Tesla takes Canadian taxpayers for $60-million subsidy ride

Author: James Wood 2020/10/06

Canadian taxpayers are paying millions to support sales of Tesla cars after the company qualified for a federal subsidy by producing a lower quality car, according to newly-released records.

“It certainly looks like Tesla gamed the system by listing a no-frills model just under the maximum price in order to get access to millions in taxpayer subsidies for higher priced models,” said Aaron Wudrick, the Canadian Taxpayers Federation’s Federal Director.

“Everyday taxpayers are subsidizing fancy cars for wealthier people.”

In 2019, the Canadian government launched a program called Incentives for Zero-Emission Vehicles, which knocks up to $5,000 off the purchase price for electric vehicles with six seats or fewer if the base model sells for less than $45,000.

If a vehicle’s base model qualifies, higher priced versions are also eligible with a price limit of $55,000.

Dealerships apply it to the price of eligible vehicles when they’re purchased, and apply to Transport Canada in order to be reimbursed for the subsidy afterwards.

The program was launched in May 2019 and was expected to run for three years, with a budget of $300 million. As of Jan. 19, 2020, $134 million in rebates had been issued, with the rest of the funds expected to be entirely gone before the end of the year.

Tesla has received the most subsidies from the program, raking in more than $60 million from May 2019 until the end of this March.

Tesla’s Model 3 didn’t initially qualify for the subsidy because its base model was priced too high at $53,700, well above the $45,000 price cap. 

Tesla then introduced a Canada-only version of the Model 3 called the Standard Range, with a non-negotiable reduced range of 150 kilometres per charge. Tesla priced it at $44,999, one dollar below the program’s cut-off price of $45,000 to be eligible for the federal government subsidy.

“One dollar under the cut off limit makes it look like Tesla isn’t even trying to hide the fact they are playing the rules like a fiddle,” said Wudrick.

With the introduction of the stripped-down Standard Range, the company’s higher-priced Standard Range Plus model became eligible for the $5,000 subsidy, which led to millions of dollars from the federal government going to Tesla as its car sales increased.

Records show the company sold just under 12,000 of the higher-end Standard Range Plus cars from the start of the program to March of 2020, while selling only 126 base models.

Those sales benefited from about $60.5 million worth of subsidies from all Model 3 sales, more than $31 million ahead of Chevy, whose sale subsidies were the second highest.

The CTF reached out to Transport Canada and Tesla for comment on the subsidies.

The CTF explicitly asked if the actions taken by the company fit with the intentions of the program. In response, Jessica Norup, Director of Zero Emission Vehicle Policy at Transport Canada, defended the program as a whole.

“From Transport Canada’s perspective, both Tesla Model 3 trims – the Standard Range and Standard Range Plus – meet the eligibility requirements of the iZEV program, which are intended to increase Canadians’ uptake of more affordable ZEVs,” said Norup.

“Beyond meeting the iZEV’s program requirements, and ensuring that the vehicle is available for Canadians to order, Transport Canada does not have views on how automakers decide to market their vehicle offerings to consumers.”

Norup confirmed there is no set date for a review of the subsidy program.

“This program needs a top to bottom rethink, because Tesla and their wealthier customers are making off like bandits at taxpayers’ expense,” said Wudrick.

Tesla did not respond to repeated requests for comment for this report.

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