Tesla Nabs $465M Government Loan To Build Model S 505
SignalFreq writes "Tesla Motors, based in San Carlos, California, was approved yesterday for $465M in loans from the Department of Energy's Advanced Technology Vehicles Manufacturing program. Tesla plans to use $365M of the money to finance a manufacturing facility for the Model S (review, Letterman video) and $100M for a powertrain manufacturing plant in the SF Bay Area. 'Tesla will use the ATVM loan precisely the way that Congress intended — as the capital needed to build sustainable transport,' said Tesla CEO and Product Architect Elon Musk. Tesla expects the Model S to ship in late 2011 and the base cost to be $57,400 ($49,900 after a federal tax credit). Ford received $5.9B and Nissan received $1.6B under the same program."
A requirement for the loan (Score:2, Insightful)
should have been a 25K car cost cap.
That way most people could only barely not afford it.
Re:Model S (Score:2, Insightful)
Even the head of the America's Socialist Party [washingtonpost.com] doesn't think so. Propaganda rule #1: At least get the disinformation believable. Otherwise it just makes Obama haters appear stupid. Just sayin..
News for nerds, not ideologues. (Score:1, Insightful)
Why are you such knee-jerk ideologues? A government spending money is socialism? Are you that stupid?
This is an honest-to-goodness American technology company building some very cool 21st century vehicles.
I'm really ashamed of America sometimes.
Re:Model S (Score:5, Insightful)
Obama socialist?
People who claim that Obama or the American Democratic party for that matter is socialist needs to take a trip around the globe. In many European countries the Democrats would be considered a right wing party.
Re:More bullshit (Score:5, Insightful)
> I know. Just like those silly Interstate highways
Roads are specifically mentioned in the US Constitution. Pass
> the US Marine Corps
A Navy is specifically mentioned. The Marines are a sub unit of the Navy. Pass
> the US Postal Service that'll deliver
Postal service is permitted. Pass. But note that most packages use private carriers these days, the postal service is mostly for bills and junk mail.
> and those terribly inefficient and socialized Firefighters and that neo-communist socialized Police Department
Those services are not provided by the US government. Federal money for those purposes are unconstitutional. Good luck getting enough literate Supremes to be able to figure that out any time soon.
US Taxpayer money to a private automaker? Fail. Unless you can point me to the clause I missed that specifically grants the US government that power the 10th Amendment forbids it. Again, good luck finding five Supremes who can read.
Re:More bullshit (Score:3, Insightful)
More bullshit courtesy of the U.S. Gubmint!
I know. Just like those silly Interstate highways, the US Marine Corps, the US Postal Service that'll deliver a package of paper to any door in the US within a day or two for an affordable flat fee, and those terribly inefficient and socialized Firefighters and that neo-communist socialized Police Department. Government. Pah! Who needs it?
The Republicans are involved at the highest levels of government. If anybody would be in a position to fix it instead of complaining about it then it would be them, or at least them when they had control of all three branches not too long ago. So why didn't they do anything about it? And if it's a system that cannot be fixed and they do not believe in it, why are they still a part of it?
If us IT geeks went about our jobs like Republicans, we'd be saying stuff like "Bah, stupid computers! Management wants to do another IT project. Just another pointless boondoggle that will get screwed up, mark my words! We'd all be better off going back to paper! Who wants some pencil-necked geek standing between you and your work telling you what you can or can't do with some stupid blinking box?"
Re:A requirement for the loan (Score:3, Insightful)
Do government car-maker loans work the same way as student loans? For a student loan, you have to pay it back with interest regardless of what happens. Can't get out of a student loan going bankrupt or anything?
Re:A requirement for the loan (Score:5, Insightful)
The technology does not exist yet to make a $25k electric car that can succeed in the American market. Tesla is right to start with the high-price, high-profit end of the market and work their way down to the high-volume mainstream as the technology matures and the supply chain scales up. Trying to start out by making a capable electric car for the mainstream American market is a much riskier move, and requires much more up-front money - hence the much larger handouts that have gone to the more established automakers. Tesla, on the other hand, has already established their electric vehicle business as profitable, and can use their profits and experience from the Roadster to help subsidize the development of the Model S.
Re:loans for everyone! (Score:5, Insightful)
just a guess, but it could be because of the 3 manufacturing plants and 1100 dealerships Nissan has in the US.
Re:Overpriced. (Score:5, Insightful)
Cars are cheap because nearly everybody in this country needs a car. You need a car to get to work, you need it to get to school and you need it for recreation. Sure, if you happen to live in a major city there is also mass transit, but for a large percentage of the population a car is a necessary reality.
Now, with that being said - what happens when something is produced in such great numbers? Economies of scale - the price is driven down due to mass production. Vehicles that cost $13,000 USD are a reality and they're not half bad either. A pretty decent car can be purchased for $20,000, and a really good car for $30,000. Luxury vehicles are nearly anything $40,000 and above.
What about electric cars? They aren't mass produced in any great number just yet, because so far everyone is content with dropping $13,000 on a car that's just "good enough" for their needs. Why do I need an electric vehicle? What benefit does it give me _right now_? Fuel costs decrease significantly, yes - but enough to offset the price of the car? Probably not, even over the lifetime of the vehicle. Therein lies the problem.
Electric vehicles - especially from a non-big 3 startup - are something I believe the government should assist. Your tax dollars are helping fund the future, because while you may not be able to afford this vehicle at $50,000, you might be able to afford the next car they produce using the profits of the Model S.
When the world is filled with "good enough" and people who like "good enough" - how do you convince people to switch to something better?
Re:A requirement for the loan (Score:5, Insightful)
In the electric car industry, that's simply too big a jump to make all at once. If your ultimate goal is to produce 200,000 $25k cars a year, and the current state of the art is 2,000 $100k cars a year (the Tesla Roadster), then it's only reasonable to expect to produce 20,000 $50k cars (the Tesla Model S) as a stepping-stone. The market is there, and those early adopters will facilitate the eventual availability of the $25k mass-market car you're talking about. If you do the math, the "rich" purchasers of the Model S will be kicking in about one billion dollars a year towards this goal, double the government loan amount. So think before you knock 'em.
Re:Wasted taxpayer dollars (Score:4, Insightful)
In other words the taxpayers just had half a billion stolen from them and given to some idiot Californicators to waste on building overpriced cars that will only sell if they are subsidized with yet more taxpayer dollars.
Seriously, if these cars were such a great moneymaking venture I don't think California is lacking in venture capitalists even in a recession. You only go to the government with hat in hand if you know it is a losing idea but can be made politically appealing anyway. These days you just have to say "green!" to crack open the piggy bank.
Who built the Interstates?
Fleet Car (Score:5, Insightful)
Re:Wasted taxpayer dollars (Score:4, Insightful)
> If you have such a problem with half a billion dollar loan, I'd hate to see how
> you'd react to the $5.9 billion loan Ford just got from the same program.
I'm pissed off about that too. I'm pissed off at the money we are pissing away on the auto bailouts in general. We spent all that money.... and they went bankrupt anyway. But since they cheated and didn't let them do a proper bankruptcy it's going to be f&%king Groundhog Day in Detroit for the next 3 1/2 years as they keep going bankrupt over and over again and the US taxpayer keeps stuffing money down the UAW rathole and relaunching the zombie automakers.
Re:Wasted taxpayer dollars (Score:5, Insightful)
You remind me of my Dad in 1975 when new cars were required to have catalytic converters and could no longer use leaded gas.
Re:Nissan? (Score:4, Insightful)
Why is the United States government giving money to Nissan? Shouldn't the Japanese government do that and not the U. S. taxpayer?
They are getting money because they are trying to produce a car that might help the US reduce its dependence on dangerous, foreign, terror-funding oil.
They are getting money because they might employ you, and many other US citizens.
They are in a better position to employ you and others than 2 of the 3 major American car manufacturers because they are not shite.
Surely you don't think they are taking the money back to Tokyo to spend on kimonos?
Re:Wasted taxpayer dollars (Score:4, Insightful)
People, with machines.
Re:It's a Loan. (Score:2, Insightful)
> It's not a handout. It's a loan.
It must be great to be young and naive. You probably think the TARP money will be paid back too. It will only be paid back if Tesla makes a crapload of profits instead of losing their ass on the deal. But if it was a sure fire moneymaker they could have raised the money on the private markets. Even in a recession and credit crisis there is venture capital looking for places to park. SO we must assume it is a high risk investment being financed with a very sweetheart low interest government loan. Essentially a gift to Tesla of the spread between the low rate the government loaned at vs the higher rate the open market would have charged for the risk.
Must be great to own a Congressman or Senator. Does it make me a bitter old cynic to just assume the facility in the "SF Bay area" will be in Speaker Pelosi's district?
Re:Overpriced. (Score:4, Insightful)
Ask Apple — that is, once they recover from the devastating choices of entering the saturated mp3 player and smartphone markets.
Re:Green Car on a Budget - Innovation Not Required (Score:5, Insightful)
I'm anti-subsidy for luxury car manufacturers. Starting at $49,900 -- bah! How about spending a fraction of this to rip out the engine of a Chevy Aveo and put in an electric motor? How about an electric car people can actually buy? Innovation not required!
There is a bit more to the Tesla cars than just ripping out the ICE and putting in a regular electric motor. There is very advanced liquid-cooled Lithium Ion battery technology, a next-gen 3-phase/4 pole motor, etc. It performs at par or better than other cars in its price point, and is also practical (can carry 5 passengers and their luggage comfortably). It is easily 200 to 300 percent more energy efficient than a typical hybrid as well. Luxury or not, getting such a vehicle to market is very worthwhile. Remember the Prius was the favourite toy of green-wannabe celebrities and rich folk in its early adoption phase, and this is a much better alternative.
Given the nature of the technology this is the ONLY way to bring it forward. I think GM's approach (with bringing out a less exotic Chevy Volt) or yours (an even more austere Aveo) is backwards. Say it costs $5000 to $10000 to implement the advanced battery and drivetrain at this point in development. This means the cost of an electric Aveo would be 50+ percent higher than for a gas one, which is "cheap enough" to run in the first place. NOBODY who is willing to be an "early adopter" would buy an electric aveo at a profitable price point, because green and innovative as the drivetrain would be, the rest of the car is actually rather crappy.
OTOH, The Tesla S is probably no more tha 10 or 20% more expensive than a comparable car that runs on petroleum fuel. Early adopters tend to be more affluent as well, and when you get to that less-than-20% premium for something cool and new. This car has a realistic chance of making a profit, or at least paying back its loans. The Volt or an electric Aveo would be a guaranteed money loser.
Remember, that Tesla got its loans specifically because it has committed to re-investing profits from early, more exotic/expensive models into more practical, affordable models. Even in its early stages on the market it has established a track record: It followed up an exotic, very expensive roadster with a luxury sedan that is actually very practical and within the price range of upper-middle class households (the ones who buy Escalades, BMW 5 or 7 series, etc). Ensuring the success of the S means the much more likely possibility of an under $30K vehicle that competes right in the mainstream sedan market.
If the US is going to get all socialist on us, I'm glad it isn't following the tired old thinking that to support innovation it must have this fixation on immediately addressing the needs of the "masses" or "working poor" or that crap, when it isn't realistic from a business perspective. Certainly better than taking a controlling interest in a loser bankrupt GM or gifting Chrysler to the unions--doing both with massive loans backing the moves (if taxpayers weren't forced to accept such nonsense, thay'd never in their right mind invest in such shaky enterprises). GM in particular has been the ABSOLUTE LEAST INNOVATIVE auto company on the entire planet for decades--even its best products are dependable but very boring and un-innovative, and they've invested the least into new technologies in their plants out of EVERY SINGLE company that builds cars in N America.
If my gov't is going to throw boatloads of cash around on speculative enterprises, I'd MUCH rather it go do something bold, new, exciting and innovative like Tesla than something tired, old and nothing to show for in terms of innovation than words and vague plans crafted for the purpose of begging for alms from the gov't. as GM and Chrysler have done in the last year.
Re:loans for everyone! (Score:5, Insightful)
Because the money is going to a Nissan plant in TN that is being retrofitted to develop, manufacture, and test cutting edge batteries. Would you rather that the DOE does not provided to money on some idiotic jingoistic grounds only so that a future industry in and that portion of the economy is cornered in Japan?
Geography (Score:4, Insightful)
$100M for a powertrain manufacturing plant in the SF Bay Area
How on earth can that be the cheapest place to manufacture something?
I suspect the factory location is more political than practical ("I've love to help you get that loan, but you know, it'd sure be nice if you located that factory in my state").
Re:It's a Loan. (Score:4, Insightful)
> the TARP thing was needed.
Was it? Everybody said that..... but 'everybody' seemed to be the ones either handing out the money or the politically connected people who were lining up to take the money. And then they didn't even spend most of the money to solve the 'toxic asset' problem that we were assured was going to bring on a depression. No, they nationalized banks, insurance companies and automakers with most of it and show every sign of keeping any money that does get paid back as a giant off the books slush fund.
Not the only one who is starting to smell a giant rat. Seeing the same 'masters of the universe' types moving seamlessly between Wall Street, the Bush administration and now the Obama camp spending Sagans of cash that was called into existence from nothing to bail out old money companies who did stupid things because they were afraid of being called names by Democrats.
Re:It's a Loan. (Score:3, Insightful)
You only think the TARP thing was "needed" because somebody told you it was.
How do you know there weren't any banks making loans? To homebuyers? Or to businesses? When the news told you they weren't making loans, did you find out which they were talking about? Were businesses looking for loans in the first place? OR were businesses interested in shoring up their own books before getting more loans? This is all past tense, "were", how do you know businesses want loans now? Home prices haven't gone up, so shouldn't they be in the same situation?
If I sound patronizing, it's because I am. I find that the vast majority of people who state opinions on TARP, like yourself, have no answers to any of those questions. You just think it was good because whoever you voted for told you so.
The parent you replied to actually had rationalizations for how loans and risk work in a marketplace. You should start learning there.
Re:loans for everyone! (Score:4, Insightful)
Loans to people/companies who can actually pay them back yield a lot of money. Average return on a 15 year mortgage, for example, is about double. It's also frontloaded, so they make most of the profit by year 10 and all that is left is the principal that needs to be paid back.
Corporate loans work similarly, so if Company X pays back a 1 billion dollar loan in 10 years, the loaner has made a profit of probably around 50-75%.
That's a whole lot different than a grant, in which case the money is free so long as it is used for the specific purpose it was granted for.
Loans are a good thing as long as there is a good reassurance that the loan will be paid back. I don't mind a loan to Nissan, since they have a number of US factories and have a very solid business. That means more jobs and money for the US.
Loans should NOT be given to US companies that look like they might fail. That's what got the mortgage industry into trouble and helped cause this crisis in the first place. Propping up a failing business is bad practice, but helping a viable business become more viable and more profitable is good practice, especially when you can get a good return on your investment. All we should care about when granting these loans are two things: Will it create more lasting jobs in the US, and will we get are money back and then some. If we start fudging the second one just because it is a US based company, then we'll be headed for more heartache.
Re:Government is exactly backwards (Score:3, Insightful)
Re:It's a Loan. (Score:5, Insightful)
Re:A requirement for the loan (Score:2, Insightful)
They purposefully chose to commit manslaughter with the Pinto after being aware it was unsafe and should have been recalled. That's worth a life sentence, and during my life I will not fund a company that chose to wilfully murder people for profit.
Re:Green Car on a Budget - Innovation Not Required (Score:3, Insightful)
How about an electric car people can actually buy? Innovation not required!
It's not sufficient to build a car that people can buy, it also has to be a car they want to buy, or it won't sell.
Various companies have tried the "rip out the engine of a standard car and replace it with an electric motor" route before, and it doesn't work. You end up selling what looks like a $15,000 car for $35,000, and the car has a top speed of 70 miles an hour, a range of 40 miles, and takes 6 hours to "refill". The public has already said thanks, but no thanks, to that type of product.
If you actually want to sell electric cars, you have to make them good enough that people will want to buy them, and that means designing them from the ground up as electric cars, not retrofitting an electric motor into an inappropriate framework.
Re:More bullshit (Score:4, Insightful)
One question. If the 'general welfare' clause were intended to be as open ended as you guys believe it to be, why did they feel a need to carefully enumerate the powers and limitations in the lines directly under that header?
So we have two competing theories:
1. The 'general welfare' clause, along with the other all purpose commerce clause, grant unlimited powers to the Federal government making the 9th and 10th Amendments (passed as Amendments btw which can override the original document) null and void.
2. The words 'general welfare' appear in the section heading describing the general flavor of the more specific defined powers granted in the section which taken together define the limits of Congress's powers to 'provide for the common defense and general welfare of the United States.'
But since you posted as an AC it is doubtful you will man up and even try to answer.
Re:loans for everyone! (Score:3, Insightful)
(and yes, it is a handout. It's called "gambling with someone else's money". If you go broke anyway, you don't pay it back, because you can't-)
As to why ANY of them are getting any government money,,,,, that would have to do with a certain musty piece of paper, and of a number of politicians who have no use for it.
~
Re:Fleet Car (Score:3, Insightful)
Where does this "electricity" come from? (Score:0, Insightful)
I find it amusing that nobody even mentioned this? Do they really polute less - or are the emmissions just happening somewhere else? ;) (*Cough* Coal, Natural gas, etc.)
Re:Wasted taxpayer dollars (Score:3, Insightful)
> Oh, and management willingly signed every contract that holds provisions in it your find repugnant.
Interesting definition of 'willing' you have there. Places like Detroit aren't in 'right to work' states so once a shop goes union you basically have two choices, sign the contract or close the plant. And you are sitting at the table with a Federal negotiator with unappealable powers to impose 'binding arbitration' so closing the plant is only an option if HE says it is and HE is a political appointee who answers to elected officials much more beholden to the union that management's campaign contributions.
> But yet, it's all the workers fault, and the management that signed these contracts and directly
> managed the company into the ground is blameless.
Blameless? Did I say that? Not only did they give in to suicidal demands they made so many other blunders space doesn't permit a full venting.
But the overriding problem currently facing the US auto makers is the UAW and a real bankruptcy is the only viable way to opening up those contracts. All of the money we are pouring into those companies until that happens is wasted and that is exactly what this is all about, preventing the UAW from taking a reality check. To prevent that centuries of contract law are being shredded, billions of taxpayer dollars wasted, etc. All because the UAW is what is 'too big to fail' but even Obama doesn't have the political capital to actually SAY that. The actual automakers are already valueless so allowing them to fold wouldn't cause much of an economic dislocation beyond what has already happened when the stock and bond holders were left with nothing. The corpse of GM is essentially being used to launder money to the UAW.
The whole house of cards should be allowed to collapse. Management and the investing world would learn the important lesson that taking the easy way out and giving in to insane demands eventually has a price. The unions would learn that excessive greed kills the golden goose. The total collapse of the Michigan political establishment would be a good thing for the state. And everyone would learn that NOBODY is 'too big to fail.'
Re:Nissan? (Score:4, Insightful)
I've been to Europe, so, yes, I have seen and used the public transportation system. (Props to the Netherlands and Germany!) The U.S. just needs to take a look at its infrastructure and wonder whether all of that stimulus might be spent on other endeavors that have a greater impact on the greatest amount of people. We should not be so concerned with keeping the car companies alive for the short term. Let us thing in the long term.
SiO2
Re:A requirement for the loan (Score:3, Insightful)
Yes, government price fixing... That's what we need to save the car industry and promote innovation!
Re:A requirement for the loan (Score:3, Insightful)
Why is the parent modded troll? She quite correctly points out that Ford has received a far larger cheque than Tesla, and essentially for the same general purpose - "improving fuel economy". Yes, this isn't bailout money; but neither is Tesla being bailed out. It's very much a fair apples-to-apples comparison.
Re:Model S (Score:2, Insightful)
You mean like the federal government handing out majority ownership rights over the new GM to the unions that help destroyed it (Obama's loyal supporter base) and shafting the secured bond holders who were legally first in line to be compensated? Sounds a whole lot like your definition.
Re:Geography (Score:3, Insightful)
You can't just take some laid off Mexican auto assemblers from an old GM plant, put them in a new building and tell them to start making Electric car drivetrains -there are probably entirely new process steps (not to mention components) which would make this a non-starter
Let's also be fair here and mention that cars made in Mexico have repeatedly been shown to have quality problems; this has happened again and again with Fords, GMs, and especially VWs; the Golfs made in Mexico are complete shit piles, so they went back to making them in Germany, and now they're some of the most reliable cars there are.
I don't know WHY the cars that come out of Mexico are shit, but they are.
Re:More bullshit (Score:2, Insightful)