Tesla Bailout Request Spurs Class-Warfare Backlash

Critics argue that Tesla’s request to use taxpayer money to help a company making cars for wealthy patrons is elitist and wrong.

Tesla Motors CEO Elon Musk is drawing fire over his request for a $350 million loan from the federal government. Although the company receives widespread support for its leadership role in the burgeoning electric car industry, a growing number of observers believe that any funds given to Tesla, regardless of how the money would be used, are unwarranted. The Tesla Roadster sells for $109,000, but the company hopes to build a more affordable plug-in vehicle.

The backlash began with Randall Stross’s opinion piece in the New York Times, in which he wrote that Tesla’s “all-electric technology remains woefully immature and don’t-even-ask expensive.” Stross characterizes the Tesla Roadster and the company as elitist. He writes that many of the first vehicles “have gone to [Silicon] Valley’s billionaires and centimillionaires who are Tesla investors as well as early customers.”

Arnold Schwarzenneger is one of the first owners of a Tesla Roadster. He said, “It’s so nice when you sit in this sexy car and you drive from zero to 60 in 3.9 seconds, which is faster than a turbo Porsche. And no engine sound or greenhouse gas emissions.” Schwarzenneger chastised Detroit for not building electric cars. He said, “Arnold to Detroit: Get off your butt!”

Web Insiders Exchange Angry Arguments

At least one of those wealthy first customers, Jason Calacanis, the founder of Weblogs, Inc., came to Tesla’s defense in his blog, accusing Stross of demonstrating a “kill the wealthy ethos.” In the blog post (which was republished on Huffington Post), Calacanis wrote: “Tesla isn’t about rich Silicon Valley guys in sports cars: it’s about extracting ourselves from the environment-killing, human-rights violating, terrorist-supporting regimes in the Middle East. The only reason we deal with countries that suppress women and homosexuals and give money to terrorists who kill based on a religion is because we are dependent on their oil.”

CenterNetworks.com, an information resource about Web 2.0 and social media, later disclosed that Jason Calacanis’s new company Mahalo received funding from Tesla Motors CEO Elon Musk, and that Mr. Calacanis’s brother-in-law Ryan Scott is an investor in Tesla.

Another argument espoused by Tesla critics is that Tesla is unlike the Detroit Big Three, because it has an insufficient track record. The critics believe that $350 million is a lot of money to give a company that has delivered only approximately 100 vehicles. These critics, expressing opinions on the blogosphere, argue that Tesla needs to continue pursuing private investment capital, not taxpayer dollars. If it can’t survive by building itself up through private investment, the argument goes, it doesn’t deserve to survive.

Loren Feldman of 1938Media rants that Tesla “doesn’t deserve a nickel from the US government.”

Tesla’s Elon Musk has said that without the federal loan, the company will not be able to proceed with its next generation of all-electric cars, starting with the plug-in Model S sedan. (Loan funds would be applied to development of the Model S, not the Tesla Roadster.) However Allen Stern, CenterNetworks editor, questions the affordability of the Model S—a vehicle with a target price of approximately $60,000. He writes, “I haven’t seen anything from Tesla that speaks to the average American family.” Stern argues that “instead of dropping hundreds of millions into Tesla,” the country should invest in public transportation, efficient air travel, and university-level battery research programs. “Take the millions and billions of dollars and create better transit systems in cities across this country. There’s so much that can be done with transit to create real environmental and human savings.”


  • Jeff

    Jason Calacanis is a smart guy, and he knows better than anyone how to get himself and his company in the spotlight through controversy and attack linkbait. I agree that even a $60K electric vehicle won’t help much…let’s fund a technology that can make a real difference.

  • David

    it seems a lot of people have forgotten about the “early adopter” in electronics. the ones who buy the new stuff first ALWAYS pay top-dollar. then, as sales increase and companies ramp up more economics of scale, the prices drop to where more people can afford them. Sometimes it’s fast (like how a $1000 Blu-Ray player from 2 years ago can now have an equivalent bought for under $200 today) and sometimes it’s slower (like how long it took anti-lock brakes to filter to “to the rest of us”).

    I think the theory is that, if you subsidize some of the “early adopter curve”, you can get those economics of scale faster.

  • crut100

    Elon Musk has alienated nearly everyone in management that works for him, caused massive cost overruns and delays with his meddling, still hasn’t really been able to scale up and now wants my money. NO WAY!!!! His business is just like anyone else’s it need to be run properly or it need’s to go under. Frankly, with the subset of clients that could afford his type of vehicle and the limited product he shouldn’t have a problem selling every unit he can produce. Problem is he can’t produce them b/c he keeps messing up the plans of those that were to run the company. If he gets ANY of my money I will track the votes of every senator and congressman and post them everywhere. Tesla getting our money would be a CRIME!!!

  • Old Man Crowder

    Who’s calling whom ‘elitist’?

    When the so-called Big 3 rolled into Washington in their private jets to ask for billions in order to stave off bankruptcy, I thought that was just a little ‘elitist and wrong’, too.

    Their arrogance was astonishing.

    I’m with David. It’s all about economies of scale. I don’t know much about Tesla, but I bet $350 M would go a long way to improving their product. Plus, they don’t have to worry about the UAW mucking things up, do they?

    Think of it this way: For every non-polluting Tesla put on the roads, it means one less smog-forming Lamborghini or Ferrari. The environment still wins.

  • Picky McPicky

    Old Man Crowder (great name) hit the nail on the head. How dare anyone call Elon, his company and consumers elitist. GM senior management practically invented the term elitist. Remember folks, the Governator bought a good number of Hummers before he and his Hollywood cronies bought Teslas.

  • Paul Beerkens

    This article makes me really angry. Tesla is one of the bright spots in our struggle to get off foreign oil. Sure their current version is expensive but it is the only real car out there in the EV sector. The whole industry can learn from their successes and failures. It should be a no brainer to give them the money and we should have done this a long time ago. $350 million is not a lot to pay for the possibility that an American mass production electrical vehicle will be available in a few years.

    You have to compare this to the 14000 million we are about to give to the big three just to cover their bill for the next 3 months. This will not buy us anything in terms of reducing our dependence on oil.

  • Rachel Konrad

    Let’s get beyond the column in the New York Times, which incidentally ran a correction and two letters to the editor in support of Tesla, and answer the fundamental question that bloggers are debating: Yes, absolutely, the federal government should provide low-interest loans to Tesla (and other R&D-focused automakers that have already demonstrated a commitment to building fuel-efficient vehicles) to encourage and hasten the time to market of a sophisticated all-electric, zero-emission powertrain for affordable, family cars. If this isn’t in the public interest, what is?

    Just to set the record straight among the good folks in the blogosphere:

    The silly headline (subject of the correction) says Tesla shouldn’t get a low-interest loan from the Department of Energy because “only the rich can afford it.” Afford what? The loan would NOT fund anything having to do with the $109,000 Roadster sports car but rather future generations of more affordable sedans and a powertrain facility to make battery packs and other components for other automakers, which could also use them for affordable sedans and subcompacts.

    The columnist says Tesla’s technology “remains woefully immature” and the Roadster is “not much more than a functioning concept car.” Absolutely untrue, as anyone who has test-driven or owned one attests — it’s a viable production vehicle that competes on fit and finish, performance and handling with vastly more expensive cars. Tesla has delivered more than 100 to customers already and is increasing production starts to 30 per week in 2009. The Roadster is the real deal – a viable production vehicle that also serves as an innovative precursor to other, less expensive products in Tesla’s pipeline.

    On that note, let’s discuss an issue that even the most rudimentary students of the technology industry understand: R&D and early-adopter technology is relatively expensive. Whether it’s the iPhone or photovoltaic panels or satellite nav systems (FYI, highly subsidized by the federal government), the first owners pay the most. But the technology inevitably becomes affordable within several product cycles, whether on the timeframe of Moore’s law or (in the case of battery capacity) at the fair clip of 8 percent per year. Given the Tesla Model S five-passenger sedan (base price expected at $57,499) and the Bluestar project (all-electric, zero-emission subcompact for $30,000), discussing the loan applications and Roadster — which isn’t part of the loan application proposal — is highly specious.

    Finally, readers must understand difference between the Detroit Three’s “bailout” and what was originally a progressive and well intentioned program to encourage fuel-efficient vehicles. The New York Times column calls Tesla’s loan application the “Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act” — cutesy but dead wrong. The loan wouldn’t be used for the Roadster or Tesla’s ongoing operations. Tesla’s blog clarifying the distinction:
    http://www.teslamotors.com/blog2/?p=66

    FWIW, I’m all for spirited debate about public policy, but it should be based on facts, not catchy buzz words and misinformation.

    Rachel Konrad
    Senior Communications Manager
    Tesla Motors, Inc.

  • Ross Nicholson

    Tesla has 100 more electric cars on the road than GM, Chrysler, and Ford together. I say, give the 14 billion dollars to Tesla, let them buy the old companies, and let’s rock.

    If we’re giving big, big, big, big, big bucks to GM, then is it fair to do nothing for viable small competitors, like Tesla and Aptera? Bail-outs have externalities, competitors Tesla and Aptera shouldn’t have to compete against GM, Chrylser, Ford AND the Federal Government simultaneously. Those companies are showing us the way. They need economies of scale now and should be rewarded with our trust, because they want to build efficient cars that don’t use foreign oil.

  • Ross Nicholson

    So are we going to sit around and complain about how rich Mr. Musk is or are we going to encourage the successful people who can get us out of this fix? Gas is going straight back up to $5.00 then $10.00 then $100.00 a gallon for all we know. God has given us these two great visionary groups of dedicated people. They’re chomping at the bit. Let’s let ‘em run!

  • perfectapproach

    What upsets me is that this is free-enterprise. The US government should NOT “bail out” Tesla, nor should it “bail out” GM, Chrysler, or Ford. These companies should be allowed to fail. Failure is the consequence of poor business decisions, and these companies should lie in the bed they make.

    HOWEVER, I do feel that the US government should “invest” in automotive companies that push technology away from fossil fuels and towards something more renewable. As such, I feel that Tesla deserves something. And to a lesser degree, Ford and GM do too. Ford already has a pretty good line of hybrids, and are already in a pretty good position for the future. (Note that they are not asking for bail-out money, they just want something to fall back on…a credit line. I don’t disagree with this idea.) GM, despite their history of killing good, progressive automotive technology, deserves some kind of help to bring out the Volt. The Volt has a whole new kind of drivetrain, and I think this will revolutionize automotive hybridization.

    Chrysler, on the other hand, needs to fail. That company has been making bad decision after bad decision for a LONG time.

  • Joe

    Well the rich pay for the initial cost of almost anything new, to pay for the research, initial high product cost and startup of things like Blueray, VHS, Cars, and etc. We benefit by this and after two years the price of everything comes down to us middle class. Give them the money, why not!

  • time_for_a_change

    Rachael makes some good points in favor of Tesla, but as Sr comm mgr, how unbiased can that be ? Woefully immature, I’d apply that to EVs which employ very heavy battery banks, with a life expectancy of 4, perhaps 5 years (then how much $ to replace?) and a vehicle range or what, 150 or so miles, and no provision to quickly recharge and continue on the road. Sry but that IS immature technology when considered as a replacement for a road vehicle.
    C’mon folks, the cost will NOT come down. This is not jellybean electronics like VCRs and DVDs, etc, its an automobile. Has anyone ever seen a production automobile come DOWN in price (of a scale similar to electronics) ? No, and it won’t happen here. I am seeing the best case (subject to inflation, cost increases/overruns) mentioned here of a $30k sedan from Tesla. Thats STILL not affordable…! $30K?! A new Civic at $17k will get 40plus mpg on petrol, run 100k miles plus w/o basically ANY repair costs, and is very low emission, all while providing seating for 5, and it doesn’t need $4 or $5k in batteries every few years.

  • Neil

    One fundamental problem with “bailouts” is being exposed here. The problem is that when struggling or failing companies get a “bail out” it puts everyone who is running a good business at a disadvantage. For example – I don’t think Ford needs a bailout like Chrysler & GM. But they are at the table to get a “line of credit” just in case they need it, i.e. they don’t want to be left out. Likewise after large banks were bailed out, American Express, which isn’t even a bank, suddenly became a bank on paper. This is not because they need the money, but because they will be at a competitive disadvantage to their competitor who may be getting low interest government loans while they could be stuck with high interest private loans.

    So why are we surprised automakers other than the big three are piping up for a handout too? Every American car maker should have access to low-interest credit if any do; if anything the companies that are the worst off should have to pay more. Tesla would be fools not to ask for money, even if they do not need it.

    As for electric cars, maybe Tesla, Zenn or the MIEV will shake things up over the next couple of years…

    Cheers!

  • perfectapproach

    Neil, that is a very good reason to eliminate “bail-outs” altogether. It DOES put successful companies at a disadvantage to failing companies who get federal assistance. I absolutely do not approve of that. That’s not what capitalism is all about, and it’s not what democracy is all about.

    The only reason to consider any kind of bail-out at all is the massive problem of unemployment if those companies are allowed to go under. Tesla is not big enough to affect the US economy in this way, so it won’t be considered for a bail-out. They definitely deserve some kudos (and possibly some cash) for pushing electric vehicle technology as far as they have though, and I hope that the US government is paying attention.

  • Zero X Owner

    The loan requested is from a fund specifically set aside for industrial infrastructure designed to produce highly efficient cars (NOT vehicles) in return for improved national security and keeping our kids in the military being put at daily risk to provide our continued new, extreme dependence on subsidized foreign oil.

    Tesla is the currently most qualified and appropriate US car (NOT vehicle) manufacturer for those loans, as they actually already produce what the loans are intended for and just need to scale up to work the costs down to get large scale market penetration to us Joe the Electric Car Buyers. They already have a site and local support to scale up what they are doing in the most modern, cost-effective way. Yes, the concept of diminishing returns to scale does apply to automobiles, unless your buyers and supply chain are completely incompetent and you know nothing about production business.

    Please get your information straight before writing, article author (commentor Paul Beerkens and a few others showed a little rational, critical thinking in response, while time_for_a_change can’t do basic math – even with a power pack change every three years, I save thousands over the gas equivalent to my electric vehicle up front and on maintenence, which I’ll gladly spend on performance and aesthetic after market parts and supplies, so the related economy doesn’t take a hit from my primary consumer savings). This is no stringless bailout, like the big 3 are constantly whining for to pay past due bills (they think they are a timely payer if they pay 45 days past invoice receipt – I sit in the dark and cold, hungry, if I’m such a late payer). The special fund, already in law and set aside, is for loans to drag automakers kicking and screaming to the huge wad of future profits sitting on a golden platter in front of their face, if they can ever figure out how to do basic marketing and customer support of highly efficient vehicles.

    BTW, I bought my electric vehicle purely on performance, even though it also saves me money, improves national security and saves the lives of soldiers, lowers my tax bill and makes gas cheaper for the pure gasser holdouts – it’s got huge low end torque, linear acceleration and handles hugely better than the nearest equivalent gassers. The handling is so good, I’m sure it’d be lost on most ham fisted go straight fast brained Americans – it’s responsive to this bizzare driving concept called technique and skill. I can even hear how well the vehicle responds to my inputs, rather than be deafened by the bellowing noise a gasser makes while it sluggishly moves herky-jerky. Plus, I can sneak up on wild game in the countryside better.

    I hope everyone else here lists the electric vehicle make and model that they own, or I’ll just assume that they’re posting on a topic they have absolutely no personal experience with and should have their uninformed opinion weighted accordingly.

  • NC Dave

    If all Tesla is looking for is a loan, then they should go to a bank. The banks have already been loaned money through TARP specifically for this type of situation, lending to a business to stimulate the economy.

  • Zero X Owner

    Also, please note that in technical jargon, the word “immature” has a special meaning, which is “capable of improvement”, as opposed to gas vehicles, which apparently are mature (incapable of improvement). Mature is a nice word for obsolete.

  • Zero X Owner

    @ NC Dave

    The loan money already set aside specifically for fuel efficient vehicle production infrastructure was passed in the same legislation as TARP, separate from the bank bailout.

    So you’re saying that rather than tapping money already set aside for a specific cost-saving (long term efficiency in the transportation sector) purpose, which Telsa would use for exactly that specific purpose, that Telsa should try to access loans from banks who are currently not lending (have you heard of the recent credit freeze associated with the rare, current global recession), who were given money primarily to address the mortgage crises, so that less bank money would be available to address the mortage crisis? That leads me to ask, NC Dave, why you hate homeowners and want to see the general economy to fail even harder than it is?

    Lead, follow, or get out of the way. In your case, the latter seems best.

  • Zero X Owner

    BTW – the loan wouldn’t even be for the Tesla Roadster – it’d be for the already designed, cheaper Tesla Model S, which is planned to be much, much cheaper than the current selection of full size, blinged out SUVs.

  • DS

    The $700 billion in the Troubled Assets Relief Program (TARP) was not set aside for the financial industry to lend companies like Tesla money. However the $25 billion set aside in the Department of Energy’s Advanced Technology Vehicles Manufacturing Loan Program was. That is the program/money in which Tesla qualifies and Tesla is seeking a loan from. It’s not a gift, it’s not a bailout, it’s a loan to promote a strategic initiative.

  • perfectapproach

    @ NC Dave:
    I see where you are coming from, but you have to remember that the bail-out money given to the banks was not really designed to make loans any cheaper. It was designed to:
    1) Provide liquidity/longevity to banks so that they can continue to operate until “things turn for the better…”
    2) Help to offset the loss of people defaulting on loans that should have never been given out anyway.

    As such, the banks are still in very poor condition to be giving out loans to companies such as Tesla. They’re barely in any shape to be giving out loans to anyone.

  • perfectapproach

    Also @ NC Dave:
    Also bear in mind that if Tesla goes to Joe Blow Bank and gets a $350 million loan, that loan will eventually cost Tesla something in interest.

    Meanwhile, if GM/Ford/Chrysler get a loan/gift/whatever from US government funds, they will probably pay FAR less/NO interest on their loan/bailout.

    This puts Tesla at an even greater disadvantage because they’re having to pay for something that GM/Ford/Chrysler are NOT having to pay for. Tesla is already at a disavantage because of it’s small size and niche market, so having to pay more than GM/Ford/Chrysler for financial assistance will hamper their progress even more.

  • vfx

    Tesla has built a company from two guys in an office, produced a groundbreaking car filed several patents and has changed the face of motoring after GM left the electric car for dead.

    GM says the Volt so far has cost either $1.5 Billion or $750 thousand and the EV 1 was a $Billion. From scratch Tesla is delivering a car for $147 million. Give them the loan.

  • vfx

    That’s $750 million for the Volt (not thousand)!

  • Ross Nicholson

    Government should never invest in companies that the government can do without (e.g. a bomb company during a war). However, in a dangerous deflation like this one, the market wants cash (because the cash is increasing in value better than other investments, even gold & oil), so the government should invest in lots of companies, municipals, foreign company stocks even, basically all across the board at a very low percentage level until the inflation counters the deflation. Those stocks, bonds, mortgages, that the government buys at low percentages of total outstanding value during a deflation should then be sold on the market during an inflation, to deflate the currency when that is needed. It’s something like what the fed does, but the fed is too small now in relation to the size of the whole economy and out of interest room. As the government holds the various instruments of investment, losses/profits go to Social Security trust funds. Simple.

  • time_for_a_change

    IDK why Tesla, without government assistance, cannot proceed with development of ‘more’ affordable (altho I still dispute a $60k sedan and a $30k subcompact are in any way affordable) vehicles… How did they develop the $100k roadster ? Is it making money ? Are the investors gone ? Why isn’t there an R&D/new product development (etc) budget set aside, if this is indeed a viable, well managed and financed company with a plan? To me that speaks extremely poorly of the management of the company and the risks of investing in same. It would appear everything has been spent on producing the roadster which must sell at $100k plus (at a profit, at a loss, or ?) . Did the business model forecast what, tens of thousands of units annually -that everybody would be buying these at $100k? What was the plan, assuming the government WASN’T handing out money- what WAS the plan for developing these other vehicles, since now they ‘cannot without assistance’. Good plan, not. Government aid for privately held companies ? C’mon, thats just taxpayer funded welfare with several more zeros added on, as we merrily march toward socialism like a bunch of sheep. Remember the government can only give what it has taken from somebody else, and all of this aid/assistance/bailout- whatever, is coming right out of our pockets (assuming ur employed and paying taxes, of course). Is incredible debt to China any less a domestic threat than pouring $ into the Arab countries for petrol ? IDK.

  • Dan L

    Think of the batteries, people!

    Any yahoo can build an EV, if they can get the right battery. A lot of research is going into making the right battery now, and making it affordable. But not at Tesla. Tesla strings together a bunch of existing laptop batteries. Giving Tesla money will not drive the cost of EVs down, because Tesla will use the money on something everyone already knows how to do (making an assembly line) and not on the part that needs our support (making a better battery.)

  • Zero X Owner

    @ Dan L

    There are different programs for that. This is about reviving American manufacturing infrastructure in a way that will serve the country LONG-TERM and making NEXT generation jobs, not bubbles. Your comment is an unhelpful distraction from the main topic of the article, which is that negative misinformation about electric drive vehicles is widely spread on hybridCARS blogs and not corrected.

    @ time_for_a_change

    That’s way cheaper than blinged out full size SUVs on the market now. Market penetration and return to scale takes time (it took non-animal drawn cars about 150 years to become widely accepted in the first place), so your argument that any change must be total, absolute and complete instantaneously or it’s not valid is ridiculous. No technology exists based on that artificial and nonsensical requirement. Tesla hasn’t collapsed and they have over 100 vehicles on the road, so they have already acheived a number of permanent successes, efficiently. If you intend to set up straw men to knock down, your comments are doing a fine job. If you are a Luddite, it’s showing.

  • sri

    Low interest or even interest free loans for forward thinking companies like Tesla, Aptera, altair nano, A123, etc would be one of the best investments the fed can make. Think about the billions already spent and research efforts like fuel cell cars, with no returs in the foreseeable future. Not to mention the billions simply spent on oil. Why not spend a bit on something that’s so close to the market.

    Even if a particular company like Tesla turns out to be a failure despite the the support, having thousands of of viable EV/PHEVs on the road will lit a fire under the big companies. If not for the prius, will the big 3 even be thinking about hybrids now? With all due respects for free-market, if you want the economy to go in a certain direction (In this case oil-free), the playing field should be tilted a bit.

  • Economist

    @ sri:

    There are no free markets in the real world. The tilting you refer to would be a tilting towards free markets, rather than the current market failure monopolistic situation that is gas only transportation.

    First, existing gas autmobile and oil markets create huge negative externalities (pollution and destructive military costs among them) that drag down the world economy (see current reality). Electric drive vehicles, such as the existing and forthcoming Tesla line, however, create positive externalities (cleaner air (even using coal based power) and reduced dependency on foreign oil and less shifting of our money to volatile regions of the world among them) which the producers and purchasers of those electric drive vehicles are providing you for free. Because it costs to give these positive externalities away for free, there are fewer electric drive vehicles produced than there would be in a free market.

    Thus, the loans to Tesla would be formally considered a correction to a market failure, a correction that would get us closer to the results from a free market, not further from free markets. If you beleive in the economic efficiency of free markets, then this market failure correction to optimize next generation industrial infrastructure for more long term efficient transportation loans is the most conservative, classical, libertarian, fiscally responsible, efficient thing you can do.

    Second, when you commit to only one transportation method, gas only, you become captive to that supply, which leans towards monopoly situations. Competition is the classical, conservative solution for that, part of free markets. Allow many other real solutions to develop, including plug in hybrids, economically feasible alt fuels (such as non-food crop ethanol (with no import restriction games), and bio-diesel), and the consumer and businesses ultimately pay less for energy, which allows for more production and consumption from that savings which makes the economy boom. Get it?

    “Negative Pigovian tax (Pigovian subsidy)
    One can encourage certain behaviors by subsidizing them, for instance donating to socially beneficial non-profits or installing solar panels to avoid pollution. Such a subsidy of a positive externality can be considered a “negative Pigovian tax”.
    The motivation for such a subsidy is trying to reach economic efficiency. When a positive externality is present, a firm’s solution of its utility maximization problem does not account for the additional utility (to another agent) produced as a by-product (the externality), thus causing the firm to produce less than the pareto-efficient level. The Pigouvian subsidy thus internalizes the externality into the agent’s utility function, by giving the firm incentive to produce more than it otherwise would.”

    Time to stop subsidizing gas hogs with our kids lives in the military, who are daily confronted by enemy resources available thanks to the gas money we send overseas that can be misdirected. Get it?

  • RKRB

    -Cell phones, airplanes, pacemakers, television, and Teflon were originally only suitable for “the rich,” too.
    -Bad journalism makes bad policy, and the NY Times journalism is traditionally very, very suspect indeed.
    -A more appropriate question is whether the auto bailouts are necessary or efficiently run, and how we can avoid setting a precedent where anyone can qualify for bailout money.

  • Fact Checker

    @ RKRB

    You are wildly off-topic in your final paragraph.

    The topic of this article IS NOT auto bailouts (for the big 3), which failed in Congress due to a lack of accountability, pain sharing, and the big 3′s abysmal record in efficiently and effectively producing and marketing competitive, fuel efficient vehicles.

    The topic of this article IS that some people have a problem with a company successfully making fuel efficient cars and in applying to use a resource already set aside and specifically directed to creating even more fuel efficient cars for additional social cost savings.

    Nice try, trying to confuse and conflate Tesla with the problems of the big 3 automakers. Different issues, diffent solutions (big 3 – none , Tesla – DOE for EFFICIENCY, already a done deal). Your post ends up with classic FUD. Stop it.

  • Economist

    Why my emphasis on the negative externalities of pollution and the positive benefits of clean air? I’m no tree hugger. I want:

    LOWER HEALTH CARE COSTS

    which a cleaned up transportation sector will simply, cheaply and efficently provide. The resulting lower health care costs will provide consumers with savings, that they can spend on other, more productive things (such as fun, high performance electric drive cars), which will make the economy boom. Get it?

  • Anonymous

    Zero X Owner: Immature is actually a nice word for “unproven” or “unreliable.” Mature, as in the ICE, means “very well developed” and “reliable.” But the ICE isn’t done yet, not with HCCI, DCT’s, etc. coming up in the future (i.e., immature).

    Fact Checker: Tesla hasn’t proven it can do anything! Even after using a Lotus Elise chassis, they couldn’t bring the car out on time. They finally gave up on the 2-speed transmission. You can criticize the Big 3 (and they’re certainly not perfect), but they are much more efficient than Tesla.

    Economist: We don’t subsidize gasoline, we tax it. Electric vehicles pay no road tax, and still can’t compete without subsidies.

    What we need to do, however, is to tax gas more (returning it as an income tax credit) to make fuel-efficient cars more desirable. I don’t care what the technology is, and it shouldn’t be chosen by a bureaucrat who has no idea what it actually costs to build things.

  • David

    Tesla is applying for a loan that was specifically created to provide funding to promote and assist development of technology forward, efficient, environmentally friendly vehicles.

    Tesla is the textbook definition of the company that is deserving of this money. The big 3 are the polar opposite of this. Look at what Tesla has accomplished – an electric car that can go head to head with a Ferrari, at about 1 cent per mile and without burning gas.

    I expect the only people adverse to Tesla receiving this funding are those with special interests in keeping the big 3 alive. Regardless of whether funding is given to the big 3, Tesla absolutely qualifies for the funding under the terms in which it was originally created — to provide funding for companies providing new, more fuel efficient vehicles. Tesla has accomplished more for green car technology with a few hundred million dollars than the big 3 have with billions to date.

    Tesla deserves what they applied for. Support Tesla and the future, or “bail out” the same old.

  • Snarky

    @ Anonymous:

    That must explain why there are millions of proven electric drive vehicles working reliably every day around the world, including trains, forklifts and golf carts. What you say does not contradict that electrics can only improve while gassers are about as good as they can get.

    Your next comment has absolutely nothing to do with bailouts or the Tesla DOE loan (which is not a bailout). Telsa has had less delays than Boeing.

    We subsidize gas hugely more (negative externalities, such as trillions in military spending) than we tax it. The electric vehicle that Zero X Owner has outcompetes everything in its class on performance and price with absolutely no assistance from anybody. Electric vehicles already pay road tax in many states through registration fees.

    Who said we had to make the false choice between uninformed bureaucrats and anybody but that (wouldn’t that include bloggers with no personal experience in electric drive)?

    Lots of FUD from Anonymous. Facts and insightful commentary, not so much. Good luck getting a tax increase passed.

  • sri

    @ Economist:

    I agree with your points. But aren’t you preaching to the choir? My free-market comment was aimed at those who believe all companies should survive on their own and should not be helped no matter what.

  • Economist

    @ sri,

    based on the response of Anonymous, no, I am not preaching to the choir. You can never explain the obvious to the little experienced enough. That’s why proper marketing and education about electric drive is so hugely critical. So far, I’d say that the general public has no idea of the areas in which electric drive can stomp gas. Another way we directly subsidize gas is with special credits to huge oil companies for them to look for more oil when there is a massive glut of it at the moment.

    You said “My free-market comment was aimed at those who believe all companies should survive on their own and should not be helped no matter what”. If they truly believe that, they should wholeheartedly back the DOE loan program and Tesla’s access to it, as it will result in an outcome closer to that resulting from free markets, compared to the current growing market failure that is the big 3 domestic automakers. Their recent, paltry vehicle efficiency attempts may be a case of too little, too late.

    It would be extremely naive for people to think that free markets currently exist within the big 3 domestic auto industry. Consumers are not offered the vehicles they demand and are forced to go to foreign or small domestic automakers to get what they want, often paying a premium in the process. Large domestic companies have lobbyists in the capitol (revolving doors, anyone?), and lawyers to get unfair, uncompetitive advantages, such as irrational standards no other country would adopt in its right mind, and will lie, cheat, steal, kill, screw their stock and bondholders and make short sighted, short term decisions that are horribly unprofitable in the long run to satisfy their CEOs egos (side note: GM recently said that the EV1 did not negatively affect their profitability), made possible by horizontal integration and interlocking and compliant boards of directors.

    The DOE loan program, to which Tesla is richly deserving, in part will move the automaker situation closer to a free market outcome, not further away, as I previously explained. Why do you think it passed, when the big 3 bailout to pay old bills didn’t?

    It’s sad that the big 3 domestic automakers hate money so much that they refuse to build profitable, desirable, fuel efficient vehicles. Maybe it’s time to move them out of the way for those who can and will, domestically.

  • AP

    Zero X Owner, “reviving” Tesla is hardly the word for it, because they have no track record. They have produced hardly anything, and have contributed no new technology themselves, as Dan L says.

    I’d feel differently if they hadn’t taken an off-the-shelf chassis, off-the-shelf batteries, and joined them with common motor technology, to produce an expensive vehicle with limited range. But there’s little meat there.

  • Zero X Owner

    @ AP

    “Reviving” referred to American manufacturing (we used to make things that people wanted to buy), not to Tesla. Tesla provides the vehicle (pun intended) for new manufacturing infrastruction, as the old is obsolete. Telsa has a multi-year track record of developing and manufacturing many electric vehicles for purchase by regular consumers, which are on the roads today. What other domestic automakers have that kind of track record?

    Dan L was referring to a separate program, related to batteries, than the manufacturing one that Telsa is part of. Tesla’s main contribution is RESULTS, as they are putting actual advanced technology fuel efficient vehicles on our roads, which is the primary intent of the DOE loan program, and proprietary use system integrations to do so. As an owner of two vehicles that use electric drive, I know that the integration of all the real systems, including the user, is an absolutely critical aspect of getting consumer acceptance, exceeding consumer’s wildest dreams and getting market penetration of truly fuel efficient vehicles. Tesla’s new ideas have identified and have continually refined an integration that allows for white hot consumer preference. Also, the chassis is not off the shelf but has specially designed extrusions, the power pack of assembled cells has a unique design, and they designed the working high performance gear connection to the motor, where at least two outside experts in the field failed. Way to show that you know nothing about Tesla. Of course, Tesla’s Model S can use even more advanced technology if that’s appropriate for the DOE loan and to Telsa’s market penetration strategy.

    As was stated before, after Dan L’s comments, there are already separate programs in the DOE loan program for batteries. We get to pursue both if we want, but the manufucturing component is a core and valid part of the program. Live with it.

    On how you feel – You would prefer that Tesla constructs actual vehicles out of angel wings and magical peanut butter and exports them to Mars? I have no idea what point you think you are trying to make when you complain that Tesla uses and will use real parts to make real vehicles. Abstractions don’t hold a set of golf clubs in their trunk, you know. I’d feel sad if Tesla listened to your feelings, as they would not be churning cars out of their domestic assembly operation, but would instead be sitting around huge piles of invisible teddy bear fluff trying to figure out how to make cars out of it.

    It’s now clear that electric drive’s biggest obstacles are a lack of effective marketing and education (see a Wrightspeed or AC Propulsion Tzero electric stomping on gasser supercars on YouTube for a start).

    Most of the arguments in here are perfect for high school sophmores in debate class to deconstruct and slaughter.

  • AP

    Zero X Owner,

    Not really sure where you’re going there, but….

    Nice use of the overused “making vehicles people want,” since the top two selling vehicles are from Ford and GM, but we won’t let facts get in the way. I guess people were forced to buy all those SUV’s, too.

    What I meant by “off the shelf” wasn’t literally off of a physical shelf. I meant they are merely taking someone else’s components and putting them together. They may be doing some adapting of the design, but compared to the overall effort of building a car, they’re doing very little.

    As far as integration is concerned, integrating an electric motor into the system is a piece of cake, compared to integrating a hybrid powertrain. Develop a way to blend the re-gen and brakes, come up with proper transient controls for tipping into the pedal, and the rest is basic motor control. I don’t see much to it. Electric motors pretty much respond “instantly” anyway. Since their chassis is from Lotus, did Lotus do their integration?

    As far as the transmission, how hard can it be to design a gear reduction unit? They aren’t the only ones doing this. Is theirs novel? More efficient? Quieter? Better? Why? How?

    Don’t get me wrong – it’s a great-looking car, but Ferrari’s been making good-looking cars for a long time.

  • Zero X Owner

    @ AP:

    Where I’m going is that I don’t like it when you spread FUD about electric drive and other topics, unchallenged by reality.

    Stop living on past glories. The Ford F-150 pickup truck was the top selling vehicle in the US for decades until it was trounced this year by no less than four far more fuel efficient vehicles, the vehicles that people now want (based on real sales figures in 2008), the Honda Civic, Toyota Carolla, Toyota Camry and Honda Accord. Full size SUV sales for year to date are massively down year over year. The Ford Escape, Mercury Mariner and Mazda Tribute SUV hybrids get about 34 mpg, so we can put those in the fuel efficient vehicle category (you gotta think a little bit when you consider sweeping categories – it’s a new world). Oh wah, boo-hoo, those pesky facts are ruining your outta left field statements again.

    Taking components and putting them together is the definition of manufacturing. Saying that is a mere act tells out how you poorly you regard American manufacturing.

    Thank you for acknowledging that systems integration on full electrics are easier than on parallel hybrids. That why parallel hybrids are best considered a bridge to full electrics (with or without range entending generators using the fuel of your choice). Is the last 10 years that hybrids have been around long enough for us to over the bridge, yet? That’s only a question of timing, not whether or not we are already irreversibly on the electric road.

    I’m glad that you know so much about atomotive engineering and find it so easy. Instead of asking me for all those details on Tesla’s products, perhaps you could independently research them or look at their DOE loan application and report back here with the results? Some things about electrics vehicles are exactly the same as for gas vehicles, so new electric automakers could learn a lot from the big 3, but some things can be very, very different, such as the stresses on reduction gears. The power to weight ratios of electric drive are often astounding compared to gassers, which is part of why they can be great performers. I can beat pretty much anything up to a Lamborghini Diablo off the line in my cheapo electric vehicle and the Tesla Roadter’s not much worse than mine (Model S specs unknown to me).

    Show me a high performance Ferrari that uses about 33kW/100 miles (yes, you can translate brake horsepower into an approximate watt number – go to sites on power to weight ratios) and I’ll start being impressed.

  • Zero X Owner

    @ AP:

    Thanks for prompting me to figure it out. My inexpensive, electric vehicle gets more than twice the power to weight ratio of a McLaren F1 GT supercar, at 2/1,000 the cost (that’s 0.2%).

    On that one measure of economic efficiency for super performance power, I’m 2,000 times more economically efficient than the best that gassers can throw my way. Pure gassers are obsolete.

  • AP

    Zero X Owner, do you mean 33 kW-hours/100 miles? Kilowatts are power, not energy (1 kW is about 1.34 HP). You have to multiply power by time to get energy. I’m not sure how you’re getting a power-to-weight ratio from an energy/distance ratio.

    The reason electric cars are fast (and definitely fun) off the line is that they can make maximum torque at zero speed. But this is high torque, not high horsepower. Power is torque times motor speed, so power at low speeds is actually almost nothing.

    This high torque at zero speed is why they don’t need a clutch to disengage them from the wheels when stopped, and why they often don’t have multiple gear ratios. Tesla was going to have a 2-speed transmission on theirs for better efficiency at high vehicle speeds, which is a good idea. But it’s not rocket science, and a good mechanical engineer can handle new situations. Either they couldn’t, or one of their suppliers couldn’t.

    By the way, I really have nothing against electric cars. In the right situation, they can be really effective. They’re just not the be-all/end-all. Their range will always be limited, due to the mass and room necessary for batteries to store enough energy to get anywhere. They’ll never be trip cars, unless you’re really patient. In cold weather, you waste a lot of precious electrical energy making heat for the windshield – and the passengers. Costs should come down, but I truly doubt we can rely on gas prices being high enough to make them compete head-to-head with gasoline-powered cars for at least ten years. Until then, the extra cost for them will never be paid back. Government subsidies may help at first, but we can’t really afford those very long.

    After looking up what FUD means, I had to chuckle. Mine is no knee-jerk reaction to innovation. I’m all for new technology where it makes sense. Forcing a new technology into use prematurely can produce no-win situations, like the EV1. But, in the American tradition, people see the flash, not the substance. What I don’t like is the mindset that there is only one way to do things, and that everything else is stupid. Many measures, including squeezing more efficiency out of ICE’s, should be taken to solve our energy addiction. Just don’t blame manufacturers for serving a market that the government encourages – like SUV’s. Blame the government.

  • Zero X Owner

    If you don’t want an electric, I suggest that you don’t get one. I’ll smile at you as I pass you in your slow gasser.

    Yes, I know how energy and power works as well as any other car driver does and I didn’t get P/W from E/D. I simply noted, separately, that they are both important considerations for electric drive configurations and design. For someone who claims that systems integrations and drive-train design is simple, the subtleties of electrics don’t seem to hit you over your head.

    You could use your same arguments why gas cars are so inferior to horses in so many situations.

    There is a concept called a range extender, for the gasser faint of heart, although the Telsa has over a 200 mile range with reasonable driving (further than my last pickup truck’s range) and fully recharges in 3.5 hours. My vehicle has a big enough range for me to commute to work and back without recharging and when I want to charge it, it takes me less than 2 hours from a regular (not clothes dryer style) outlet. Or I can just pop in a fresh power pack in a few seconds, which I have done.

    As for long trips, the Chevy Volt’s series hybrid (primary electric drive with a generator range extender using the fuel of your choice) first configuration gave it a range of 640 miles. With a five minute gas up of the generator you’d be good for another 600, etc., etc. How many pure gassers can do that? GM eventually changed the specs, as the range of its electric car was excessive (most cars are good for around 300 miles). So, no problem there – you just toss a range extender generator on your electric vehicles. Most heavy freight is moved many thousands (millions?) of miles daily by electric drive hybrid (diesel) trains, so electric drive already dominates long distance hauling. Today while I was going to work, I passed by a full size SUV, that had flipped and gone off the road due to poor handling, in an electric diesel train, at 80 mph with no stop lights or sign and no slow traffic.

    If GM forced the EV1 on people, it’d be a shock to those few who even knew about them and had to jump through repeated outrageous hoops to get them, only to not be able to buy them (lease only) and to have them taken away against their wishes.

    I don’t mind if you have opinions, but do you have to be wrong about almost everything you say about automobiles?

    My favorite thing is those people who ask me at red lights to show them how fast my electric vehicle accelerates. Do they really think I am going to smash my vehicle into the slow-ass Corvette in front of me?

    Electric is not a new technology, simply a slightly stifled one when it comes to consumer vehicles. I’m sure you’ll realize that the next time you open a refrigerator, wash your clothes or recharge your cell phone.

    ICE’s have been squeezed for efficiency over 100 years already about as hard as possible (a Ford Model A gets better mileage than most modern cars). It’s time to let them give electric a helping hand as their best use.

  • AP

    Zero X Owner,

    I saw a lot of words in your response, but no response. How do you figure that your electric vehicle has twice the power/weight as a McLaren F1? If you’re using off-the line acceleration, that hardly takes any power at all.

  • Zero X Owner

    @AP

    I used real world, independently confirmed data. No figuring involved at all.

  • Jon

    I’d far rather see money loaned to Tesla than the big three. The big three have done nothing since their last bailout to prove they can operate their businesses properly. Tesla is a start-up in need of help to bring about a paradigm change, Tesla is exactly where money should be going… the future.

  • AP

    Zero X Owner, I assume from your response that you have no data, or you would have quoted it. It’s better to stay within your range of knowledge.

    Jon, “their last bailout” never happened. The only one that received a government loan was Chrysler, and they paid it back early – with interest. In fact, the reason the paid it back so early was because the government was interfering so much with their “knowledge.” As far as doing “nothing since their last bailout to prove they can operate their business properly,” look at the country they operate in. America is the only one that has allowed free trade, welcomed foreign competitors subsidized by their home countries, and subsidized them ourselves to locate here. Our tax and health care policies favor new competitors (with younger, healthier work forces), while taking the Big 3 for granted. We have the most unpredictable fuel prices, most fickle government policies, and most fickle customers (other countries’s customers support their domestic makers to keep the money in their country).

    Our government is the only one that has an adversarial relationship with its domestic auto makers. Other nations realize how important manufacturing is, and that you can’t just cut each other’s hair or serve each other burgers to get by. Canada, Germany, and Sweden all passed laws to rescue OUR companies’ operations in their countries before we did.

    The domestic auto industry has made mistakes, but so has our government, and so have we. We love to rip them for past sins, but don’t want to hear about their greatly improved quality or flaws in the foreign competitors. This time should be taken to straighten out (or form) our energy policy and revive the industry, not kick it while it’s down. That’s not the American way, nor in your own best interest.

  • Zero X Owner

    @ AP

    You assume wrong. Let me repeat:

    “I used real world, independently confirmed data. No figuring involved at all.”

    Look it up yourself. It’s available publicly to all who don’t insist on wearing last century’s blinders or who are too lazy to do their own research.

    I suggest that you purchase a McLaren F1 GT (not the boring, slow regular F1) and take it to a track to collect your own data so that you can futiley try to prove me wrong. My prediction is that you will break it before you even drive it all the way there, as gassers are hugely less reliable than electrics.

    How pleasant it is that you are getting all shreiky and defensive, now that every single one of your arguments against electrics has been shown to be wrong.

  • AP

    Zero X Owner, I’ll have to admit – you’re interesting.

  • Zero X Owner

    @ AP

    The American way used to be to crap out the lowest acceptable quality at the cheapest price with razor thin margins and make ourselves big on volume and then brag about market dominance. That’s how we changed from an agrarian society to a (former) world power. We have been supplanted in this by the Japanese (starting with the Honda 600) and now, the Chinese (BYD F3DM).

    The big 3′s reaction to plunging market share, starting in the 1970′s, was to game the system hard (bizarre NHTSA standards that create more dangerous vehicles, wacky CAFE standards that favor SUVs, corn ethanol scam (non-food ethanol works, though), etc., etc.) in a futile attempt to forestall the end game. The gaming possibilities are running out now.

    On to the end game…

    Transition (should have been doing this the last 35 years):

    Electric, with a little help from ICE generators. Diesel electric series hybrids, anyone? Who wouldn’t want a train on rubber wheels? Think of childhood winter holidays and the phenomenal torque. Maybe we should ask Lionel Trains to make a car (or GE for that matter as they have 80 years of experience) – just put the smart key fob under the tree.

    End Game (now):

    Electric

  • Zero X Owner

    @ AP:

    In fairness, a Bugatti Veryron has a 35% higher power to weight ratio than my electric vehicle, but my electric vehicles costs 0.5% as much as the Veyron and VW (the owner of Bugatti) loses about 1.5 million dollars on each sale of each Veyron.

    Once again, the economics of electric crushes gas only powered vehicles, on dollars per power to weight ratio.

    An extra $40,000 from the consumer for each 1% gain in the power to weight ratio, in this particular comparison, strikes me as evidence that ICE technology is pretty mature (obsolete).

    Also, my electric vehicle is much, much safer than the Veyron when it was under development.

  • Chris Longley

    Clearly a small auto manufacturer that came out of nowhere and has broken away from the pack by producing fast and cool zero emission vehicles deserves endorsing. Especially considering they will use the money to produce $30,000 and $60,000 models (code named Blue Star and White Star respectively).

    With the exception of 60 Chevy S 10 electric vehicles that were sold in the late 1990′s, the big three haven’t sold and aren’t selling any ZEV’s.

    That speaks for itself.

  • Macmang4

    Watch the movie Tucker, same crime going on just this time it’s over ethanol and oil, you think they will let this car happen and loose all that money. It’s not just about the money it’s the freedom of choice. I bet there are at least 1 million people in the USA that would help this company build these cars voluntarily, as they would fight for this country that they love, but the moms and dads of this country are still living the last generations dream. Control control control. Look at the iPhone it dropped in price quickly, the computer industry is a great example of what will happen when you have true competition, they are so lucky that steve jobs isn’t in the auto industry, I would so buy one of his electric cars, lol I bet it wouldn’t crash!