These are interesting times for Tesla.
The company is ramping up construction at its Northern Nevada “gigifactory,” seeking to finish the project well ahead of schedule in an effort to meet ambitious production goals for its mass-market Model 3 sedan.
At the same, Tesla may be nearing a deal to bail out struggling SolarCity for something in the area of $2.85 billion. Several analysts have raised red flags over the deal. Tesla — which, despite wowing Wall Street investors, has never turned a profit in its decade of existence — has been burning through cash while SolarCity is bleeding red ink and loaded with debt.
Bloomberg.com labeled the potential acquisition “Musk buys Musk” given that Tesla founder Elon Musk is also chairman of SolarCity and the company’s largest stockholder. Critics wonder if Mr. Musk is simply shuffling cash around to keep his business interests solvent.
Meanwhile, somewhat below the radar, Tesla’s sales model remains under attack in a handful of states. The company seeks to avoid the typical automaker-dealer template and sell directly to consumers. This has angered powerful car dealer interests, which have long profited from so-called franchise laws that govern the sale and distribution of new vehicles in most states.
Recall that Nevada lawmakers, when meeting in special session in 2014 to approve the $1.3 billion subsidy package to lure the Tesla batter factory to the Reno area, also amended state law to accommodate the electric car company’s sales approach.
Utah hasn’t been so amenable. Car dealers there continue to fight Tesla’s attempt to cut out the middleman. The Utah Supreme Court will soon hear arguments in a case that will determine whether Tesla may sell new cars from its Salt Lake City showroom. A lower court ruled against Mr. Musk.
These franchise laws discourage retail innovation, drive up costs and protect entrenched interests. Tesla deserves to prevail.
But the irony abounds. Tesla exists in large part thanks to government interventions, whether in the form of green energy subsidies to spur consumer demand for its vehicles or as marketable tax credits intended to limit greenhouse gas emissions. A Los Angeles Times analysis last year concluded that Mr. Musk’s various enterprises have soaked up an estimated $4.9 billion in government handouts.
While the Times report noted that government breaks to private companies are not unusual, the “subsidies for Musk’s companies stand out both for the amount, relative to the size of the companies, and for their dependence on them.”
Mr. Musk has for years fruitfully mined the public sector for special dispensation. Now in Utah he finds Tesla stymied by others who have done the same.