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Tesla Motors Turns a Profit For the First Time
d0rp writes with news that Tesla Motors has reported earning a profit for the first time in its six-year history. Sales of the $109,000 Roadster earned the company $20 million in revenue, which settled out to $1 million in profits. "Most of that money rolled in after Tesla delivered cars customers had already placed deposits on. Although the company has, according to spokeswoman Rachel Konrad, seen a 'surge' in orders for the Roadster and the higher-performance Roadster Sport (price: $127,500), it isn't likely to keep rolling cars out so quickly. Konrad says Tesla is 'definitely on pace' to meet its goal of 1,000 to 1,200 cars a year but didn't say when that might happen. Tesla has so far delivered about 609 Roadsters since production started in March, 2008." The company is working on a new 'Model S' sedan, with the help of $465 million in government loans, and has also entered into a partnership with Daimler to help the German auto company produce electric Smart cars.
How does a company that makes $1,000,000 in profit over 1 full year, get 465 Million dollars in loans from our government?? How will they pay that back in a reasonable time?
Imagine you have an account at a bank that has unlimited ability to borrow money from other banks. Now imagine that bank actually borrows money from other banks to pay the interest on the previously borrowed money. It's not a problem for the bank because if the interest payments get too large, the bank can---and will---borrow still more money. Now say you ask to borrow money from that bank. The amount is less than an hour's worth of revenue (real and borrowed) for the bank. If you default on the loan, the bank can just borrow more money to cover the loss. At best you can only pay back interest on this relatively small loan. Do you really think this bank would care?
Welcome to America.
Life is short; think quickly.