Test drive: Tesla Model S

[ChrisV]

A government loan to an unloanable entity is a de facto subsidy though.

SBA loans to small businesses all the time. I don't see why a larger loan to a sliaghtly larger busiess is a bad thing. Sorry, it's not a fucking grant and those get given out to busiesses ALL THE TIME. I don't have a problem with the government betting on American industry. I'd much rather see that then the government paying people to have kids (like happens on welfare) for no return. And I'd rather see business loans than see actual subsidies (paying farmers not to grow crops, for example).

[MrH]

Mr H,

Believe me, I am against tax loop holes and other kinds shenanigans I have seen several CEOs I talk to use for their businesses ( I am the CEO of a small startup, myself). I try to do what I can to maintain an honest lifestyle, keeping business things and private things strictly separated. ( believe me, when you start a business, there are all kinds of things you can take advantage of, to avoid taxes)

However, history is filled with examples of new and old technology being helped out by government money in the form of loans, subsidies and what nots.

I don't know if Tesla will be a success, little early to tell. But if 20000 Model S s sold/reserved are any indication, there seems to be traction here, based a lot on the unique driving characteristics of the Model S type of EV (skateboard architecture)

Results speak for themselves, don't they? I mean a venerable stalwart like BMW with decades of car building experience going head to head with the M5 which is their best, against a scrappy little baby like Tesla, and we have people unabashedly admitting that Model S is a better drive. ( not just talking about pure 0-60 times here, which is a strong point of the Tesla, incidentally)

If there is ever a case for the American made automobile, bursting with innovation and promise, this is it. I don't choose my cars lightly, I love to drive, and to dethrone my Bimmer is not easy. That the Model S did it so easily, was in fact a bit saddening! I almost hated the Model S because it was too good! If you can believe that.

Anyway, I am done here. People will always believe what they will, until they experience this car for themselves. So be it.

I'm not debating how great the Model S is.  I haven't driven it, but everyone who has says it's game changing.

The only question I have is:  If you gave Porsche or BMW the same money that Tesla got, what could they make?  I'd rather see Tesla succeed than fail obviously (I mean, I've got tax dollars riding on it, right? ).  I just don't think it's fair to compare them and say that BMW can't compete.  They're not playing by the same rules at all.  Even though the Model S is selling now alright, I don't think that's necessarily indicative of the future of the company.  If Tesla didn't get loans, and the Model S was $125k+, would it still be selling anything like it is now?

[GoCougs]

Every loan is a gamble. Nothing is guaranteed. If everyone was as pessimistic as you, there would be no ventures, no venture capitalists, not to speak of many other things that have been created thus far on this planet.

SBA loans to small businesses all the time. I don't see why a larger loan to a sliaghtly larger busiess is a bad thing. Sorry, it's not a fucking grant and those get given out to busiesses ALL THE TIME. I don't have a problem with the government betting on American industry. I'd much rather see that then the government paying people to have kids (like happens on welfare) for no return. And I'd rather see business loans than see actual subsidies (paying farmers not to grow crops, for example).

Guys, borrowers are not all equal. It's simple finance 101 - risk models are objective, quantitative endeavors. Tesla, Solyndra, unemployed 18-year-olds, etc., are objectively and quantifiably lousy borrowers (low/zero assets, income, etc.) and no rational (private) entity is going to lend any appreciable amount of money. So yes, government making loans is a bad thing, as it rewards irrational behavior and distorts markets.

[LonghornTX]

Actually, again, single central pollution sources that are regulated to be clean are cleaner than amillion individual point sources (cars). And power plants get cleaner every year, while individual cars get dirtier every year. And EVs aren't tied to one "fuel" source, as they can take advantage of every improvement in power generation, from cleaner coal plants to NG plants, to nuclear, hydro, solar and wind power, all without changing the car itself. Imagine trying to make your gasoine car progressively cleaner as you own it... Simply put, studies have shown that well to wheel, EVs are an order of magnitude cleaner that ICE cars, even the most "efficient" ICE cars.

Not to nit pick, but cars are also getting cleaner every year, so I have trouble following your argument. Similarly with your last statement. I would be interested to read those studies, because I have heard the opposite.

[LonghornTX]

Guys, borrowers are not all equal. It's simple finance 101 - risk models are objective, quantitative endeavors. Tesla, Solyndra, unemployed 18-year-olds, etc., are objectively and quantifiably lousy borrowers (low/zero assets, income, etc.) and no rational (private) entity is going to lend any appreciable amount of money. So yes, government making loans is a bad thing, as it rewards irrational behavior and distorts markets.

Who should fund bleeding edge innovation then Cougs? You expect the VC sector, who will use similar models, to shoulder it all?

[MrH]

Who should fund bleeding edge innovation then Cougs? You expect the VC sector, who will use similar models, to shoulder it all?

Wait, VC sector uses similar models to who?

And yes, they should.

[GoCougs]

Who should fund bleeding edge innovation then Cougs? You expect the VC sector, who will use similar models, to shoulder it all?

Nobody "should" do anything. Let freely associating people decide what they want to do. 

[ChrisV]

Not to nit pick, but cars are also getting cleaner every year, so I have trouble following your argument.

You have two ideas confused. Each new model of a car is cleaner than the last. That's your understanding and statement. BUT, an individual car as it's used gets dirtier every year as it's emissions systems wear out. Get it? An EV doesn't get dirtier every year that it's used, as it has no emissions itself, and the sources it gets it's power from get cleaner every year. So that particular individual car does NOT get dirtier every year that you use it. Understand?

A Nissan Versa, for example puts out x amount of CO2 per mile when it's new. After 10 years, due to normal end user maintenance, it emits x*5 CO2 as it's emissions suystems wear out. In comparison, a Nissan Leaf emits 0 CO2, but the power plant it gets it's electricity emits y amount of CO2 per KW. After 10 years, due to emissions regulations on the power plant, that plant emits y/2 CO2 (half the amout it did when the leaf was new) therefore the Leaf causes less emission as it ages.

There have been numenrous studies on this, and EVS emit less pollution to start with, and due to the way power plants have to become cleaner every year, a USED EV gets cleaner as it ages, unlike an ICE car. THAT'S the statement you were having a hard time understanding.

[GoCougs]

You have two ideas confused. Each new model of a car is cleaner than the last. That's your understanding and statement. BUT, an individual car as it's used gets dirtier every year as it's emissions systems wear out. Get it? An EV doesn't get dirtier every year that it's used, as it has no emissions itself, and the sources it gets it's power from get cleaner every year. So that particular individual car does NOT get dirtier every year that you use it. Understand?

A Nissan Versa, for example puts out x amount of CO2 per mile when it's new. After 10 years, due to normal end user maintenance, it emits x*5 CO2 as it's emissions suystems wear out. In comparison, a Nissan Leaf emits 0 CO2, but the power plant it gets it's electricity emits y amount of CO2 per KW. After 10 years, due to emissions regulations on the power plant, that plant emits y/2 CO2 (half the amout it did when the leaf was new) therefore the Leaf causes less emission as it ages.

There have been numenrous studies on this, and EVS emit less pollution to start with, and due to the way power plants have to become cleaner every year, a USED EV gets cleaner as it ages, unlike an ICE car. THAT'S the statement you were having a hard time understanding.

ICE-powered cars only get dirtier if their emissions systems fail (catalytic converter, rings, FI system) and in this day in age when those things happen a car becomes a liability if not almost undrivable. It can happen but by and large it doesn't, especially with a conscientious car owner (the standard comparator in this situation).

As to CO₂ emissions increasing? Emission of CO₂ from burning fossil fuels is a basic chemical reaction. It can only be reduced by lowering the inputs (as in, burning for fossil fuels).

Fossil fuel power plant efficiency isn't going to increase anytime soon owing to the basic science of combustion. You're also neglecting line losses of transmitting power over many many miles of copper and that the efficiency of a fossil fuel power plant isn't any better than the average ICE engine and as a result EVs generally don't get materially better MPGe when their power is derived from fossil fuel power plant (and roughly 70% of the US's power is generated from fossil fuel power plants). 

Counter to you claim efficiency and environmental improvements can be rolled out to new cars vastly quicker than the nation's tens of thousands of fossil fuel power plants. New car models are introduced every year - power plants not so much.

So, all in all, EV=cleaner or better MPGe doesn't really wash. The pollution and efficiency is just pushed around.

[MrH]

ICE-powered cars only get dirtier if their emissions systems fail (catalytic converter, rings, FI system) and in this day in age when those things happen a car becomes a liability if not almost undrivable. It can happen but by and large it doesn't, especially with a conscientious car owner (the standard comparator in this situation).

As to CO₂ emissions increasing? Emission of CO₂ from burning fossil fuels is a basic chemical reaction. It can only be reduced by lowering the inputs (as in, burning for fossil fuels).

Fossil fuel power plant efficiency isn't going to increase anytime soon owing to the basic science of combustion. You're also neglecting line losses of transmitting power over many many miles of copper and that the efficiency of a fossil fuel power plant isn't any better than the average ICE engine and as a result EVs generally don't get materially better MPGe when their power is derived from fossil fuel power plant (and roughly 70% of the US's power is generated from fossil fuel power plants). 

Counter to you claim efficiency and environmental improvements can be rolled out to new cars vastly quicker than the nation's tens of thousands of fossil fuel power plants. New car models are introduced every year - power plants not so much.

So, all in all, EV=cleaner or better MPGe doesn't really wash. The pollution and efficiency is just pushed around.

Not to mention the LCA of an electric vehicle compared to a gas powered one.  The energy and resources required to create these battery packs are HUGE.

[LonghornTX]

Wait, VC sector uses similar models to who?

And yes, they should.

VC companies analyze risk when weighing potential investment options, using many of the same analytic techniques that a bank would use to weigh a loan for a small to medium sized business. They look at projected cash flows, market projections, etc. Depending on the type of VC firm, and the investment they are looking at, it is generally assumed that the venture might also need to raise debt financing, especially if they are a capital intensive business like Tesla.

I am glad our leaders don't depend on the VC community to fund our most cutting edge research, they would never have the risk appetite to fund technologies that truly change the world.

[GoCougs]

VC companies analyze risk when weighing potential investment options, using many of the same analytic techniques that a bank would use to weigh a loan for a small to medium sized business. They look at projected cash flows, market projections, etc. Depending on the type of VC firm, and the investment they are looking at, it is generally assumed that the venture might also need to raise debt financing, especially if they are a capital intensive business like Tesla.

I am glad our leaders don't depend on the VC community to fund our most cutting edge research, they would never have the risk appetite to fund technologies that truly change the world.

Leaders???

[LonghornTX]

You have two ideas confused. Each new model of a car is cleaner than the last. That's your understanding and statement. BUT, an individual car as it's used gets dirtier every year as it's emissions systems wear out. Get it? An EV doesn't get dirtier every year that it's used, as it has no emissions itself, and the sources it gets it's power from get cleaner every year. So that particular individual car does NOT get dirtier every year that you use it. Understand?

A Nissan Versa, for example puts out x amount of CO2 per mile when it's new. After 10 years, due to normal end user maintenance, it emits x*5 CO2 as it's emissions suystems wear out. In comparison, a Nissan Leaf emits 0 CO2, but the power plant it gets it's electricity emits y amount of CO2 per KW. After 10 years, due to emissions regulations on the power plant, that plant emits y/2 CO2 (half the amout it did when the leaf was new) therefore the Leaf causes less emission as it ages.

There have been numenrous studies on this, and EVS emit less pollution to start with, and due to the way power plants have to become cleaner every year, a USED EV gets cleaner as it ages, unlike an ICE car. THAT'S the statement you were having a hard time understanding.

I only misunderstood because you wrote your post in a rather vague manner...

But since Cougs and MrH have already addressed most of the shortcomings of your argument, I would just ask to see, or even point me towards, the "numerous studies" on this that show "well" to recycle/scrap that EV's are cleaner for the environment than modern ICE powered vehicles. The fact is, modern ICE emission control systems generally don't wear out, and when they do, they are monitored closely by the car's on-board diagnostics, prompting a service visit. The car will generally not pass an emissions test, thus in many states it won't be able to inspected, prompting the owner to fix the problem or sell it. Since it would be illegal to run that vehicle without an inspection, I would call into question any study that tried to quantify how many vehicles into the future would fall under that designation.

And while EVs don't create any CO2 when they operate (though the power generation used to recharge them does), the manufacturing process (again from "well" to recycle) for their batteries do. MUCH more so than for the typical ICE drive train. On top of that, as Cougs notes, power plants don't go through the level of innovation that you imply, as frequently as you imply, and on top of that, many utility providers are opting for natural gas power plants that may rely on gas created through CO2 heavy extraction processes.

I am interested in reading these studies...

[LonghornTX]

Leaders???

You know, the people we elect to make decisions about our country as a whole. Shouldn't be that hard to understand...Unless of course you are just trying to create another avenue to espouse your fringe political and social philosophy

[GoCougs]

You know, the people we elect to make decisions about our country as a whole. Shouldn't be that hard to understand...Unless of course you are just trying to create another avenue to espouse your fringe political and social philosophy

The irrefutable point is it is irrational and immoral to assert "leaders" have risk appetite, let alone even just standing, to decide what "cutting edge" research should get funded.

[LonghornTX]

The irrefutable point is it is irrational and immoral to assert "leaders" have risk appetite, let alone even just standing, to decide what "cutting edge" research should get funded.

So that we are clear, are we only talking about government backed loans to start ups, or government backed research in general (like DARPA, for example)?

[GoCougs]

So that we are clear, are we only talking about government backed loans to start ups, or government backed research in general (like DARPA, for example)?

Yup.

[LonghornTX]

Yup.

Assuming you are talking about the former, I would tend to agree with Chris's previous post on this. Furthermore, Tesla only received the loan (interest bearing, mind you) after the company had completed multiple rounds of equity funding and already launched its first product. I think it is a smart move to fund a company like Tesla, at the stage that they did. It is clear the company will be successful, at least in the short term, and in the long-term could very well be the next great american OEM. Let us also not forget that their loan came from a 2007 program created by Bush, so this philosophy certainly has roots on both sides of the spectrum, at least in the U.S.

[ifcar]

Unless of course you are just trying to create another avenue to espouse your fringe political and social philosophy

[gasps] And on the internet, of all places!

[GoCougs]

Assuming you are talking about the former, I would tend to agree with Chris's previous post on this. Furthermore, Tesla only received the loan (interest bearing, mind you) after the company had completed multiple rounds of equity funding and already launched its first product. I think it is a smart move to fund a company like Tesla, at the stage that they did. It is clear the company will be successful, at least in the short term, and in the long-term could very well be the next great american OEM. Let us also not forget that their loan came from a 2007 program created by Bush, so this philosophy certainly has roots on both sides of the spectrum, at least in the U.S.

Wow, you should research Tesla's abysmal financial position. $412MM in revenue ($40MM of which was selling carbon credits lol), $396MM in net losses, $452MM in debt, a balance sheet in the red (if Tesla were most any other company this would mean BR), and worst of all IMO for predicting profitability, a net operating loss.

The only thing clear is Telsa is dead without continued government funding. LOL on Tesla being the next great OEM. Not a chance - they're far too vertically integrated for that. At best Tesla goes the way of Fisker (= gets bought by a Chinese auto company after it effectively fails).

[SVT666]

Anyone want to wager on whether or not the US Government writes off Tesla's loans "for the good of the EV movement"?

[GoCougs]

Anyone want to wager on whether or not the US Government writes off Tesla's loans "for the good of the EV movement"?

That would be the least of the fallout. With a red balance sheet Tesla will need more loans just to make it through 2013.

[LonghornTX]

Wow, you should research Tesla's abysmal financial position. $412MM in revenue ($40MM of which was selling carbon credits lol), $396MM in net losses, $452MM in debt, a balance sheet in the red (if Tesla were most any other company this would mean BR), and worst of all IMO for predicting profitability, a net operating loss.

The only thing clear is Telsa is dead without continued government funding. LOL on Tesla being the next great OEM. Not a chance - they're far too vertically integrated for that. At best Tesla goes the way of Fisker (= gets bought by a Chinese auto company after it effectively fails).

Hahaha, you're blinded by your biases and silly philosophical leanings. First of all, all of the numbers you quoted are from their year end 12', when they had only moved a couple thousand Model S and production per day was much lower than it is now. Having a significant fixed cost that is being underutilized (a factory) will tend to do that to profitability. You should research the company more yourself. If you did, you would see the massive revenue increases they posted in Q4 vs Q3. Based on the wild success that is the Model S, many analysts predict an operating profit by at least the end of Q2, and potentially continued profitability starting 2014. They already have a significant number of orders for a car (the Model X) that won't be produced for another year or more.

LOL at you thinking they are even in the same realm as Fisker. It should be clear from reviews of their products that they are not even close. Your histrionics are good for a laugh every once in a while, that is for sure.

[giant_mtb]

You have two ideas confused. Each new model of a car is cleaner than the last. That's your understanding and statement. BUT, an individual car as it's used gets dirtier every year as it's emissions systems wear out. Get it? An EV doesn't get dirtier every year that it's used, as it has no emissions itself, and the sources it gets it's power from get cleaner every year. So that particular individual car does NOT get dirtier every year that you use it. Understand?

A Nissan Versa, for example puts out x amount of CO2 per mile when it's new. After 10 years, due to normal end user maintenance, it emits x*5 CO2 as it's emissions suystems wear out. In comparison, a Nissan Leaf emits 0 CO2, but the power plant it gets it's electricity emits y amount of CO2 per KW. After 10 years, due to emissions regulations on the power plant, that plant emits y/2 CO2 (half the amout it did when the leaf was new) therefore the Leaf causes less emission as it ages.

There have been numenrous studies on this, and EVS emit less pollution to start with, and due to the way power plants have to become cleaner every year, a USED EV gets cleaner as it ages, unlike an ICE car. THAT'S the statement you were having a hard time understanding.

Yeah, 'cause batteries remain 100% efficient until they suddenly die.

Not.

[GoCougs]

Hahaha, you're blinded by your biases and silly philosophical leanings. First of all, all of the numbers you quoted are from their year end 12', when they had only moved a couple thousand Model S and production per day was much lower than it is now. Having a significant fixed cost that is being underutilized (a factory) will tend to do that to profitability. You should research the company more yourself. If you did, you would see the massive revenue increases they posted in Q4 vs Q3. Based on the wild success that is the Model S, many analysts predict an operating profit by at least the end of Q2, and potentially continued profitability starting 2014. They already have a significant number of orders for a car (the Model X) that won't be produced for another year or more.

LOL at you thinking they are even in the same realm as Fisker. It should be clear from reviews of their products that they are not even close. Your histrionics are good for a laugh every once in a while, that is for sure.

No offense but this sounds like a something between a Musk's frequent don't-talk-about-my-dad insecurity-laced screed and an Obama press underling sermon.

First, operating profit ain't net income. Tesla is gonna need a whole lot of operating profit to become viable - boost CoH, payoff its mammoth debts, actually pay for its plant/labor/mat'l.

Second, by definition (slim CoH, red balance sheet, operating profit still in the red) Telsa fail without significant and chronic government handouts.

Third, government will still need to subsidize the purchase of cars and building of charging stations for to compel consumers to even think about buying Tesla cars.

In short, without continued government handout Tesla fails, and not only after significant government handouts will Tesla ever approach self-sustaining viability.

[LonghornTX]

No offense but this sounds like a something between a Musk's frequent don't-talk-about-my-dad insecurity-laced screed and an Obama press underling sermon.

First, operating profit ain't net income. Tesla is gonna need a whole lot of operating profit to become viable - boost CoH, payoff its mammoth debts, actually pay for its plant/labor/mat'l.

Second, by definition (slim CoH, red balance sheet, operating profit still in the red) Telsa fail without significant and chronic government handouts.

Third, government will still need to subsidize the purchase of cars and building of charging stations for to compel consumers to even think about buying Tesla cars.

In short, without continued government handout Tesla fails, and not only after significant government handouts will Tesla ever approach self-sustaining viability.

No offense, but your post is almost unreadable and sounds like a right-wing diatribe more likely to be attributed to someone who gets their views and information from cable television than someone who actually knows what they are talking about.

Trust me, I understand the difference between operating profit and net income. I likely have significantly more education in the realm of accounting than you do, and have professional experience working with the analyst community looking at companies like Tesla.

As I already demonstrated previously, Tesla is hardly in dire straights financially (which you never addressed) and has a bright future ahead of them. Oh, but I guess it is much easier to make your argument when you just pick and choose the numbers, rather than actually looking at them closely. They make a product that consumers love and have already gained a reputation as an innovative producer of automotive products.

You are such a right-wing shill sometimes, it makes me laugh. Many companies operate with similar levels of debt to Tesla at their stage. They seem to be having absolutely no problem servicing it and are on track, last I checked, to pay off their loan from the government 5 years early. Tesla basically used the loan to jump start R&D, not necessarily to keep the lights on. They used it wisely it would seem, as the vehicle they ultimately developed seems to be taking the world by storm. I would argue (and most analysts following TSLA would prob agree) that given the significant levels of demand they face (which outstrips their supply), they could probably easily sell their vehicles without the tax rebates. Further, given the number of charging stations that actually exist, versus the number of Model S vehicles that have been ordered, your third argument falls pretty much flat on its face.

So yea, keep trolling Cougs, it seems to be the only thing you are actually good at.

[Catman]

Look at the internetry

[Morris Minor]

Model S may be a good car; I think it's fascinating. But that does not detract from the problem of it having been funded with money forcibly extracted from other people. I'm not singling out Tesla; my objection extends to all government engagement in matters for which it is too stupid ever to be involved.

[Laconian]

Model S may be a good car; I think it's fascinating. But that does not detract from the problem of it having been funded with money forcibly extracted from other people. I'm not singling out Tesla; my objection extends to all government engagement in matters for which it is too stupid ever to be involved.

GM

[ChrisV]

Yeah, 'cause batteries remain 100% efficient until they suddenly die.

Not.

they don't get dirtier (i.e. they don't produce more emissions unlike an aged catalytic converter), But you have no argument, I can tell. You really don't know what you are talking about.