Digital Domain - Only the Rich Can Afford It. Should Taxpayers Back It? - NYTimes.com
THE Tesla Roadster is an electric car that goes fast, looks sensational and excites envy. The seductive appearance, however, obscures some inconvenient truths: its all-electric technology remains woefully immature and don’t-even-ask expensive. If enough billionaires step forward to inject additional capital to keep the doors of its manufacturer, Tesla Motors, open, I’m happy for all parties.
If investors pass up the opportunity, however, why should taxpayers fork over the capital that Tesla needs? The Roadster is not much more than a functioning concept car that sells for $109,000. The company is requesting $400 million in low-interest federal loans as part of the $25 billion loan package for the auto industry passed by Congress last year.
The program is intended to encourage automakers to improve fuel efficiency, but should it be used for a purpose like this, as the 2008 Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act? Can you conceive any way that federal dollars could be put at greater risk — and for no equity in return, keep in mind — to benefit fewer people?
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Unfortunately for Tesla, batteries are based on chemistry and have nothing to do with Moore’s Law. Lawrence H. Dubois, chief technology officer at ATMI, a semiconductor industry supplier, said, “With batteries, you can’t just squeeze more energy into a smaller and smaller space the way you can squeeze more transistors.”
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To answer the fundamental question that the NY Times rant poses: Yes, the federal government should provide low-interest loans to Tesla (and other R&D-focused automakers) to encourage and hasten the time to market of a sophisticated all-electric, zero-emission powertrain for affordable, family cars. If this isn't in the public interest, what is?
Just to set the record straight with the good folks in the blogosphere:
The silly headline of the NY Times pontification says Tesla shouldn’t get a low-interest loan from the Department of Energy because "only the rich can afford it." Afford what? The loan would NOT fund anything having to do with the $109,000 Roadster but with future generations of more affordable sedans and a powertrain facility to make battery packs and other components for other automakers, who will also use them for affordable sedans.
The columnist says Tesla's technology "remains woefully immature" and the Roadster is "not much more than a functioning concept car." Absolutely untrue, as anyone who has test-driven or owned one attests -- it's a viable production vehicle that competes on fit and finish, performance and handling with vastly more expensive cars. We have delivered nearly 100 to customers already and are increasing production starts to 30 per week in 2009.
Most worrisome: Stross pontificates about Silicon Valley all the time for what is arguably world’s most influential newspaper, yet he doesn't grok that R&D and early-adopter technology is relatively expensive. Whether it's a cell phone (even the iPhone from Stross' beloved Apple) or photovoltaic panels, the first owners pay the most. But the technology inevitably becomes affordable within several product cycles, whether on the timeframe of Moore's law or (in the case of battery capacity) at the fair clip of 8 percent per year. Given the Model S (base price expected at $57,500) and the Bluestar project (all-electric, zero-emission subcompact for $30,000), why did his rant focus on the Roadster, which isn't part of the loan application proposal? Makes no sense.
Finally, despite talking extensively to Stross about the distinction between the Detroit Three's "bailout" and Tesla's participation in a progressive government project to fund fuel-efficient vehicles, he utterly failed to grasp the difference and calls Tesla's loan application the "Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act" -- again, catchy but dead wrong. The loan wouldn't be used for the Roadster or ongoing operations. Our blog clarifying the distinction (published before the article and sent to Stross, who apparently didn't read it):
http://www.teslamotors.com/blog2/?p=66
One of the most thorough (and hilarious) refutations of the article if you need further clarification:
http://calacanis.com/2008/12/01/on-bailouts-and-sports-car/
Thanks for listening. FWIW, I'm all for spirited debate about public policy, but it should be based on facts, not catchy buzz words and misinformation. Blog on!
Rachel Konrad
Senior Communications Manager
Tesla Motors, Inc.
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