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Should Taxpayers Back Cars Only the Rich Can Afford?
theodp writes "The NY Times questions the $400M in low-interest federal loans requested by Tesla Motors as part of the $25B 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?' Tesla says it is assembling about 15 cars a week and has delivered about 80 of its $109,000 base-price Roadsters to date, many of which have gone to the Valley's billionaires and centimillionaires who are Tesla investors as well as early customers. We discussed the company's financial difficulties last month."
Let the market decide, not a group of politicians paid off by lobbyists from the money they're lobbying to get.
We shouldn't be bailing any of them out.
"Ubuntu" -- an African word, meaning "Slackware is too hard for me". - stolen from Dan C alt.os.linux.slackware
Tesla's request was so they could design and build a much cheaper electric family sedan; i personally believe that it is a good investment even if the car costs 50k.
It seems unlikely that tesla will mass produce a car, but it does seem likely that they will be gobbled up by a larger company that will.
It would be money well spent
Who else is going to improve the technology? If it was one of the companies already in the industry, it'd be done by now. Don't give the entrenched guys anything. Give it to new companies.
Just because the rich get it first doesn't mean we won't get it, too. Look down at the device under your hands as you flame me for proof.
I don't know how it works in the USA, but here in Canada we don't measure electricity in gallons.
Tesla may not sell cars that everyone can afford today, but just by making cars, they are assumedly building on their ability to lower prices in the future.
As long as the money goes toward R&D, it's an investment in our future which I would support even if the other Big 3 were't going bankrupt.
-- "In order to have power, I must be taken seriously." -Mojo Jojo
To say that a low interest loan to Tesla is a bailout for billionaires is to seriously ignore what Tesla is doing. While everyone else is either developing low-speed electric cars (e.g. cars that can't run on the highway and don't have to pass all of the safety regulations) or estimating that their electric hybrid will run AT MOST 40 miles off the battery, Tesla has developed the first practical all electric car that can run 200 plus miles on a charge using (mostly) existing technology. You know, something that the big three for the last 20 years has said couldn't be done.
In addition, Tesla is continuing to work to engineer a pure electric car for the masses. This is where most of the money would be applied. It's not to bail out the roadsters already being built/already on order.
Plus, the established auto makers research is primarily still into improving ICEs, which is inherently, horribly inefficient. We've had over a hundred years of research and development into improving the ICE and it's still AT BEST only 25% efficient. We don't need any more ICE development, thank you very much. Considering that the Tesla roadster gets 4 times the fuel efficiency as the best ICE, the money would be applied exactly as it is intended (something that would probably not be the case for GM and company).
Lastly, if we're talking about bailouts, why should taxpayers bail out the Big Three? Their officers are responsible for pitifully shortsighted business decisions for the last 30 years, culminating in the current state of the US auto industry. If we reward businesses for bad business decisions, what's the incentive to do better? Let them be bought out by Toyota, et al. Good riddance, I say.
The NSA: The only part of the US government that actually listens.
Should taxpayers back car makers first of all. Propping up failing industries with cash is like trying to fight gravity by throwing things up in the air. Should productive people pay for the calamitous ruin produced by government backed union thugs? So politicians bought michigan votes and now it's time to pay, only the payers will be the people living in the US. Uh uh.
Should we pay for the cars of the wealthy... ooooooh the wealthy. Yeah right, this is about the wealthy. Wait, no. Actually this is about the fucking Marxists who believe in unions, who believe in a socialized banking system.
Taxpayer should not back anything, and that includes the most bankrupt and morally corrupt company of all, the US government. Who will bail out the US government? Ponder this.
\u262D = \u5350
We shouldn't be bailing out any of the automakers, but since we are wasting the money anyway, I would greatly prefer the money to go to companies with *vision* rather than to companies that will waste the money making hybrid SUVs.
If you had super powers, would you use them for good, or for awesome?
many of which have gone to the Valley's billionaires and centimillionaires
Usually, a centimillionaire only has enough cash to buy a used car. Making this high-end car available to these people sounds like a huge benefit to me.
Tesla is asking for a loan, which means it will be payed back, I have a few fedaral loans and no one gives me grief or calls it a hand-out. They just nod and say, "yeah, I have student loan payments too." second, Tesla makes electric cars using rather advanced battery systems to get a theorectical 200 miles per charge and something more like 100 miles per charge if you believe Jason Calacanis. So if you can accept that "improve(ing) fuel efficency" is the same as using new technology to make an electric car that people want, then giving a loan to Tesla seems to fit the criteria for this $25B loan package. I hear Tesla is also working on cars for regular people, so why not? They are making a product that people want, and if they succeed in making a car affordable to the masses then they will succeed in increasing fuel efficiency.
Seriously, folks - this has less to do with protecting the Rolls Royces of this world, and more to do with encouraging alternate means of locomotion.
Where would you rather give your money (if you're a US taxpayer, it is your money)... to a bunch of failing and backwards-looking automaking corps, or to a young and hungry company that is looking to change the very way we fuel up our cars?
Forget the politics - the Big Three are in thrall to a wage and compensation plan that is simply unsustainable and way above market value, no matter how the mathematics are applied. Not blaming the unions per se (the corps agreed to it, after all) but seriously - add it up yourself.
Coupled with the dragging and tooth-pulling required to get the likes of GM and Ford to go all-alternative (or to even jack up the fuel efficiency to something near what the competition has right now)? Why bother? They'll simply make a lot of noises about having changed their ways, and 10 years later they'll be right back in Congress again, begging for more money.
This may sound trollish, but screw that - let the innovators of this world get a leg-up, if we're going to be throwing around money in the first place. Let the collapse of the Big Three be an object lesson to those who think they're somehow entitled to continued existence just because they happen to be a big corporation.
Quo usque tandem abutere, Nimbus, patientia nostra?
Should taxpayers back space stations only the rich can afford to visit?
I agree completely.
The best way to develop the technology and bring the cost down to something affordable is to have it in production. And right now Telsa is producing 15 MORE zero emission cars a week than all of the Detroit automakers combined.
Given that poor people pay a higher proportion of fuel tax than rich people fuel taxes are a good example of regressive taxation
echo -e 'global _start\n _start:\n mov eax, 2\n int 80h\n jmp _start' > a.asm; nasm a.asm -f elf; ld a.o -o a;
You're a god damn twit. How do you think Tesla is paying for the R&D needed to make cars for average folks? Through selling cars that are marketed to people who don't care about paying $109K for a car.
If they need money, they can SELL me a car. A good car, that I can afford.
What is this nonsense about throwing money we don't have at problems that aren't ours?
What's next? The Ferrari bailout?
I don't know about you, but it looks like Tesla is trying to push the costs down. Yes, right now, they are making a pretty pricey car. They next project will be a sedan which they're looking to charge half the price, which puts it in reach of a lot more people. If they can get a loan to push the development more quickly, I'd say they are at least as deserving as the incumbent carmakers. Hopefully the production scale-up will allow for more innovation in battery research, mostly in cheaper high capacity batteries.
That was my initial reaction. These things do have a way of coming down in price as more cars are designed and produced. In the long term the sports cars and race cars have a tendency to serve as a test bed for features that ultimately find their way into more affordable vehicles.
A couple of weeks ago I saw a mercedes with a bumper that had a pressure sensor to indicate when the bumper backed into something and a rear hatch which opened and closed by button. A decade ago I hadn't heard of those features in any car.
I'm not really sure how else this should work unless we want to either do without the advances or pay even more to have something that everybody can drive now.
Any new technology is initially going to be affordable only by the wealthy. If we say we are not going to subsidize R&D for products for the wealthy, we are saying we are not going to subsidize R&D at all.
It's the energy you can get from as many 9v batteries as you can fit in a gallon milk jug. It's about 4% smaller than the imperial electrogallon, which uses a gallon-sized pail. You may remember the story a few years back when an MIT mathematician proved that an ideal battery configuration would hold two additional batteries, without stretching the jug, and we all had to recalculate our electricity bills.
But we stick with it, because we true Americans (as opposed to people in New York, California, and -- in a shocking turn of events -- Indiana) know that the metric system is the first step down the path to socialism.
You want the truthiness? You can't handle the truthiness!
A similar question could be asked about computers, in the 1950's. Electric cars are very likely something that will be needed in the future. The more that gets done on them now, the cheaper they will be in the future. These first few cars will be expensive, yes, but that goes for most prototype cars.
A centimillion only buys one decitesla. I suspect the editors were referring to hectomillionaries, though with the recent gyrations in the market some of them may have dropped an exponent or two.
My business partner and I both reserved '09 Tesla Roadsters. Why? Not because it's a hot car, or it drives like a rocket, but because we want to see electric car research pushed faster. And it was the next best thing to investing in the company. It drives me nuts when some fool comes out and says "Tesla can have help when their car is priced for the average person". They won't need help by than. They need help getting to that point.
Why not repeal the subsidies to oil companies? Some direct, some indirect. That would level the playing field, stop skewing the market and then we would see where alts to oil stand in terms of economics. Then a decision on what to do about alt energy and transport will be easier to make.
http://gristmill.grist.org/story/2008/3/6/122829/2907
http://www.ucsusa.org/clean_vehicles/vehicle_impacts/cars_pickups_and_suvs/subsidizing-big-oil.html
http://cleantech.com/news/node/554
http://www.commondreams.org/news2008/0401-12.htm
http://www.progress.org/2003/energy22.htm
putting the 'B' in LGBTQ+
I thought the whole bailout (not the one for the car industry, but rather about credit) was about liquidity. As anyone in the business world can tell you, liquidity problems can sink the best companies. In other words: You can have the best business idea ever, but if no one wants to invest in it you won't be able to make money. Same can happen down the line. If you have all you money invested, for example in machines, because demand is so high, and then one of you customers pays his bills late you could go belly up very fast.
Some banks even pull that on you in normal times. Maybe because they think they can make more money by selling your assets than by waiting for interest to come.
Now because nobody trusts anybody anymore in the credit industry liquidity has dried up. Many good businesses could fail because they are unable to borrow money. If one of their customers pays late ...
Tesla says they have orders for years to come. Maybe they have a very sound business, but still have problems getting money because of the banks.
We should raise the gas taxes.
NO.
As P. J. O'Rourke said, giving money to governments is like giving whiskey and car keys to adolescents. The proper role for taxation is to raise the funds necessary for the government's constitutional powers, not to manipulate the behavior of the public.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Unlike in economics, in technology, there IS an observable trickle-down effect. Investment in a high-tech ground-breaking company makes a lot more sense than keeping broken-down old GM creeping along.
Yes, the USA should invest in manufacturing and in particular, manufacturing for better technologies, and at a national level. It benefits the workers, it benefits the rich, it benefits a country whose sense of well being is made by being self sufficient in both the goods it produces and energy that it uses.
It's easy to demonize the rich, but history suggests caution. In 1993, as part of the Clinton economic recovery plan, Democrats raised taxes on luxury items. What they discovered is that they threw out of work quite a number of not-so-rich custom craftsmen, artists and workers that did things like make $2000 end tables, boats, and jewelry. Woops. The luxury tax was quickly repealed but the symbol of the small business owning craftsmen going belly up inspired middle America to elect Republicans in droves in 1994.
The whole "bailout" for car manufacturers is about retaining the skill among the workforce to create manufactured products. Clearly, Tesla is forging ahead and trying to build all electric cars. While only the rich can afford them now, if they are successful, perhaps other people will too in the future. I know Elon Musk is a self promoting douche, but, he is building the damn car and I bet he's got a lot of good people working for him.
I think the bank bailouts are far worse than any detroit bailout. Has anyone else ever bothered to total up the cost of the bailouts to banks versus the cost of the mortgages actually supposedly bad? You'll not be too surprised to find that we've already written out enough money to buy -all- of the subprime mortgages....but, why is anyone being foreclosed on?
This is my sig.
You can't tell "than" from "then" and still are able to afford a Tesla Roadster?
There's hope for me yet..
Good point though.
Truth arises more readily from error than from confusion. -Francis Bacon
Nonetheless, until that point it is a distortion of the market to negligible public benefit. Tesla are funded by venture capital, the entire point of which is that they are taking the high risk that Tesla will fail to make electric vehicles economic, and that instead it'll be the company that comes along and learns from all of Tesla's mistakes that will be successful. If the public bails out the venture, then the primary beneficiaries are the VCs that have effectively had their risk underwritten by the taxpayer (nationalising the risk, privatising the reward). The public gains comparatively little -- it really doesn't matter whether it's Tesla's roll of the dice that wins or the next VC-backed company after them; and the limitation of liability ensures there is a greater upside reward than downside risk so there will be a next VC-backed company rolling the dice on green or electric vehicles. (I've already heard of a few other up-and-coming "green" car ventures.)
When was this election when I got to vote on individual federal expenditures? Hell, no congressperson that I've voted for has ever been elected.
-- The act of censorship is always worse than whatever is being censored. Always.
If you read about fascism from the horse's mouth, you'll see, that there is no difference. Here, I picked the most familiar-sounding items put forth 88 years ago:
Had it not been for Hitler's bizarre obsession with genocide — which, as Franco and Mussolini demonstrated, is not an inalienable part of Fascism — the Left would've considered Hitler as a perfectly respectable source of quotes and inspiration, along with Lenin, Mao, and Karl Marx.
In Soviet Washington the swamp drains you.
So helping General Motors to build a new hybrid Cadillac is going to be a better way for the government to throw its money around than letting Tesla be able to invest into their "Whitestar" vehicle that is targeted for around $50k for around 1/10th the cost that GM is asking for?
I don't get what you are saying here. This isn't Tesla asking for money by itself, but asking to be included with the other companies that also claim to be "American Automotive Manufacturers" and for the Feds to maintain a level playing field. Are you sure the feds should subsidize Ford and Chrysler at the expense of taxing Tesla out of existence?
...They don't need to screw around with import taxes like common peasants.
They just raise their own salaries.
Mit der Dummheit kämpfen Götter selbst vergebens
Tesla is doing it the opposite way that the automakers started, thats a reason why they'll never scale and do what they need to do to become a long term success.
Ford didn't start out with expensive fancy cars that no one could afford, they changed the industry with a cheap car, built the base and then started making luxury models.
Tesla will be a niche, like Porsche, Lambo, Ferrari, Aston Martin are.
Tesla Motors is in direct competition with General Motors and the Volt. Indeed, there are many places where GM executives have openly stated (including on 60 Minutes and other major media outlets) that they wouldn't have even started the Volt if it weren't for Tesla showing it could be done.
So tell me, why should GM get a special subsidy for building the Volt and Tesla be told to "get lost" and build their car on their own?
The $400m check isn't just a grant, it is a loan that must be repaid. What getting it from the government will do is provide basic capital to build the factories, finance the R&D, and get built the next generation of Tesla vehicles. Tesla even has the manufacturing facility picked out and some of the preliminary designs for that vehicle.
All that Tesla is doing here is to insist that they be treated as an American automotive manufacturer. If GM is getting the subsidy, why not Tesla as well?
Government run mass transit systems that are far more efficient than any other mode of transportation: problem.
Destroying efficient transit systems and replacing with inefficient road systems, finite and domestically unavailable energy sources: solution!
Government development of electric vehicles to salvage the free market's mistake of investing in road infrastructure: problem.
Free market solution of continuing to produce technology that is destroying the environment and our economy: solution!
Ask any of his Somalian friends... government is a problem masquerading as a solution.
Just because something is regressive taxation *does not* mean that it's a bad idea. Especially in the case of taxes designed to change economic incentives, the regressiveness of the tax is solidly a secondary concern - and one that can be easily solved by cutting income tax further for the lower brackets.
-- The act of censorship is always worse than whatever is being censored. Always.
... thats a reason why they'll never scale and do what they need to do to become a long term success....Tesla will be a niche, like Porsche, Lambo, Ferrari, Aston Martin are.
So let me get this straight, because they make quality luxury cars, they are doomed to fail horribly, just like Porsche, Lambo, Ferrari, Aston Martin and BMW?
Really, take a good look at what you're saying. You're saying they should follow Ford's model of success (be first to market... how's that work for Tesla entering an established market?) and then they should "work their way up to building 'quality' luxury cars, just like Ford." Seriously, just look at how well that is working for Ford!
A niche may be the best way to go, because no one in theu US needs a cheap NEW car.
That's too easy a market to undercut with USED cars. It's all about dollars per mile, so buying used and junking them when they go beyond economical repair makes great sense.
"This post is an artistic work of fiction and falsehood. Only a fool would take anything posted here as fact."
Counterpoint: Yes, we should be bailing them out.
This has been "completely unjustified point-counterpoint" theater. Tune in next week when we look at whether or not global warming is real. A preview
Point: Yes, it is.
Counterpoint: No, it's not.
But Tesla isn't inherently a luxury model. It's only so expensive because the fundamental technology for this kind of car is so expensive, not because they wanted to make a car specifically for the rich market. In that sense, they're really doing what the very first car manufacturers were doing - first make something that generally works, no matter the price; then, develop the technologies to get the price down and expand the target market.
Once upon a time, computers were the size of rooms and could only be afforded by governments and very large corporations.
Yet, after half a century of investment by the British at places like Bletchley, the US on ENIAC and the Third Reich on IBM products... plus things like the government funded ARPANET, we now have computers for everyone, internet for everyone, medical and scientific research advancing as people are capable of helping fold proteins or search the stars in their own homes.
Yes, right now, a Tesla roadster costs a lot of money. But, by investing in the technology, by establishing a market, by drawing interest, it won't do in ten or twenty years time.
Pretty much every invention that's improved human life or reduced our burden on the planet has been expensive at first. But that's never yet been a good reason not to help advance things up front, knowing it'll trickle down many times over, over time.
Ford didn't start out with expensive fancy cars that no one could afford, they changed the industry with a cheap car, built the base and then started making luxury models.
Tesla will be a niche, like Porsche, Lambo, Ferrari, Aston Martin are.
Actually - not quite. Ford's first models were not the industry-changing (if not world-changing) Model T. That comes several years later in Ford's history. And even the first Model T's weren't produced with the manufacturing technology that made it a historical icon. And it should be noted that before the Model T, there was also a very high-end luxury Model K in Ford's lineup. What Tesla is doing isn't THAT far out of line of what Ford did; introduce new technology to the public while using advances in technology (both product and manufactoring) to lower prices on future models.
When you compare Telsa to Ford, you have to look at the big difference in history. Ford entered a fairly young market with a technology that really didn't have an equivalent other than others producing similar technologies. That is, the automobile competed only with other automobiles. Telsa is entering a market with an automobile using a very different power system that has to compete in a market already saturated with conventional powered automobiles. Not only do they have to develop technology and come up with a profitable way to sell that technology, but they also have to capture the attention of the market and distinguish themselves from the conventional competition. Tough market. Especially when "electric car" has an emotional response similar to "golf cart" (and lets not kid ourselves - the car market is very much driven by emotion).
Will Telsa remain a niche? Sure - if they keep producing roadsters. But then... who would have seen Ford producing the Model T back in their early history of the Model A and Model K?
How about this:
Take the money they are requesting and instead use it to fund the foundation of a brand-new, American-based, car manufacturing company. This new company will not only be able to hire all (or at least most of) the workers that the current ones lay off, but it will also re-introduce some competition in the industry (which, incidentally, is the lifeblood of capitalism).
That should both ease the economic crisis and help reduce the negative economic impact of the current auto cartel, while not rewarding the current industry controllers for their demonstrated financial incompetence (thus keeping the taxpayers less pissed off).
Sounds like a win all around, eh?
Tesla do some "integration work", that is they make a big battery module from calls they find on the market. But the important progress in batteries comes from companies like A123 and Valence, which actually work on the battery cells and improve them.
The rest of an electric car is mature technology these days. Electric motors and the electronics to drive them have been in use for a while.
C - the footgun of programming languages
If you're not making enough to pay any taxes, you're not making enough to own a car. Yes, the tax funds should go into mass transit.
The Ford Model A was an unsophisticated vehicle except where it counted ---
in that tough, damn near indestructible, little four-cylinder engine.
If there are no trained mechanics outside the major cities, than you build a car that doesn't need a trained mechanic.
A car that can be built on an assembly line without skilled labor.
If the roads are mud, you build for mud.
You don't build for speed.
You need only the simplest of transmissions. You need only the simplest of mechanical brakes.
Ford understood that he could leverage the lack of infrastructure to support the automobile to his advantage.
The Ford Model A and Model T were basic transportation.
They were easily and cheaply "modded" into pick-up trucks, delivery fans, campers - anything you needed. The farm tractor. The stationary engine on wheels. It had everything but a PTO.
The railroads put them on tracks. Rural libraries used them as bookmobiles. The shopkeeper put his grocery or general store on wheels.
One traveling evangelist and his wife built a tiny church on a Ford body, and took to the road with a pump organ and a fold-down steeple.
That I would like to have seen, both for its innocence and its imagination.
The big framework question is:
What is the best blend of economic methods to deploy to bring about a low energy low carbon emission future?
Right now the low energy low carbon emission future mostly appears to cost too much or it works too slow:
Solar electricity costs somewhere above $.50/kwh. and high performance electric cars are priced like the Tesla.
So is a loan to the big 3 or a loan to Tesla the best way to build an electric car?
All of these organizations have the same problem: No cheap electric car energy storage device.
The problem is not motors, magnets, electronics or chassis design. It is the energy storage device.
The automotive field previously was stalled for decades at a time waiting for innovations to trickle past the patent wall and other production barriers. Examples include: engine valve alloys and spring steel technology, hydraulic brakes, the ignition system, the deep draw steel oil pan, the front wheel drive CV joint, the automatic transmission.
Now who is holding what patents for what?
I don't know. On my wife's Honda I see lots and lots of really ingenious good ideas. I see ideas that were never around when I was working on Studebakers.
It seems to me all these "new battery" technologies involve making a roll of electrodes and spacer materials, dunking the thing in some glop and then sealing the top of the battery can.
Somebody has a patent for some parts of this process and basically that means a 10 year delay while we wait for the patent to expire.
Remember how Xerox held up the xerographic copy machine business for 20 or 30 years with patents? How about the pharmaceutical companies and their high price AIDS drugs?
What possible government assistance is available if foreign organizations hold the key patents needed for mass production of electric car batteries? There is no clear path for the government to clear away patent obstacles.
So let's explore the development of the syllogism:
If patents and undisclosed business secret technologies block the production of traction electrical storage devices what would be the most productive government intervention and assistance?
Should the solution be a few ivory tower Manhattan projects given to a few prestigious colleges or should we try a massively parallel research project done at the next 10,000 perfectly worthy colleges and junior colleges in the USA.
The bio tech field has had a pattern where once a scientist got a feeling for specific set of chemical processes and results. The scientist would either join a company and file patents or the scientist and the University would file patents. The result is the people get high priced proprietary Aids drugs even though public funds paid the initial research.
So let's restructure the government intervention in the "electric traction energy storage device" problem so the result is a low cost, generic, easily repairable energy storage device ... with the right kind of government research and development and prototype trials: Open research with no patents and full publication of results and methods.