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Old 12-07-2008, 12:26 PM   #1
AVANTI R5
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Default Should Taxpayers Back a High-End Electric Carmaker?

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THE Tesla Roadster is an electric car that goes fast, looks sensational and excites envy. The seductive appearance, however, obscures some inconvenient truths: its all-electric technology remains woefully immature and don’t-even-ask expensive. If enough billionaires step forward to inject additional capital to keep the doors of its manufacturer, Tesla Motors, open, I’m happy for all parties.

If investors pass up the opportunity, however, why should taxpayers fork over the capital that Tesla needs? The Roadster is not much more than a functioning concept car that sells for $109,000. The company is requesting $400 million in low-interest federal loans as part of the $25 billion loan package for the auto industry passed by Congress last year.



The program is intended to encourage automakers to improve fuel efficiency, but should it be used for a purpose like this, as the 2008 Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act? Can you conceive any way that federal dollars could be put at greater risk — and for no equity in return, keep in mind — to benefit fewer people?


Tesla Motors, a privately held company based in San Carlos, Calif., has spent almost all of the $145 million in capital it has raised to date. It says it will soon receive another round of $40 million from its private investors to sustain operations.



In the start-up ecosystem of Silicon Valley these would be respectably large numbers, but in the automotive world, fully developing an entirely new line of technology can easily run $1 billion. That is what General Motors’ first attempt at an electric vehicle, the EV1, was estimated to have cost to develop in the 1990s.


Tesla says it would use the federal funds to move forward on plans to bring out a second-generation car, a less expensive sedan seating five. It’s also counting on rapid improvements in the core component of its powertrain — a thousand-pound pack of lithium-ion batteries — but such improvements don’t happen at the pace Tesla needs them to happen.


Tesla’s backers in Silicon Valley can be forgiven for hoping for a miraculous technical breakthrough, because Moore’s Law makes miracles appear in the Valley every day: costs drop by half every two years, again and again and again. The law is actually a rule of thumb, not a scientific law, and is based on the recurring doubling of transistors placed on an integrated circuit.



Unfortunately for Tesla, batteries are based on chemistry and have nothing to do with Moore’s Law. Lawrence H. Dubois, chief technology officer at ATMI, a semiconductor industry supplier, said, “With batteries, you can’t just squeeze more energy into a smaller and smaller space the way you can squeeze more transistors.”


Elon Musk, the chief executive of Tesla, said his company would benefit from what he called “a weak Moore’s Law,” referring to the 8 percent annual improvements in the price performance of lithium-ion batteries. But 8 percent, compounded, would bring too few benefits, too late to Tesla: it would take nine years to halve the price of its battery pack.



The company would not be saddled with such costly components had it not elected to pursue a design that endows its car with both high performance and a long range between charges — 244 miles, Tesla says. Earlier this month at the Los Angeles auto show, BMW unveiled its all-electric Mini E, with a smaller battery, a motor with about 20 percent less horsepower than Tesla’s and a shorter range, 150 miles. BMW believes that current technologies used in the all-electric vehicles have not been tested enough in real conditions to be ready to be sold to the public. It will begin by leasing for one year a fleet of 500 Mini E’s for $850 a month each. At the end of the lease term, the cars will be returned to BMW for testing.



Tesla would have needed a much smaller battery pack had it forsaken the all-electric design and instead offered a plug-in hybrid, a more affordable design that many auto manufacturers are readying for production, like that for the Chevrolet Volt. An electric motor provides the primary motive force, and a small internal combustion engine serves as an auxiliary source of power to extend the range that the car can go between charges.


The battery need be no bigger than what is necessary to provide enough juice to go 40 miles, the maximum daily round-trip commuting distance for 78 percent of surveyed households, according to a widely quoted Department of Transportation study in 2003.



Tesla pitches all-electric cars as the greenest form of personal transportation, eliminating vehicle emissions and helping to wean the United States from its dependence on foreign oil. The cars reduce air pollution indirectly, to whatever degree the power generation on the grid uses energy sources other than coal. And for households that install their own power-generating solar panels, electric cars can rightfully claim to attain truly zero emissions today.


LAST week, I visited the Tesla showroom in Menlo Park, Calif., and took the Roadster out on the highway. As I headed back to the showroom and waited at red lights, ready to hit the accelerator and fly, I realized that I was experiencing a guilty pleasure derived not just from the speed available at my touch but also from temporarily possessing something that shouted to the world its exclusiveness.


Tesla says it is assembling about 15 cars a week and has delivered only about 80 to date. Many of those have gone to the Valley’s billionaires and centimillionaires who are Tesla investors as well as early customers; these include Sergey Brin and Larry Page, the co-founders of Google, and Jeff Skoll, co-founder of eBay. The company’s principal financier is Mr. Musk, who attained considerable wealth as a co-founder of PayPal.



I wonder how Tesla’s course has been influenced by at least some of its investors being helplessly smitten by the world’s quietest dragster.


Mr. Musk said: “I’m not doing this because I think the world has a shortage of sports cars.” But his customers must be loaded with green in order to go green.
http://www.nytimes.com/2008/11/30/bu...er=rss&emc=rss
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Old 12-07-2008, 01:03 PM   #2
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Wait, wait, wait.

Tesla has only spent $145 million to date over the course of what? 3 years? and now they want $400 million? Am I reading that correctly?
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Old 12-07-2008, 01:57 PM   #3
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Wait, wait, wait.

Tesla has only spent $145 million to date over the course of what? 3 years? and now they want $400 million? Am I reading that correctly?
that's the difference between the capacity to build 12 Roadsters per week and cranking out Whitestars in significant volumes.

i, for one, support Tesla receiving DOE funds. that's what the fund is designed for, and the Whitestar could well pave the way for a true mass market electric vehicle (possibly through Tesla's powertrain business -- they're reputed to be the supplier for the electric underpinnings of the Mini E).
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Old 12-07-2008, 03:16 PM   #4
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Originally Posted by shikataganai View Post
that's the difference between the capacity to build 12 Roadsters per week and cranking out Whitestars in significant volumes.

i, for one, support Tesla receiving DOE funds. that's what the fund is designed for, and the Whitestar could well pave the way for a true mass market electric vehicle (possibly through Tesla's powertrain business -- they're reputed to be the supplier for the electric underpinnings of the Mini E).
O.k, that makes better sense.
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Old 12-07-2008, 05:01 PM   #5
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BMW unveiled its all-electric Mini E, with a smaller battery, a motor with about 20 percent less horsepower than Tesla’s and a shorter range, 150 miles
Sounds to me like the "problem" has already been solved, and at zero cost to US taxpayers.
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Old 12-07-2008, 05:07 PM   #6
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Sounds to me like the "problem" has already been solved, and at zero cost to US taxpayers.
even though it's reputed to use a Tesla powertrain the Mini E isn't for sale. 500 of them are for lease at $850/month. this is not a sustainable business model, and this plant would help to address the economies of scale.
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Old 12-07-2008, 05:56 PM   #7
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that's the difference between the capacity to build 12 Roadsters per week and cranking out Whitestars in significant volumes.
Who's going to be queuing up to buy $60,000 electric sedans from Tesla?

Even the Volt isn't going to be that expensive if GM survives, and would have much better long-distance performance (since it can run on gas as well as electricity) and a global servicing network for purchasers.

Tesla just seem to be a company looking for a market; which is precisely why investors don't want to give them money. They should probably forget building cars and just supply powertrains to companies who can afford to build them.
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Old 12-07-2008, 07:12 PM   #8
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Who's going to be queuing up to buy $60,000 electric sedans from Tesla?

Even the Volt isn't going to be that expensive if GM survives, and would have much better long-distance performance (since it can run on gas as well as electricity) and a global servicing network for purchasers.

Tesla just seem to be a company looking for a market; which is precisely why investors don't want to give them money. They should probably forget building cars and just supply powertrains to companies who can afford to build them.
good point. they bit off more than they could chew but that doesnt mean its game over for them. they can just continue operating as a supplier until they are profitable enough to have their own automobile branch.
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Old 12-07-2008, 08:26 PM   #9
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Who's going to be queuing up to buy $60,000 electric sedans from Tesla?

Even the Volt isn't going to be that expensive if GM survives, and would have much better long-distance performance (since it can run on gas as well as electricity) and a global servicing network for purchasers.

Tesla just seem to be a company looking for a market; which is precisely why investors don't want to give them money. They should probably forget building cars and just supply powertrains to companies who can afford to build them.
well, they have 1200 people who've placed a deposit on the Roadster to start... i think you underestimate the number of green-minded people who aren't flat broke.
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Old 12-07-2008, 09:07 PM   #10
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well, they have 1200 people who've placed a deposit on the Roadster to start... i think you underestimate the number of green-minded people who aren't flat broke.
you think 1200 is a lot?

green-minded ppl who arent broke buy prius, not tesla.

rich ppl who have nothing better to do place orders on hard-to-get cars like the tesla. they need to show the list of vehicles that those people with deposit on the tesla also have... you might see a lot of gas guzzlers on the list.
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Old 12-07-2008, 09:46 PM   #11
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even though it's reputed to use a Tesla powertrain
At the LA show it was revealed that the Mini's drivetrain came from California's AC Propulsion, not Tesla.

Interesting aside, the guy who designed Tesla's motor and power electronics came from Aerovironment, which later became AC Propulsion. The power systems in the Volt and the EV1 also trace their roots to Aerovironment...

I wonder if Miles, Aptera, Roush and Detroit Electric will apply for loans from the fund too? There are a lot of smaller US players dabbling in the electric car space right now, most being fairly quiet (Miles), and some being very much in stealth mode (Detroit Electric).
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Old 12-08-2008, 09:35 AM   #12
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even though it's reputed to use a Tesla powertrain the Mini E isn't for sale. 500 of them are for lease at $850/month. this is not a sustainable business model, and this plant would help to address the economies of scale.
Well, its a start. The point is the vehicle has already been developed. Why should taxpayers subsidize US companies to reinvent it?
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Old 12-08-2008, 11:05 AM   #13
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Shouldn't they at least have a history of success before the government gives them any more money. Obviously if the business plan was good, they'd get their money from the market place. They only employee a small amount of people. They will produce very limited numbers of cars. Frankly, if the were gone tomorrow, they would not be missed except of course by the 1200 people that have paid for or made deposits on cars that will probably never be delivered any way.

Tesla is a bad investment.
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Old 12-08-2008, 11:25 AM   #14
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Shouldn't they at least have a history of success before the government gives them any more money. Obviously if the business plan was good, they'd get their money from the market place. They only employee a small amount of people. They will produce very limited numbers of cars. Frankly, if the were gone tomorrow, they would not be missed except of course by the 1200 people that have paid for or made deposits on cars that will probably never be delivered any way.

Tesla is a bad investment.
exactly. why should the government save them if only a small number of ppl will be affected?... the ONLY reason i think the big 3 should be saved is so the families of the workers will not be on the streets. if the government even consider saving tesla, maybe they should also consider saving every single business thats going under... because frankly, most businesses that have gone out of business recently (example: Linens & Things) have more than 1200 potential customers... even for this burger joint thats near my house.
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Old 12-08-2008, 11:37 AM   #15
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are you guys seriously making a utilitarian argument in favor of the bailouts? wow.

Mike Wevrick: this loan program was designed to support the development of more efficient cars -- that's why Tesla should be eligible. Tesla has a viable plan to do just that regardless of unfounded internet-forum aspersions on their market. QED.
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Old 12-08-2008, 11:44 AM   #16
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I would rather loan a few hundred million to Tesla than a few billion to bail out Chrysler.
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Old 12-08-2008, 11:57 AM   #17
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Mike Wevrick: this loan program was designed to support the development of more efficient cars -- that's why Tesla should be eligible. Tesla has a viable plan to do just that regardless of unfounded internet-forum aspersions on their market. QED.
I understand that. I don't think it is good policy for gov't to subsidize development of more efficient cars (or any other specific/targeted goal), for several reasons:
A) If that were a desirable goal, the easiest way to reach it is to just raise gas taxes. Supply/demand forces will take care of the rest.
B) More efficient cars are already on the market or close to it (eg plug-in Prius). Why pay for something that has already been done at no cost to taxpayers?
C) Tesla specifically is a niche player targeting wealthy buyers. If they need money, let them raise it from the millionaires who want their product.
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Old 12-08-2008, 01:52 PM   #18
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I would rather loan a few hundred million to Tesla than a few billion to bail out Chrysler.
I came in here to post this.
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Old 12-08-2008, 03:58 PM   #19
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I understand that. I don't think it is good policy for gov't to subsidize development of more efficient cars (or any other specific/targeted goal), for several reasons:
A) If that were a desirable goal, the easiest way to reach it is to just raise gas taxes. Supply/demand forces will take care of the rest.
B) More efficient cars are already on the market or close to it (eg plug-in Prius). Why pay for something that has already been done at no cost to taxpayers?
C) Tesla specifically is a niche player targeting wealthy buyers. If they need money, let them raise it from the millionaires who want their product.
1. raising gas taxes is tantamount to political suicide. i agree that it'd be a good idea but it's not going to happen. period.
2. the big 2.8 were the ones who wanted this money, presumably so that they could misuse it and fund their continued operations in an underhanded way. ask them why they thought it was so crucial that they lobbied to have it included in the TARP bill.
3. as detailed above even though my specific example of the Mini E was incorrect Tesla's technology may prove to have implications for the car world well beyond the Roadster.

take into account that the venture capital world is reeling from the lack of credit much as is the rest of the economy and you have a number of good reasons why investing in companies working to create greener cars would be in the public good.
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Old 12-09-2008, 09:47 AM   #20
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Again, should we at least require some sort of success from Tesla before giving them $1, much less loan guaranties on $400 million. If you believe they're the future and deserve money, then by all means send them your money but please don't "volunteer" me and my money.

Also, Tesla is an aggregator of technology and not an innovator.
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Old 12-09-2008, 10:23 AM   #21
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Tesla is an aggregator of technology and not an innovator.
show me another fully electric car with a 240 mile range.
Let alone a dead sexy one with hard to match acceleration.
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Old 12-09-2008, 10:39 AM   #22
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Again, should we at least require some sort of success from Tesla before giving them $1, much less loan guaranties on $400 million. If you believe they're the future and deserve money, then by all means send them your money but please don't "volunteer" me and my money.

Also, Tesla is an aggregator of technology and not an innovator.
Define your vision of "success".

My own personal opinion is I don't think any PUBLICLY TRADED company should be getting any money from the Gov't (aka: us). Never mind privately held company like ChryCo and Tesla.

If they do, they should no longer be traded on the market and any and all profits go back to the american tax payer until the loan is re-paid.

If they continue to hemmorage money for over a year and fail to return a profit, they get folded.

Now, because there's no value to the stock in the company, and less than 50% of the country wants to buy any GM product, now the taxpayers are being forced to invest in the product still! Again... what's wrong with this picture? If I had faith in GM, I'd buy a GM product (before you question me... I have a '93 saturn and an '02 Tahoe). The rest of the country... they do not see value in GM. So they speak/spoke with their wallets.

Any bailout of them will do nothing other than to delay the inevetible, their ultimate folding.

--kC
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Old 12-09-2008, 11:52 AM   #23
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1. raising gas taxes is tantamount to political suicide.
What do you call the massive increase in income tax we are all going to be facing to pay for all these bailouts and subsidies?
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