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Tesla

Electric carmaker giant, Tesla, has called for an increase in fuel duty and a charge on the purchase of a petrol and diesel car. Elon Musk, Tesla’s chief executive, is lobbying the UK Government, saying these extra taxes and charges will help towards subsidising electric vehicles. Here we look at the influence of Musk and Tesla on the current car market.

UK Fuel Duty

UK Fuel Duty is currently set at a flat rate of 57.95 pence per litre for petrol, diesel, biodiesel and bioethanol. There are reduced rates for LPG, natural gas and fuel oil used for heating.

The fuel duty rate was frozen by the UK Government in the March 2021 Budget. Rishu Sunak did consider an increase to raise funds and to re-enforce the government’s commitment to reducing carbon emissions. Due to the COVID pandemic and the public’s reliance on cars for transport he decided to freeze the tax for the next year. This is due in large to social distancing and the reluctance of people to use public transport.

Sunak did claim that fuel rates would increase as the government promotes the transition to low-emission vehicles, prior to the band on most new Internal Combustion Engine (ICE) vehicles from 2030. He reiterated the UK’s commitment to reach net-zero emissions by 2050.

Who is Elon Musk?

Many wonder how an awkward, nerdy boy from South Africa went on to become the richest man in the world with an estimated net worth of around $200 billion. He is sometimes referred to as a ‘thrillionaire’, being a high-text entrepreneur always looking at turning science fiction into reality.

Musk holds three citizenships being born to a Canadian mother and South African father. He was born and raised in South Africa before moving to Canada at 17 to attend Queen’s University. He moved to California in 1995 to attend Stanford University, before deciding to pursue his business career co-founding the software company Zip2 with his brother. Musk would go on to sell his startup in 1999 to Compaq for $307 million. the same year the entrepreneur co-founded X.com. X.com would go on to merge with Confinity and form the company Paypal the following year. Two years later Paypal was acquired by eBay for a whopping $1.5 billion.

The same year Musk sold eBay, he founded SpaceX in 2002. Musk is convinced that for human life to survive, humanity has to live across a number of planets. He founded Space Exploration Technologies (SpaceX) so he could produce affordable rockets. He has launched a number of rockets into space, including the Falcon heavy mission which carried a Tesla Roadster and a dummy named ‘Starman’ in the driver seat as a dummy payload.

He owns a number of other companies including SolarCity, the second-largest supplier of solar power systems in the U.S; Neuralink, a neurotechnology company, focused on producing devices that can be implanted into the human brain to merge humans with software; Hyperloop, a high-speed transportation system that can in theory transport people from San Fransisco to Los Angeles in 35 minutes at a speed of 670 mph (faster than a commercial plane!). The entrepreneur also owns the aptly named ‘The Boring Company’, founded to construct tunnels.

Tesla

Musk joined Tesla Motors Inc, the electric vehicle manufacturer, as chairman and product architect in 2004. By his own admission, he held a natural intrigue with the possibility of electric cars many years earlier. He assumed the leadership of Tesla as CEO in 2008 following a series of internal conflicts and the 2008 financial crisis.

Tesla built the Tesla Roadster in 2008 which was the first serial production of an all-electric car operating on lithium-ion battery cells. Tesla is the most valuable carmaker of all-time, worth around $676 billion. It is currently the biggest manufacturer of electric cars with a market share of 28%. Tesla is hugely popular due to its innovative technology, high performance and modern design. The popularity and intrigue of Elon Musk helped elevate the status of the brand.

Tesla has since become the most valuable carmaker in the world. It’s share price peaked in January 2021 at $880, increasing 10-fold in a year. Tesla famously bought $1.5 billion worth of Bitcoin in February 2021, helping elevate the value of Bitcoin overnight. The decision by Musk generated over $1 billion in paper profit in less than a month.

What is Elon Musk Proposing?

Musk has pioneered the mass production of electric vehicles to tackle carbon emissions. His view on fossil fuel bans is different from his peers in the car industry. Tesla’s rivals have campaigned intensively against proposals to ban all petrol, diesel and hybrid cars by 2030. Tesla is openly supporting the ban on petrol and diesel cars by 2030, and hybrid cars by 2032.

Tesla has called for an immediate increase in fuel duties and an additional charge on petrol and diesel care purchases. They argue this will help pay for grants and tax breaks for battery-powered cars.  The maximum grant for an electric car has recently been reduced from £4,500 to £3,000 with the exclusion of plug-in hybrids

The emergence of VW in the Electric Car Market

The German car giants have announced plans for a massive expansion of the production of electric cars. This includes billions of Euros to be spent on software development and battery cell production. Volkswagen Group owns Audi, Bentley, Bugatti, Lamborghini, Porsche, Seat, Skoda and Volkswagen. As a result they are well-positioned to take on Tesla. Volkswagen’s CEO Herbert Diesss states, “Our plan is to secure pole position”.

VW currently sell 10 million vehicles a year, which is 20 times that of Tesla. VW’s valuation is $120 billion, compared to Tesla’s valuation of £676 billion, as mentioned earlier. Both Tesla and VW are building car plants cin Germany, capable of producing 100,000’s of electric vehicles a year.  Tesla claim their new factory to open just outside of Berlin will produce the next generation of automotive software. This will include advanced batteries and cutting-edge autonomous driving technology. These are two key areas that will revolutionise driving as we know it and is where Volkswagen is aiming to challenge.

Nigel Carr
Nigel Carr
Nigel is a freelance financial writer and Author at Kinsella Tax. A business graduate he writes on financial matters as well as music for a number of high quality websites.
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