Elon Musk’s rise to become the world’s first trillionaire was fueled not only by investors and technological breakthroughs but largely by years of U.S. government support, according to an analysis of early growth and financing of SpaceX and Tesla.From the NASA contracts that kept SpaceX alive, to the federal loans, tax breaks, and regulatory programs that boosted Tesla, U.S. government funding played a crucial role in both companies surviving their fragile early years and expanding into global giants.SpaceX was struggling to stay afloat in its early years when it received significant support from the US government. In 2006, NASA awarded the company a $278 million grant to develop the Falcon rocket system and Dragon spacecraft, as the United States was looking for private partners to replace the Space Shuttle program and maintain access to the International Space Station.This funding was just the beginning. According to data from PitchBook, SpaceX has received more than $500 million in early government grants. Later, in 2008, when the company was running out of money, NASA awarded it a $1.6 billion contract, a turning point that ensured its survival.Investment director Ross Gerber, CEO of Gerber Kawasaki and an early investor in Tesla, said the US government was essential to Musk’s companies existing in the first place.
“There[Tesla and SpaceX]wouldn’t exist without the government,” said Ross Gerber, CEO of investment firm Gerber Kawasaki and an early investor in Tesla.SpaceX later became a prime contractor for NASA, launching missions and transporting astronauts to the International Space Station, and turning its early public funding into long-term government work.Casey Dreyer, head of space policy at the Planetary Society, said NASA’s early funding was crucial.“That was about half of the capital they had raised to that point,” Casey Dreyer, head of space policy at the Planetary Society, a public interest group that advocates for spaceflight, said before SpaceX’s IPO.“This was a major commitment made by NASA,” they added.SpaceX benefited from direct federal funding, but Tesla’s support came indirectly but was equally important to its early survival.In 2010, when Tesla sold fewer than 2,000 cars, it received a low-interest loan of $465 million from the US Department of Energy. The financing helped her develop the Model S, which became her first major commercial success. Tesla later repaid the loan in early 2013 after raising additional capital through stock sales.US government support also came through consumer incentives. A $7,500 federal tax credit for electric vehicle buyers has helped Tesla attract demand and push up prices.
Analysts estimate that Tesla buyers received about $3.4 billion in federal tax credits before the program expires in 2019, and is later briefly restarted under the inflation control law before being phased out again in 2025.However, the most important long-term support came through regulatory appropriations. Under US emissions rules, automakers that exceed environmental standards can sell credits to those that don’t.
Tesla, which only produces electric cars, has consistently earned surplus credits.Between 2008 and 2019, these regulatory credit sales generated more than $2 billion for Tesla, sometimes accounting for nearly a quarter of its revenue. Even after that period, the company continued to benefit, generating an estimated $12.3 billion in additional credit sales through 2019 onward.Tesla itself has admitted how close it came to collapse.
Musk admitted in 2020 that the company was on the verge of bankruptcy in 2019, despite its growing reputation.In a tweet in 2020, Musk admitted that Tesla was on the verge of filing for bankruptcy in 2019.Even as Tesla moved toward profitability, it remained heavily supported by credit revenue, and did not achieve consistent profits without it until after 2021.Today, Tesla is worth about $1.5 trillion. They are driven less by car sales and more by investors’ faith in future technologies such as robots and humanoid robots. However, analysts say the foundation for this assessment was built during the years when government programs helped stabilize both Tesla and SpaceX.
