In an announcement today at Ford’s research center in Dearborn, Michigan, the U.S. Secretary of Energy will be giving details about the first loans to come out of the government’s $25 billion program to help auto manufacturers. Ford got a $5.9 billion loan, but Tesla Motors, Silicon Valley’s electric car manufacturer, is receiving $465 million from the program. The money will go towards completing the development of its Modern S sedan and its electric power trains, which are being licensed by other car makers such as Mercedes. Last month, Mercedes’ parent company Daimler also invested $50 million for a 10 percent stake in Tesla. That brought the total debt and equity invested in the company to more than $200 million. Now, with the government loan, that brings the total capital raised to $700 million.
If the government is going to be giving out loans to help car makers produce more fuel-efficient vehicles, it is good to see some of that money trickle down to helping electric cars get off the drawing table and into driveways. Tesla plans to use $365 million of the loan to accelerate the production of its Model S sedan, and the remaining $100 million for its electric power train manufacturing plant in California, for which its is in the final stages of negotiating a lease.
At the tail-end of a long blog post yesterday responding to allegations in a lawsuit by Tesla co-founder Martin Eberhard, Tesla CEO Elon Musk reveals that the company is on track to hit profitability next month as it ramps up production of its all-electric Roadster sports car. He also writes that the company has received more than 1,000 pre-orders for the Model S sedan, up from 500 in the first week. At about $50,000 after a tax credit, the Model S will be about half the price of the Roadster. In the post, he explains how the Roadster made possible the sedan:
Tesla is sometimes criticized for the fact that our first car is relatively expensive, implying we thought there was a shortage of sports cars for rich people! Obviously, the transition to electric cars can only occur if they are affordable. However, a low volume and fairly costly product like the Roadster is the only realistic initial option for a small startup trying to create breakthrough technology. New technology in any field takes a few versions to optimize before reaching the mass market and in this case it is competing with 150 years and trillions of dollars spent on gasoline cars.
I want to be clear, though, that we are trying to get there as soon as possible. My main reason for putting so much time and money into helping create Tesla is to speed up the transition to electric cars. This was not a case of rank ordering likely return on investment and concluding that the auto industry was the easiest way to make money! While I’m confident that Tesla will turn out to have a good return for investors, building a car company has to be one of the hardest ways to make a buck.
That $465 million loan should help.
BMW’s parent company Daimler ??? hello??
Daimler BMW’s parent company? You may want to check that again.
err yeah .. I think they meant Mercedes.. wow thats a huge gaff.
Thanks, was writing too fast, fixed.
No, Daimler is NOT BMW’s parent company. They are arch rivals :)
Okay, so that is $700 million and profitable by next month. Let’s set an watch now. He is in charge and there should be no more finger pointing now.
The cash for clunkers program that gives out $4500 for trades that get over 10 MPG should be really profitable for Tesla, seeing how EVERY single car out there qualifies, even 2009s.
http://www.fuel...4clunkers.shtml
You could probably trade any model, even a hybrid for $4500 against a Smart too.
When I was at Google I/O there was a Tesla in the Moscone Garage parked next to me. That was the first time I’ve seen one. Then I saw one on the road. Not very practical for groceries, but whatever.
10 MPG under infinity qualifies automatically.
Even if you had a Smart @ ~50MPG, you could get the full $4500 against a Tesla.
Your vehicle still has to get below 18MPG for you to qualify..
I believe that’s only for trucks Jay.
In a comment based segment I call, what about Canada?
http://picasawe...549268390483426
I would like to point out that Canadians will never get $4500 back from their government because of the linked document. All investors in GM received this doc yesterday.
It proves that people that worked on behalf of the Federal government of Canada poured all your EI insurance money into GM. … and subsequently lost it. Small business in Canada can not buy it’s own workers compensation. You have to pay the govt directly for workers compensation insurance. They sell small businesses this insurance called employer side of EI and QPP for 10 times the cost of workers comp in the USA. You have no choice but to comply because it’s soviet style up there.
They sell this at a flat rate. If your employees are high up on construction beams or if they have a low risk typing job at an office, you pay the same rate, such is communism. Same for all with no regard to details.
OK, with that said, the Canadian mafia, which Gagliano was a large part of along with Cretien, started stealing the EI in the 1990’s funding various programs for clients with it, in exchange theey were given kickbacks. The sponsorship scandal, airbus ect…
They actually gave almost ALL your EI, which was unfairly taken in the first place to GM for kickbacks. I am not a Canadian citizen any longer, I protested this for a long time. Perhaps it’s time to take down Ottawa.
I know how indifferent you all are in Canada, because you were conditioned to be that way. But come on. You have to do something. And get rid of the Queen while you’re at it please.
All crown corporations are chartered by the Queen. None of them have regulations above a single ombudsman or woman. They spend all your money without anyone’s knowledge, and you can do nothing to stop them. They often do it for personal gifts.
Wake up people. Start throwing stones.(figuratively)
If you are Canadian, you should also know that EDP, export development canada, like BDC was set up to give funds to Canadian small business exporting to the USA. You may have seen that multimillion dollar ad campaign that EDC put out on TV which showed them funding a hockey helmet company which exported hockey gear to the US.
Funding GM with EDP money was a violation of their own charter’s conditions, which even beyond the fact that they took the money illegally directly from EI, small business, and gave it to GM for kickbacks, is bad.
This is Yooooouuuuur government of Canada.
Just like Cadman, when you put poor hicks in government, they are easily open to corruption because they never had anything. Cadman was one in a million to resist. 99.9999% of them up there do not, especially not the frenchies.
I apologize for the typo’s. “Lets sit and watch now.”
Last I checked BMW was an independant company, not part of Daimler.
Erick, not much of a car person? Even the article you link to in the beginning, you know, the one that YOU wrote, starts with, “Silicon Valley electric car manufacturer Tesla Motors got another shot in the arm today from German auto giant Daimler, which took a 10 percent stake in the company and expanded its partnership with Tesla to equip future MERCEDES-BENZ vehicles with electric lithium-ion batteries”
“BMW’s parent company Daimler”
lol, what?
So that’s a million dollars for every car they sold so far? Talk about SV culture coming to the auto industry.
I always find it a shame when the government funds anything that should be handled in the marketplace.
And automobiles should 100% be funded privately by entrepreneurs responding to genuine consumer demand.
The government is LOANING money, not purchasing equity outright. The only reason they had to resort to the gov’t loan was due to the fact that all of the banks had all their capital dry up overnight courtesy of the mortgage bubble. They had a private loan ready to go before October 08 hit.
Were it not for gov’t investment, we wouldn’t be sitting here sending messages back and forth over a vast, DARPA invented network.
DARPA was NOT a private company you Moron. the point is the govt should stay out of the business of picking companies it wants to fund either loaning them or investing in them. why is govt selectively loaning to tesla and not to hundreds of other Startups doing much more important work than building yet another car? govt should use regulation to force car companies to produce more fuel efficient cars, not pick winners in the business.
There are hundreds of companies in clean tech, Bio tech, life sciences whose worjt he govt doesn’t understand and which are not as high profile as auto companies that dont get any “LOANS” from the govt.
DARPA was pure research project that helped any company that used the technologies that came out of it.
I completely agree, Chris. Entrepreneurs need to create value propositions that will entice investors and customers to part with their money.
If you have to take money from people by force, your value proposition can’t be very good.
My good sense tells me that the “free market” to which is referred here does not exist in the auto industry.
Detroit-backed marketing, lobbying, and unruly tactics have thwarted a conversion to all-electric vehicles for decades. Free market? Yeah, right.
The government should absolutely step in to help turn the tide. In fact, why give any money to Detroit? Put it all into electric vehicles or better yet, create sustainable urban environments free of the need for vehicles.
It’s a slippery slope but reflects that it is important for the USA to reduce its dependence on Middle Eastern oil. Gas prices currently don’t even begin to cover the military cost of supporting this dependence.
Yes Chris, this amounts to picking winners and losers, and all too often the tilt is toward the loss side. Bureaucrats become enamored with personas, or technologies and they get sucked into supporting a train that really has no wheels. Add in the political ‘requirements’ to get guvment money and you know . . .
Go free market!
Or maybe not.
There is no such thing as a free market when it comes to automobiles in the United States. Internal combustion vehicles are indirectly subsidized by the United States military protecting access to oil in the Middle East. Aircraft carriers in the Persian Gulf, Air bases in Qatar, wars in Iraq, none of these things are free to the taxpayer, but they have all been making cheap fuel for gas guzzlers possible while simultaneously stifling innovation in electric vehicles.
nice level playing field – I’m sure one day Americans will want to plug in their cars – until then we’ll just throw more money away on California
So all those Wall Street banks and big 3 Automobile companies are in California?
I would totally invent an electric car or 2 for $465 million.
especially when it’s backed the the US government…. where’s the risk?
This smells rotten.
Would it not make more sense to build Teslas in one of the now redundant or soon to be closed auto factories, rather than build a new one from scratch in Cali?
I’ve read good things from highly regarded motoring journalists who’ve driven the Tesla Roadster. The Model S is a good looking car, even though (or perhaps because) it apes the Maserati Quattroporte and Jaguar XF. I look forward to getting behind the wheel.
Ian Hendry
CEO, WeCanDo.BIZ
http://www.wecando.biz
Erick, your first link refers to “Modern S” instead of “Model S”.
Good for Tesla for getting this money!
Will Tesla be recycling all the “used” batteries that are a by-product of creating their electric vehicles?
BTW, I’m all for keeping the Monarchy just like it is thank you very much.
I would love to see Quebec try to separate so long as the British Armed Forces are in control of Quebec City!
http://www.ted....ctric_cars.html
All you people … watch this! It’ll give you a better understanding of what’s at stake here !
Hi Erick,
I hope they succeed with their electric cars project. Also wish that electric cars become a reality sooner than later.
Thanks for the great post.
Mani Raj
Havoc Marketing
So we’ll be burning more coal to produce the electricity to charge our electric cars?? How is that environmentally responsible???
(57% of the electricity in the USA is produced by coal.)
Oh, and of course, those batteries will eventually end up in the dump. (Despite the recycling program.)
This is just a way for a bunch of rich guys to get taxpayers money.
Five years from now this company will be out of business and taxpayers will be stuck with the bill.
Why don’t they just invest their money in another competitor to Facebook and keep taxpayers money out of this?
“So we’ll be burning more coal to produce the electricity to charge our electric cars?? How is that environmentally responsible???”
The production of energy through coal fired electricity stations and then output through an 80% efficient motor is much more efficient than regular petrol engines.
“Despite the recycling program”
I promise the value in recycling them is much better than just dumping them – there will be incentives not to dump them.
“This is just a way for a bunch of rich guys to get taxpayers money”
As a commenter pointed out earlier – compare half a billion to the price or wars in the middle east to secure oil.
“Why don’t they just invest their money in another competitor to Facebook and keep taxpayers money out of this”
As we are talking about Elon Musk then yes he did have an internet based company called paypal (bought by Ebay) and he does have another company that builds spacecraft which is partially funded by Nasa to deliver astronauts to the international space station.
If you are interested in learning a little more then watch this:
http://fora.tv/..._with_Elon_Musk
and you’ll probably see why he is so successful.
Coal plants don’t change output power instantly. Tesla’s cars will probably be charged mostly using power that coal plants are producing at night that currently goes unused because shutting down a coal plant at night and then starting it up again the next morning just doesn’t work.
Additionally, Tesla’s cars will transition to clean energy as our electric generating capacity is transitioned.
Given that lithium is potentially in short supply, I doubt people will be any more likely to dispose of those car batteries as trash than they would be to get rid of unwanted gold jewelry via the trash. I suspect recyclers will pay hundreds if not thousands for a used battery pack from any of Tesla’s cars.
Erick,
I believe you were in a rush when writing this article. It is “Model S” not “Modern S”.
Roshan
This is BullS**T, giving loan money to a niche LUXURY car manufacturer, especially in an economic depression.
The price for a Tesla is a whopping $110,000… and its never going to come down to be affordable by the masses. Only the super rich can buy these… they are like Lamborginis.
In an economic depression, these kind of companies are SUPPOSE to get shelved and or go under. Because their products just are not feasible.
I could see giving a loan to someone who was like Volkswagen trying to build a Bug or Tata trying to build a Tata Nano and only if they needed the money (Tata doesn’t). They didn’t because these cars were wildly popular and affordable.
Amen. +1.
umm, model s is a family car and costs ~50k.
booo!
We do not need more government intervention and distortion in this market.
Another $500,000,000.00 to rich people — the give them the car only THEY want that nobody else can afford. Thanks, Mr. President.
Not even THEY, they are targeting a niche market of the upper class Americans.
My father, for example, has said he absolutely does not want to add an electric “sports car” to his collection. He needs the noise, the rumble, and without it it just won’t feel right.
Money well spent Mr. Government :/
The money is great.
But I wonder how much more research is needed for this type of car? The EV1 worked great back in the day. It just seems the car people keep trying to delay a mass produced E-car so that they can keep selling remakes of the same old gas cars.
Great to see that the Tesla hasn’t vanished into obscurity! I remember reading about it a couple of years ago, then never heard of it again. It’s a great concept giving recognition to one of the greatest inventors of our times. At last.
Well it is time for electric cars. I love their marketing tactic.
Introduce fancy and pricey cars, create a hype, build a brand and then sell normal cars at better margins.
It’s a fact that electric vehicles are much cleaner for the environment than gas-powered cars, even when 100% of the electricity comes from coal-fired plants. This is a function of efficiencies including being able to put emissions controls on a few power plants instead of trying to affordably put emission controls on 1,000,000 cars.
Also, Tesla’s first model: $110,000 – second model (Model S) – around $60,000 – their third model is supposed to be around $30,000 and they’re also working with Smart and other companies to produce electric drivetrains for new cars that virtually ANYONE can afford. This isn’t just rich guys “taking” taxpayer money. Look to Wall Street for that.
Rory, put your money where your mouth is at. You have no clue what the future brings for Tesla. They claim that their next car will be $60K, that is not in stone yet. They could run into unexpected obsticles for all we know and sell the Model S for $80K. If you think that anyone can afford $30K cars – then you are in another universe. People are getting their cars, homes and more taken away from them in the middle of the night because they can’t afford their payments. Whomever believes that giving the auto makers more money right now is good is a true and utter moron. You obviously know nothing about the stock market and how this effects it and has been for the last year and a half. Slap Slap – you need to be brought back to earth my friend because our government can’t even afford the money they are handing out right now. Wake up people, we are going to be run by the Republic of China within the next 10 years if we keep this up.
+1
Someone with a brain on these boards.
I’m also happy to see investment into a company that can put the capital to good use, rather than to pay off debts.
this is when i lose confidence in our govt. and our president, i am obama supporter but this decision stinks! when people can’t afford simple things, why in the world give millions of dollars to the company that is building cars for super rich
yes, if you want innovation in electrical cars, give that money to universities that develop the technology and whoever wants to manufacture cars based on that technology can do so on their own!
One of the better uses of the bailout money. Hopefully something would come out of it.
While I agree with some complainers that the method of funding electric car advancement might be improved, I also have to say that Telsa is the first company that comes to my mind when I think about a push for electric cars. I mean I haven’t seen many BEFORE the current administration and this program jumping to put out electric cars, and truly make a shift toward them.
Maybe the only the rich can afford the Roadster, but the t.v., and gasoline car, used to be like that too. IMO one of the key things needed is not only the technology for electric cars, it’s more public interest in them, and to me Telsa has spearheaded that more than anyone else I know.
Does anyone know how the government is going to tax electric cars to offset the lost gas tax revenue?
Good grief! I think you mean the taxpayers have loaned Tesla that money. What did they put up for collateral?
Why in the world are US taxpayers putting up $465 million so millionaires can drive “green” super cars??
Sure, Ford gets a piece of the action, but has anybody noticed that we tacked an additional $1 TRILLION to the national debt in 6 months?
Electric cars are nice and green and fun, BUT, as a taxpayer, I would rather have that money pay down the national debt or be returned as a tax refund.
Tesla has now failed as a private enterprise. There is no way around this. It might succeed as a subsidized organization, but it cannot now *ever* succeed as a private business. Tesla is not a Google, an Apple, or in any way comparable to a successful privately-funded company. Driving a Tesla is about as cool as serving government cheese at a wine tasting.
“One of the better uses of the bailout money”
It’s not bailout money. But I would agree that it’s one of the better uses of tax dollars.
wrong, tax money should stay in the pockets of people.
No person should be subjugated to fund a private enterprise, without so much as a vote.
NO ONE voted for this. Pretty soon we’ll have a Queen of America again and we’ll be as downtrodden as the people to the north of us riddled with corruption and the Sicilian mafia.
It’s a real shame Tesla couldn’t get a loan, but that should have been the end of the company.
This artificial cloud is going to dissipate and they’re going to fall hard to the ground.
The government needs to stay out of it. Otherwise it’s not America anymore, it’s Russia.
http://moneycen...xes/P148855.asp
Married, 2 kids
United States 11.9%
Canada 21.5%
15% sales tax, gas that costs twice as much due to a 55% fuel tax. If you want to import anything from another country because the cost of goods are too expensive here in the US because of the above policies, the tarrif will be no less than 35%.
The tax on small business owners and SCORPs will be about 60-75% total.
Life will become unbearable, the mafia will take hold like in Canada. The people in Louisiana will start to speak french again because of the mayhem, and then everyone will be completely FSCKED.
That is what’s coming if we continue GM, AIG, Tesla, ect….
Anybody that thinks Canada is a great place to live should actually go there. Canada is a dump and most people there would happily do anything, anything at all, to leave.