause

At issue was the Interstate Commerce Clause of the U.S. Constitution, which gives Congress alone the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” It established a vast free-trade zone among the 50 states, a keystone of American prosperity.

The debate was reported in the Texas Tribune.

“How does a manufacturer of a product that owns every retail outlet benefit a consumer or the state of Texas?” Wolters asked.

Reyes responded, “All we’re asking to do is be allowed, unfettered, to compete.”

According to the Tribune, Reyes called his company the “underdog.”

Reyes insisted that Tesla just wants to sell directly to its customers. Currently, Tesla sells no cars in Texas, but in 2015 plans to sell 55,000 nationally and abroad, Fortune reported yesterday. That’s a fraction of total expected U.S. vehicle sales of more than 17 million, according to Automotive News.

Also yesterday, Reuters reported on the company’s financial problems, “Tesla Motors Inc missed fourth-quarter sales targets and analysts’ profit expectations, but Chief Executive Officer Elon Musk on Wednesday said by 2025 Tesla’s growth trajectory could take its market value to $700 billion, matching that of Apple Inc.

“It was a glimmer of optimism capping a difficult quarter that saw the electric-car company struggle with production and delivery issues on several fronts, notably in China.”

Although perhaps utopian, it’s that promise of Apple-like success that concerns dealers in Texas and elsewhere. Musk did not attend the debate.

Wolters addressed the replacement threat directly at the debate. “If we didn’t have franchise laws, the manufacturers, as they should, would focus on their shareholders and only have dealerships in the most profitable, highly populated areas of our state,” he said. “Do we want to jeopardize two-thirds of the dealerships in our state?”

Reyes said, “It is odd to me that the only thing consumers can’t buy direct is booze and cars in this state. Imagine the Girl Scouts having to sell through a distributor network. Imagine Apple having to sell through a distributor network.”

Prohibition

The alcohol example is interesting because it involves a quirk in the Constitution. Alcohol Prohibition, “the Noble Experiment” from 1920-32, was imposed with the 18th Amendment, which banned manufacturing or importing alcohol except for medicinal or religious purposes.

It was enforced through the Volstead Act and other federal laws.

However, when Prohibition was repealed, the 21st Amendment allowed the states to carve out their own distribution laws for alcohol. It reads, “The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”

Note the clause, “in violation of the laws thereof” — meaning state laws.

That’s why California has very liberal alcohol laws. But in Pennsylvania, as Forbes recently reported, “If you want to buy beer, you have to go to a beer store or distributor. If you want to buy spirits, you have to go to a state-run liquor store.”

But there’s no 21st amendment for anything besides alcohol.

Foie gras

Ironically, California itself is challenging the Interstate Commerce Clause in its controversy over foie gras, insisting that a state ban on the culinary delicacy’s production and use includes banning importing it from other states and countries.

State restaurants have retorted that, although the state can ban specially fattening a goose — the way it’s made — it can’t ban importing foie gras.

As CalWatchDog.com reported, Attorney General Kamala Harris is appealing a January ruling by U.S. District Court Judge Stephen Watson that federal law preempts state law on importing foie gras.

Arizona

Texas’ action also is somewhat ironic, given its boast of having fewer regulations and a more pro-business environment than California.

Tesla is faring batter in the Grand Canyon State. Reported the Arizona Republic:

“House Bill 2216 would effectively upend the decades-old system that prohibits manufacturers from competing with dealerships through direct sales. Tesla is pushing a bill similar to one that failed a year ago in hopes that a new governor and Legislature are more open to what it sees as free-market principles.

“Standing in the way are the state’s car dealers, a group that directly employs about 24,000 Arizonans and accounts for $2 billion in sales taxes, a crucial element of the state’s revenue. They see Tesla as seeking an exception that would allow it to establish monopoly powers that threaten the state’s broader economy.”

But Tesla owners, by definition an upscale group able to purchase a $101,500 car, may have the last say. Mark Rohde told the Republic, “As a consumer, I don’t need a dealer to take care of me. I don’t need a middle man. If you believe in free-market economies, then you better get behind free-market economies.”

Originally Published on CalWatchdog.com

The Tesla Effect

Call it the Tesla Effect.

Good news — so far — for California’s successful electric-vehicle maker and others in the industry. At least through last November, the low gasoline prices of recent months have not crashed electric vehicle sales.

Plug In America, which follows EV sales, charted both sales and the price of gas for recent years. “Gasoline prices have fluctuated almost a dollar during this period,” it found. “Very recently, they’ve dipped to new lows. But on average, the trend has been flat, because all the ups and downs cancel each other out.”

The chart on their site shows national gas prices jumping up and down from 2011 through Nov. 2014, from lows of around $3 a gallon to highs of nearly $4. California prices have been about 10 percent to 15 percent higher than national prices.

“The current generation of plug-in vehicles started selling in December 2010,” Plug In America also reported. “As a product category, PEVs [plug-in electric vehicles] are still in their infancy. Sales have risen year after year. The trend is rising.”

EV sales

The chart on that site shows sales of EVs steadily rising from close to zero at the beginning of 2011 to about 10,000 a month at the end of 2014. Here’s a similar chart:

US electric car sales

However, a caution light comes from Robert Poole, director of transportation policy at the Los Angeles-based Reason Foundation. “We are now seeing gas prices far below the data for 2013 and 2014, so all bets are off in terms of the impact on hybrid and EV sales impact,” he told CalWatchdog.com.

“The auto industry is already seeing a large increase in pickup truck and SUV sales, which is widely attributed to the impact of lower gas prices,” he said. “I would be very surprised if there were not a comparable impact, in the other direction, on sales of hybrids and EVs.”

Long-term data to come out in future months will tell the story.

But USA Today reported this week:

“Sales of new cars and trucks roared off to a fast start in January, towed by Americans’ renewed love affair with trucks and SUVs as low fuel prices mean the gas-thirsty models aren’t so expensive to fill up.

“Trucks — a category that consists of pickups, vans and SUVs — were 54% of January sales; cars were the remainder, according to sales tracker Autodata.”

One detail can be noted, for Fiat Chrysler Automobiles. Its Chrysler division went bankrupt during the Great Recession, was bailed out by the federal government, then merged with Fiat. The picture now:

“Jeep, again, was the star, posting its best-ever monthly sales and recording a 44% increase by the compact Jeep Cherokee SUV.

“Patriot, smaller than Cherokee and on the market since the 2007 model, found new buyers somewhere, and recorded a 35.6% gain.

“Ram pickup was up 14%.

“Chrysler has become largely a truck and SUV company — 72.5% of its sales — while its cars are an almost incidental 27.5%.

“Even against the industry-wide strong, new interest in trucks and SUVs, FCA US results are dramatic.”

The future

These numbers likely only would hold so long as gas prices remain low. If the history of fluctuations once more arcs upward, then gas-powered vehicles again could come into disfavor.

The San Jose Mercury News reported today:

“Those amazingly low gas prices that soothed motorists for the past few months will soon be in the rearview mirror: Pump prices have jumped a dime or more in the past week and are expected to soar another 30 to 50 cents a gallon by April. 

“That would have California drivers paying around $3 a gallon, a far cry from today’s $2.53 statewide average mark but still well below the $3.60 price a year ago.”

California’s situation is unique because of special state fuel requirements, including the conversion, going on now, to more expensive summer fuel. And the state is working out how much the new tax for the cap-and-trade program will cost.

But gas prices are rising across the country. “[T]he most pain is being felt now in the upper Midwest, where the statewide average in Michigan soared from $2.09 on Tuesday to $2.23 on Wednesday,” the Mercury News reported. “Bay City, Michigan, led all metropolitan areas in the nation with a 29-cent overnight hike.”

On the other hand, Citigroup economists expect the oil price decline to continue, or at least not to rise.

Originally published on CalWatchdog.com

What incumbent candidates conveniently leave out of campaign ads

Humorist Will Rogers observed, “This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer.” If Rogers were a Californian today, he would say the same thing about the state Legislature.

Fortunately, for average citizens, the Legislature adjourned a few weeks ago so its ability to inflict more harm on taxpayers, property owners and businesses is on hold until the first of the year.

Lawmakers are no longer in Sacramento listening to high-powered lobbyists for special interests that back more taxes and spending. Most have returned to their home districts to beg for votes. They are likely to be attending local events and some will actually be walking in neighborhoods to convince voters they deserve to be returned to the Capitol. And, of course, they will be invading your mail box, television and radio with their political ads.

The majority of candidates for reelection will be bragging that they and their colleagues have achieved a balanced, on time budget and the state is on the right track. Their accomplishments, they will claim, entitle them to continue in office.

However, here are some things that most will not mention. California continues to have one of the highest unemployment rates in all 50 states. Our state ranks first in marginal income tax rates, state sales tax and gasoline tax. Businesses, and the jobs they provide, continue to flee the state. Even firms like Tesla and SpaceX that have been provided massive tax subsidies by Sacramento, have chosen to expand their facilities outside of California – Tesla to Nevada and SpaceX to Texas. And the Legislature continues to support subsidies to Governor Brown’s bullet train that may end up costing taxpayers nearly $100 billion.

Another topic that most incumbent lawmakers will not want to discuss is their efforts to pass ACA 8, an amendment to the California Constitution that would make it much easier to increase property taxes to pay for infrastructure bonds. Passage of this, and other proposals that fell just short of approval this year, could have resulted in increased property taxes totaling billions of dollars, once again putting homeownership in jeopardy as it was prior to Proposition 13, when there were no limits on annual increases in the tax bill.

It is also unlikely they will want to discuss their rejection of legislation that would have slowed the implementation of carbon fees, fees that are likely to add somewhere between 15 and 40 cents to the cost of a gallon of gas after the first of the year. This is no less than a war on the poor, who already can barely afford to put fuel in their cars due not only to high prices, but also to the highest gas tax in the nation. And California has plenty of poor. We lead all 50 states in the percentage of those living in poverty.

Voters who have the opportunity to meet candidates for office, whether they are incumbents or aspiring challengers, should be prepared to ask a few questions.

Here is a good question for all candidates, “Do you believe it is fair that Californians pay the highest tax rates in nearly every category?” An excellent follow-up question would be, “Where do you stand on an extension of the Proposition 30 income and sales tax increase, set to expire in the next several years?” And, of course it is always revealing to get answers to this question, “Do you support the governor’s bullet train that could cost taxpayers a hundreds billion dollars or more?”

Honest answers to these questions would provide a good gauge of how well a candidate understands that their actions have real consequences for average Californians. Some may show that they genuinely respect those they serve, while others, who are likely to equivocate when responding, will reveal that they are motivated by self-interest.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

VIDEO: Jim Lacy on the Obama administration picking winners and losers in business

ACU Board Member Jim Lacy appeared on Fox Business Network’s Stuart Varney Show on 8/15 to discuss the problems of government “picking and choosing winners and losers” in business in the case of California’s incentive offer to exempt Tesla from environmental regulations – but not the rest of the businesses in the state.