Tesla Repays Department of Energy Loan Nine Years Early

http://www.teslamotors.com/about/press/releases/tesla-repays-department-energy-loan-nine-years-early

by weisser • 13 years ago

670 180 13 years ago

VandyILL• 13 years ago

Does anyone know if the DOE is able to recycle the funds back into loans for other electric vehicle manufacturers? If so, this may have been an extra smart move on Tesla's part because it could help competitors access capital and start investing in some of the shared technology behind electric cars and help bring the whole industry to scale.

wmf• 13 years ago

IIRC the DOE still has billions of electric vehicle loan money that they haven't awarded because there are no companies worthy of receiving it. They're also gun-shy about another Solyndra.

snprbob86• 13 years ago

The subtitle says: "ONLY AMERICAN CAR COMPANY TO HAVE PAID BACK GOVERNMENT"

Assuming that's true, I'm not sure whether I should be proud of Tesla, ashamed of our Government, or angered at other car companies. Probably all three...

lclarkmichalek• 13 years ago

What's the problem with companies paying back loans when they "need" to (i.e. when the loan comes to an end)?

malkia• 13 years ago

more like to give an example?

gridspy• 13 years ago

It can leave you exposed if you're ever forced to pay it back by the government. If the timing is wrong it might be hard to raise the money.

davidrudder2• 13 years ago

I'm not an economist, but this is how I understand it. GM paid back it's debt in full, but it paid most of it back in stock. The US government has sold some of it, so it's gotten about half of it's bailout back in cash. But, it still has a ton of GM stock. It's selling the stock slowly to avoid disrupting the market.

That being said, the government needs to sell at something like $75/share to make their money back, but it's at $33 as I write this.

Source: http://www.fool.com/investing/general/2013/05/09/when-will-g...

testing12341234• 13 years ago

This announcement doesn't really have anything to do with GM (or even apply to them) in anything but the "we gave them a loan" sense.

From the linked article:

"This program is often confused with the financial bailouts provided to the then bankrupt GM and Chrysler, who were ineligible for the ATVM program, because a requirement of that program was good financial health."

nathan_long2• 13 years ago

>> GM paid back it's debt in full, but it paid most of it back in stock. ... the government needs to sell at something like $75/share to make their money back, but it's at $33 as I write this.

So they "paid" their debt with something that 1) isn't worth enough to cover their debt and may never be 2) gives the government a financial interest in continuing to keep them afloat.

Pretty nice deal if you can get it.

3am• 13 years ago

Why be mad at anything? At most be mad at car makers for running so leveraged that they had liquidity problems at the same time that all the major lenders in the financial system ran into solvency problems (and feel free to be mad at the financial sector)

But given that, it was _excellent_ government policy to guarantee loans to the automakers, just from a cost/benefit perspective. And there's no shame in not going above and beyond the repayment terms of a loan - but good for Tesla for doing so (and great marketing).

Uhhrrr3• 13 years ago

GM was in trouble long before the 2008 crash: http://www.thetruthaboutcars.com/2008/06/general-motors-deat... (in June 2008, they were already up to part 181 in their series)

Also, guaranteed loans for automakers might be excellent compared to other government policy, but given that Ford didn't take a loan, and there are many foreign companies which didn't need loans, the existence of any benefit from subsidizing more poorly-run automakers is questionable.

dcosson• 13 years ago

I'm sure there was some money wasted along the way, but this makes me think of the often-quoted (around here at least) anecdote that VCs succeed not by getting decent returns across the board but by having one or two "home runs".

If Tesla is the home run that this ATVM program made possible, maybe it doesn't matter if all the rest end up defaulting on the loans (which this article doesn't even imply, Tesla seems to have just paid back the loan early). Obviously the economics of government loans aren't exactly the same as those of VC investments, but making the large-scale production of electric cars economically feasible is a huge accomplishment that seems like it'd be worth the cost of this whole program.

roin• 13 years ago

As you noted, the problem is that the government bought debt, not equity, so they don't share in the upside that would make this a financial home run that makes up for other failures. That being said, the government isn't in this to make money, they're in it for the broader benefits that will spillover outside of the individual company receiving financing. In that sense the VC analogy could work, because a major successful electric car company in the US probably would be a "home run" for the country (and the world) on several dimensions, more than making up for losses on the way.

rayiner3• 13 years ago

Who ever pays back the government for stuff? It's largely besides the point. The government didn't bail out say GM because it wanted to get a return on its investment. It did so because of the fear that letting Detroit go bankrupt would have a domino effect that would leave a gaping crater in employment. If the car companies manage to pay back the government, great. Even if they don't, that wasn't really the point.

ericcumbee2• 13 years ago

Yet GM still went bankrupt...just a few months later. People forget that. So what was really gained?

duck3• 13 years ago

fear that letting Detroit go bankrupt would have a domino effect that would leave a gaping crater in employment

You mean like the +20% currently unemployed in Detroit? The best thing about Detroit is that one day it will be used as a case study of why entitlements don't work out the way people think they do.

lanstein2• 13 years ago

"ONLY AMERICAN CAR COMPANY TO HAVE PAID BACK GOVERNMENT"

I'm not so sure Elon isn't writing his own copy.

skore• 13 years ago

Both can be true at the same time. The second statement you quote does not specify the program which was paid back.

lanstein2• 13 years ago

I'm just referring to the tone :)

andrewtbham5• 13 years ago

I own Tesla stock and I'm glad to see this. Tesla has been a highly politicized stock... largely because Mitt Romney and Sarah Palin called it a "loser." My hope is that this will help get rid of that stigma and help them with their image and political battle with dealerships in red states, like North Carolina and Texas. This also removes some strings attached to the DOE loan. For instance, Tesla could be acquired (although I find that unlikely).

axus• 13 years ago

I wondered if the payback a political move; something to make the U.S. government look good after the problems with Solyndra and Fisker Automotive. Mentioning the other auto companies doesn't sound like an attempt to make the government look good, though, just Tesla.

twistedpair3• 13 years ago

Don't forget, we tried to make Tesla dealerships illegal first here in Mass. NC was late on that one, so let's not make it a "Red State" matter.

veritas202• 13 years ago

It's a preservation of money and industry matter.

andrewtbham5• 13 years ago

I agree, the dealership issue is not a red/blue state issue. It's one less criticism that can be used against Tesla... one that would likely be more effective in red states.

veritas202• 13 years ago

It's crazy to see that a "red" state, you know the champions of free-market and capitalism, would support such laws that restrict any manufacturer from selling directly to consumers. The obstacles being thrown in Tesla's path from the dealership associations fly in the face of capitalism and free enterprise. Before Tesla, I wasn't aware that these types of laws existed.

deelowe2• 13 years ago

Who said republicans support a truly free-market?

JunkDNA2• 13 years ago

Crony capitalism is one of the few issues both Democrats and Republicans see eye to eye on. Each party has their specific business favorites, but it's sadly a bipartisan problem.

NatW• 13 years ago

Clips from Fox on Tesla http://www.youtube.com/watch?v=WcHkIWkecY8

elchief• 13 years ago

KPMG predicts an 85% fall in the number of cars required (long term).

Who do you think GOOG will turn to for the driverless cars? A big player or a little guy that can still grow in a shrinking market?

mrkmcknz2• 13 years ago

Didn't Tesla repay this loan back with another loan:

http://www.reuters.com/article/2013/05/15/us-tesla-stock-idU...

I'm not a market economics kind of guy but I don't see how this is any kind of special achievement. Surely any other car manufacturer could have done precisely this?

apaprocki• 13 years ago

Not if the rate was 10%, 20%, etc. It's just a form of bootstrapping. The government stepped in and bootstrapped it so now the private sector can finance it normally.

cinquemb• 13 years ago

Maybe it isn't a special achievement if you're suggesting GM could pull this off.

twistedpair3• 13 years ago

Seems that not all electric car companies getting loans from the US gov't are repaying their loans.

meterplech• 13 years ago

The story is that they paid it back via the private market, meaning that the financial community believes in the company enough that they no longer need public support.

Incidentally, they did issue corporate debt (a form of a loan, sure), but also issued more equity as well.

mrkmcknz2• 13 years ago

I guess it probably made sense financially in that the private market believed in Tesla enough to provide a better rate than the original loan.

ChuckMcM• 13 years ago

No, they paid back the government loan with stock.

The difference between a 'convertible note' and a 'loan' is that in a convertible note turns into its conversion when 'due.' Basically it turns into stock at the value of the amount borrowed plus interest.

There is a fascinating Convertible Note generator that you can run on the Wilson Sonsini web site [1] which I recommend doing if you are at all interested and read all the text about why or why not you might want choose one set of terms over the other.

[1] http://www.wsgr.com/WSGR/Display.aspx?SectionName=practice/t...

damoncali5• 13 years ago

It's raising money. For most car companies that is not a special achievement. For Tesla, who has not yet proven that they can make money, it's something of a milestone - at least a smallish signal of market confidence. All the chest beating is just Musk being Musk.

matt_brushlabs2• 13 years ago

I don't know if Elon should be so quick to thumb his nose at the other auto manufacturers. For one, he's facing a pretty substantial uphill climb WRT dealership laws in a lot of states, and rattling the snake cage won't win any friends.

On the other hand, when brand value (save Ford) for the domestics is strikingly low, maybe he's throwing punches exactly when he needs to.

preinheimer• 13 years ago

He's not fighting car makers, he's fighting the (generally very independent) dealers in those states. Playing nice isn't going to have them withdrawing their complaints.

At this point better PR, and a mention on the six o'clock news seems worth it.

matt_brushlabs2• 13 years ago

I'd agree with you, on the most part -- but I've worked with folks at the Big Three on their dealership strategies, and trust me: they're strange bedfellows.

Look no further than how TrueCar had to pivot their business model in a short period of time in order to comply with the cold backhand of dealers. It's a juggernaut, sadly.

I'm rooting for Elon to turn it on edge.

noname123• 13 years ago

The reason why Tesla is able to pay the Dept of Energy loan early is because of a secondary stock and bonds offering worth about >850+ million. In another words, Tesla is raising funds by generating more debt (from bondholders) and diluting share value (from shareholders), roughly about 3.5 mil out of 40 mil float, and using that money to pay the US govt.

TSLA rose on the news despite diluting shareholders is because coupled with the announcement, Elon Musk mentions that he will personally put an additional 100mil into the secondary offer; and general exuberance that TSLA will use the cash for more infrastructure build-out, a la Google, Yahoo during their heyday's. Make no mistake, this is as much a PR ploy by Tesla to pump up their offering.

It's incredibly smart for Musk and company to raise money in a very favorable environment as TSLA climbed from 45 to 90 after earnings. However, it remains to be seen if they can be still profitable. Note that they are still selling each car at a material loss; and only managed to show a profitable quarter by trading green credits they gained from their manufacturing. To truly scale, they need to either drive down the production cost of their cars down and broaden their market as there are only so much supply of carbon-emission credits on the market.

Disclosure: I trade TSLA options on volatility, without any directional bias.

andrewtbham5• 13 years ago

Where do you get 40M for the float? Yahoo indicates 73M. Plus doesn't dilution go against all outstanding shares (115M)?

http://finance.yahoo.com/q/ks?s=TSLA+Key+Statistics

Nrsolis3• 13 years ago

If I take a step back from this, I'd say it's bad strategy to bet against Elon Musk. IMHO, part of what makes his companies appealing is that he has a remarkable track record of keeping his head down and just getting sh!* done. I'm very impressed with his work ethic and vision and I think Tesla is going to go far.

Secondly, if he is successful and manages to bootstrap and entire electric car industry from the ground up, what kind of effect do you think this innovation is going to have on the world? Think of the massive investment in geopolitical resource availability that will be mitigated by the diversification of fuel options for auto transport.

He already hit one home run with PayPal, hit a triple with SpaceX, and might steal home with Tesla. He's a star player in a very sparse field of real innovators right now.

Disclosure: I also trade TSLA options, but I'm quite bullish on the company.

encoderer3• 13 years ago

Musk had very little to do with PayPal. He built a competing product, X.com, which was acquired by PayPal. Musk then served as CEO and if his interview in "Founders at Work" is any indication, he didn't do much besides piss off Max Levchin before stepping down after a relatively short tenure.

I love what Musk has done post PayPal, but no reason to rewrite history here.

mempko3• 13 years ago

cars are not an innovative technology. Cars that run on electricity existed since the 1920s and only recently mass produced by the likes of Nissan and others. Telsa sells expensive, heavy cars that run on batteries. Yes they are shiny. You know what would be innovative? Mass transit on a mass scale, away from automotive transport...

but there is no money to be made on any market for that..

revelation• 13 years ago

They already raised all the money prior to this announcement. They raised debt precisely because they didn't want to dilute shareholders (too much) and give existing short positions an easy out. You certainly realize they could have easily funded $1B through shares only at their then stock price level.

Elon predicted $200M capex in the next quarter, mainly to complete tooling and optimize factory processes. He clarified that they are not looking to scale the manufacturing process any further than its current level (400-500 cars/wk).

Stock price is up because Tesla only had $200M in cash equivalents available, which is a pretty small number for a car manufacturer, especially one looking to develop a new model (Model X) for a 2014 release and expanding charging/sales/service infrastructure.

Disclosure: I think technical trading is bullshit.

Nrsolis3• 13 years ago

Heh. It's all about the Alpha.

mncolinlee3• 13 years ago

There's something bizarre about griping that they reached profitability from green credits. To clarify, these green credits were voluntarily paid by OTHER CAR COMPANIES like Fiat who did not innovate enough to develop their own green cars. In essence, these credits work similarly to carbon credits or sulfur credits. They are NOT paid by taxpayers or by the government in any way.

It was a capitalist regulation in California designed to provide financial incentives and produce more revenue for innovative green companies. Companies have the option to develop their own green cars, buy credits, or else cede the California market to competitors. Those incentives have been very successful. There are far more new models of low and zero emissions vehicles than ever before.

Remember the popular Saturn EV-1 from fifteen years ago? It and other green vehicles were killed because California removed its regulations mandating production of low emissions vehicles.

Shivetya• 13 years ago

they are not free, they are paid by any consumer who directly or indirectly has a relationship with someone who purchases a vehicle from one of the makers who is paying these credits.

Voluntary my ass. If they don't pay what happens? Your fined. Its a tax. It is paid by consumers because they buy cars. If anything its California's way of having people in other states fund their initiatives.

I guess kudos can go to Musk for making sure his company is positioned physically and product wise to make the most from it. It is a disguised transfer from one company to another facilitated by the state. It is not voluntary if a fine results

damoncali5• 13 years ago

People don't like that those credits are temporary, subject to the whim of the government, and the entire source of Tesla's current profitability. It's a pretty big asterisk - you can't blame people for pointing it out.

andrewtbham5• 13 years ago

The concern is that as they sell more cars outside of the US and California where there are no credits, it will decrease their margin.

mempko3• 13 years ago

How many emissions do you suppose get emitted by all the metal, plastic, and rare metals that get dug up to create a tesla. What exactly is green about it?

Wouldn't it be more green for our society to pay for mass transit instead?

But apparently the only way to get something done is through companies and the market...

pbreit3• 13 years ago

> selling each car at a material loss

Is that true? I know the company overall would not have turned a profit without the credits but was under the impression that they currently had positive gross margins on the Model S.

damoncali5• 13 years ago

Gross margin, and it's tiny without the credits. Tesla's most recent quarter resulted in an operating loss and a net loss.

Edit: my bad. Seems the net income was slightly positive last quarter (with regulatory credits included, without them it's a big old negative).

jforman• 13 years ago

"Make no mistake, this is as much a PR ploy by Tesla to pump up their offering."

I don't get your negativity here. The fact that a major green tech company working with government support is able to shift financing over to the private market is, indeed, a remarkable feat and is absolutely something they have a right to crow about. The government, too — it's an example of a progressive system working as designed.

As for PR's impact to stock price...TSLA is 70% institutional owned. Anybody with a material stake in the company is savvy enough to know that they're not suddenly self-sustainably cash-flow positive.

der3k3• 13 years ago

"I don't get your negativity here."

I didn't get the negativity. He was just stating a reasonably deduced thought.

sillysaurus• 13 years ago

I don't get your negativity here.

It didn't read as negative.

guelo• 13 years ago

Considering the terms of the government loan were very favorable (rates equal to the interest rates on Treasury notes in 2010) it doesn't make sense to me that they would want to pay it off early and get rid of all that liquidity. As a quickly growing company didn't they have something better to spend that $450 million on?

orijing• 13 years ago

Like a butt-load of positive PR? I think they calculated that the positive PR value (or maybe mitigating negative PR) was worth the incremental cost of capital from the normal markets vs. from the DOE

Eliezer2• 13 years ago

Yeah, that puzzled me too. The PR couldn't be worth that much, could it? How could the interest possibly be more expensive than the stock dilution?

Unless they just don't like having debt outstanding which seems understandable... though with debt that cheap...

mathattack• 13 years ago

I interpret it as a way to keep competitors at bay. "The public markets can fund electric cars. No more government loans are needed for us, or anyone else for that matter."

Coko2• 13 years ago

They paid it off early because the loan came with restrictive agreements that prevented Tesla to stay competitive. This is from Tesla's own words, see my post. https://news.ycombinator.com/item?id=5755082

cjg_• 13 years ago

Well there are some restrictions imposed on Tesla by this load.

See http://www.businessinsider.com/elon-musk-borrows-150-million...

There is says that the loan requires Musk to have a 65% ownership of the company which of course is expensive to maintain when they are raising money.

JumpCrisscross• 13 years ago

"TSLA rose on the news despite diluting shareholders is because coupled with the announcement, Elon Musk mentions that he will personally put an additional 100mil into the secondary offer"

Dilution doesn't care who does the diluting - a share issued to Elon Musk dilutes as much as a share issued to TIAA-CREF. Regarding the double down, I do not believe Elon Musk's commitment to Tesla was in doubt previously. Its effects were probably limited to the marketing of the issue.

More critical is: (a) TSLA maturing to where it can issue debt (albeit, of the convertible type), (b) its extrication from a volatile political situation, and, (c) its new liquidity buffer. I do not think it is appropriate to characterise it as a "PR ploy". As you mentioned, they are still unit loss-making - that those losses need to be financed is more than superficial.

newbie12• 13 years ago

I've been a vocal critic of Tesla and the DoE loan program, and I'm really glad to see Tesla pay off the loan and move into private markets. I want to root for this company to succeed and now I feel like I can do that. Taxpayers still got ripped off given the size of the loan relative to the company, and the huge downside risk, but I'm glad Musk pulled it off!

ghshephard3• 13 years ago

It's these type of posts that make it to the top of a thread that make me not want to check into HN.

Can't we celebrate a company, that was called out as a bad stimulus target during the presidential debates actually paying back all their loans ahead of time? If there was one place I hoped I could go to celebrate an innovative company's success, it would be HN.

I take particular issue with, "Make no mistake, this is as much a PR ploy by Tesla to pump up their offering."

Paying back $450mm in loans isn't just a "ploy" - it's actually raising the money and sending it back to the taxpayers. And, at the same time, doing something innovative and forward looking - building electric cars - which, (look at Fisker) - is NOT a slam dunk, even with green credits.

I, for one, am applauding Tesla today. We can do that without saying that they will be successful in everything, and in the future. But today they are.

BHSPitMonkey3• 13 years ago

> It's these type of posts that make it to the top of a thread that make me not want to check into HN.

Posts that provide insightful explanation about the story? Yes, less of that and more unqualified positive gushing, please. There is nothing wrong with offering an informed opinion, even if (especially if) it's not in full alignment with the prevailing attitude of the hivemind.

baddox2• 13 years ago

If celebrating the actions of trendy companies and founders is what you're after, the vast majority of Hacker News should be very satisfying to you. Comments like the one you replied to are much rarer.

tptacek3• 13 years ago

I didn't read this comment nearly as negatively as you seemed to have.

a1a• 13 years ago

>> It's these type of posts that make it to the top of a thread that make me not want to check into HN.

I disagree. This is actually the kind of posts that makes me want to check into HN. The poster knows what he talks about and he shares his view on the matter.

For comparison, read the Reddit comments about the same link: http://www.reddit.com/r/technology/comments/1evskd/tesla_rep...

.. and next time, please skip the fallacy of attacking something irrelevant, i.e. what kinds of posts you like and what you think fits on HN, instead of the argument itself.

Notice: I'm only annoyed by the first two lines of your post, the rest I think is a valid argument.

joshdance• 13 years ago

I agree. Let's applaude the lone electric car success.

dreamdu5t2• 13 years ago

I can't get a clear picture on how much Tesla's success is a result of government subsidies, loans, and windfalls.

For example, at one point Musk said 10% of their revenue was from selling carbon credits they get for each car they sell to other car companies.

What's difficult for me is there's no place where you can get a decent summary of the kind of government programs Tesla relies on or takes advantage of.

ritchiea• 13 years ago

I love that these types of comments are at the top of Hacker News. They add valuable information to the discussion. I don't understand how you expressing your admiration for Tesla is at odds with the interesting factual background of the comment you responded to.

NickM3• 13 years ago

Note that they are still selling each car at a material loss; and only managed to show a profitable quarter by trading green credits they gained from their manufacturing.

I'm not sure that's entirely accurate. I'm looking at their quarterly results for Q1 2013: gross profit was $96.3 million, but the ZEV credit sales were only $67.9 million for the quarter. Unless I'm missing something, it would appear that they are profitable even without taking the ZEV credit sales into account.

hncommenter13• 13 years ago

I believe you are missing something.

"During the first quarter of 2013, we recognized $67.9 million in ZEV sales, which contributed to our gross margin. ZEV credit revenue should decline in future quarters relative to our automotive sales as we grow our sales outside the United States and earn fewer credits on the 60 kWh Model S battery variant for those sales that occur in the United States. Other regulatory credit sales recognized during the first quarter of 2013 were $17.1 million." (1Q2013 10Q, p. 22).

$67.9 + 17.1 = $85M in revenue from ZEV + other regulatory credits. Presuming these credits have a nominal cost-I would imagine they're almost 100% margin, given that they're pieces of paper--that leaves $96.3 - 85 = $11.3M in gross profit from selling cars.

tomasien3• 13 years ago

WHO IS UPVOTING THIS PREDICTABLY NEGATIVE SHIT ON HN? What is this? How does this happen? I'm just stunned. Every single time. It's never even the "that's awesome! Keep in mind, there's this additional context" posts, it's just the "this isn't actually awesome, here's why" posts.

NO. It's awesome that a private company sold stock that is hot because they're doing well to pay back public debt. Good for fucking them. People wanted to buy it because they see it as valuable, and they paid back the American people with some of that money. Good for them, period.

csense2• 13 years ago

> WHO IS UPVOTING THIS PREDICTABLY NEGATIVE SHIT ON HN?

People who are interested in views that are contrary to the mainstream and don't want HN to become an echo chamber.

People who value critical, insightful analysis and discussion by people who are willing to question the "party line" of a particular product's marketing department and fan club.

People who don't care about catering to the whims of people who can't stand to read "negative" things on the internet.

> NEGATIVE SHIT

I question this characterization of noname123's comment. The third paragraph I read as healthy skepticism, not negativity for its own sake. It's certainly information that a responsible investor would want to carefully consider.

The comment certainly wasn't "shit," it was well-thought-out and informative. The commenter certainly did his homework.

tomasien3• 13 years ago

I'm not even mad at noname123 for posting this! I'm not! It's totally legit to make this post, although it's not as good as it could be, it's fine. JUST STOP UPVOTING IT!

codex2• 13 years ago

There's one more reason to repay the loan early: it prevents the US from exercising 3M stock warrants worth about $250M. The fund raising also allowed Elon to borrow money against his other holdings to purchase more Tesla stock off the open market.

Agreed that sustainable profitability is an open question: because Tesla knew they would be raising more money after their first profitable quarter, they could pull put all the stops for maximum profitability, and go back to spending more once the round was in the bank. Will that happen? Unclear. But when you raise money you usually spend it.

TrevorJ• 13 years ago

The point about green credits in interesting. I suspect you will find many people who argue that it should be considered a legitimate business strategy, and other who view it as an artificial market that could evaporate at any given time depending on the whims of congress.

daniel-cussen• 13 years ago

I still think it's better for the private sector to assume the risk inherent in that debt than it is for the public sector to do so.

gailees• 13 years ago

like a BOSS

codex2• 13 years ago

Tesla's early repayment of their DOE loan has prevented the U.S. government from exercising three million warrants, which would have netted America around $250 million at the current stock price. Smart move for Tesla, almost a huge boon for U.S. taxpayers.

Eliezer2• 13 years ago

Oh, they had stock warrants? That explains it. Trading the low-interest debt for stock wouldn't make any sense otherwise.

MarkMc• 13 years ago

Mitt Romney must hate Tesla - it is a textbook example of why governments should sometimes mess with free markets.

If the government had not provided this loan Tesla would have gone bankrupt and the US would have lost a significant high-tech asset. 99% of the time the market is more efficient than government, but that other 1% counts for a lot.

JunkDNA2• 13 years ago

The right wing argument against government meddling isn't that it doesn't work sometimes (broken clocks being right twice a day and all that). The complaint is that, in aggregate, for every Tesla there are countless Solyndras. Governments aren't good at picking investments for the exact same reason individual people are not good at picking investments: predicting the future is hard. It's doubly hard when governments do it because of the distorting influence of constituents and politics. Let the private sector keep that money and if Elon convinces enough people to lend him cash, he can move forward. I have no doubt he could have done everything he has without a loan from Uncle Sam.

josefresco2• 13 years ago

"The complaint is that, in aggregate, for every Tesla there are countless Solyndras"

The problem with that argument or complaint is the evidence against it...

"The Energy Department has said that losses in the $34 billion loan portfolio amount to about 2% of the total."

This program might be a success so far, I cannot speak to past government investments which might back the "right wing" view better.

cdugg• 13 years ago

I don't remember getting a check from tesla nor was I asked permission to loan them money . The whole absurdity of "greater common good"

nathan_long2• 13 years ago

What's absurd about it? If pollution has bad and expensive effects (asthma, flooding, crop loss), those creating it should pay to help deal with it. It's like paying to have your own trash picked up instead of dumping it in your neighbor's yard.

If you doubt that pollution is bad, that's another story, but you're in the minority and outvoted.

twoodfin• 13 years ago

And you really think the best way to do that is to subsidize toys for rich folks?

roguas• 13 years ago

Of course they should pay. Money should go to people who suffer from pollution.

Its not like paying to have your own trash picked up. When you pay to have trash picked up you can choose a company, you can do it yourself, you can produce no trash etc.etc.

Why should one pay companies to make cars they will never buy? One that has never added his 5cents to the pollution is beyond reason. But then again democracy is just another form of tyranny.

imgabe• 13 years ago

Do you remember when you voted for the representatives you appointed to make those decisions for you?

kumarski• 13 years ago

What about Lee Iaccoca? and Sergio Marchionne?

I thought they fully repaid the government too. Maybe I'm confused?

Coko2• 13 years ago

I usually don't comment, but I'm surprised that I haven't seen anyone mention what I think is the most important part of the story.

The DOE loan was an attractive low-interest loan. Why would they repay it early? Because the DOE loan had restrictive agreements that prevented Tesla to stay competitive.

From page 44 of their May 10th Quarterly Report SEC Filing:

"Our DOE Loan Facility documents contain customary covenants that include, among others, a requirement that the project be conducted in accordance with the business plan for such project, compliance with all requirements of the ATVM Program, and limitations on our and our subsidiaries’ ability to incur indebtedness, incur liens, make investments or loans, enter into mergers or acquisitions, dispose of assets, pay dividends or make distributions on capital stock, prepay indebtedness, pay management, advisory or similar fees to affiliates, enter into certain affiliate transactions, enter into new lines of business and enter into certain restrictive agreements. These restrictions may limit our ability to operate our business and may cause us to take actions or prevent us from taking actions we believe are necessary from a competitive standpoint or that we otherwise believe are necessary to grow our business. In addition, our DOE Loan Facility also contains a variety of customary financial covenants, including covenants related to current ratio, leverage ratio, interest coverage ratio and fixed charge coverage ratio. We modified certain of these covenants in February 2012, September 2012, and again in March 2013."

damoncali5• 13 years ago

Not terribly surprising. I've seen HUD loans up close, and if DOE loans are anything like HUD loans, they are a nightmare. Audits, escrows, and complexity 'til the cows come home.

Thanks for digging that up though, I was wondering why they refinanced it, as I assume the interest rate was pretty good.

Fuxy• 13 years ago

Finally a company with a sense of integrity and responsibility.

Regardless of how they raised the money the had a debt that they needed to pay and they did which is more then i can say about most companies. "Tesla will be the only American car company to have fully repaid the government."

All other companies only care about their stock and how to make more money the last thing on their mind is paying back their debts and the government lets them get away with it because their "too big to fail".

Let me tell you something ...there's no such thing that is the result of their bad decisions and if they don't fail they will repeat the same mistakes again and again because they can.

Tesla Repays Department of Energy Loan Nine Years Early

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