Huh? Detroit News columnist criticizes Tesla loan, but not exactly in a brilliant manner
Tesla Model S - Click above for high-res image gallery
Manny Lopez does not appreciate Tesla Motors getting $465 million from the Department of Energy. The Detroit News columnist wrote an article published today that calls the money "an all-out gift to Tesla, the Silicon Valley startup that makes cars for the rich and famous" and said that Tesla "has friends in Congress who are making decisions without regard to facts and figures." The rest of the article is just a bunch of whining about how almost no-one will ever get to drive or buy a Roadster or a Model S. "I'm sure these are fun cars to drive," he write, "...But that's not how our dollars should be spent, propping up millionaires and billionaires, who, unlike their Detroit CEO brethren, fly in private planes when they're not toying around town in their electric cars.
Whew.
As Business Insider notes, the article gets a lot of things just wrong. Lopez calls the money a gift, when it's really a loan. He doesn't mention the strong support that Ford (another DOE winner) and other automakers have in Congress. And what is that about CEOs and private planes? (Lopez also wrote that Tesla got $425 million, but whatever). Lopez says that there is merit to giving Ford money, because "it will make in a dozen factories to build more gas sippers." Does Lopez think there is no merit in inspiring a new generation of electric car fans and, you know, actually selling some EVs?
Gallery: Tesla Model S
[Source: Detroit News, Business Insider]
Reader Comments (Page 1 of 2)
Anonymouse 5:27PM (6/25/2009)
Stupid people will continue to exist. :)
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TvLover 5:26PM (6/25/2009)
I am of the opinion that Lopez is an untalented jackass. At least one of us is correct. The loan to Tesla was specifically given to provide for the building of a plant to build the model S and to help with the engineering of the next one in the line that is supposedly going to have a pricepoint in the 30s. Frankly, I think whoever pays Lopez should fire the idiot and tell him to go flip burgers, at least then he would have a less "challenging" job.
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why not the LS2LS7? 5:34PM (6/25/2009)
Maybe the article isn't tactful, but he's right. There's no reason to think this is any less of a gift than other loans made recently.
Tesla has no shown path to profitability, this is likely to be a bust-out. $57K cars with 150 mile range is a tough row to hoe.
If Tesla succeeds, great. But right now there is now way to say this loan is any less likely to turn sour than the last set of loans given out.
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downtoearth 6:32PM (6/25/2009)
why not the LS2LS7:
> Maybe the article isn't tactful, but he's right. There's no reason
> to think this is any less of a gift than other loans made recently.
Sadly I have to agree.
> Tesla has no shown path to profitability, this is likely to be
> a bust-out. $57K cars with 150 mile range is a tough row to hoe.
I bet Musk goal is to create a brand and then sell it. He also did similarly in the past: http://en.wikipedia.org/wiki/Elon_Musk#Entrepreneurial_activities
Chris M 6:36PM (6/25/2009)
Because of cost cutting measures, Tesla Motors will start showing a profit next month on the Roadster. They could cut costs even further if they had their own production line and were producing in greater volume.
The Model S won't be using expensive carbon fiber for it's body, so the 0 to 60 time won't be as good as the Roadster, but the production costs will be a lot less.
Tesla Motors would have eventually been able to produce the Model S even without the loan, but the loan definitely speeds up the process.
why not the LS2LS7? 8:49PM (6/25/2009)
Profit per-unit maybe, they'll never break even on it.
Honestly, with the amount of fiscal wizardry (and by that I mean BS) shown by Silicon Valley types, I don't really believe a word they say about how much they make on the car anyway. It's easy to just underestimate the warranty/recall costs or just throw in a lump of "goodwill" for good measure and make things look not as they are.
Chris M:
Carbon fiber isn't particularly expensive. Working with it is (painting it, drilling it to mount it, etc.) a bit so.
The Tesla I know wasn't really looking like they were going to get the Model S out the door. I'm still not convinced they will. The investment from Daimler was clearly critical, without it, they couldn't have convinced the DOE they were viable.
polo 1:57AM (6/26/2009)
There's no reason to think this is any less of a gift than other loans made recently.
Yes there is. I assume the other "loans" you are referring to is the bailout money for GM and Chrysler. Well, they are two different types of loans entirely, given for completely different reasons and completely different criteria. If you weren't so pigheaded you would have noticed that GM and Chrysler applied for these DOE loans and were denied because they could not prove financial viability (at the moment they're in bankruptcy still). Telsa was given the loan because they could. The fact that Mercedes saw enough to give an initial $50mill investment should be a hint that maybe Telsa DOES have a viable market strategy.
"Tesla has no shown path to profitability, this is likely to be a bust-out. $57K cars with 150 mile range is a tough row to hoe."
Yes they have. First off they will be licensing their battery tech to MB, and they are planning volume sales of the Model S - a car designed to compete in the luxury car segment - at a premium price that will give good margins. Those good margins will finance the development of the Model T - which will be produced in even larger quantities - in a few years when they will be able to take advantage of lower battery costs (economies of scale) resulting from volume EV production by other automakers economies of scale kick in. Oh and the car is $50K with the govt incentives and you can double the range for a few thousand extra.
But you "just know" they're lying about all this and its all "fiscal wizardry" (and by that I mean BS), because you could figure it all out but the DOE and Mercedes couldn't, right?
Snowdog 5:42AM (6/26/2009)
"Profit per-unit maybe, they'll never break even on it."
So? They don't have to. Almost no company does make a total profit on their first product. If Telsa gets the Model S out the door and shows their mainstream car after that and it looks desirable, they will likely go IPO and be flush with cash.
There is certainly reason to expect this loan will be paid back before the money dumped into the two bankrupt auto makers, where the government has already acknowledged that a lot of money will never be seen.
I think this money is as likely to be paid back as the Billions given to Ford. But it is a lot smaller amount at play here.
why not the LS2LS7? 12:05PM (6/26/2009)
snowdog:
You should move to Silicon Valley and become a VC. You show a complete lack of understanding of business or a willingness to deceive in such a way that has the same effect. You will do very well in that environment.
The product of a company is not its stock. Taking a company that hasn't figured out how to make money yet IPO doesn't fix anything. It is just selling a loser to a bigger fool. See pets.com. See toys.com. See quokka.com. See furniture.com. See LoudCloud.
As to the making money on the car thing, I'm glad we agree on that. You can try to write off the idea that Tesla isn't making money on their product if you want. I won't. I leads to bad places, even GM found that out eventually.
polo:
Your post just says your optimistic about Tesla. You want to believe what they are saying, while you were skeptical of what GM was saying. This is an opinion and a position, not facts. Tesla has no battery technology worth licensing out. Tesla will be abandoning their own battery technology because it isn't cost-effective.
The DOE WANTS to be fooled. This program was created as a bailout for the car companies before the real bailouts (starting with the banks) happened. There was no political capital for a handout, so they called it a loan.
As to their "$50K" cars, the cars are only "$50K" if you get the government handout. You only get one government handout. If you already bought a Volt, a Prius plug-in or other vehicles under the program, you don't get another. For $57K you spend a lot and get a Chrysler 300 with an electric conversion of 150 miles in range. You can spend more (tens of thousands, not a few thousand) and get more range? Yeah, or I can spend a lot less and get more range. You're counting on people buying cars on something other than value and capability for money and there are a limited number of those people out there.
paulwesterberg 5:58PM (6/25/2009)
Tesla has shown more willingness to sell an electric car to the American people than any of the big auto manufacturers.
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Chris M 6:38PM (6/25/2009)
Yes, they've actually sold more EVs than GM, Ford, Toyota and Honda put together!
why not the LS2LS7? 8:54PM (6/25/2009)
I don't think if you count deliveries then that is true. If you count orders (and down payments) taken it probably is. Tesla has delivered something like 500 Roadsters so far, and Toyota made 330 RAV4 EVs alone. This is before you count the EV1, Ranger and S-10 electric.
Chris M 9:22PM (6/25/2009)
I'm counting actual sales, not the leases that were cancelled. Toyota didn't sell all the RAV4EVs they made, Ford only sold a few Ranger EV pickups, GM sold only a few S10 EV pickups, and Honda didn't sell a single EV at all.
Serge 6:08PM (6/25/2009)
" ... but that's not how our dollars should be spent ..."
It's an investment, not spending. I welcome fiscal hawks to examine the Pentagon budget: perhaps they can tell us how much ROI we are getting there ...
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Chris M 6:40PM (6/25/2009)
Doesn't GM make "cars for the rich and famous"? They still have the Cadillac division. Besides, GM has received far more money as a "bailout" than Tesla has as a LOAN. Besides, that LOAN program was for "Advanced technology vehicle production", and Tesla is currently the only company actually selling a freeway capable EV - they qualify in spades.
Besides, didn't Ford get a much bigger loan? I think Manny Lopez is just upset that some money went to a California company. If he had his way, all that loan money would go to the Detroit 1 and 2 bankrupts.
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CaramelZappa 1:19AM (6/26/2009)
Tesla got less than 500 million and ford got over 5 billion. Nissan, which isn't even an American company (Not complaining, but it's important to some people}, got almost 2 billion.
Paul A 6:41PM (6/25/2009)
"I bet Musk goal is to create a brand and then sell it"
This is one of the biggest problems in a nutshell. Telsa has far more in common with early internet start ups than most would like to admit. It's all about exit strategy, and bringing in the next investor (now the taxpayer) than actually trying to make a profit.
They've used up, what, $400 million in cash to build a 1,000 cars? They lose money on every car to make a buzz so they can draw in bigger and bigger investors. They've also wrecked everyone's expectations of realistic (break even) electric cars by doing this. How can a $50,000 car compare to a $400,000 one?
The American taxpayer is getting robbed on this deal.
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PyRo1509 7:28PM (7/02/2009)
"They lose money on every car to make a buzz so they can draw in bigger and bigger investors."
worked for the Prius.
and how you frame the problem is wrong too.
If you give me the invoice price of a car. I cant just start up and build you that car. I have to build an efficient factory first and blah blah.
If I could i'd buy that model S in a second.
Chris M 9:29PM (6/25/2009)
Um, Tesla recently announced that with improvements in production methods, their cost of producing a Roadster is now down to $80K, and they are selling for over $102K. That means about $22K gross profit on each one sold. It may take a few years, but they will pay back all the money invested in development and then some.
Bill 9:37PM (6/25/2009)
Tesla still has no path to producing a mass-market (tens of thousands per year) electric vehicle.
Given what they spent to make a few hundred Roadsters essentially by hand, $500 million won't suffice for a true production run of the Model S.