Everyone wants a bailout—how about Tesla?
Do you favor a bailout for the Big Three auto makers? How about for a little fourth? That would be Tesla Motors, which has asked for $400 million of a $25 billion loan package—the Advanced Technology Vehicle Manufacturing Incentive Program (ATVM)—for the auto industry that Congress approved in 2007. Should Tesla get the loan?
In “Only the Rich Can Afford It. Should Taxpayers Back It?” Randall Stross writing in the New York Times says no way. Alluding to the “2008 Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act,” Stross asks, “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?” And not only would a Tesla bailout benefit exclusively rich investors and auto purchasers, Tesla can’t cut the mustard technologically, Stross contends. He acknowledges that battery development benefits from a weak Moore’s law that increases their capacity eight percent annually, but he contends that “eight percent, compounded, would bring too few benefits, too late to Tesla: it would take nine years to halve the price of its battery pack.”
Not so fast, responds Jason McCabe Calacanis, the founder and CEO of Mahalo.com, writing in the Huffington Post. “Yes Randy,” he says, addressing Stross, “the first version of technology tends to be expensive. Personal computers used to cost $5000, flat-panel TVs were $10,000 and–gasp–the first decade’s worth of solar panels were not worth the price. You’re a *technology* journalist at the New York Times. You understand all too well that expensive technology becomes commodity technology within 10 to 20 years of its inception.” As for battery technology, Calacanas writes, “If Tesla cuts the cost of the battery pack in half over the next nine years, they will have two choices: take about $20,000 off the price of the car or double the range to 500 miles.”
In his conclusion, Calacanis has this to say to Stross: “You should be proud of Tesla and support them, as well, because if Tesla gets the *loan* (a loan, not a gift), you just might be driving an electric car built in the United States by American workers. That consumer purchase is a vote which, once cast, will help us shift our interactions with the Middle East back to condemning them for violating basic human rights instead of our dual-headed approach of insincere appeasement and inappropriate force. That approach hasn’t been working out to well, has it?”
My take: Tesla Motors is as deserving, or more deserving, of ATVM funds as the Big Three. Tesla VP of business development Diarmuid OConnell makes a convincing case here. But Tesla Motors is simply not to big to fail. I hope the company can raise the money it needs from private sources. What do you think?
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