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Tesla and the danger of soft budget constraints
The Wall Street Journal is not always friendly to Elon Musk and Tesla Motors. In an article published August 16, staff writer Holman Jenkins, Jr. suggests that Tesla is one election away from extinction. Why? Holman bases his analysis on a study of John Z. DeLorean and an economic principle known as soft budget constraints.
The study by Graham Brownlow of Queen’s University Belfast was published in October, 2014. It says one of the foundations for DeLorean’s start-up car company was the willingness of the British government to subsidize the enterprise with grants, tax breaks, government backed loans, and other political incentives.
In 1975 when DeLorean Motors began, conflict between Protestants and Catholics in Ireland was at a fever pitch. The economy of Northern Ireland was in tatters and the British government was desperate to attract manufacturing jobs to the area. DeLorean promised to do just that and the government responded with open arms.
Brownlow says the support from the government amounted to what economists refer to as soft budget constraints, meaning the company never had to turn a profit. In effect, as DeLorean boasted at the time, the government was in so deep, it had no choice but to continue funding the operation. In layman’s terms, its like having rich parents and knowing they will cover your losses no matter how foolishly you spend your money.
Jenkins says Tesla Motors is similarly positioned. It is the beneficiary of several indirect government subsidies such as federal and state tax credits, HOV stickers, and the like. He also claims the company benefits from direct government support in the form of loan guarantees and corporate tax credits. Taken together, they provide Tesla with the ability to exceed normal budgetary constraints on a regular basis.
He prefers what he would term the more traditional model, as laid out by Brownlow. “The more [an entrepreneur] expects that the existence and growth of the firm will depend solely on production costs and proceeds from sales, the more he will respect the budget constraint,” Brownlow writes.
Jenkins hints darkly that Musk’s recent decision to bring the start of production of the Model 3 forward by 2 years is a ploy designed to force the federal government to extend the tax credit program for buyers of electric cars. Tesla will be bumping up against the 200,000 vehicle limit in total US sales by the time that car goes on sale.
He also thinks the merger between Tesla and SolarCity is intended to mute the criticism that Teslas are not as environmentally friendly as they are touted to be, since the majority of electricity in the United States comes from burning fossil fuels like natural gas and coal.
Jenkins reminds readers that John DeLorean’s dream came crashing down once Margaret Thatcher came to power. She turned off the financial spigot that had propped him up, with predictable results. The implication is that Tesla is just one election away from a similar fate.
Jenkins could be the designated cheerleader for all the people who have shorted Tesla stock. The comments appended to his story in the Journal make it clear his opinions have plenty of enthusiastic supporters, many of whom view Elon Musk as little more than a scam artist.
In his efforts to advocate for a level playing field where every corporation pays all its bills on time, pays all its taxes, never accepts a hand out from the government, and always does the right thing, he conveniently overlooks the $5 trillion a year in direct and indirect subsidies the International Monetary Fund says are provided to the fossil fuel industry every year.
There is a coda to the DeLorean story, one that is seldom told. It is said that John Z personally selected the spot where his factory in Northern Ireland would be built. The Irish have a long and steadfast belief in what they call “the little people.” We call them leprechauns.
According to the story, the site DeLorean chose required the removal of a whitethorn tree. Now, everyone knows the little people build their homes in the roots of whitethorn trees. Uprooting one is guaranteed to bring some seriously bad mojo down on your head.
What happened to DeLorean only proves that legend may be more powerful than economic theory. The antidote to Jenkins’ gloomy predictions may be to inform Elon he must never cut down a whitethorn tree to build one of his factories.
Source: Wall Street Journal
President Donald Trump unveiled an upgraded Boeing 747-8 at Joint Base Andrews on June 19, 2026, describing the Qatar-gifted aircraft as an interim Air Force One equipped with advanced communications systems, including Starlink, Elon Musk’s SpaceX satellite internet service.
The plane, valued at around $400 million and modified for presidential use, serves as a bridge until the delayed VC-25B replacements arrive. Trump highlighted its luxury features and new technology during remarks to service members.
Trump stated:
“We have communication equipment up there that nobody’s ever seen before. It’s the highest level and, uh, including Starlink. My friend Elon is going to be very happy, but, uh, Starlink and we have, uh, four or five different sets of double and triple communications like people haven’t seen.”
He added:
“And it represents what can happen with hard work, innovation, and aggressive timelines because we did this quickly and yet there’s never been communication like is on this plane.”
🚨 President Trump confirmed today that the new Air Force One is equipped with Starlink:
“We have communication equipment up there that nobody’s ever seen before, it’s the highest level and including Starlink…my friend Elon is going to be very happy.” pic.twitter.com/IhkDmtr5hL
— TESLARATI (@Teslarati) June 20, 2026
The aircraft features a redesigned red, white, and blue livery and has been outfitted with Starlink satellite connectivity alongside other secure systems.
Trump praised the plane’s uniqueness, calling it among the world’s most luxurious. The gift from Qatar and subsequent modifications have drawn attention, with the jet positioned as a solution for presidential travel. It is expected to support operations, including potential ceremonial roles such as Fourth of July flyovers.
The event marked the formal introduction of the converted jet, which will help maintain capabilities while the primary Air Force One fleet undergoes modernization. Defense observers note the inclusion of commercial satellite technology like Starlink as part of efforts to ensure resilient communications, crucial to keep the country running as the President is in the sky.
President Trump’s comments underscored appreciation for rapid upgrades and innovation in equipping the aircraft. The plane remains a U.S. government asset and is slated for eventual transfer related to presidential library purposes after its service.
Tesla just gave what is perhaps its biggest signal yet that the launch of the Cybercab, its autonomous ride-hailing-geared car, is imminent.
The Cybercab has been spotted outside of Gigafactory Texas in massive numbers over the past few days, with hundreds of units being stored on property just days after the vehicle received a Certificate of Conformity from the EPA.
Today, things were a bit different.
Cybercabs spotted on Giga Texas property today had an addition: a Cybercab decal on the side, reminiscent of the “Robotaxi” ones that were placed on Model Ys just as the company launched its ride-sharing platform about a year ago.
Giga Texas drone operator Joe Tegtmeyer noticed the change today:
Tesla Cybercabs are now getting “Cybercab” logos on the side of them!
Tesla did the same with Model Ys that were given “Robotaxi” logos: https://t.co/DanANtw1m7 pic.twitter.com/FqOhH0S9Ks
— TESLARATI (@Teslarati) June 19, 2026
Tesla could be signaling that the Cybercab is preparing to enter the Robotaxi fleet in the coming weeks or months with this move. It seems more symbolic than anything; Tesla is ready to throw Cybercabs in the ride-hailing platform just as it did with Model Ys last year.
The addition of the Certificate of Conformity awarded to the Cybercab is another major factor working to Tesla’s advantage. The company now has permission from the EPA to allow the vehicle to operate on public roads and enter the chain of commerce. It’s officially street legal.
Tesla Cybercab specs revealed: range, curb weight, range ratings, and more
The big question that remains is whether Tesla will be able to operate the car without a safety monitor, especially considering it plans to put the car out there without a steering wheel or pedals. With the Cybercab only having a seating capacity of two, it is hard to believe Tesla will even consider putting a Safety Monitor in the car.
It did recently self-certify as Level 4 and has the ability to operate driverless vehicles in the State of Texas under a law that took effect on May 28. You can read more about that here:
Tesla’s Robotaxi dreams just took a massive step toward reality
We’d imagine Cybercabs will be on the roads as soon as July, but August will likely be a better estimate of when the car will be entered into the Cybercab fleet. It all depends at where Tesla is, as they’ve truly prioritized safety with the rollout of the Robotaxi platform.
Elon Musk has publicly questioned Moody’s credit assessments following the rating agency’s decision to assign SpaceX a Baa1 investment-grade rating, two notches above Tesla’s Baa3. The comments came amid discussions comparing the two companies’ financial profiles.
SpaceX earned its first-time Baa1 rating with a stable outlook from Moody’s. The agency highlighted the company’s leadership in orbital launches, the growing recurring revenue from its Starlink satellite network, strong vertical integration, U.S. government contracts, and emerging opportunities in AI infrastructure.
These factors were cited as supporting robust cash flows, margin expansion, and financial flexibility.
Musk responded directly: “Tesla’s credit rating is ridiculously low tbh,” and added, “Yeah, makes no sense. Tesla has over $40B in cash, no debt, and is consistently profitable!” His remarks underscored Tesla’s balance sheet strength and profitability at a time when many traditional automakers continue to report losses in the shift to electric vehicles.
Yeah, makes no sense.
Tesla has over $40B in cash, no debt and is consistently profitable!
— Elon Musk (@elonmusk) June 19, 2026
Tesla maintains a leading position in the global EV market, with diversification into energy and storage, battery technology, and robotics through projects like Optimus. Recent financial updates show the company generated positive free cash flow of $1.4 billion in Q1 2026, supported by operating cash flow of $3.9 billion. Cash and short-term investments stood at approximately $44.7 billion.
Moody’s has affirmed Tesla’s Baa3 issuer rating with a stable outlook in periodic reviews, acknowledging the company’s EV leadership, technology strengths, including AI for autonomous vehicles, solid profitability, and strong liquidity.
Tesla (TSLA) scores Baa3 Moody’s rating for ‘stable’ outlook
However, the agency has also noted challenges in the automotive segment and expectations for margin pressures.
Musk’s critique highlights a common debate about how traditional rating methodologies apply to high-growth, capital-intensive technology companies. SpaceX benefits from long-term government-backed contracts and diversified, recurring revenue streams, while Tesla’s valuation reflects heavy investment in future technologies such as autonomy and robotics.
Both ratings remain investment-grade, yet the one-notch difference has fueled online discussion about potential inconsistencies in evaluating innovative firms.
The exchange comes as SpaceX explores financing options following its recent valuation milestones, while Tesla continues executing on its multi-year roadmap. Musk’s pointed response serves as a reminder that credit ratings, though influential for borrowing costs, represent one lens through which markets assess corporate strength—and that company leaders often view their financial positions through the lens of long-term innovation and cash generation rather than short-term risk metrics alone.
President Trump touts new Air Force One with Musk technology
Tesla Cybercab launch is imminent after latest sighting at Giga Texas
