The Government Comes Through For Tesla With A $465 Million Loan

http://www.techcrunch.com/2009/06/23/the-government-comes-through-for-tesla-with-a-465-million-loan-for-its-electric-sedan/

by jasonlbaptiste • 17 years ago

45 41 17 years ago

techcrunch.com

kirse2• 17 years ago

When the mess gets sorted out, I'd like to have a conversation with whoever's in charge at the time the car czar or whoever and say 'I'd like to run your plants, if you don't mind,' Musk said ( http://tinyurl.com/km5e4h )

Sounds like Elon will fit right in at Detroit. Run an unprofitable car company and dip into our pockets when you can't do it right.

pkulak• 17 years ago

Wow, for a second there I thought it said digg.com in my address bar.

absconditus• 17 years ago

A loan isn't exactly stealing.

anamax2• 17 years ago

> A loan isn't exactly stealing.

A "govt loan" isn't exactly voluntary on behalf of taxpayers. You remember taxpayers - they're the folks who are actually putting up the money.

tptacek6• 17 years ago

(a) Musk says they're on track to be profitable in months. Do you have evidence to muster that he's lying? I'm sure he could be, but it's not very interesting just to say he is.

(b) Detroit auto companies have historically been very profitable.

(c) The auto industry is structurally inhospitable to newcomers. Legacy manufacturers have locked up supply chains, locked up distribution channels, and are entrenched in a regulatory environment designed for 12-figure industrial bohemoths. That there may not be a way to "do it right" is an argument in favor of propping up Tesla.

radu_floricica2• 17 years ago

I like Tesla like the next guy, but when it comes to investing, especially public money, the burden to prove profitability comes on the company.

I'm glad this happened, but the GP is not wrong to criticize this. It's still taking public funds and putting them in a company who still hasn't made a profit.

jpwagner• 17 years ago

Considering that tesla is valued at 1BB (http://bit.ly/14WPOY) and has had 701MM in funding (http://bit.ly/2lv8So) I would say the onus is on you as the refuter to show data that they will be "profitable in months."

While renewable energy cars is something we all hope will eventually succeed, I'm not sure how sound it is to throw a bunch of money at Elon Musk.

kyro2• 17 years ago

Instead of waiting on Musk to provide evidence to backup his statement, you're seriously putting the burden on kirse to prove that Musk is lying...? That's a weird path to take. The fact is Tesla isn't profitable yet, and although Musk says they will be in the coming months, that talk doesn't mean anything until the reports are released showing profitability.

tjic• 17 years ago

> Musk says they're on track to be profitable in months.

How many startup CEOs say anything else?

...and how many of them turn out to be correct?

ssharp• 17 years ago

This is a company that said 6 months ago that they couldn't even do proper cost accounting. From what I've read about them in the past, this is one of the last companies I'd be giving hundreds of millions to.

On the other hand, they seem like they are very close to having an incredible product.

philwelch• 17 years ago

"(b) Detroit auto companies have historically been very profitable."

Have you ever heard that phrase, "past returns not a guarantee of future returns"?

To Detroit it applies triply. Autos are no longer a growth industry, the US auto market is no longer free of foreign competition, foreign customers are no longer interested in US-made cars, and the union-guaranteed benefits to Detroit autoworkers are no longer financially sustainable.

ccc3• 17 years ago

It will be interesting, a few years down the line, to compare what Tesla does with its $465m compared to what GM does with its billions. Obviously not an apples-to-apples comparison, but it might illustrate the cost of the inherent friction in massively bureaucratic companies.

Regarding Tesla's profitability, it's EBITDA profitability, and in the words of Warren Buffet:

"References to ebitda make us shudder-does management think the tooth fairy pays for capital expenditures?"

Certainly this is an important milestone for Tesla. It means that they're getting a handle on their supply chain, but this doesn't make them anything close to a stable company. They still have to get to a point where their cars aren't just profitable, but profitable enough to pay for the factories they're built in. Hopefully this latest influx of cash will be enough to get them there.

vaksel• 17 years ago

GM will use it's billions to come out with the Volt with production in hundreds of thousands. A car for the public that has the best of both worlds, Electric for short range trips, with gas as backup for when you run out of charge.

Tesla will use it's millions to come out with the Model S, with production of 1-2000 units a year. A car for the more luxurious segment, that's electric only, that'll leave you stranded if you forget to recharge the battery.

pchristensen• 17 years ago

Re GM: That's quite optimistic. Most of the money and effort with GM will go into making it a stable employer for as many as possible.

Re Tesla: Quite possibly true, but you shouldn't build infrastructure from scratch to build millions of cars. They should validate their business and market at 2000 units/yr and expand if it works.

Comparing the two, the GM money is to prevent downside, the Tesla is to capture upside. Both are valid reasons for investment and only hindsight will tell if either was a good bet.

tptacek6• 17 years ago

GM will use government money to build a mass market car because that is what GM is in a position to do.

Tesla will use its millions to build a luxury car because that is what Tesla is in a position to do.

Tesla is not in a position to compete head-on with the Volt, because Tesla has almost none of the infrastructure that GM has. If Tesla tried to build a Volt competitor, it would fail. If, by some miracle, it succeeded in building a supply chain and manufacturing operation that could turn out hundreds of thousands of cars, it would quickly go out of business competing for a low-margin segment of the market against the largest automotive conglomerate in the world.

The point of Tesla isn't to provide you with a car. The point of Tesla is to develop the technology that other companies will use to provide you with cars later on down the road.

The Tesla Roadster and Model S are big red herrings.

weegee2• 17 years ago

at least we know that money is going to a company that is actually building cars that will run when the oil runs out.

weegee2• 17 years ago

no fans of electric cars here, I see.

jrockway• 17 years ago

No, it's just a bunch of people whining about "their money" being used to foster innovation. It's OK when someone invests money in their web app for displaying porn with rounded corners and "type centric design", but it's a waste when the government tries to encourage the development of sustainable transportation technology.

Gotta love the conservatives...

radu_floricica2• 17 years ago

Funny thing is, this loan is most likely an investment in green technology, nothing else. So your comment isn't really off-topic.

But the way you put it made you sound a bit... out of touch with the discussion. Also fanatical, and not even wanting to participate in it, just dismissing it out of hand. And without a starting capital letter, it's pretty much the typical throw-away remark not encouraged here.

zandorg• 17 years ago

Along with the huge NASA cash ($billions) for SpaceX, it's a good year for Musk.

skipwalker• 17 years ago

Just a quick question. Why is Tesla more deserving of a loan to accelerate their development of electric cars than a company like Aptera (http://www.aptera.com)?

This is the fundamental problem. The government is not funding direct research in a University setting, they are directly funding one company over another in a nascent industry. Why do Tesla's shareholders get this advantage over other startup company shareholders?

This is one of the problems this conservative has with this situation.

The Government Comes Through For Tesla With A $465 Million Loan

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