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Is Tesla the One Automaker the Government Should Consider Bailing Out?

Posted Dec 01, 2008 05:51pm EST by Sarah Lacy in Investing, Venture Capital, M and A, IPOs, Recession, Clean Tech, Autos
The initial vision for TechTicker was to blend commentary from the heart of Silicon Valley and Wall Street, to get the innovation-side and capitalization-side of technology news. One issue in the news today shows why geography matters: Tesla.

Tesla is a Silicon Valley-backed maker of glitzy $100,000-plus electric sports cars. And, if the government is going to spend billions to bail out automakers, Tesla is asking for $400 million to help build out its lower-priced sedan electric cars.

The New York Times cried foul in a column on Sunday and, this morning, Aaron and Henry agreed, saying isn't Silicon Valley the land of free markets?

Says the Valley: If our tax money is going to private businesses, shouldn't we pick a small loan to one that isn't broken? My guest today investor, blogger -- and fellow Californian -- Paul Kedrosky and I agree. We're no fans of any auto bailouts. But if we're going to have them, a comparatively small loan to Tesla may be the only palatable part of this plan.
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114 Comments

Yahoo user
Yahoo user - Monday December 01, 2008 06:01PM EST

Why? Can't sell their 100k junk.....their car has soooooooooooooo many problems.check out some of the blogs. Yeah!!! Lets Scam Valley Nerds run the show now.

Yando
Yando - Monday December 01, 2008 06:16PM EST

Please if we have to subsidize at least help those who are trying to promote green and inventive products which work, even if these goods are purchased by the well to do who would otherwise buy foreign products like Ferrari or Porsche.

Henry
Henry - Monday December 01, 2008 06:16PM EST

You can't randomly select one company for the government to help. Obama's energy plan as well as his recovery tactics call for incentives for energy efficiency and reducing carbon. Tesla (which I believe is a bit of a scam, in that they have no track record in manufacturing for the mass market which is what we need to address, not expensive sports cars) should be treated the same as any company with products that lower the carbon footprint and increase energy efficiency.

letstakeawalk
letstakeawalk - Monday December 01, 2008 06:21PM EST

What about Fisker? They are a Tier-1 supplier to GM, Ford, and the US military. Their Fisker Hybrid sedan will sell for around $80,000 - and their order books are already full. They should be well positioned to be successful! They're partially owned by Quantum Tech, (QTWW)

A
A - Monday December 01, 2008 06:27PM EST

I'd bail out the auto companies ONLY if they commit to electric vehicles like the Volt in a BIG way.

RaulP
RaulP - Monday December 01, 2008 06:37PM EST

Washington doesn't seem to care about high tech companies nearly as much as they do about old money businesses, not surprisingly. This bailout mess is only meant to help the good 'ol boys; everyone else, sit tight and wait for the trickle down, it might be a good long wait.

Ralph B
Ralph B - Monday December 01, 2008 06:49PM EST

Instead of bailing out, why not loaning out to an auto company that is working on a hydrogen car.

you
Yahoo! Finance User - Monday December 01, 2008 06:54PM EST

They need to understand that the "Auto Maker" bailout is really an Auto Union bailout. Tesla cars are built in England, and the bailout doesn't buy enough votes for the politicians to worry about.

Michael B
Michael B - Monday December 01, 2008 07:01PM EST

Why not bail out Tesla, at least they are trying something new and innovative. GM, Ford and Chrysler have been building the same crap for years. The big three should fail, teach the manufacturers and the worthless UAW a lesson. Reward those who are getting off their butts and creating something new. Eventually the Tesla product will work properly, the prices will come down, and everybody will be happy.

Michael B
Michael B - Monday December 01, 2008 07:01PM EST

Why not bail out Tesla, at least they are trying something new and innovative. GM, Ford and Chrysler have been building the same crap for years. The big three should fail, teach the manufacturers and the worthless UAW a lesson. Reward those who are getting off their butts and creating something new. Eventually the Tesla product will work properly, the prices will come down, and everybody will be happy.

Jim
Jim - Monday December 01, 2008 07:01PM EST

Teslas are just not practical, using conventional lithium-ion batteries. Their batteries won't last long, take too long to charge, etc. Phoenix Motorcars' SUTs and SUVs are much better, largely due to the Altair Nanotechnologies' "NanoSafe" batteries (made with lithium nano-tinanate anodes rather than graphite.) If the Government helped Phoenix Motorcars get started churning out these EVs (with the NanoSafe batteries), it would help things in many ways. Totally electric. You could possibly get all your "fuel" from your own solar-panels. But even if you use the power from the power-company... A full $3 charge done overnight at home could take you 130 miles. (Once a week for most people to get to/from work.) With these NanoSafe batteries, a full charge at a commercial "filling station" would only take you 10 minutes (the same time it takes to fill up your gas-tank). The NanoSafe batteries will also last much longer than the vehicle itself ... virtually forever. If you do the math ... Before you lose the first 4% of charging capacity, you will have taken the vehicle thru about a million miles worth of charging/discharging cycles ... and that rate of loss even diminishes the "older" they get. The Phoenix EVs also have a much, much better regenerative-braking percentage than the Teslas, due to what the batteries can handle.

Eldon
Eldon - Monday December 01, 2008 07:07PM EST

wake up people. where do you think the electricity will come from to power these electric cars? It will have to come from coal powered plants, regardless of what big mouths like Al Gore say. So stop calling electric cars pollution free. .

design88
design88 - Monday December 01, 2008 07:22PM EST

DO NOT BAIL ANYONE OUT. THE THREE (USED TO BE CALLED BIG THREE) ARE ASKING FOR LOAN GUARANTEES, NOT BAIL OUT MONEY LIKE THE FINANCIAL INSTITUTIONS RECIEVED. LET'S FACE IT, WITHOUT THE (BIG) THREE SILICON VALLEY DRIES UP AND SO DOES THE REST OF THE USA. AND YES THIS WAS WRITTEN WITH A HINT OF SARCASM. BUY AMERICAN, THE LIFE STYLE YOU SAVED MAY BE YOUR OWN

John
John - Monday December 01, 2008 07:23PM EST

GM has hydrogen cars running around California right now. There is a write up on a GM one in this month's Motor Trend. Besides the very high cost to make such a vehicle, the writer of that article liked it a lot. He couldn't find fuel though without using up half his fuel looking for fuel!!. For those Chemists out there demanding an electric car, go to Wikipedia and look up "Lithium-ion battery." Maybe after reading that, one might gather some insight as to how hard it is to build a battery that lasts ten years, fully discharges every day, doesn't blow up in flames, and works in extreme hot and cold. It turns out that a 400 pound battery equals one gallon of gas at 40 miles per gallon.

you
Yahoo! Finance User - Monday December 01, 2008 07:27PM EST

How many $80k to $100k cars will they sell if everyone is out of work. Every primary manufacturing job spawns seven service sector jobs. The reverse case holds true for jobs lost.

you
Yahoo! Finance User - Monday December 01, 2008 07:34PM EST

But from what I understand that coal energy will be utilized at a higher percentage efficiency in electric cars. While coal is dirty, gasoline cars (and the process for refining) are/is probably dirtier and not EVEN as efficient as electric. From a quick search it looks to be about 20% for gasoline versus 70% for electric.

RichA
RichA - Monday December 01, 2008 07:51PM EST

A bailout for a sports car is rediculous and offensive. People are in fear of losing jobs and homes. Supporting a $100k sports car, where all the design decisions are made for performance, has no value to any other price point. If you want to be serious about electric, then do something useful like promote a Prius factory in America.

John
John - Monday December 01, 2008 07:51PM EST

I hope some of you will read all of this. It shows the development money GM spent and apparently doesn't get much credit for. For all the money they spent, if they could have built them they would have. http://en.wikipedia.org/wiki/General_Motors_EV1

Anthony
Anthony - Monday December 01, 2008 07:52PM EST

Gm had a winner with the EV-1. Sure it was 80,000 but it had broad appeal. The government could have subsidized production of these cars back in 1999 so GM could reach economies of scale and further cut costs. But no Gm sold the battery patent to Chevron and that car is history. Shame on the U.S. automakers.

you
Yahoo! Finance User - Monday December 01, 2008 08:02PM EST

Wake up you guys. The Auto companies are not asking for a "bailout" They are asking for a loan to weather an economic disaster that they did not create. Look to your senator and congressman if you want to blame someone for this mess. The electric car companies like Fisker, Phoenix, and Tesla thought they could do a better job than automotive experts. I think the Tesla was full of problems and delayed over a year from their intial launch. Unheard of in automotive companies. The tesla was even not a new car, it is based on the Lotus. GM, Ford and Chrysler are the inovators here, they were the first to market with many of the performance, pollution, and safety features that we see in cars made all over the world. They make cars that are more fuel efficient than any other automaker in nearly every class of vehicle. If you don't believe if go to fueleconomy.gov and do some comparisons. In most vehicle classes you will find a GM or Ford product at the top. Go to jdpowers and look at dependability and initial quality studies, you will find GM, Ford, and Chrysler at the top in most categories as well. Our system here in America has handicapped the automakers here, our unions, our healthcare and retirement plans that are the companies responsibility. These are burdens that the foreign OEM's have not had to shoulder. Also go do a web search on the value of the yen and its manipulation by the Japanese govt. and its effect on US OEM's competitiveness. or the keretsu's (sp?) where us suppliers are not able to bid on contracts due to these relationships. I could go on and on...... I also would like to point out Sen. Dick Shelby (Al) who is very opposed to bailouts. But what has his homestate provided to Mercedes, Honda, and Hyundai? Nothing but state subsidies in the form of tax abatements, infrastructure, and training of workers to the tune of billions $$. But he opposes loans to US OEM's. What a joke.

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