Posted on 05/29/2013 4:23:59 PM PDT by KingofZion
In 2009, as the financial crisis raged and General Motors and Chrysler plunged toward bankruptcy, Tesla Motors faced a seemingly impossible task: raising half a billion dollars to build an electric-car factory. Tesla had just staggered through a year of layoffs, canceled orders, and record losses. Then suddenly, salvation. The U.S. Department of Energy offered to lend the company $465 million at rock-bottom interest rates.
*** And in sharp contrast to Solyndra, the solar panel maker that defaulted on its $528 million loan from the Energy Departtment, Tesla last week paid the government back early, with interest.
Yet despite all the public celebration, both Solyndra and Tesla stand as warnings of the dangers in deputizing bureaucrats to play bankers and venture capitalists. In both loans, the government walked away laughably undercompensated for the risk it accepted in the startup companies. In fact, the Tesla deal was arguably far more costly for America than the Solyndra fiasco.
When the government’s negotiators started hammering out the details of the Tesla investment in mid-2009, it was obvious to both sides that the feds were in a position to name their terms. *** Personal loans made in 2008 by Elon Musk, Tesla’s co-founder and CEO, provide a telling contrast. Musk received a much higher interest rate (10 percent) from Tesla and, more importantly, the option to convert his $38 million of debt into shares of Tesla stock. That’s exactly what he ended up doing, and the resulting shares are now worth a whopping $1.4 billion—a 3,500 percent return on his investment. By contrast, the Department of Energy earned only $12 million in interest on its $465 million loan—a 2.6 percent return.
(Excerpt) Read more at slate.com ...
Ping.
Here’s an interesting side note. The former Solydra “factory” and the shuttered NUMMI Plant where Tesla has been “building it’s cars,” are right next door to one another!
Tesla is selling cars...unlike the Solyndra guys who just plain folded up.
The problem is that the car is $60k minimum, and you got only a 230-mile range on one ‘fill’. Based on comments about charging-up....you need around four-to-five hours. And no one ever chats much on how your power bills go up after you start using it regularly.
If you look at the purchase crowd for Tesla....it’s mostly engineer guys who put in time to review the stats and believe the car works for what they want. The negative though....as I see it....it’s a drive-local car only. So you need a second, and maybe a third car in the house....so make this all work.
I went to school with them. Those chicks were bad news.
I don’t see how you can say Tesla ripped off the taxpayers when they repaid the loan with the agreed upon interest. Do you think we should become a government of “state capitalism” with long term stock and high interest rates, or help potentially valuable companies survive and thrive but keep them in the private sector in the long run.
From Forbes May 27, 2013 Op-ed:
If Tesla Would Stop Selling Cars, We’d All Save Some Money
First of all, let’s stipulate that the Tesla model S is a pretty cool looking car, that the high-end version accelerates like a rocket, and that its massive, low center of gravity pretty much inures it against a rollover. Next, let’s congratulate Elon Musk on paying off his half-billion dollar federal loan ahead of time. Finally, thanks to everyone in the country for helping to make this possible, and for continuing to do so.
The public is still on the hook for Tesla, and will be for the foreseeable future.
First, there’s the $7500 taxback bonus that every buyer gets and every taxpayer pays. Then there are generous state subsidies ($2500 in California, $4000 in Illinois—the bluer the state, the more the taxpayers get gouged), all paid to people forking out $63K (plus taxes) for the base version, to roughly $100K for the really quick one.
The latest round of Tesla wonderment came when it reported its first quarterly profit earlier this month. TSLA stock darned near doubled in a week. Musk then borrowed $150 million from Goldman Sachs (shocking!) and floated a cool billion in new stock and long-term debt. That’s how we—the taxpayers—were repaid.
But is TSLA another Google GOOG -1.46%, or just another DoubleClick? DCLK zoomed from $2 to $200 without ever showing a profit, something Tesla has yet to do with its cars. It then famously crashed.
Tesla didn’t generate a profit by selling sexy cars, but rather by selling sleazy emissions “credits,” mandated by the state of California’s electric vehicle requirements. The competition, like Honda, doesn’t have a mass market plug-in to meet the mandate and therefore must buy the credits from Tesla, the only company that does. The bill for last quarter was $68 million. Absent this shakedown of
potential car buyers, Tesla would have lost $57 million, or $11,400 per car. As the company sold 5,000 cars in the quarter, though, $13,600 per car was paid by other manufacturers, who are going to pass at least some of that cost on to buyers of their products. Folks in the new car market are likely paying a bit more than simply the direct tax subsidy.
How’s this going to work in the future? As long as the competition has to pay greenmail to Tesla, probably just fine. And with California gradually ratcheting up the electric-vehicle mandate, maybe just finer. No wonder the stock price doubled and Goldman shelled out.
There’s only one slight, teensy-weensie problem. While there were enough high-end customers to supply Tesla around $400 million in gross receipts last quarter (that would be 5,000 cars at an average of $80,000 a copy), they still lost money. How many customers are there for such a pricey car?
Tesla can’t increase demand by dropping the price very much. About the only way they can do this (barring some—currently remote—major battery technology improvements) is by cutting the vehicle’s range. Nissan’s Leaf provides a bit of instruction here. Selling for around $32K (out the door) it sold pitifully few—less than 10,000 last year.
As the May 22 Wall Street Journal showed, when a battery car’s range gets in the Leaf zone (real world: 70 miles; advertised: 83) you can’t even give it away. The federal $7500 with $2500 in several states, and the reduced fuel costs, more than pay for two-year leases on the car. That’s right, free transportation, and sales still suck.
Tesla can’t go much below the EPA estimated 205 mile range (make that about 170 in modestly cold winter weather) of its base version before it hits the same range-anxiety wall.
If Tesla’s sales drop—not by much—the company isn’t going to be able to cover its losses by selling green indulgences. First, the primary losses increase, and then they have fewer indulgences, which are generated by car sales.
So here we have a car pushing $100,000 paid for in no small part by you and me, no matter whether Tesla paid back their federal loan or not. The small comfort is that we are off the hook for any default on that loan, but it would be more comfort if we weren’t all compelled—completely against most of our wills—to shell out around somewhere around $10K (depending on state) for every one that goes out the door. The more they sell, the more we pay.
The only way to stop this craziness is for the company to stop making cars. If demand drops much, or California goes into a major fiscal crisis (they’re working on it), oddly enough, Tesla’s bankruptcy will save the rest of us some money.
Article link: http://www.forbes.com/sites/patrickmichaels/2013/05/27/if-tesla-would-stop-selling-cars-wed-all-save-some-money/
Heck, FR loves Tesla. I predict that Tesla will be found to be selling cars below their cost of production. Just a matter of time until it collapses.
Tesla Motors is a single leaf on a tree. The forest is fascism.
What a peculiar thing to say. More accurate to say how the government sold out the taxpayers.
So, we “invested” $ 465 million and got back $ 477 million.
We could have lost the entire $ 477 million, given the Obama Administration horrid record of “investment”.
Thank God Fisker Motors only burned through $ 193 million of the $ 528 million we were going to give to them.
Another “success “ story.
We used to throw people in jail for less.
Maybe yes, maybe no. There are tech-savvy FReepers, automotive enthusiast FReepers, and just-plain “fond of the oddball” FReepers that were attracted to the Tesla story - before the political aspect (underwritten with massive taxpayer funds and loan guarantees) soured them.
Had they not sold out to the dark side I would have applauded them for their endeavor - even if I couldn’t afford one of their cars.
Exactly... and the manipulators will make out like bandits they are.
Tesla is a nice piece of tech. However, it’s just a rich man’s toy, as is any $100,000 car.
No doubt Tesla hopes for breakthrough in battery technology that will make their gamble pay off. In that sense, they aren’t Solyndra, which was a scam and not a gamble.
Tesla ripped off the taxpayer?
He, I’m against this whole business of funding “Sun Ventures” but, Bush signed this $25 billion program into existence in 2007.
The incompetent negotiators at Guv Bank didn’t think to insist on a stock option as part of their deal and instead took a straight forward note.
Telsa paid back the loan early, saving shareholder millions but, they paid it back and per the terms of agreement.
Sure, Elon hit the jackpot but, the taxpayer didn’t get screwed in that loan.
The people who buy these cars don’t really care about the electric bill.
It comes in and gets paid.
Tesla cars are purchased by those who can afford a luxury car and in this instance they are also buying exclusivity.
Exclusivity in that I and many friends can afford new luxury vehicles but, can’t justify an electric car.
Those, like some of my friends who have private jet money couldn’t care less and they are only buying the Tesla for use around town, while keeping Flintstone mobiles for regular travel.
Even then, I know of a friend who forgot about the distance limit and simply called a limo company who picked him up STAT.
He thought it was funny and had his gardener go and supervise the thing as it was put on a flat bed truck.
The gardener drove 45 minutes from town to watch the vehicle and made sure he followed the instructions given to him as to how it was to placed on a flat bed.
I have no idea what the instructions are but, apparently you can’t tow these things like a regular car.
It’s a luxury item. Much like buying a Rolex, Cartier or Omega watch.
I have to wind those things but, they are exclusive.
A Timex keeps a licking and keeps on ticking. I have one that is 17 years old and I haven’t changed the battery on it yet.
I’ll toss it when it comes and get another one.
Another scary part of the Tesla stock price is they are predicting only about a 10% increase in car sales for the next 12 months. That doesn’t cut it at all in my book.
Yup, they finally are building BART thru that neighborhood all way the way to San Jose.. what a mess that’s gonna be.. expensive .. but not as bad as High-Speed Rail..
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