Investor's Corner
Tesla is being ‘anti-subsidized’ in the US, and it’s thriving in spite of it
Ask any TSLAQ believer about one of the biggest reasons for Tesla’s ongoing success, and there’s a good chance that one will hear the word “subsidies.” More often than not, Tesla critics would argue that the electric car maker has only survived because the US government heavily subsidizes it — and without these subsidies, Tesla would fall.
Unfortunately for TSLA bears, this is not an accurate assumption. In fact, if one were to look at what Tesla has had to deal with in the past years (and is still dealing with today), it would actually be more accurate to state that the company had been “anti-subsidized” for the most part, both in its home country and some key territories abroad.
As thoroughly discussed by Tesla investor KarenRei on Twitter, Tesla actually has dealt with a lot of handicaps when selling its cars to consumers. Take the United States, for example. Being a pure electric car company, it was no surprise that Tesla was the first to trigger a phaseout of the $7,500 tax credit given to EV buyers in the country.
Today, Tesla buyers no longer receive tax credits from the United States government, which means that at this point, the company is taking on traditional automakers solely through its vehicles’ own merits. Buyers of pretty much every other car except the Chevy Bolt still receive a $7,500 tax credit, while those who purchase Teslas do not get any incentives. Yet, despite this, the demand for the company’s vehicles has remained healthy.
Another ghost from Tesla’s past that always emerges in the constant bull vs. bear debates online is the loan that the company received during the US financial crisis. Tesla did receive a loan from the Obama administration, but so did other companies, the biggest of which was General Motors, the quintessential American automaker. Tesla would eventually pay back the $465 million loan it received from the US government — 10 years early. GM, in comparison, defaulted on their own loan. This nifty little detail usually gets a bit overlooked whenever Tesla’s loans are discussed among critics.
But what about state incentives that are granted to Tesla for, say, building Giga Nevada? Well, that’s not particularly unique to the electric car maker, either. It should be noted that it is a pretty common practice for states to offer incentives to attract large corporations to invest and build their facilities within their borders. Doing so triggers an influx of jobs, as well as potentially positive effects for local businesses.
And don’t forget that Tesla is still struggling to formally sell its cars in several US states. It’s almost ironic how Tesla was able to secure land, build a factory, and start delivering locally-produced Model 3s in China to consumers before it was able to get permission to sell its cars in parts of its home country, like Texas.
In other territories, Tesla receives anti-incentives as well. This happened to the Model 3 in Canada, whose EV incentives required the base price of qualified vehicles to start below the cost of the Model 3, effectively excluding Tesla’s most affordable vehicle. This reflected a similar strategy adopted in Germany when the Model S was released in the country.
Keeping these in perspective, it almost seems like governments across the globe earnestly want electric cars to succeed. But when it comes to Tesla, the company has not been handled with kid gloves at all. Far from it. In a way, it seems fair to argue at this point that Tesla’s success, as evidenced by its 112,000 vehicle deliveries in the fourth quarter of 2019, is happening in spite of anti-incentives that are consistently thrown its way. Perhaps, just as argued by the company’s supporters, Tesla’s products just happen to be very compelling for buyers.
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H/T @enn_Nafnlaus/Twitter
In a new note to investors on Tuesday, Morgan Stanley analyst Andrew Percoco said that Tesla has one big financial question to answer for investors regarding its Robotaxi rollout, Full Self-Driving software, and Optimus.
Percoco said in the note that, for the most part, investors are still very positive about the direction the company is headed. However, there are some things the firm would like to see, and they have to do with financials.
Tesla (TSLA) Q2 2026 earnings results: miss on EPS, beat on revenue
Tesla bulls are more than convinced that the company’s Full Self-Driving software is proof it can develop physical AI. Financially, however, there are still some questions, especially on elevated spending, which CEO Elon Musk said would occur as the company works to roll out Robotaxi faster and continue developing its Optimus robot.
The latter two are where Tesla will have to prove progress to investors, as Percoco writes that both projects “will require clearer evidence that Robotaxi is scaling and more tangible Optimus proof points to support the ROI on elevated capex.”
Percoco said the second quarter earnings call did not change his long-term thesis of where Tesla is positioned in the AI race, which is out in front. However, there are concerns that weaker gross margins and higher R&D spend will stress financials, and that has “sharpened our (and investors’) focus on measurable progress across Robotaxi and Optimus.”
Additionally, Robotaxi still needs to be proven with more operation in existing cities while maintaining safety but improving how many rides it gives in any given time, he said. For Optimus, Percoco wrote that he is “still looking for evidence beyond commentary around SOP.”
Morgan Stanley put Percoco in charge of covering Tesla after long-time analyst Adam Jonas transitioned to the automotive side.
Currently, Morgan Stanley has a $415 price target on Tesla and a ‘Hold’ rating on the stock. It is trading at around $330 at the time of publication, which was 2:30 P.M. on the East Coast.
SpaceX’s massive investment in AI will make it a big winner, Argus Research said after the company’s successful earnings call last week.
The firm also upgraded shares to a Buy from Hold and set a $160 price target.
SpaceX (NASDAQ: SPCX) is currently recovering from its heavy AI infrastructure investments, as it spent nearly $16 billion in Q2 alone. The company did this primarily by monetizing high-demand GPU compute capacity at a much faster pace than traditional data center economics would suggest.
Company CFO Bret Johnsen said that SpaceX would be able to pay back anything on new deployments within a year.
There are plenty of ways the company can do this:
Leasing excess compute capacity through contracts
SpaceX has already built Colossus and Colossus II, largely for its own model training. However, much of that capacity is already rented out to third parties. It already has major deals with Anthropic, Google, and Reflection AI. These partnerships are adding billions per month to SpaceX’s spreadsheet.
High utilization driven by industry-wide scarcity
The demand for advanced AI training and inference capacity continues to exceed what is available for use. SpaceX can fill new racks quickly after they come online, so the capital deployed converts into revenue with minimal idle time.
Additionally, management and outside observers have described the new compute capital as behaving more like a cost-of-goods-sold than traditional multi-year capex, especially because of this rapid monetization pattern.
Capacity has already scaled from ~0.4 GW a year to 1.4 GW annually by the end of Q2. There are targets of more than 2 GW by year-end.
High incremental margins on the rental business once capacity is online
GPU cloud providers often operate at strong gross margins. SpaceX can monetize capacity that was already partially built or can be added efficiently. This means that incremental EBITDA margins on the rental revenue are usually high. This accelerates cash recovery relative to the gross capital outlay.
Parallel monetization of its own AI software and applications
Beyond pure infrastructure rental, SpaceX also generates revenue from Grok through subscriptions and usage, from X through ads, data, and other related services, enterprise APIs, and the planned integration of the Cursor coding tools acquisition.
These application layers ride on the same compute infrastructure and provide additional high-margin streams that could offset build-out costs. AI-segment revenue overall rose sharply to about $2.6 billion in Q2, according to Motley Fool. This was driven primarily by the infrastructure contracts, but the software side is also partially responsible.
Efficient, large-scale deployment and vertical integration advantages
SpaceX has emphasized the rapid construction of power and cooling infrastructure and favorable cost-per-megawatt economics relative to industry benchmarks in some disclosures.
Combined with its ability to scale capacity aggressively and the fact that many contracts start generating revenue within months of capacity coming online, the effective payback compresses dramatically compared with more conventional multi-year data-center projects.
SpaceX’s dominant near-term recovery path will turn the AI clusters into a hyperscale-style compute rental business for other leading AI companies while still using a portion for internal models.
Elon Musk
Another Tesla SpaceX merger prediction by ARK Invest has Elon Musk talking
Elon Musk again denies a Tesla China split as new SpaceX merger speculation resurfaces quickly.
Elon Musk restated that Tesla has no plans to separate its China business from the rest of the company, responding to a new round of merger speculation from ARK Invest.
On the firm’s “Brainstorm” podcast, Cathie Wood’s team, including chief futurist Brett Winton and research director Nick Grous, argued a Tesla and SpaceX combination remains likely, with an announcement possible before the end of the year even if the deal itself would not close that quickly. Winton called Tesla’s Shanghai operations a “small ish wrinkle” for a merger rather than a real obstacle, since SpaceX’s national security work with the U.S. government sits uneasily next to Tesla’s manufacturing base in China.
Musk pushed back on the framing directly. “China is awesome. I strongly encourage people to visit,” he wrote on X. He also repeated language he first used in late July, when the Wall Street Journal reported that Tesla executives had been told to prepare for a possible spinoff, sale, or closure of the China business ahead of a SpaceX tie up. Musk called that report “absurdly fake news” at the time, adding that a separation had “never even come up in a discussion ever,” a line he echoed again this week.
The repeated denial has not settled the underlying question, because Shanghai’s role in Tesla’s business is exactly what makes a merger complicated. Gigafactory Shanghai still ships more than half of Tesla’s global deliveries and functions as the company’s main export hub for Europe and Asia. Teslarati previously reported on Musk’s initial denial, and the merger conversation itself has been building since SpaceX’s IPO gave it public shares to use as acquisition currency.
Wedbush’s Dan Ives has pegged the odds of a Tesla SpaceX merger at 80 to 90 percent by early 2027, and ARK’s prediction of a year end announcement adds another data point to that timeline, even as Musk keeps rejecting the specific mechanics reporters have described. Neither position rules out the other. Musk can deny a China spinoff was ever discussed while analysts still expect some form of combination to move forward, since ARK and Ives are both describing convergence at the corporate level, not necessarily the internal restructuring the Journal described in July.
For now, Tesla’s China business remains intact, and Musk’s comments this week make clear he has no interest in publicly walking that position back, no matter how often the merger question resurfaces.
Tesla has one big financial question to answer for investors: Morgan Stanley
SpaceX AI investment gamble will make it a big winner, firm says
