- Elon Musk’s business ventures have received billions of dollars in government incentives over the years.
- SpaceX is trying to elbow its way into a subsidy program meant to increase broadband internet penetration in rural America.
- The spacecraft manufacturing firm is yet to sign up a single customer for its satellite internet services.
Would any of the business ventures Elon Musk is currently engaged in have come this far without government help?
The question once again leapt to the limelight after the billionaire’s spacecraft manufacturing firm lobbied a federal agency to change the rules in order to be eligible for subsidies.
Per the Wall Street Journal, SpaceX has lobbied the Federal Communications Commission to propose a policy change. The change would raise the chances of the spacecraft manufacturer obtaining federal funds allocated to aid high-speed internet penetration in rural America. The FCC hasn’t reached a decision yet on whether SpaceX will get the federal incentives though. About $16 billion have been earmarked for this effort.
How to crowdfund for a billionaire’s side project
Other than the bad look of a billionaire-owned firm seeking subsidies raised from taxes on the mobile phone bills of middle-class tax payers, if SpaceX is contracted for the job it could turn out to be a waste of taxpayer’s money.
SpaceX may already have launched more than 300 Starlink satellites but it has no track record in offering broadband internet to consumers. Especially not with the technical specifications that the FCC had outlined.
Specifically, the firms competing for the federal funds all offer broadband to consumers via fiber-optic cable. SpaceX, on the other hand, intends to use its Starlink satellites to offer high-speed low-latency internet.
Since its founding, the Elon Musk-led spacecraft manufacturing firm has spent over $17 million in lobbying efforts.
Tesla, SolarCity… all the other times Elon Musk turned to government handouts
If the current efforts pay off, it will not be the first time that Elon Musk will be depending on the kindness of politicians to offer his companies a lifeline. The same has happened with his other business ventures including Tesla (NASDAQ:TSLA) and SolarCity.
As of 2015, the Los Angeles Times estimated that Elon Musk’s business ventures had benefited from an estimated $4.9 billion in government subsidies.
With an even larger number of Tesla cars, solar panels and batteries sold since then, the amount is substantially higher now. The incentives were mainly in the form of environmental credits, tax breaks and grants.
Obviously startups need all the help they can get. But if they are heavily dependent on corporate welfare from the government, therein lies a problem. What happens when the kindness of politicians runs out?
Elon Musk learns the shortcomings of being a corporate welfare queen
Several examples across the globe have already offered the answer to what happens when the government money taps run dry. Last month in Norway, for instance, Tesla registered 83 new cars only following the softening of subsidies. This was in sharp contrast to the 1,016 cars registered in February 2019. A similar thing occurred in the U.S. last year.
In Hong Kong, the Elon Musk-led electric car maker faced the same predicament in the first half of 2017. After the government halted a generous tax incentive in 2017, sales plunged from the 2,939 new cars registered in March of that year (the last month the incentive was in place) to just 32 for the next nine months of the year.
It is time Elon Musk learnt the value of viable business models and stopped depending on federal largesse. Middle-class taxpayers should not be subsidizing a billionaire’s unsustainable business models!
Last modified: March 4, 2021 5:11 PM