Elon Musk's Heavily Subsidized Companies Lose $3.5 Billion in Value

Elon Musk's companies Tesla Motors and Solar City may not be economically viable, having just lost about half their value
Elon Musk’s companies Tesla Motors and Solar City may not be economically viable, having just lost about half their value

Given substantial public support for the basic ideas of solar energy and electric cars, the products of Solar City and Tesla Motors should have a great chance of succeeding in the market place. But now more than, the staggering financial losses of these two companies prove they are not economically viable.

The two Elon Musk founded companies, that have received more than $4.9 billion in government subsidies, have lost more than $3.5 billion in value since the beginning of this year. Musk is the largest stock holder in both companies, Tesla Motors and Solar City, and the losses have cost the investors in the companies more than $15.7 billion total. Musk has lost $682 million on his shares in Solar City, as the stock had fallen to $18.63 last Tuesday. Musk’s stock in Tesla, now worth $4.2 billion, had lost more than $2.8 billion in value.

Late last year, Musk had been buying more shares in Solar City as the company has then lost another $155 milion in value as its core product was failing to compete on the open market. While solar power, like most forms of renewable energy, are unable to compete with conventional energy sources, the falling prices of oil and very low price of abundant coal for generating electricity make solar even less competitive. Investors have been urged to stay away from Solar City, which is seen as rapidly becoming more of a failure.

While Tesla Motors has sold more than 100,000 of the Tesla Model S, a full sized electric powered luxury car, as of December of last year, the company has yet to be consistently profitable. The Model S has won several awards from automotive magazines. Despite selling at a price between $70,000 to more than $100,000, the sale of more than 100,000 of these cars, and the massive government subsidies, has not resulted in profitability for the company.

In the past, Musk’s companies including Solar City and Tesla Motors have enjoyed a great deal of support on Wall Street from investors as well as from politicians in Washington D.C. who have approved the billions in subsidies, at taxpayer expense, for them. Solar City has received about $2.5 billion in subsidies, including $1.5 billion in federal subsidies, more than one billion from New York state, and $5.6 million in tax credits and rebates from Oregon.

Tesla Motors, which has received almost $2.4 billion in subsidies, including more than $772 million from the state of California, $1.29 billion from Nevada, and more than $300 million in federal subsidies. Between them, Solar City and Tesla Motors have raked in more than $4.9 billion in total government subsidies.

Despite the massive subsidies, both companies have failed to achieve sales of their products on the open market to a degree that would make the companies profitable. The failure of both companies to turn a profit, after several quarters of losses, is leading to less support from investors, who have expected to see Musk’s companies begin to show profits.

As reported by USA Today, Musk has lost more than $681 million in value of Solar City, or about 63 percent of the value, while he has lost more than $2.77 billion, or about 40 percent of the value of Tesla Motors. In total, he’s lost about half the value he owned in the two companies.

Just recently, Tesla Motors announced it’s eleventh straight quarterly loss, despite increased sales of the Model S luxury sedan. Tesla announced losses of $320.4 million, or about $2.44 per share of stock, compared to 12 cents per share profit expected by investors.

Elon Musk’s dream of making electric cars and selling solar panels is proving, despite the massive government subsidies for both, to be a dream that not succeed in the long run. America was build by innovators and inventors who come up with products that the people want to buy and the sales of those products make their inventors quite wealthy. Steve Jobs didn’t need to get billions in government subsidies to invent the iPod, and the iPhone, and get hundreds of millions of consumers to buy them. Tesla and Solar City are not those kinds of companies, and it’s doubtful they would exist without the massive government subsidies. In losing as much value as they have, and failing to win in the marketplace, it seems likely they may not exist in the long term even with the massive subsidies.