Hyundai makes bogus claims, White House passes the buck, is Tesla’s angry reaction justified?

Tesla Motors is angry this week at Hyundai making bogus political allegations about Tesla’s Supercharger network, and at the U.S. White House for passing the buck in dealing with the battle over Tesla’s direct car-sales model. On the one hand Hyundai is making yet another astonishingly bad statement, and on the other hand the White House doesn’t have the power to influence the car sales model since it is each individual state which sets car sales policy. Tesla Motors’ response in both cases was anger, and one wonders if Tesla is overreacting.

Hyundai causes our jaw to hit the floor with another crazy statement

In the case of Hyundai, John Voelcker (Green Car Reports) interviewed Michael O’Brien, head of product planning for Hyundai North America, about the Fuel Cell version of the Hyundai Tuscon. During that interview O’Brien made a jaw-droppingly false statement about the funding of Tesla’s Supercharger network, while at the same time jaw-droppingly ignored an issue with funding the hydrogen refueling infrastructure required for Hyundai’s fuel cell vehicles.

What O’Brien said was Tesla’s Supercharger network was funded using public dollars, from the grants and loans given to Tesla by the U.S. Government. At the same time he said that Hyundai received no government grants for their fuel cell vehicles.

Pick your jaw up off the floor.

O’Brien was wrong on both counts – though, there may be ways to twist the story to fit his statement.

First, the grants and loans given to Tesla were entirely for building the factory in Fremont at which Tesla Motors is building the Model S, Model X, and the forthcoming Gen3 car. The biggest chunk of that were loans given through the Dept. of Energy, alongside loans given to companies like Nissan or General Motors for their own electrified vehicle projects. Tesla Motors has since paid back their entire loan, something no other company has done.

Tesla Motors has also received tax breaks from California for equipment purchases – the big machines in the factory were bought tax-free as a result. Not loans, but tax credits.

As I recall it, no loan or grant was made to Tesla for anything related to the Supercharger system.

What Diarmuid O’Connell, Tesla’s vice president of business development, told Green Car Reports is: “I am furious at any allegation that any public money was spent on the Supercharger network. Those sites have been paid for entirely by Tesla Motors–which continues to spend money in expanding the network. This stands in stark contrast to certain foreign carmakers, including Hyundai who have no manufacturing presence in California but expect the state’s taxpayers to spend up to $200 million to set up hydrogen stations.”

What O’Connell refers to is the program in California to build a hydrogen refueling network ahead of “mass production” of fuel cell vehicles from several manufacturers. A program which Hyundai representatives recently openly admitted to manipulating for Hyundai’s gain.

California is putting a huge emphasis on fuel cell vehicles. In CARB’s rules over the ZEV mandate, Fuel Cell vehicles earn more ZEV credits than do 100% battery electric vehicles. While BEV sales earn more ZEV credits than do plug-in hybrid or hybrid vehicle sales, the multiplier for fuel cell vehicle sales is making fuel cell vehicles more attractive to manufacturers than battery electric vehicles.

What Hyundai said is that while the company is losing $150,000 per Tuscon FCEV delivered, they’re making much more from earning ZEV credits.

In other words, Hyundai is benefitting from government programs, even if its not a direct loan or grant.

Further, the hydrogen refueling stations built at California taxpayer cost is also benefiting Hyundai. Those stations would not exist any other way – at $2 million apiece, there’s no business model to support their existence. The only way fuel cell vehicles will have value is for a refueling network to exist.

Therefore, the automakers seeking to sell/lease FCEV’s in California are relying on taxpayer funded hydrogen refueling stations to sell enough FCEV’s to make enough ZEV credits to continue selling gasoline powered cars in California and thereby continue raking in money from Californians.

The truth? Tesla Motors hasn’t received loans or grants to cover development or buildout of the Supercharger network. Hyundai, and certain other automakers, are benefitting from taxpayer funded hydrogen refueling stations.

Do I think I would be angry, if I were in Diarmud O’Connell’s shoes, that Hyundai claimed the opposite? You betcha.

Let’s quibble around this a little bit, however.

O’Brien is technically correct, because Hyundai didn’t receive anything directly for their fuel cell vehicle development (so far as I know). What I showed, though, is that Hyundai and the others are receiving indirect benefit from government expenditures.

The only way O’Brien could be accurate about Tesla Motors is that the government loans/grants gave Tesla Motors more working capital. Yes, it was earmarked to factory construction, but because Tesla had a bigger pile of money they could spend more on Supercharger research & development. Tesla may not have otherwise been able to create such an excellent system, and that system adds tremendously to the value of Tesla’s automobiles. Therefore, did the government fund the Supercharger system? The connection is loose.

Does this mean O’Connell’s anger is less justified? Maybe.

Actually, all of us should be angry that so much emphasis is being put on fuel cell vehicles. The market is showing an appetite for quickly growing the electric vehicle market, while the fuel cell vehicle market is still in early early early R&D with limited production with what amounts to pilot project sales. Further, fuel cells are far dirtier than is claimed, and don’t produce much environmental benefit, while battery electric vehicles do (when powered from clean electricity).

White House passes the buck on Tesla’s battle over direct car sales

The other item raising O’Connell’s anger was the White House response to a petition calling on the Obama Administration to intervene on state laws that are preventing Tesla Motors from selling cars directly to the public.

Tesla Motors is facing battles in several states over this issue, with the Automobile Dealers Associations using their lobbying power to try and block Tesla from selling cars. Diarmud O’Connell happens to be in charge of Tesla’s response to this battle.

What the White House said is: “We believe in the goal of improving consumer choice for American families, including more vehicles that provide savings at the pump for consumers. However, we understand that pre-empting current state laws on direct-to-consumer auto sales would require an act of Congress.”

The issue is state laws governing the car sales process. Those laws vary from state to state, and some states have draconian laws completely forbidding direct car sales such as Tesla’s preferred model.

It means the Federal Government has limited power to influence State laws.

Diarmud O’Connell’s response? “Rather than seize an opportunity to promote innovation and support the first successful American car company to be started in more than a century, the White House issued a response that was even more timid than its rejection of a petition to begin construction of a Death Star. Instead of showing the sort of leadership exhibited by senior officials at the Federal Trade Commission who declared their support for consumer freedom of choice, the White House merely passed the buck to Congress and trumpeted its advances in promoting vehicle efficiency. Given the economic and environmental principles at stake, we would have hoped for stronger leadership and more action.”

Yes. We tend to agree. But, isn’t this issue about state laws?

Is O’Connell’s anger misplaced? We have here two stories in which Tesla Motors is reacting angrily to stuff happening around the company. Rather, it’s Diarmud O’Connell reacting angrily. In both cases the anger is somewhat justified, but maybe not to the extent he is showing. And, anger isn’t always the best response.

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About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.