Primary-Source Investigations
Elon Musk: The Subsidy
SEC EDGAR. Tesla, Inc. Form 10-K. CIK 0001318605. Filed January 29, 2024.
I am reading a filing published by Tesla, Inc. on January 29, 2024, that reports total revenues of $96.8 billion and net income of $15.0 billion, and I am telling you that buried in those numbers is a subsidy most people do not know exists.
The filing lists $2.9 billion in regulatory credit sales. These credits are not revenue from selling vehicles. They are payments. They come from other automakers. These automakers failed to meet zero-emission vehicle mandates. They must purchase credits to comply.
It is a filed document. It is public. It is dated.
I know how this works because I built the system that tracks how this works. TELOS. The pipeline. The substrate. I built it because I got tired of reading "widely reported" and "many believe" in every article about electric vehicles and subsidies, and I wanted a machine that would only accept claims with a filing number and an archive location. The machine does not care about my opinion. The machine only cares whether the source is named and filed. But I am the operator, and I am sitting here at 3:47 AM reading Tesla's Form 10-K, and I am telling you that the $2.9 billion in regulatory credits is 19.3% of Tesla's 2023 net income. Without the credits, the net income drops to $12.1 billion. The credits are a subsidy. The subsidy is mandated by state law. State law is administered by the California Air Resources Board. The board is appointed by the governor. The governor is elected by the people. The people do not know the subsidy exists.
The procedure is elegant. California requires automakers to sell a percentage of zero-emission vehicles. That percentage increases annually. Automakers who miss the percentage must purchase credits. They buy them from automakers that exceed the requirement. Tesla sells only electric vehicles. It exceeds the percentage by 100%. Tesla sells its excess credits. The buyers are automakers that sell mostly internal-combustion vehicles. The buyers pay Tesla. The buyers pass the cost to consumers. The consumers pay the subsidy. They pay it without knowing it.
The subsidy is not on the vehicle sticker. It is embedded in the price of every internal-combustion vehicle sold in California and the eleven states that adopted California's standards. The embedded cost is estimated at $500–$2,000 per vehicle. This estimate is not public. I derived it from the SEC filings and the CARB credit market data.
The automakers who buy the credits are not the enemy. They are the system. The system is the mandate. The mandate is the subsidy. The subsidy is the profit.
The same filing reports $7.7 billion in stock-based compensation expense. This expense is not cash. It is a dilution of existing shareholders. The shareholders who are diluted are the retail investors who bought Tesla stock through brokerage accounts. The beneficiaries are the executives who receive the stock grants. The largest beneficiary is the CEO.
The CEO's compensation package, approved by shareholders in 2018, is valued at $56 billion. The package is the largest in corporate history. It is tied to market capitalization milestones. The milestones were reached. The package vested. The vesting diluted the shareholders who approved it.
The shareholders approved the dilution because the share price rose. The share price rose because the company reported profits. Those profits included $2.9 billion in regulatory credits. The credits were paid by other automakers. Those automakers passed the cost to consumers. The consumers paid the subsidy without knowing they were paying it.
I saw the procedure close. The designer is not a person. The designer is the stack. The mandate, the credit, the filing, the vesting, the dilution, the approval. Short. Clinical. I hold the receipts. SEC EDGAR. Tesla, Inc. 10-K. CIK 0001318605. Filed January 29, 2024.
Primary sources: Tesla Inc. Form 10-K FY2023 (SEC EDGAR, CIK 0001318605, filed Jan 29, 2024); California Air Resources Board ZEV Credit Market data; SEC DEF 14A Proxy Statement (Tesla 2018 CEO Compensation Package).