The Government Comes Through For Tesla With A $465 Million Loan | Hacker News Reader

The Government Comes Through For Tesla With A $465 Million Loan

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When the mess gets sorted out, I'd like to have a conversation with whoever's in charge at the time the car czar or whoever and say 'I'd like to run your plants, if you don't mind,' Musk said ( http://tinyurl.com/km5e4h )

Sounds like Elon will fit right in at Detroit. Run an unprofitable car company and dip into our pockets when you can't do it right.

(a) Musk says they're on track to be profitable in months. Do you have evidence to muster that he's lying? I'm sure he could be, but it's not very interesting just to say he is.

(b) Detroit auto companies have historically been very profitable.

(c) The auto industry is structurally inhospitable to newcomers. Legacy manufacturers have locked up supply chains, locked up distribution channels, and are entrenched in a regulatory environment designed for 12-figure industrial bohemoths. That there may not be a way to "do it right" is an argument in favor of propping up Tesla.

I like Tesla like the next guy, but when it comes to investing, especially public money, the burden to prove profitability comes on the company.

I'm glad this happened, but the GP is not wrong to criticize this. It's still taking public funds and putting them in a company who still hasn't made a profit.

You summed it up very well.

"Profitable in a few months" means you're unprofitable. We can draw up all sorts of extrapolations based on preorders and expected order rates etc., but until the past month's income statement shows green, a business is not profitable. It really is that simple.

I hope nothing but success for Tesla in that they usher in an electric car revolution (just imagine if the USA became the primary source of electric cars for the world), but until then I'd like to see some numbers if I'm paying for Elon to run his mouth.

I'd rather own stock in a company (early Google for instance), that is a few months out from 'profitable', with a sales curve that is trending up, up, up, than stock in, say, GM, in the last month or two that it was profitable.

"Not profitable yet" does not necessarily imply "doing it wrong", but you're right, it is easier to ignore that fact, make a cheap snarky comment, and then act self-righteous because you know the definition of the word 'unprofitable'.

I'm not sure I understand what you're saying. Most startup capital goes to companies that aren't profitable.

Maybe this'll help you understand - Musk is not getting venture capital, he's getting our money.

Government funding is needed to create new industries or spur innovation in nascent fields. Entire industries like online companies would not exist without DARPA funding of internet, fast food companies would not exist without govt. funding of the interstate.

In light of the fact that Detroit got bailout money its perfectly sensible for the govt to invest in innovation within the auto industry.

I don't agree with this AT ALL.

It's not the role of government to decide when to "fund" or "not fund" certain types of industries. Let the private sectors decide if that's a good idea or not. Do you agree with farm subsidies?

Are you glad your tax dollar get spent on projects that may have no practical purpose because there's no market or products ready to use them?

That sounds like an awfully naive version of how government works. What about DARPA grants to university research projects? Or NIH grants for medical research? What about speculative defense projects, like (to name a bad case) missile defense, or (a good one) unmanned aerial vehicles?

The government "funds" and "doesn't fun" "certain industries" all the time. In fact, it even does what it's doing with Tesla in a smaller scale routinely, through the SBA process. The Tesla loan is a drop in the ocean compared to the SBA loan budget.

I understand that the government funds lots of projects as you mention, my point is that I don't think the government should fun these types of projects and it's going beyond the intentions of the founders.

I suppose I'm in the minority, having a small government is better than a fat government.

I'd rather have an Internet and atorvastatin than an ideologically pure government. But that's just me.

The private sector is not a perfect allocator of resources. If we let the private sector alone decide where money went there would, for example, be very little funding for basic research.

I hope you're not saying that the farm subsidies are meant to encourage new technology? If you are, what technology would that be?

Actually, I was hoping to bring up farm subsidies as a failure of spending government money on something that should be handled via the private sector.

But is it the lesser of 2 evils that Tesla get some that would have otherwise gone to say, GM?

Considering that tesla is valued at 1BB (http://bit.ly/14WPOY) and has had 701MM in funding (http://bit.ly/2lv8So) I would say the onus is on you as the refuter to show data that they will be "profitable in months."

While renewable energy cars is something we all hope will eventually succeed, I'm not sure how sound it is to throw a bunch of money at Elon Musk.

Instead of waiting on Musk to provide evidence to backup his statement, you're seriously putting the burden on kirse to prove that Musk is lying...? That's a weird path to take. The fact is Tesla isn't profitable yet, and although Musk says they will be in the coming months, that talk doesn't mean anything until the reports are released showing profitability.

I'm sorry, I'm not suggesting whether he's right or wrong. Like I said, it's entirely possible Musk is wrong, or lying.

What I'm saying is, looking at a pre-revenue startup and calling it "unprofitable" may be a true statement, but it's certainly not an interesting one.

Ah ok, that's fair.

> Musk says they're on track to be profitable in months.

How many startup CEOs say anything else?

...and how many of them turn out to be correct?

"(b) Detroit auto companies have historically been very profitable."

Have you ever heard that phrase, "past returns not a guarantee of future returns"?

To Detroit it applies triply. Autos are no longer a growth industry, the US auto market is no longer free of foreign competition, foreign customers are no longer interested in US-made cars, and the union-guaranteed benefits to Detroit autoworkers are no longer financially sustainable.

This is a company that said 6 months ago that they couldn't even do proper cost accounting. From what I've read about them in the past, this is one of the last companies I'd be giving hundreds of millions to.

On the other hand, they seem like they are very close to having an incredible product.

A loan isn't exactly stealing.

> A loan isn't exactly stealing.

A "govt loan" isn't exactly voluntary on behalf of taxpayers. You remember taxpayers - they're the folks who are actually putting up the money.

Taxpayers (or at least voters, not the same) are free to vote for people who wouldn't give these loans. Unless you think that the entire idea of representative government is wrong, of course, but then I'd like to see proof of another, better working model.)

The fact that representative govt is better than the alternatives does not imply that it is good enough to give free rein.

Wow, for a second there I thought it said digg.com in my address bar.

It will be interesting, a few years down the line, to compare what Tesla does with its $465m compared to what GM does with its billions. Obviously not an apples-to-apples comparison, but it might illustrate the cost of the inherent friction in massively bureaucratic companies.

Regarding Tesla's profitability, it's EBITDA profitability, and in the words of Warren Buffet:

"References to ebitda make us shudder-does management think the tooth fairy pays for capital expenditures?"

Certainly this is an important milestone for Tesla. It means that they're getting a handle on their supply chain, but this doesn't make them anything close to a stable company. They still have to get to a point where their cars aren't just profitable, but profitable enough to pay for the factories they're built in. Hopefully this latest influx of cash will be enough to get them there.

GM will use it's billions to come out with the Volt with production in hundreds of thousands. A car for the public that has the best of both worlds, Electric for short range trips, with gas as backup for when you run out of charge.

Tesla will use it's millions to come out with the Model S, with production of 1-2000 units a year. A car for the more luxurious segment, that's electric only, that'll leave you stranded if you forget to recharge the battery.

Re GM: That's quite optimistic. Most of the money and effort with GM will go into making it a stable employer for as many as possible.

Re Tesla: Quite possibly true, but you shouldn't build infrastructure from scratch to build millions of cars. They should validate their business and market at 2000 units/yr and expand if it works.

Comparing the two, the GM money is to prevent downside, the Tesla is to capture upside. Both are valid reasons for investment and only hindsight will tell if either was a good bet.

GM will use government money to build a mass market car because that is what GM is in a position to do.

Tesla will use its millions to build a luxury car because that is what Tesla is in a position to do.

Tesla is not in a position to compete head-on with the Volt, because Tesla has almost none of the infrastructure that GM has. If Tesla tried to build a Volt competitor, it would fail. If, by some miracle, it succeeded in building a supply chain and manufacturing operation that could turn out hundreds of thousands of cars, it would quickly go out of business competing for a low-margin segment of the market against the largest automotive conglomerate in the world.

The point of Tesla isn't to provide you with a car. The point of Tesla is to develop the technology that other companies will use to provide you with cars later on down the road.

The Tesla Roadster and Model S are big red herrings.

Just a quick question. Why is Tesla more deserving of a loan to accelerate their development of electric cars than a company like Aptera (http://www.aptera.com)?

This is the fundamental problem. The government is not funding direct research in a University setting, they are directly funding one company over another in a nascent industry. Why do Tesla's shareholders get this advantage over other startup company shareholders?

This is one of the problems this conservative has with this situation.

Along with the huge NASA cash ($billions) for SpaceX, it's a good year for Musk.

at least we know that money is going to a company that is actually building cars that will run when the oil runs out.

Funny thing is, this loan is most likely an investment in green technology, nothing else. So your comment isn't really off-topic.

But the way you put it made you sound a bit... out of touch with the discussion. Also fanatical, and not even wanting to participate in it, just dismissing it out of hand. And without a starting capital letter, it's pretty much the typical throw-away remark not encouraged here.

no fans of electric cars here, I see.

No, it's just a bunch of people whining about "their money" being used to foster innovation. It's OK when someone invests money in their web app for displaying porn with rounded corners and "type centric design", but it's a waste when the government tries to encourage the development of sustainable transportation technology.

Gotta love the conservatives...

I'm more or less fanatically liberal. But I happily set that aside while visiting HN.

Please don't bring in such broad attacks. I almost voted it down as well (despite agreeing with the sentiment), for the exact reasons pointed out by radu_floricica.

Let's maintain a high level of discussion for HN.

It is their money.

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