Tesla Repays Department of Energy Loan Nine Years Early(teslamotors.com)
teslamotors.com
Tesla Repays Department of Energy Loan Nine Years Early
http://www.teslamotors.com/about/press/releases/tesla-repays-department-energy-loan-nine-years-early
191 comments
There's one more reason to repay the loan early: it prevents the US from exercising 3M stock warrants worth about $250M. The fund raising also allowed Elon to borrow money against his other holdings to purchase more Tesla stock off the open market.
Agreed that sustainable profitability is an open question: because Tesla knew they would be raising more money after their first profitable quarter, they could pull put all the stops for maximum profitability, and go back to spending more once the round was in the bank. Will that happen? Unclear. But when you raise money you usually spend it.
Agreed that sustainable profitability is an open question: because Tesla knew they would be raising more money after their first profitable quarter, they could pull put all the stops for maximum profitability, and go back to spending more once the round was in the bank. Will that happen? Unclear. But when you raise money you usually spend it.
Note that they are still selling each car at a material loss; and only managed to show a profitable quarter by trading green credits they gained from their manufacturing.
I'm not sure that's entirely accurate. I'm looking at their quarterly results for Q1 2013: gross profit was $96.3 million, but the ZEV credit sales were only $67.9 million for the quarter. Unless I'm missing something, it would appear that they are profitable even without taking the ZEV credit sales into account.
I'm not sure that's entirely accurate. I'm looking at their quarterly results for Q1 2013: gross profit was $96.3 million, but the ZEV credit sales were only $67.9 million for the quarter. Unless I'm missing something, it would appear that they are profitable even without taking the ZEV credit sales into account.
I believe you are missing something.
"During the first quarter of 2013, we recognized $67.9 million in ZEV sales, which contributed to our gross margin. ZEV credit revenue should decline in future quarters relative to our automotive sales as we grow our sales outside the United States and earn fewer credits on the 60 kWh Model S battery variant for those sales that occur in the United States. Other regulatory credit sales recognized during the first quarter of 2013 were $17.1 million." (1Q2013 10Q, p. 22).
$67.9 + 17.1 = $85M in revenue from ZEV + other regulatory credits. Presuming these credits have a nominal cost-I would imagine they're almost 100% margin, given that they're pieces of paper--that leaves $96.3 - 85 = $11.3M in gross profit from selling cars.
"During the first quarter of 2013, we recognized $67.9 million in ZEV sales, which contributed to our gross margin. ZEV credit revenue should decline in future quarters relative to our automotive sales as we grow our sales outside the United States and earn fewer credits on the 60 kWh Model S battery variant for those sales that occur in the United States. Other regulatory credit sales recognized during the first quarter of 2013 were $17.1 million." (1Q2013 10Q, p. 22).
$67.9 + 17.1 = $85M in revenue from ZEV + other regulatory credits. Presuming these credits have a nominal cost-I would imagine they're almost 100% margin, given that they're pieces of paper--that leaves $96.3 - 85 = $11.3M in gross profit from selling cars.
Ah, good catch! I did miss that note about the $17.1 million. Also, the $11.3M is partly from other stuff - selling drivetrains for the RAV4 EV, selling apparel, etc - not just selling cars. However, it would seem my main point still stands: it's not accurate to say Tesla wouldn't be profitable without the ability to sell energy credits.
The point about green credits in interesting. I suspect you will find many people who argue that it should be considered a legitimate business strategy, and other who view it as an artificial market that could evaporate at any given time depending on the whims of congress.
I still think it's better for the private sector to assume the risk inherent in that debt than it is for the public sector to do so.
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I'm not even mad at noname123 for posting this! I'm not! It's totally legit to make this post, although it's not as good as it could be, it's fine. JUST STOP UPVOTING IT!
WHO IS UPVOTING THIS PREDICTABLY NEGATIVE SHIT ON HN? What is this? How does this happen? I'm just stunned. Every single time. It's never even the "that's awesome! Keep in mind, there's this additional context" posts, it's just the "this isn't actually awesome, here's why" posts.
NO. It's awesome that a private company sold stock that is hot because they're doing well to pay back public debt. Good for fucking them. People wanted to buy it because they see it as valuable, and they paid back the American people with some of that money. Good for them, period.
NO. It's awesome that a private company sold stock that is hot because they're doing well to pay back public debt. Good for fucking them. People wanted to buy it because they see it as valuable, and they paid back the American people with some of that money. Good for them, period.
> WHO IS UPVOTING THIS PREDICTABLY NEGATIVE SHIT ON HN?
People who are interested in views that are contrary to the mainstream and don't want HN to become an echo chamber.
People who value critical, insightful analysis and discussion by people who are willing to question the "party line" of a particular product's marketing department and fan club.
People who don't care about catering to the whims of people who can't stand to read "negative" things on the internet.
> NEGATIVE SHIT
I question this characterization of noname123's comment. The third paragraph I read as healthy skepticism, not negativity for its own sake. It's certainly information that a responsible investor would want to carefully consider.
The comment certainly wasn't "shit," it was well-thought-out and informative. The commenter certainly did his homework.
People who are interested in views that are contrary to the mainstream and don't want HN to become an echo chamber.
People who value critical, insightful analysis and discussion by people who are willing to question the "party line" of a particular product's marketing department and fan club.
People who don't care about catering to the whims of people who can't stand to read "negative" things on the internet.
> NEGATIVE SHIT
I question this characterization of noname123's comment. The third paragraph I read as healthy skepticism, not negativity for its own sake. It's certainly information that a responsible investor would want to carefully consider.
The comment certainly wasn't "shit," it was well-thought-out and informative. The commenter certainly did his homework.
HN needs to not be an echo chamber, but the comment sections are becoming the opposite. If you're trying to justify a really pedantic but generally uniformative post (you say it's informative - how? I suppose you could have missed the 10 earlier HN threads about the stock sale, but it wasn't unknown info) by its third paragraph being healthily skeptical I think you're losing steam.
The problem isn't pointing out these facts - it's framing them as THE narrative and in a purely negative light.
The problem isn't pointing out these facts - it's framing them as THE narrative and in a purely negative light.
Where do you get 40M for the float? Yahoo indicates 73M. Plus doesn't dilution go against all outstanding shares (115M)?
http://finance.yahoo.com/q/ks?s=TSLA+Key+Statistics
http://finance.yahoo.com/q/ks?s=TSLA+Key+Statistics
If I take a step back from this, I'd say it's bad strategy to bet against Elon Musk. IMHO, part of what makes his companies appealing is that he has a remarkable track record of keeping his head down and just getting sh!* done. I'm very impressed with his work ethic and vision and I think Tesla is going to go far.
Secondly, if he is successful and manages to bootstrap and entire electric car industry from the ground up, what kind of effect do you think this innovation is going to have on the world? Think of the massive investment in geopolitical resource availability that will be mitigated by the diversification of fuel options for auto transport.
He already hit one home run with PayPal, hit a triple with SpaceX, and might steal home with Tesla. He's a star player in a very sparse field of real innovators right now.
Disclosure: I also trade TSLA options, but I'm quite bullish on the company.
Secondly, if he is successful and manages to bootstrap and entire electric car industry from the ground up, what kind of effect do you think this innovation is going to have on the world? Think of the massive investment in geopolitical resource availability that will be mitigated by the diversification of fuel options for auto transport.
He already hit one home run with PayPal, hit a triple with SpaceX, and might steal home with Tesla. He's a star player in a very sparse field of real innovators right now.
Disclosure: I also trade TSLA options, but I'm quite bullish on the company.
Musk had very little to do with PayPal. He built a competing product, X.com, which was acquired by PayPal. Musk then served as CEO and if his interview in "Founders at Work" is any indication, he didn't do much besides piss off Max Levchin before stepping down after a relatively short tenure.
I love what Musk has done post PayPal, but no reason to rewrite history here.
I love what Musk has done post PayPal, but no reason to rewrite history here.
>Musk had very little to do with PayPal.
That's rather inaccurate. Musk's company was X.com and Thiel/Levchin/Noseks's was called Confinity. They had a 50/50 merger in early 2000, and at first the new company was called X.com.
Furthermore, Confinity[1] was doing Palm Pilot payments under the PayPal brand[2], while X.com was working on internet money transmission over email. Which idea was more useful in the long run? (hint: if you chose Palm Pilot's - you're wrong)
Much of the disinformation stems from a book called the "The Paypal Wars" written by a Thiel fanboy, that is embarrassingly biased. Musk writes:
"The only negativity in recent years was due to a book called The PayPal Wars, written by a sycophantic jackass called Eric Jackson. This guy was one notch above an intern at PayPal in the first few years of the company, but gives the impression he was a key player and privy to all the high level discussions. Eric couldn't find a real publisher, so Peter funded Eric to self-publish the book. Since Eric worships Peter, the outcome was obvious - Peter sounds like Mel Gibson in Braveheart and my role is somewhere between negligible and a bad seed. However, to his credit, Peter didn't realize the book would be as bad as it was and apologized to me personally at a Room 9 board meeting at David Sacks's home in LA."[3]
Post-merger it's hard to say who did what exactly, and Levchin for example was instrumental in Paypal's anti-fraud system, a key development that allowed the company to navigate around a potentially ruinous situation.
The bottom line is, 3 hyper-smart guys (Thiel, Levchin and Nosek), don't give away essentially 50% of their shares to some someone else (X.com) on a whim. This was a calculated and deliberate decision. Similarly, it's unlikely Musk would have succeeded alone either, and thus why they are all called co-founders of PayPal, Inc.
[1] http://en.wikipedia.org/wiki/Confinity
[2] http://www.halplotkin.com/cnbcs029.htm
[3] http://gawker.com/230076/an-alternate-history-according-to-e...
That's rather inaccurate. Musk's company was X.com and Thiel/Levchin/Noseks's was called Confinity. They had a 50/50 merger in early 2000, and at first the new company was called X.com.
Furthermore, Confinity[1] was doing Palm Pilot payments under the PayPal brand[2], while X.com was working on internet money transmission over email. Which idea was more useful in the long run? (hint: if you chose Palm Pilot's - you're wrong)
Much of the disinformation stems from a book called the "The Paypal Wars" written by a Thiel fanboy, that is embarrassingly biased. Musk writes:
"The only negativity in recent years was due to a book called The PayPal Wars, written by a sycophantic jackass called Eric Jackson. This guy was one notch above an intern at PayPal in the first few years of the company, but gives the impression he was a key player and privy to all the high level discussions. Eric couldn't find a real publisher, so Peter funded Eric to self-publish the book. Since Eric worships Peter, the outcome was obvious - Peter sounds like Mel Gibson in Braveheart and my role is somewhere between negligible and a bad seed. However, to his credit, Peter didn't realize the book would be as bad as it was and apologized to me personally at a Room 9 board meeting at David Sacks's home in LA."[3]
Post-merger it's hard to say who did what exactly, and Levchin for example was instrumental in Paypal's anti-fraud system, a key development that allowed the company to navigate around a potentially ruinous situation.
The bottom line is, 3 hyper-smart guys (Thiel, Levchin and Nosek), don't give away essentially 50% of their shares to some someone else (X.com) on a whim. This was a calculated and deliberate decision. Similarly, it's unlikely Musk would have succeeded alone either, and thus why they are all called co-founders of PayPal, Inc.
[1] http://en.wikipedia.org/wiki/Confinity
[2] http://www.halplotkin.com/cnbcs029.htm
[3] http://gawker.com/230076/an-alternate-history-according-to-e...
My knowledge of this comes directly from the Levchin interview in Founders at Work by YC's own Jessica Livingston. I consider that a primary source.
Regarding the name, PayPal the product -- which included a web app and not just the Palm Pilot product -- launched before the merger. I remember evaluating both x.com and paypal when I was in high school selling computer parts on auction -- at Haggle.com.
Finally, starting your comment with "Sigh, blah blah middlebrow blah blah" just kind of makes you seem.... yeah.
Regarding the name, PayPal the product -- which included a web app and not just the Palm Pilot product -- launched before the merger. I remember evaluating both x.com and paypal when I was in high school selling computer parts on auction -- at Haggle.com.
Finally, starting your comment with "Sigh, blah blah middlebrow blah blah" just kind of makes you seem.... yeah.
So wait... Levchin counts as a primary source but Musk doesn't?
It must be fun to give more weight to the side you support.
It must be fun to give more weight to the side you support.
> So wait... Levchin counts as a primary source but Musk doesn't?
> It must be fun to give more weight to the side you support.
No, actually an interview with Musk is a primary source, too. You realize "primary source" is an actual thing and not just something I made up? Are you trolling or just being argumentative for no reason?
> It must be fun to give more weight to the side you support.
No, actually an interview with Musk is a primary source, too. You realize "primary source" is an actual thing and not just something I made up? Are you trolling or just being argumentative for no reason?
I know that's what the PayPal Wars book implies but Musk has argued against this version of history pretty strongly - http://gawker.com/230076/an-alternate-history-according-to-e.... I imagine the truth is somewhere between the two extremes.
According to the "PayPal wars" book PayPal didn't acquire X.com, it was a 50-50 merger. It is true (again, according to this book written by a PayPaler) that Musk wasn't as important to the PayPal success as the "funder" title would imply, but he did drive innovation into the space as a competitor and then saved the company from the hands a clueless CEO.
It's very hard to say if PayPal would have succeeded without him. For one, it would have probably been much harder for PayPal to raise 100 Mio without the X.com merger. They got that amount shortly before the dotcom crash, so it was crucial for their survival.
It's very hard to say if PayPal would have succeeded without him. For one, it would have probably been much harder for PayPal to raise 100 Mio without the X.com merger. They got that amount shortly before the dotcom crash, so it was crucial for their survival.
> Musk had very little to do with PayPal
That's false.
That's false.
cars are not an innovative technology. Cars that run on electricity existed since the 1920s and only recently mass produced by the likes of Nissan and others. Telsa sells expensive, heavy cars that run on batteries. Yes they are shiny. You know what would be innovative? Mass transit on a mass scale, away from automotive transport...
but there is no money to be made on any market for that..
but there is no money to be made on any market for that..
I don't know what you are talking about. That's about as close to apples and oranges as I can think.
In order to have mass transit, you need to have the MASS part. Mass transit only works in areas with sufficient population density and predictable traffic patterns to make the investment in that infrastructure worthwhile. Electric cars, however, help extend the reach of the existing electrical infrastructure into transportation.
In the area where I live, we have extensive commuter and long-haul rail. I also saw two different Tesla cars on the road in my neighborhood.
The first portable computers were large, heavy, and expensive. Given the technology curve and the total addressable market of transportation, I'd expect we will see much more attention to that solution given the wall we've hit with hydrocarbon based transportation.
In order to have mass transit, you need to have the MASS part. Mass transit only works in areas with sufficient population density and predictable traffic patterns to make the investment in that infrastructure worthwhile. Electric cars, however, help extend the reach of the existing electrical infrastructure into transportation.
In the area where I live, we have extensive commuter and long-haul rail. I also saw two different Tesla cars on the road in my neighborhood.
The first portable computers were large, heavy, and expensive. Given the technology curve and the total addressable market of transportation, I'd expect we will see much more attention to that solution given the wall we've hit with hydrocarbon based transportation.
They already raised all the money prior to this announcement. They raised debt precisely because they didn't want to dilute shareholders (too much) and give existing short positions an easy out. You certainly realize they could have easily funded $1B through shares only at their then stock price level.
Elon predicted $200M capex in the next quarter, mainly to complete tooling and optimize factory processes. He clarified that they are not looking to scale the manufacturing process any further than its current level (400-500 cars/wk).
Stock price is up because Tesla only had $200M in cash equivalents available, which is a pretty small number for a car manufacturer, especially one looking to develop a new model (Model X) for a 2014 release and expanding charging/sales/service infrastructure.
Disclosure: I think technical trading is bullshit.
Elon predicted $200M capex in the next quarter, mainly to complete tooling and optimize factory processes. He clarified that they are not looking to scale the manufacturing process any further than its current level (400-500 cars/wk).
Stock price is up because Tesla only had $200M in cash equivalents available, which is a pretty small number for a car manufacturer, especially one looking to develop a new model (Model X) for a 2014 release and expanding charging/sales/service infrastructure.
Disclosure: I think technical trading is bullshit.
Heh. It's all about the Alpha.
There's something bizarre about griping that they reached profitability from green credits. To clarify, these green credits were voluntarily paid by OTHER CAR COMPANIES like Fiat who did not innovate enough to develop their own green cars. In essence, these credits work similarly to carbon credits or sulfur credits. They are NOT paid by taxpayers or by the government in any way.
It was a capitalist regulation in California designed to provide financial incentives and produce more revenue for innovative green companies. Companies have the option to develop their own green cars, buy credits, or else cede the California market to competitors. Those incentives have been very successful. There are far more new models of low and zero emissions vehicles than ever before.
Remember the popular Saturn EV-1 from fifteen years ago? It and other green vehicles were killed because California removed its regulations mandating production of low emissions vehicles.
It was a capitalist regulation in California designed to provide financial incentives and produce more revenue for innovative green companies. Companies have the option to develop their own green cars, buy credits, or else cede the California market to competitors. Those incentives have been very successful. There are far more new models of low and zero emissions vehicles than ever before.
Remember the popular Saturn EV-1 from fifteen years ago? It and other green vehicles were killed because California removed its regulations mandating production of low emissions vehicles.
they are not free, they are paid by any consumer who directly or indirectly has a relationship with someone who purchases a vehicle from one of the makers who is paying these credits.
Voluntary my ass. If they don't pay what happens? Your fined. Its a tax. It is paid by consumers because they buy cars. If anything its California's way of having people in other states fund their initiatives.
I guess kudos can go to Musk for making sure his company is positioned physically and product wise to make the most from it. It is a disguised transfer from one company to another facilitated by the state. It is not voluntary if a fine results
Voluntary my ass. If they don't pay what happens? Your fined. Its a tax. It is paid by consumers because they buy cars. If anything its California's way of having people in other states fund their initiatives.
I guess kudos can go to Musk for making sure his company is positioned physically and product wise to make the most from it. It is a disguised transfer from one company to another facilitated by the state. It is not voluntary if a fine results
Voluntarily it would take a lot to resist making maximal short-term profits from gas guzzlers for long term unproven gains such as the ones Musk's company has been doing. Are you saying governments shouldn't institute any regulations, including carbon credit systems, and everything should be decided by the free market?
Sure, it's not voluntary, but then again neither is most of the stuff that producers of things do. The consumer demand is the taskmaster, and thanks to government regulations, so is the public interest, in the form of policies designed to reduce carbon emissions and pollution.
I think unqualified free market advocacy amounts to basically a wish for there to be consumer interest only, without any system for representing public interest that uses any signal other than money. But taken to its extreme, the absence of any system to balance the money signal can lead to things like buying up lakes to dump in, or buying up all the judges in a town, just because you can pay off enough people. In a completely free market, if you are rich enough, you can theoretically buy enough institutions and mercenaries and set up enough corrupt judges to let you kill people for fun.
Sure, it's not voluntary, but then again neither is most of the stuff that producers of things do. The consumer demand is the taskmaster, and thanks to government regulations, so is the public interest, in the form of policies designed to reduce carbon emissions and pollution.
I think unqualified free market advocacy amounts to basically a wish for there to be consumer interest only, without any system for representing public interest that uses any signal other than money. But taken to its extreme, the absence of any system to balance the money signal can lead to things like buying up lakes to dump in, or buying up all the judges in a town, just because you can pay off enough people. In a completely free market, if you are rich enough, you can theoretically buy enough institutions and mercenaries and set up enough corrupt judges to let you kill people for fun.
I suspect that the above commenter is skeptical about carbon emissions as a legitimate externality. There are also plenty of people who do not think we should be able to address externalities through legislation.
It is strange though because it is often the people who acknowledge or advocate the use market approaches who later complain about them when they are put in practice.
It is strange though because it is often the people who acknowledge or advocate the use market approaches who later complain about them when they are put in practice.
Usually those proponents advocate the use of market approaches free from governmental intervention; a market where the commodity is a virtual creation (carbon credits) by the government is obviously contrary to their preferences.
(Note: I'm not saying the approach is wrong, I'm just explaining the position. Personally, I still haven't found anyone making a decent libertarian position on the issue. The only ones I've read/listen boiled down to "I'm not a climatologist, but I'm pretty sure it's not a real problem")
(Note: I'm not saying the approach is wrong, I'm just explaining the position. Personally, I still haven't found anyone making a decent libertarian position on the issue. The only ones I've read/listen boiled down to "I'm not a climatologist, but I'm pretty sure it's not a real problem")
Don't confuse free market advocacy with anarchy. Buying up judges, bribing other officials, and other fraudulent transactions, including stuff like misrepresentation of goods and other deceptive business practices, are not necessarily okay in a free market. However, direct government interference is. I don't advocate for a completely dog-eat-dog, caveat emptor society, but I do advocate for one in which those in power cannot control the flow of private wealth (often to their own benefit).
So then who is going to "interfere" on behalf of the society at large? On behalf of the environment? Will individual consumers do what's right for the common good, for the first time in ever?
Look, everyone is part socialist, part capitalist, part communist, part fascist, part anarchist. Just don't fall into the trap of thinking your current favourite blend of these colours is the one true path. If there's one thing you learn looking around the world, there are many blends that have proven to work comparatively well. (And others that clearly don't.)
Look, everyone is part socialist, part capitalist, part communist, part fascist, part anarchist. Just don't fall into the trap of thinking your current favourite blend of these colours is the one true path. If there's one thing you learn looking around the world, there are many blends that have proven to work comparatively well. (And others that clearly don't.)
I don't mean to imply I have the perfect system (though it obviously doesn't contain any errors I'm aware of), but rather that advocating a free market does not imply what he says it implies. Advocating a free market does not imply endorsing bribery and fraud. That was the extent of my point there.
I agree with you but the elephant in the room is, although you may be against "bribery and fraud" how would a community actually stop someone with enough money from doing just that, unless you do in fact have governments and regulations? What is going to balance the money signal? It's not enough to say that you are not for it, but what mechanism would the system actually have to deal with such abuses?
The irony is implicit -- the way to avoid the corruption of government bureacracies is to increase the size and power of said bureacracies.
Again, I am in favor of government, just not its economic interference. Reducing its economic interference actually reduces the motivation for corruption and bribery (not that I think that's enough). Bribery and corruption should still have legal penalties and be prosecuted by the government.
Abuse of wealth should still be a problem, but that doesn't require the government micromanaging that wealth.
Abuse of wealth should still be a problem, but that doesn't require the government micromanaging that wealth.
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I suppose you would argue that we should all just pay all externalities created by the free market even if they would simply bankrupt or kill us.
http://en.wikipedia.org/wiki/Externality
For example, if HSBC knowingly funded murderous, criminal gangs around the world, they should be allowed to finance killing because it helps them pursue profit?
http://www.rollingstone.com/politics/blogs/taibblog/outrageo...
Car companies had a clear choice. They could give up one profitable market or they could take appropriate actions contributing to the cause of reducing smog-related deaths in California. There is a very huge public cost for eliminating these regulations, as was PROVEN to everyone in the 1990s when most green cars were killed on the spot when earlier regulation ended.
http://en.wikipedia.org/wiki/Externality
For example, if HSBC knowingly funded murderous, criminal gangs around the world, they should be allowed to finance killing because it helps them pursue profit?
http://www.rollingstone.com/politics/blogs/taibblog/outrageo...
Car companies had a clear choice. They could give up one profitable market or they could take appropriate actions contributing to the cause of reducing smog-related deaths in California. There is a very huge public cost for eliminating these regulations, as was PROVEN to everyone in the 1990s when most green cars were killed on the spot when earlier regulation ended.
Two points. (1)The externalities are not caused by either the car makers or the oil producers. They are caused by drivers. Driving creates the emissions, and under a fair system drivers should bear the costs. (2) Mandating fuel efficient cars has the same effect on consumption as reducing the cost of gasoline.
#1 is only partly true. California proved most pollution can be stopped by the car's factory-provided emission controls before the driver ever enters the vehicle. The car maker has a great macro effect in reducing pollution. This is hugely important to Los Angeles, which is located in a bowl and has suffered from a considerable number of smog-related deaths and health costs.
#2 is incorrect. They did not mandate fuel efficient cars to reduce consumption. They mandated a certain percentage of zero and near zero emission cars. As an electric vehicle owner, I can reassure you that this does not automatically result in more miles traveled.
#2 is incorrect. They did not mandate fuel efficient cars to reduce consumption. They mandated a certain percentage of zero and near zero emission cars. As an electric vehicle owner, I can reassure you that this does not automatically result in more miles traveled.
Ummm... no. The car companies have three choices: 1) buy credits, 2) pay fines, 3) make low emission cars that earn their own credits. These kind of policies that are designed to prevent the "tragedy of the commons" happen all the time in government. You still might not agree with this type of governing, but your basic facts are wrong.
Don't forget 4) they can leave the market. It's not something they are forced to do in anyway, it is a voluntary choice to continue serving that market.
This is the most important point. The government of California is not god, and generally cannot force a business to do anything if you don't do business there.
All of the companies paying these credits are paying them because they choose to do business in that market.
All of the companies paying these credits are paying them because they choose to do business in that market.
The government is setting a price on the previously unpaid externality of carbon emissions.
The problem with this attitude is that pollution actually does have an economic, social and environmental cost. Putting in place regulations to ensure that the polluters pay that cost, instead of unfairly foisting it on everyone else, is perfectly sensible free market economics.
But it is a perfectly, wonderfully in fact, appropriate example of the government playing the role it is supposed to play by setting the terms of competition in the marketplace. Just as the government says I can't break into your house and take your stuff (which would just be another aspect of market competition, if you really liked your stuff you would have had better locks). If I do, you call the cops and punishment results. This isn't a waste of money or some sort of evil coercion, it's the government setting the rules we play by in a way that benefits everyone. Does the government always do this perfectly? Fuck no! But don't gripe about it when the system actually works!
You must remember that when the government decrees that everyone must do something or else and everyone does it, it is considered voluntary.
Yes, because our government is there by our voluntary action. If we find our government is making us do things involuntarily, we can change it.
What action did I take that constitutes my volunteering of government's legitimacy?
Existing on its soil. You can always move.
That's a little simplistic, don't you think? What about, for example, the minorities who are made to do things involuntarily?
That's what the signers of the Declaration of Independence thought as well.
However, my point wasn't about whether the government could be changed, how it could be changed, or what it could be changed to; but that its monopoly on the use of force doesn't make the actions people take based on its rules voluntary.
However, my point wasn't about whether the government could be changed, how it could be changed, or what it could be changed to; but that its monopoly on the use of force doesn't make the actions people take based on its rules voluntary.
People don't like that those credits are temporary, subject to the whim of the government, and the entire source of Tesla's current profitability. It's a pretty big asterisk - you can't blame people for pointing it out.
How many emissions do you suppose get emitted by all the metal, plastic, and rare metals that get dug up to create a tesla. What exactly is green about it?
Wouldn't it be more green for our society to pay for mass transit instead?
But apparently the only way to get something done is through companies and the market...
Wouldn't it be more green for our society to pay for mass transit instead?
But apparently the only way to get something done is through companies and the market...
The concern is that as they sell more cars outside of the US and California where there are no credits, it will decrease their margin.
[deleted]
> selling each car at a material loss
Is that true? I know the company overall would not have turned a profit without the credits but was under the impression that they currently had positive gross margins on the Model S.
Is that true? I know the company overall would not have turned a profit without the credits but was under the impression that they currently had positive gross margins on the Model S.
Gross margin, and it's tiny without the credits. Tesla's most recent quarter resulted in an operating loss and a net loss.
Edit: my bad. Seems the net income was slightly positive last quarter (with regulatory credits included, without them it's a big old negative).
Edit: my bad. Seems the net income was slightly positive last quarter (with regulatory credits included, without them it's a big old negative).
Even without regulatory credits included, they made a profit. Check the filing: total profit for the quarter was $96.3 million, and revenue from ZEV and other regulatory credits was only about $85M.
But the Model S itself is gross margin positive? That's all I was wondering.
The gross margin is 17%, but I was surprised to learn that includes ZEV credits.
From 10Q: >During the first quarter of 2013, we recognized $67.9 million in ZEV sales, which contributed to our gross margin.
http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-13-...
From 10Q: >During the first quarter of 2013, we recognized $67.9 million in ZEV sales, which contributed to our gross margin.
http://ir.teslamotors.com/secfiling.cfm?filingID=1193125-13-...
I didn't see it broken out in the financials, but I didn't look terribly hard. I don't think it's unreasonable to assume it's similar to the overall gross margins in the low single digits (2% by my math - ignoring emissions credits).
"Make no mistake, this is as much a PR ploy by Tesla to pump up their offering."
I don't get your negativity here. The fact that a major green tech company working with government support is able to shift financing over to the private market is, indeed, a remarkable feat and is absolutely something they have a right to crow about. The government, too — it's an example of a progressive system working as designed.
As for PR's impact to stock price...TSLA is 70% institutional owned. Anybody with a material stake in the company is savvy enough to know that they're not suddenly self-sustainably cash-flow positive.
I don't get your negativity here. The fact that a major green tech company working with government support is able to shift financing over to the private market is, indeed, a remarkable feat and is absolutely something they have a right to crow about. The government, too — it's an example of a progressive system working as designed.
As for PR's impact to stock price...TSLA is 70% institutional owned. Anybody with a material stake in the company is savvy enough to know that they're not suddenly self-sustainably cash-flow positive.
I don't get your negativity here.
It didn't read as negative.
It didn't read as negative.
Ploy, Noun: A cunning plan or action designed to turn a situation to one's own advantage.
Synonyms: trick
It definitely has a negative connotation.
It definitely has a negative connotation.
Can we get away from splitting hairs here? Would we rather he have said:
"Make no mistake, this is as much a PR cunning plan or action designed to turn a situation to one's advantage by Tesla to pump up their offering."
? A synonym may be trick. But the definition you cited fits what was happening perfectly without intending the synonym. Synonyms aren't always interchangeable due to nuances in meaning differences.
"Make no mistake, this is as much a PR cunning plan or action designed to turn a situation to one's advantage by Tesla to pump up their offering."
? A synonym may be trick. But the definition you cited fits what was happening perfectly without intending the synonym. Synonyms aren't always interchangeable due to nuances in meaning differences.
Seriously. I feel like sometimes people argue not in regards to the content but actually to be right. They WILL split hairs just to be right.
[deleted]
Not to me. Any plan designed to turn a situation to one's own disadvantage is by definition foolish.
"I don't get your negativity here."
I didn't get the negativity. He was just stating a reasonably deduced thought.
I didn't get the negativity. He was just stating a reasonably deduced thought.
it's really hard to find a phrase starting with "make no mistake" that doesn't culminate with a negative or dismissive slam.
As urbandictionary puts it, "a weasel-y, thought-terminating phrase that is supposed to lend gravitas to a weak position in an argument. Used by doomsayers and the overly dramatic."
As urbandictionary puts it, "a weasel-y, thought-terminating phrase that is supposed to lend gravitas to a weak position in an argument. Used by doomsayers and the overly dramatic."
Considering the terms of the government loan were very favorable (rates equal to the interest rates on Treasury notes in 2010) it doesn't make sense to me that they would want to pay it off early and get rid of all that liquidity. As a quickly growing company didn't they have something better to spend that $450 million on?
Well there are some restrictions imposed on Tesla by this load.
See http://www.businessinsider.com/elon-musk-borrows-150-million...
There is says that the loan requires Musk to have a 65% ownership of the company which of course is expensive to maintain when they are raising money.
See http://www.businessinsider.com/elon-musk-borrows-150-million...
There is says that the loan requires Musk to have a 65% ownership of the company which of course is expensive to maintain when they are raising money.
I interpret it as a way to keep competitors at bay. "The public markets can fund electric cars. No more government loans are needed for us, or anyone else for that matter."
Like a butt-load of positive PR? I think they calculated that the positive PR value (or maybe mitigating negative PR) was worth the incremental cost of capital from the normal markets vs. from the DOE
They paid it off early because the loan came with restrictive agreements that prevented Tesla to stay competitive. This is from Tesla's own words, see my post.
https://news.ycombinator.com/item?id=5755082
Yeah, that puzzled me too. The PR couldn't be worth that much, could it? How could the interest possibly be more expensive than the stock dilution?
Unless they just don't like having debt outstanding which seems understandable... though with debt that cheap...
Unless they just don't like having debt outstanding which seems understandable... though with debt that cheap...
"TSLA rose on the news despite diluting shareholders is because coupled with the announcement, Elon Musk mentions that he will personally put an additional 100mil into the secondary offer"
Dilution doesn't care who does the diluting - a share issued to Elon Musk dilutes as much as a share issued to TIAA-CREF. Regarding the double down, I do not believe Elon Musk's commitment to Tesla was in doubt previously. Its effects were probably limited to the marketing of the issue.
More critical is: (a) TSLA maturing to where it can issue debt (albeit, of the convertible type), (b) its extrication from a volatile political situation, and, (c) its new liquidity buffer. I do not think it is appropriate to characterise it as a "PR ploy". As you mentioned, they are still unit loss-making - that those losses need to be financed is more than superficial.
Dilution doesn't care who does the diluting - a share issued to Elon Musk dilutes as much as a share issued to TIAA-CREF. Regarding the double down, I do not believe Elon Musk's commitment to Tesla was in doubt previously. Its effects were probably limited to the marketing of the issue.
More critical is: (a) TSLA maturing to where it can issue debt (albeit, of the convertible type), (b) its extrication from a volatile political situation, and, (c) its new liquidity buffer. I do not think it is appropriate to characterise it as a "PR ploy". As you mentioned, they are still unit loss-making - that those losses need to be financed is more than superficial.
I've been a vocal critic of Tesla and the DoE loan program, and I'm really glad to see Tesla pay off the loan and move into private markets. I want to root for this company to succeed and now I feel like I can do that. Taxpayers still got ripped off given the size of the loan relative to the company, and the huge downside risk, but I'm glad Musk pulled it off!
It's these type of posts that make it to the top of a thread that make me not want to check into HN.
Can't we celebrate a company, that was called out as a bad stimulus target during the presidential debates actually paying back all their loans ahead of time? If there was one place I hoped I could go to celebrate an innovative company's success, it would be HN.
I take particular issue with, "Make no mistake, this is as much a PR ploy by Tesla to pump up their offering."
Paying back $450mm in loans isn't just a "ploy" - it's actually raising the money and sending it back to the taxpayers. And, at the same time, doing something innovative and forward looking - building electric cars - which, (look at Fisker) - is NOT a slam dunk, even with green credits.
I, for one, am applauding Tesla today. We can do that without saying that they will be successful in everything, and in the future. But today they are.
Can't we celebrate a company, that was called out as a bad stimulus target during the presidential debates actually paying back all their loans ahead of time? If there was one place I hoped I could go to celebrate an innovative company's success, it would be HN.
I take particular issue with, "Make no mistake, this is as much a PR ploy by Tesla to pump up their offering."
Paying back $450mm in loans isn't just a "ploy" - it's actually raising the money and sending it back to the taxpayers. And, at the same time, doing something innovative and forward looking - building electric cars - which, (look at Fisker) - is NOT a slam dunk, even with green credits.
I, for one, am applauding Tesla today. We can do that without saying that they will be successful in everything, and in the future. But today they are.
> It's these type of posts that make it to the top of a thread that make me not want to check into HN.
Posts that provide insightful explanation about the story? Yes, less of that and more unqualified positive gushing, please. There is nothing wrong with offering an informed opinion, even if (especially if) it's not in full alignment with the prevailing attitude of the hivemind.
Posts that provide insightful explanation about the story? Yes, less of that and more unqualified positive gushing, please. There is nothing wrong with offering an informed opinion, even if (especially if) it's not in full alignment with the prevailing attitude of the hivemind.
Man, I'm really not sure that you could have missed his point any more. How could you read what he wrote and POSSIBLY think he was arguing that we need "more unqualified gushing"? You pretty much just made up a strawman and beat the bejesus out of it for no reason...
I'll be the first to call out unqualified gushing, but if that's what we're calling a factual account of a company paying back a loan I simply have to disagree with you.
I'll be the first to call out unqualified gushing, but if that's what we're calling a factual account of a company paying back a loan I simply have to disagree with you.
> It's these type of posts that make it to the top of a thread that make me not want to check into HN.
> Can't we celebrate a company, that was called out as a bad stimulus target during the presidential debates actually paying back all their loans ahead of time? If there was one place I hoped I could go to celebrate an innovative company's success, it would be HN.
It's right there in black in white: "I don't like that we have posts that aren't strictly celebratory in nature" (at least about Tesla). For the record, I'm most definitely a fan of Tesla and have utmost respect for the company, but that didn't stop me from appreciating the critical view of this story that was offered by noname123 (in which I learned some things I didn't know about).
> Can't we celebrate a company, that was called out as a bad stimulus target during the presidential debates actually paying back all their loans ahead of time? If there was one place I hoped I could go to celebrate an innovative company's success, it would be HN.
It's right there in black in white: "I don't like that we have posts that aren't strictly celebratory in nature" (at least about Tesla). For the record, I'm most definitely a fan of Tesla and have utmost respect for the company, but that didn't stop me from appreciating the critical view of this story that was offered by noname123 (in which I learned some things I didn't know about).
Wait a minute did you just make up a quote out of thin air and misattribute it to someone else saying "it's right there in black [and] white"?
The quote was at the start of my comment, after which I offered a way of reiterating it.
No, he is responding to the initial branch. The quote is there in black and white
I don't see the quote anywhere, either.
This particular "informed opinion" contained nothing other than a repetition of the facts already present in the press release, packaged together with a little disdain-flavored "commentary".
If celebrating the actions of trendy companies and founders is what you're after, the vast majority of Hacker News should be very satisfying to you. Comments like the one you replied to are much rarer.
It's not the case that we have to blindly praise a company - but calling something as significant as raising $450mm in the public markets to pay back the government loans a "PR Ploy" saddens me, because that was a very real, and impressive accomplishment.
Musk/Tesla aren't without their issues, and, as John Siracusa showed us on "Hypercritical" - you can simultaneously appreciate something but still point out all of its flaws in glorious detail -but it's the frequent reflex to use the pejorative when describing intent or action, even on a good day like this, that brings down the tone of conversation.
Musk/Tesla aren't without their issues, and, as John Siracusa showed us on "Hypercritical" - you can simultaneously appreciate something but still point out all of its flaws in glorious detail -but it's the frequent reflex to use the pejorative when describing intent or action, even on a good day like this, that brings down the tone of conversation.
Ultimately Tesla is in the business of public opinion. Paying back the goverment far ahead of schedule when there is no need to necessarily do it, considering fairly favourable terms for the loan, can be considered a "PR Ploy" to play to that public opinion. After all, wouldn't they have just stated the fact and not compared themselves to other car manufacturers, even going to lengths to spell out the fact that they weren't bailed out?
It is not a bad thing, after all it is a smart move and one done so by good businessmen. But blindly assuming they are doing this from the good of their hearts "because we want to do the right thing and pay back our government" is just naive. I don't think you should consider the above as a negative comment either, there are those among us who value the business rational behind the decision, and don't get caught up in the PR fluff. I think everyone here respects and admires what Elon Musk is doing, and doing well.
It is not a bad thing, after all it is a smart move and one done so by good businessmen. But blindly assuming they are doing this from the good of their hearts "because we want to do the right thing and pay back our government" is just naive. I don't think you should consider the above as a negative comment either, there are those among us who value the business rational behind the decision, and don't get caught up in the PR fluff. I think everyone here respects and admires what Elon Musk is doing, and doing well.
Didn't the loan place a lot of restrictions on them? You have to trade off the low interest rate against that, especially when the rate they are getting with the bonds isn't that much worse.
I didn't read this comment nearly as negatively as you seemed to have.
It was a gut reaction to the "PR ploy to Pump" phrasing - which made TSLA sound like some kind of boiler-room operation engaging in shady behavior. Also, it would have been nice to come to HN and see the top rated article on TSLA calling out all the positives, rather than focussing no the Debt, Dilution, Loss that TSLA is experiencing.
It's important to take time to celebrate victories, ours, and the people/organizations we look up to.
It's important to take time to celebrate victories, ours, and the people/organizations we look up to.
Facts about debt, dilution, and loss are extremely interesting and relevant to the story. Moreover, it seems like the worst thing he had to say about TSLA is that they're very good at marketing. Which is pretty important for a car company.
The HN problem is with middlebrow dismissals at the top of threads. I'd submit that the comment at the top of this one is neither "middlebrow" nor dismissive.
The HN problem is with middlebrow dismissals at the top of threads. I'd submit that the comment at the top of this one is neither "middlebrow" nor dismissive.
"gut reaction to the "PR ploy to Pump" phrasing"
Without agreeing or disagreeing that it was a ploy or not I will say that my gut to "Pr ploy" is actually positive since success with PR is an essential ingredient to success overall. I don't look down up it in any negative sense at all.
Without agreeing or disagreeing that it was a ploy or not I will say that my gut to "Pr ploy" is actually positive since success with PR is an essential ingredient to success overall. I don't look down up it in any negative sense at all.
Tesla takes money out of people's pockets (the tax payers)and gives rich people fancy cars to drive. Not sure how to celebrate that...
They payed back their loan to the tax payers by taking out a loan from someone else, not by selling a car at a profit and making a successful product.
They payed back their loan to the tax payers by taking out a loan from someone else, not by selling a car at a profit and making a successful product.
Thank you for providing an actual middlebrow dismissal for comparative purposes.
I think they took a loan guarantee from DOE because nobody else was lending money back then and they needed funding to develop the Model S.
If my memory serves me right, they didn't need that funding to develop the Model S, they just took it to make the whole process a little bit less risky.
>> It's these type of posts that make it to the top of a thread that make me not want to check into HN.
I disagree. This is actually the kind of posts that makes me want to check into HN. The poster knows what he talks about and he shares his view on the matter.
For comparison, read the Reddit comments about the same link: http://www.reddit.com/r/technology/comments/1evskd/tesla_rep...
.. and next time, please skip the fallacy of attacking something irrelevant, i.e. what kinds of posts you like and what you think fits on HN, instead of the argument itself.
Notice: I'm only annoyed by the first two lines of your post, the rest I think is a valid argument.
I disagree. This is actually the kind of posts that makes me want to check into HN. The poster knows what he talks about and he shares his view on the matter.
For comparison, read the Reddit comments about the same link: http://www.reddit.com/r/technology/comments/1evskd/tesla_rep...
.. and next time, please skip the fallacy of attacking something irrelevant, i.e. what kinds of posts you like and what you think fits on HN, instead of the argument itself.
Notice: I'm only annoyed by the first two lines of your post, the rest I think is a valid argument.
I love that these types of comments are at the top of Hacker News. They add valuable information to the discussion. I don't understand how you expressing your admiration for Tesla is at odds with the interesting factual background of the comment you responded to.
I can't get a clear picture on how much Tesla's success is a result of government subsidies, loans, and windfalls.
For example, at one point Musk said 10% of their revenue was from selling carbon credits they get for each car they sell to other car companies.
What's difficult for me is there's no place where you can get a decent summary of the kind of government programs Tesla relies on or takes advantage of.
For example, at one point Musk said 10% of their revenue was from selling carbon credits they get for each car they sell to other car companies.
What's difficult for me is there's no place where you can get a decent summary of the kind of government programs Tesla relies on or takes advantage of.
I agree. Let's applaude the lone electric car success.
i dont think you understand...
sim1a.com
I usually don't comment, but I'm surprised that I haven't seen anyone mention what I think is the most important part of the story.
The DOE loan was an attractive low-interest loan. Why would they repay it early? Because the DOE loan had restrictive agreements that prevented Tesla to stay competitive.
From page 44 of their May 10th Quarterly Report SEC Filing:
"Our DOE Loan Facility documents contain customary covenants that include, among others, a requirement that the project be conducted in accordance with the business plan for such project, compliance with all requirements of the ATVM Program, and limitations on our and our subsidiaries’ ability to incur indebtedness, incur liens, make investments or loans, enter into mergers or acquisitions, dispose of assets, pay dividends or make distributions on capital stock, prepay indebtedness, pay management, advisory or similar fees to affiliates, enter into certain affiliate transactions, enter into new lines of business and enter into certain restrictive agreements. These restrictions may limit our ability to operate our business and may cause us to take actions or prevent us from taking actions we believe are necessary from a competitive standpoint or that we otherwise believe are necessary to grow our business. In addition, our DOE Loan Facility also contains a variety of customary financial covenants, including covenants related to current ratio, leverage ratio, interest coverage ratio and fixed charge coverage ratio. We modified certain of these covenants in February 2012, September 2012, and again in March 2013."
The DOE loan was an attractive low-interest loan. Why would they repay it early? Because the DOE loan had restrictive agreements that prevented Tesla to stay competitive.
From page 44 of their May 10th Quarterly Report SEC Filing:
"Our DOE Loan Facility documents contain customary covenants that include, among others, a requirement that the project be conducted in accordance with the business plan for such project, compliance with all requirements of the ATVM Program, and limitations on our and our subsidiaries’ ability to incur indebtedness, incur liens, make investments or loans, enter into mergers or acquisitions, dispose of assets, pay dividends or make distributions on capital stock, prepay indebtedness, pay management, advisory or similar fees to affiliates, enter into certain affiliate transactions, enter into new lines of business and enter into certain restrictive agreements. These restrictions may limit our ability to operate our business and may cause us to take actions or prevent us from taking actions we believe are necessary from a competitive standpoint or that we otherwise believe are necessary to grow our business. In addition, our DOE Loan Facility also contains a variety of customary financial covenants, including covenants related to current ratio, leverage ratio, interest coverage ratio and fixed charge coverage ratio. We modified certain of these covenants in February 2012, September 2012, and again in March 2013."
Not terribly surprising. I've seen HUD loans up close, and if DOE loans are anything like HUD loans, they are a nightmare. Audits, escrows, and complexity 'til the cows come home.
Thanks for digging that up though, I was wondering why they refinanced it, as I assume the interest rate was pretty good.
Thanks for digging that up though, I was wondering why they refinanced it, as I assume the interest rate was pretty good.
I own Tesla stock and I'm glad to see this. Tesla has been a highly politicized stock... largely because Mitt Romney and Sarah Palin called it a "loser." My hope is that this will help get rid of that stigma and help them with their image and political battle with dealerships in red states, like North Carolina and Texas. This also removes some strings attached to the DOE loan. For instance, Tesla could be acquired (although I find that unlikely).
It's crazy to see that a "red" state, you know the champions of free-market and capitalism, would support such laws that restrict any manufacturer from selling directly to consumers. The obstacles being thrown in Tesla's path from the dealership associations fly in the face of capitalism and free enterprise. Before Tesla, I wasn't aware that these types of laws existed.
Crony capitalism is one of the few issues both Democrats and Republicans see eye to eye on. Each party has their specific business favorites, but it's sadly a bipartisan problem.
Don't forget, we tried to make Tesla dealerships illegal first here in Mass. NC was late on that one, so let's not make it a "Red State" matter.
I agree, the dealership issue is not a red/blue state issue. It's one less criticism that can be used against Tesla... one that would likely be more effective in red states.
It's a preservation of money and industry matter.
Ever heard of the Tucker? It was the Tesla of its day. So Detroit sued them out of existence.
[deleted]
Clips from Fox on Tesla
http://www.youtube.com/watch?v=WcHkIWkecY8
I wondered if the payback a political move; something to make the U.S. government look good after the problems with Solyndra and Fisker Automotive. Mentioning the other auto companies doesn't sound like an attempt to make the government look good, though, just Tesla.
KPMG predicts an 85% fall in the number of cars required (long term).
Who do you think GOOG will turn to for the driverless cars? A big player or a little guy that can still grow in a shrinking market?
Who do you think GOOG will turn to for the driverless cars? A big player or a little guy that can still grow in a shrinking market?
The subtitle says: "ONLY AMERICAN CAR COMPANY TO HAVE PAID BACK GOVERNMENT"
Assuming that's true, I'm not sure whether I should be proud of Tesla, ashamed of our Government, or angered at other car companies. Probably all three...
Assuming that's true, I'm not sure whether I should be proud of Tesla, ashamed of our Government, or angered at other car companies. Probably all three...
Why be mad at anything? At most be mad at car makers for running so leveraged that they had liquidity problems at the same time that all the major lenders in the financial system ran into solvency problems (and feel free to be mad at the financial sector)
But given that, it was _excellent_ government policy to guarantee loans to the automakers, just from a cost/benefit perspective. And there's no shame in not going above and beyond the repayment terms of a loan - but good for Tesla for doing so (and great marketing).
But given that, it was _excellent_ government policy to guarantee loans to the automakers, just from a cost/benefit perspective. And there's no shame in not going above and beyond the repayment terms of a loan - but good for Tesla for doing so (and great marketing).
GM was in trouble long before the 2008 crash: http://www.thetruthaboutcars.com/2008/06/general-motors-deat... (in June 2008, they were already up to part 181 in their series)
Also, guaranteed loans for automakers might be excellent compared to other government policy, but given that Ford didn't take a loan, and there are many foreign companies which didn't need loans, the existence of any benefit from subsidizing more poorly-run automakers is questionable.
Also, guaranteed loans for automakers might be excellent compared to other government policy, but given that Ford didn't take a loan, and there are many foreign companies which didn't need loans, the existence of any benefit from subsidizing more poorly-run automakers is questionable.
Ford did get a $5.9B loan from the same DOE program as Tesla though.
https://lpo.energy.gov/our-projects/
https://lpo.energy.gov/our-projects/
> Also, guaranteed loans for automakers might be excellent compared to other government policy, but given that Ford didn't take a loan, and there are many foreign companies which didn't need loans, the existence of any benefit from subsidizing more poorly-run automakers is questionable.
FWIW, Ford's CEO disagreed, which is both why he went to Congress in 2008 to argue for the bailout, and defended the bailout in 2012 as having been good for the country, the industry, and Ford even though Ford wasn't a direct beneficiary [1].
[1] http://articles.latimes.com/2012/apr/19/news/la-ol-ford-ceo-...
FWIW, Ford's CEO disagreed, which is both why he went to Congress in 2008 to argue for the bailout, and defended the bailout in 2012 as having been good for the country, the industry, and Ford even though Ford wasn't a direct beneficiary [1].
[1] http://articles.latimes.com/2012/apr/19/news/la-ol-ford-ceo-...
Well yeah. The bailout terms were heavily slanted towards the unions. Of course Ford preferred the bailout to competing against some company which might buy all the assets at bankruptcy prices and then hire workers on much more favorable terms.
>some company which might buy all the assets at bankruptcy prices and then hire workers on much more favorable terms.
You do realise that care companies are one of the most asset-heavy companies in the world right? Nobody would have been able to pick up the pieces in a credit-crunch recession. Independently of that, there would still have been a long period between the shutdown of the company and it being picked up, and in the meantime tier-N companies would all suffer greatly as well.
You do realise that care companies are one of the most asset-heavy companies in the world right? Nobody would have been able to pick up the pieces in a credit-crunch recession. Independently of that, there would still have been a long period between the shutdown of the company and it being picked up, and in the meantime tier-N companies would all suffer greatly as well.
>Nobody would have been able to pick up the pieces in a credit-crunch recession.
All the pieces? No. But some. With a chance at picking up an additional 10+% of the US market, you don't think Toyota or similar could get enough credit to buy a couple factories and hire the better half of the laid-off workers?
All the pieces? No. But some. With a chance at picking up an additional 10+% of the US market, you don't think Toyota or similar could get enough credit to buy a couple factories and hire the better half of the laid-off workers?
[deleted]
> the existence of any benefit from subsidizing more poorly-run automakers is questionable
The automotive sector is one of the few manufacturing industries which hasn't totally packed up its bags and moved out of the USA entirely. They employ a lot of workers in politically important states and have powerful labor unions.
I live in an area that's been through tough times when a lot of industry went overseas c. 1980-2000, and much of the local political attitude is "government should do whatever it takes to keep plants from closing" -- not just among those directly employed by automakers and dozens of smaller suppliers, but among the entire community, since there's a feeling that dollars from those factory jobs indirectly support every local business.
I feel that the automotive bailout was a direct bribe to communities like mine, to calm the anger over the Wall Street bailouts by giving us a piece of the pie.
I think the whole thing stank, and voted accordingly -- not that I have any illusions that the current or future US government is or will be any better than it was in 2008-2009.
The automotive sector is one of the few manufacturing industries which hasn't totally packed up its bags and moved out of the USA entirely. They employ a lot of workers in politically important states and have powerful labor unions.
I live in an area that's been through tough times when a lot of industry went overseas c. 1980-2000, and much of the local political attitude is "government should do whatever it takes to keep plants from closing" -- not just among those directly employed by automakers and dozens of smaller suppliers, but among the entire community, since there's a feeling that dollars from those factory jobs indirectly support every local business.
I feel that the automotive bailout was a direct bribe to communities like mine, to calm the anger over the Wall Street bailouts by giving us a piece of the pie.
I think the whole thing stank, and voted accordingly -- not that I have any illusions that the current or future US government is or will be any better than it was in 2008-2009.
I'm not an economist, but this is how I understand it. GM paid back it's debt in full, but it paid most of it back in stock. The US government has sold some of it, so it's gotten about half of it's bailout back in cash. But, it still has a ton of GM stock. It's selling the stock slowly to avoid disrupting the market.
That being said, the government needs to sell at something like $75/share to make their money back, but it's at $33 as I write this.
Source: http://www.fool.com/investing/general/2013/05/09/when-will-g...
That being said, the government needs to sell at something like $75/share to make their money back, but it's at $33 as I write this.
Source: http://www.fool.com/investing/general/2013/05/09/when-will-g...
>> GM paid back it's debt in full, but it paid most of it back in stock. ... the government needs to sell at something like $75/share to make their money back, but it's at $33 as I write this.
So they "paid" their debt with something that 1) isn't worth enough to cover their debt and may never be 2) gives the government a financial interest in continuing to keep them afloat.
Pretty nice deal if you can get it.
So they "paid" their debt with something that 1) isn't worth enough to cover their debt and may never be 2) gives the government a financial interest in continuing to keep them afloat.
Pretty nice deal if you can get it.
This announcement doesn't really have anything to do with GM (or even apply to them) in anything but the "we gave them a loan" sense.
From the linked article:
"This program is often confused with the financial bailouts provided to the then bankrupt GM and Chrysler, who were ineligible for the ATVM program, because a requirement of that program was good financial health."
From the linked article:
"This program is often confused with the financial bailouts provided to the then bankrupt GM and Chrysler, who were ineligible for the ATVM program, because a requirement of that program was good financial health."
Yeah, I thought that was confusing. "We're the only", "but in some circumstances we're not really talking about everyone". I thought it was worth answering the question "did GM pay back it's loan" because GM is the largest and most notorious recipient of US loan money.
Maybe Tesla really did mean "We're the only American company who received an ATVM loan to pay it back." But, if so, they're being intentionally misleading.
Maybe Tesla really did mean "We're the only American company who received an ATVM loan to pay it back." But, if so, they're being intentionally misleading.
I'm sure there was some money wasted along the way, but this makes me think of the often-quoted (around here at least) anecdote that VCs succeed not by getting decent returns across the board but by having one or two "home runs".
If Tesla is the home run that this ATVM program made possible, maybe it doesn't matter if all the rest end up defaulting on the loans (which this article doesn't even imply, Tesla seems to have just paid back the loan early). Obviously the economics of government loans aren't exactly the same as those of VC investments, but making the large-scale production of electric cars economically feasible is a huge accomplishment that seems like it'd be worth the cost of this whole program.
If Tesla is the home run that this ATVM program made possible, maybe it doesn't matter if all the rest end up defaulting on the loans (which this article doesn't even imply, Tesla seems to have just paid back the loan early). Obviously the economics of government loans aren't exactly the same as those of VC investments, but making the large-scale production of electric cars economically feasible is a huge accomplishment that seems like it'd be worth the cost of this whole program.
As you noted, the problem is that the government bought debt, not equity, so they don't share in the upside that would make this a financial home run that makes up for other failures.
That being said, the government isn't in this to make money, they're in it for the broader benefits that will spillover outside of the individual company receiving financing. In that sense the VC analogy could work, because a major successful electric car company in the US probably would be a "home run" for the country (and the world) on several dimensions, more than making up for losses on the way.
Who ever pays back the government for stuff? It's largely besides the point. The government didn't bail out say GM because it wanted to get a return on its investment. It did so because of the fear that letting Detroit go bankrupt would have a domino effect that would leave a gaping crater in employment. If the car companies manage to pay back the government, great. Even if they don't, that wasn't really the point.
fear that letting Detroit go bankrupt would have a domino effect that would leave a gaping crater in employment
You mean like the +20% currently unemployed in Detroit? The best thing about Detroit is that one day it will be used as a case study of why entitlements don't work out the way people think they do.
You mean like the +20% currently unemployed in Detroit? The best thing about Detroit is that one day it will be used as a case study of why entitlements don't work out the way people think they do.
I was using "Detroit" in this context as a metaphor for the car industry. GM going bankrupt would bankrupt a ton of suppliers spread throughout the midwest.
As for Detroit, its problem has nothing to do with entitlements. Detroit was never New York or San Francisco, after all, in terms of entitlements. The midwestern industrial cities all have the same problem, and it's not entitlements, it's the automation of American manufacturing. Optimists tell me that its a good thing and any day now there will be new jobs for these folks, but looking at cities like Detroit, Buffalo, etc, that have been gutted for decades now doesn't make me optimistic.
As for Detroit, its problem has nothing to do with entitlements. Detroit was never New York or San Francisco, after all, in terms of entitlements. The midwestern industrial cities all have the same problem, and it's not entitlements, it's the automation of American manufacturing. Optimists tell me that its a good thing and any day now there will be new jobs for these folks, but looking at cities like Detroit, Buffalo, etc, that have been gutted for decades now doesn't make me optimistic.
Read up on the "Model Cities Program" and I think you'll see what I was talking about, even in regards to automation.
In terms of if GM had gone bankrupt, I think any supplier that was competitive at the time would still be here today. They may be supplying their goods to a different manufacture along with some other hardships, but companies that are competitive and in control of their workforce can make those changes when the time comes.
In terms of if GM had gone bankrupt, I think any supplier that was competitive at the time would still be here today. They may be supplying their goods to a different manufacture along with some other hardships, but companies that are competitive and in control of their workforce can make those changes when the time comes.
I think you underestimate the size and breadth of car manufacturing supply chains. Its very common for suppliers to build new factories/warehouses near a car manufacturing plant solely for them. You can just "make changes" if the plant is shut down.
I probably do underestimate it since I haven't worked directly in that industry, but I completely realize that fact. That is why I mentioned hardships. It might mean they have to close/resize assets and entire towns could be effected, but to say it would wipe them out I think is a stretch.
Yet GM still went bankrupt...just a few months later. People forget that. So what was really gained?
There's bankruptcy as in a controlled restructuring, and then there is bankruptcy as in a failure of the business with ripple effects throughout the economy. What GM went through was the former, and it was foreseen at the time of the government's investment.
There was nothing to keep them from going through a controlled bankruptcy at the start of it.
People forget just how amazingly tight the credit markets were at that time. Extremely tight.
To keep it short, the bailouts of both the auto sector and the banks were bad, but probably the least bad of a bunch of very worse options. The moral hazard problems with both of them are significant. (It's personally good to fail at the same time as everyone else, because you get bailed out, while we really want systems where failures are independent.)
To keep it short, the bailouts of both the auto sector and the banks were bad, but probably the least bad of a bunch of very worse options. The moral hazard problems with both of them are significant. (It's personally good to fail at the same time as everyone else, because you get bailed out, while we really want systems where failures are independent.)
What's the problem with companies paying back loans when they "need" to (i.e. when the loan comes to an end)?
Tesla's early repayment of their DOE loan has prevented the U.S. government from exercising three million warrants, which would have netted America around $250 million at the current stock price. Smart move for Tesla, almost a huge boon for U.S. taxpayers.
Oh, they had stock warrants? That explains it. Trading the low-interest debt for stock wouldn't make any sense otherwise.
"This program is often confused with the financial bailouts provided to the then bankrupt GM and Chrysler, who were ineligible for the ATVM program, because a requirement of that program was good financial health."
"ONLY AMERICAN CAR COMPANY TO HAVE PAID BACK GOVERNMENT"
I'm not so sure Elon isn't writing his own copy.
"ONLY AMERICAN CAR COMPANY TO HAVE PAID BACK GOVERNMENT"
I'm not so sure Elon isn't writing his own copy.
Didn't Tesla repay this loan back with another loan:
http://www.reuters.com/article/2013/05/15/us-tesla-stock-idU...
I'm not a market economics kind of guy but I don't see how this is any kind of special achievement. Surely any other car manufacturer could have done precisely this?
http://www.reuters.com/article/2013/05/15/us-tesla-stock-idU...
I'm not a market economics kind of guy but I don't see how this is any kind of special achievement. Surely any other car manufacturer could have done precisely this?
The story is that they paid it back via the private market, meaning that the financial community believes in the company enough that they no longer need public support.
Incidentally, they did issue corporate debt (a form of a loan, sure), but also issued more equity as well.
Incidentally, they did issue corporate debt (a form of a loan, sure), but also issued more equity as well.
I guess it probably made sense financially in that the private market believed in Tesla enough to provide a better rate than the original loan.
No, they paid back the government loan with stock.
The difference between a 'convertible note' and a 'loan' is that in a convertible note turns into its conversion when 'due.' Basically it turns into stock at the value of the amount borrowed plus interest.
There is a fascinating Convertible Note generator that you can run on the Wilson Sonsini web site [1] which I recommend doing if you are at all interested and read all the text about why or why not you might want choose one set of terms over the other.
[1] http://www.wsgr.com/WSGR/Display.aspx?SectionName=practice/t...
The difference between a 'convertible note' and a 'loan' is that in a convertible note turns into its conversion when 'due.' Basically it turns into stock at the value of the amount borrowed plus interest.
There is a fascinating Convertible Note generator that you can run on the Wilson Sonsini web site [1] which I recommend doing if you are at all interested and read all the text about why or why not you might want choose one set of terms over the other.
[1] http://www.wsgr.com/WSGR/Display.aspx?SectionName=practice/t...
Not if the rate was 10%, 20%, etc. It's just a form of bootstrapping. The government stepped in and bootstrapped it so now the private sector can finance it normally.
It's raising money. For most car companies that is not a special achievement. For Tesla, who has not yet proven that they can make money, it's something of a milestone - at least a smallish signal of market confidence. All the chest beating is just Musk being Musk.
Seems that not all electric car companies getting loans from the US gov't are repaying their loans.
Maybe it isn't a special achievement if you're suggesting GM could pull this off.
Does anyone know if the DOE is able to recycle the funds back into loans for other electric vehicle manufacturers? If so, this may have been an extra smart move on Tesla's part because it could help competitors access capital and start investing in some of the shared technology behind electric cars and help bring the whole industry to scale.
IIRC the DOE still has billions of electric vehicle loan money that they haven't awarded because there are no companies worthy of receiving it. They're also gun-shy about another Solyndra.
Finally a company with a sense of integrity and responsibility.
Regardless of how they raised the money the had a debt that they needed to pay and they did which is more then i can say about most companies. "Tesla will be the only American car company to have fully repaid the government."
All other companies only care about their stock and how to make more money the last thing on their mind is paying back their debts and the government lets them get away with it because their "too big to fail".
Let me tell you something ...there's no such thing that is the result of their bad decisions and if they don't fail they will repeat the same mistakes again and again because they can.
Regardless of how they raised the money the had a debt that they needed to pay and they did which is more then i can say about most companies. "Tesla will be the only American car company to have fully repaid the government."
All other companies only care about their stock and how to make more money the last thing on their mind is paying back their debts and the government lets them get away with it because their "too big to fail".
Let me tell you something ...there's no such thing that is the result of their bad decisions and if they don't fail they will repeat the same mistakes again and again because they can.
I don't know if Elon should be so quick to thumb his nose at the other auto manufacturers. For one, he's facing a pretty substantial uphill climb WRT dealership laws in a lot of states, and rattling the snake cage won't win any friends.
On the other hand, when brand value (save Ford) for the domestics is strikingly low, maybe he's throwing punches exactly when he needs to.
On the other hand, when brand value (save Ford) for the domestics is strikingly low, maybe he's throwing punches exactly when he needs to.
He's not fighting car makers, he's fighting the (generally very independent) dealers in those states. Playing nice isn't going to have them withdrawing their complaints.
At this point better PR, and a mention on the six o'clock news seems worth it.
At this point better PR, and a mention on the six o'clock news seems worth it.
I'd agree with you, on the most part -- but I've worked with folks at the Big Three on their dealership strategies, and trust me: they're strange bedfellows.
Look no further than how TrueCar had to pivot their business model in a short period of time in order to comply with the cold backhand of dealers. It's a juggernaut, sadly.
I'm rooting for Elon to turn it on edge.
Look no further than how TrueCar had to pivot their business model in a short period of time in order to comply with the cold backhand of dealers. It's a juggernaut, sadly.
I'm rooting for Elon to turn it on edge.
Mitt Romney must hate Tesla - it is a textbook example of why governments should sometimes mess with free markets.
If the government had not provided this loan Tesla would have gone bankrupt and the US would have lost a significant high-tech asset. 99% of the time the market is more efficient than government, but that other 1% counts for a lot.
If the government had not provided this loan Tesla would have gone bankrupt and the US would have lost a significant high-tech asset. 99% of the time the market is more efficient than government, but that other 1% counts for a lot.
The right wing argument against government meddling isn't that it doesn't work sometimes (broken clocks being right twice a day and all that). The complaint is that, in aggregate, for every Tesla there are countless Solyndras. Governments aren't good at picking investments for the exact same reason individual people are not good at picking investments: predicting the future is hard. It's doubly hard when governments do it because of the distorting influence of constituents and politics. Let the private sector keep that money and if Elon convinces enough people to lend him cash, he can move forward. I have no doubt he could have done everything he has without a loan from Uncle Sam.
"The complaint is that, in aggregate, for every Tesla there are countless Solyndras"
The problem with that argument or complaint is the evidence against it...
"The Energy Department has said that losses in the $34 billion loan portfolio amount to about 2% of the total."
This program might be a success so far, I cannot speak to past government investments which might back the "right wing" view better.
The problem with that argument or complaint is the evidence against it...
"The Energy Department has said that losses in the $34 billion loan portfolio amount to about 2% of the total."
This program might be a success so far, I cannot speak to past government investments which might back the "right wing" view better.
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What about Lee Iaccoca? and Sergio Marchionne?
I thought they fully repaid the government too. Maybe I'm confused?
I thought they fully repaid the government too. Maybe I'm confused?
[deleted]
like a BOSS
I don't remember getting a check from tesla nor was I asked permission to loan them money . The whole absurdity of "greater common good"
What's absurd about it? If pollution has bad and expensive effects (asthma, flooding, crop loss), those creating it should pay to help deal with it. It's like paying to have your own trash picked up instead of dumping it in your neighbor's yard.
If you doubt that pollution is bad, that's another story, but you're in the minority and outvoted.
If you doubt that pollution is bad, that's another story, but you're in the minority and outvoted.
Of course they should pay. Money should go to people who suffer from pollution.
Its not like paying to have your own trash picked up. When you pay to have trash picked up you can choose a company, you can do it yourself, you can produce no trash etc.etc.
Why should one pay companies to make cars they will never buy? One that has never added his 5cents to the pollution is beyond reason. But then again democracy is just another form of tyranny.
Its not like paying to have your own trash picked up. When you pay to have trash picked up you can choose a company, you can do it yourself, you can produce no trash etc.etc.
Why should one pay companies to make cars they will never buy? One that has never added his 5cents to the pollution is beyond reason. But then again democracy is just another form of tyranny.
And you really think the best way to do that is to subsidize toys for rich folks?
As far as I know, the subsidy is the same regardless of the price of the vehicle, so it doesn't apply only to "toys for rich folks". Also, I wouldn't say that a Tesla is a toy for rich folks. Many reasonably successful software engineers could afford one if they didn't want to spend their disposable income on other forms of entertainment.
"Entertainment for the upper middle class" there fixed it for you.
As part of a long term plan to commoditise the technology and make it cheap, as you no doubt well know.
Do you remember when you voted for the representatives you appointed to make those decisions for you?
TSLA rose on the news despite diluting shareholders is because coupled with the announcement, Elon Musk mentions that he will personally put an additional 100mil into the secondary offer; and general exuberance that TSLA will use the cash for more infrastructure build-out, a la Google, Yahoo during their heyday's. Make no mistake, this is as much a PR ploy by Tesla to pump up their offering.
It's incredibly smart for Musk and company to raise money in a very favorable environment as TSLA climbed from 45 to 90 after earnings. However, it remains to be seen if they can be still profitable. Note that they are still selling each car at a material loss; and only managed to show a profitable quarter by trading green credits they gained from their manufacturing. To truly scale, they need to either drive down the production cost of their cars down and broaden their market as there are only so much supply of carbon-emission credits on the market.
Disclosure: I trade TSLA options on volatility, without any directional bias.