When Republican state Senator Ted Gaines was leading the charge last year to convince billionaire Elon Musk to build Tesla Motors, Inc.’s $5-billion battery factory in California (and the senator’s district) there was no bigger booster of the high-end electric-car industry.
Things changed when Musk opted to build his “gigafactory” in Nevada last September, lured by $1.5 billion in incentives from the state. Gaines saw the error of his ways and quietly introduced Senate Bill 40 in December to slash state financial incentives for buyers of the cars.
“It’s hard for the average Californian to understand why someone buying a $100,000 car should get a rebate,” Gaines told BloombergBusiness. “That’s the same question I posed to myself, and it was hard to justify.”
The bill targets “incentives for qualifying passenger vehicles under the Clean Vehicle Rebate Project of the Air Quality Improvement Program.” Those qualifications would not include electric vehicles with a manufacturer’s suggested retail price of $40,000 or more.
That’s pretty much the market Tesla owns. Musk sells 20% of his cars in California.
The Tesla Model S starts at $71,000, but usually ends up costing a lot more. The owners tend not to skimp on accessories. But Apple Inc. co-founder Steve Wozniak, who said he would have bought his two Teslas without the incentive, told Bloomberg “a lot” of the “low-end” buyers wouldn’t have done it without the rebate.
California has paid $34 million in rebates to 13,598 Tesla owners since the program began in 2010, for an average of $2,500, according to Bloomberg. Almost twice as many people received rebates for the Nissan Leaf, a $29,000 car, and total rebates under the program top $203 million.
The federal government also offers tax credits of up to $7,500 to electric-car owners. The incentives are meant to facilitate a move away from gas-guzzling, air-polluting vehicles. As of last October, California was one of at least 37 states (plus the District of Columbia) with incentives. Incentives range from $1,000 in Maryland to $6,000 in Colorado.
Tesla’s response to Gaines’ legislation was a bit tart and more than a tad personal. Tesla VP Diarmuid O’Connell e-mailed Bloomberg:
“Punishing Tesla, a company that has created over 8,000 direct jobs in California in the past five years and thousands more indirect jobs by eliminating a modest rebate for its products while preserving that credit for companies like Toyota and Nissan—companies that have abandoned California for Texas and Tennessee respectively—seems like a curious response unless viewed through the lens of ignorance and retribution.”
Gaines’ bill is scheduled for its first legislative hearing on April 14.