By on May 23, 2013

The tweet was true:  As indicated on Tuesday, Tesla paid off its DOE loan on Wednesday. Nine years before the note was due, Tesla “wired $451.8 million to repay the full loan with interest,” as Reuters says.

The Obama administration has been massively criticized for its largesse towards Fisker Automotive, A123,and Solyndra. Both A123 and Solyndra filed for bankruptcy, Fisker is teetering on bankruptcy. The DOE is understandably effusive over the repatriated money, and Tesla. Said U.S. Energy Secretary Ernest Moniz.

“When you’re talking about cutting-edge clean energy technologies, not every investment will succeed – but today’s repayment is the latest indication that the Energy Department’s portfolio of more than 30 loans is delivering big results for the American economy while costing far less than anticipated.”

Moniz said more than 90 percent of the loan loss reserve Congress established remains intact, while losses represent about 2 percent of the overall $34 billion portfolio.

It’s not that Tesla suddenly made half a billion dollars to repay rich uncle Sam.  Tesla used money from a $968 million stock and note sale that closed Wednesday to repay the debt. The TSLA stock has been on fire lately, Tesla has a higher market cap that Fiat, and  it probably was a good time to issue more.

Executives of major automakers roll their eyes when Elon Musk talks about disrupting their business.  Boutique makers  of $100,000 cars sometimes do OK during an uptick of the economy, only to get wiped out when the economy goes sour and corrodes disposable income.  The big challenge comes when boutiques enter the mass market and find themselves confronted with many billions of investments in R&D, plants, and marketing which won’t show profits for decades. Tesla has for all intents and purposes what little market there is for itself, especially after large OEMs cooled on the idea of EVs.  Should  EVs ever become a viable market, major OEMs can dust off their digital blueprints, slap an updated body on it, and disrupt the dreams of Tesla.

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33 Comments on “Tesla: The Government Gets Its Money Back...”


  • avatar
    ydnas7

    Tesla is now the only American car company to have fully repaid the government.

    • 0 avatar

      Chrysler disagrees. Of course, that raises the question of whether Chrysler is an “American car company” at this point.

      • 0 avatar
        Thinkin...

        Chrysler also never paid its full bill. It left the US Treasury a cool $1.3B short. And people think that Tesla was in bed with the feds…

        http://www.nytimes.com/2011/07/22/business/us-sheds-its-stake-in-chrysler.html

        • 0 avatar
          wmba

          From that NYT article:

          “The unpaid portion is on the balance sheet of the “old Chrysler” — a collection of unwanted assets being liquidated in bankruptcy”

          Yup, that $1.3 billion was owed by Cerberus who owned Chrysler prior to the bailout. As I said last week, good luck getting money out of those guys. But with the magic of forgetfulness, let’s blame Fiat for not paying Cerberus’ bills.

          In the same article, some Californian politician with a giant brain and no memory thundered: ”

          “Representative Darrell E. Issa, Republican of California, said Thursday that the Obama administration “has sold out an American icon to a foreign company,” and is now “essentially giving that same company $1.3 billion of taxpayer money.”

          Yessir, and Daimler never owned Chrysler before selling it at a $37 billion loss to Cerberus, a true-blue asset stripping American hedge fund. What a twit.

          • 0 avatar
            ect

            +1. The company I worked for thorugh most of the 90′s was a supplier to all of the D3. Chrysler’s renaissance after the departure of Iacocca was remarkable, and by 1994-5 it was widely regarded as the best-managed US auto company, and perhaps the best in the world.

            Daimler destroyed Chrysler’s management team, in the name of cementing control and Jurgen Schremp’s position as CEO. By the time Cerberus took over, it was a walking dead organization.

            At the beginning of 2009, I could not see how Chrysler could possibly survive – which was much the prevalent view.

            The company’s strong – and completely unexpected – recovery is both a tribute to Fiat/Chrysler management and a godsend to the economy. Not to mention how it has preserved/benefited the lives and wellbeing of Chrysler’s employees, as well as those of their suppliers – and the tax revenues they provide.

  • avatar

    #1 Let this be a lesson that sometimes the government CAN make good investments.

    #2 Tesla needs to hurry up and get the MODEL X on the streets. I’m gonna test drive that puppy ASAP.

    #3 DEBT is SLAVERY.

    • 0 avatar
      KixStart

      Debt is leverage.

      • 0 avatar
        SomeGuy

        Depends on how it is done. Could be leverage or a double edged sword that is ready to cut your arm off.

        • 0 avatar
          dolorean

          True. Debt is good when youre the holder and can make demands upon your debtor. It’s also good leverage and provides a sense of trust between parties that business will continue. However, if the debt is too large, the debtor may make their own demands.

          Remember very clearly interviewing an Iraqi Colonel shortly after the fall of Baghdad in 2003, who told the story of why Sadam invaded Kuwait. Kuwait had loaned Iraq vast sums of cash to fund its war with Iran with long strings attached. Daily the Kuwaiti Monarch reminded Sadam of his failure to pay it back. Finally one night Sadam made a phone call to the King saying ‘Remember that debt of money I owe to you my friend? I’ve come to pay it back.’ as his tanks and helicopters rolled over the border.

    • 0 avatar
      Beerboy12

      Dept, is a tool, if used correctly.

      • 0 avatar
        stuki

        Today, in Dystopia, debt is used to turn taxpayers into tools for the bailed out classes, when the latter does not use it correctly. Which they never do, because they have no incentive to, because….. (repeat from beginning)

  • avatar
    sirwired

    I’m not sure what the big fuss is about the loan program. 2% Seems to be a pretty good loss rate for a private investment fund. Heck, for one placing such speculative investments, it’s downright spectacular.

    If we shut down a mutual fund or hedge fund every time one of it’s more speculative investments went south, there’d be no such thing as a mutual fund or hedge fund. New companies fail All. The. Time.

    We can certainly have a worthwhile debate about the government taking direct investments in private companies, but this program has hardly been the pork-filled disaster it’s been made out to be.

    Not to mention that one of the poster children, Solyndra, had most of the work done during the Bush administration, even if the check was cut while Obama was in office.

  • avatar
    Thinkin...

    Bertel: When, exactly, did large OEMs cool on the idea of EVs? I mean heck, your very next post is titled “Let the Sparks Fly: Get Ready for the EV Wars” – that sure doesn’t suggest that manufacturers are pulling out of the market. In fact, GM is pretty bullish on the Volt and ELR, not to mention the Spark. Nissan’s rocking a new Leaf this year, Ford is doing well with it’s entire Energi line and Electric Focus, Fiat’s got the 500e, BMW is pushing the i-series to market, etc.

    And I’d love to hear precisely which OEM you think has a “digital blueprint” in their back pocket that just needs to be dusted off in order to compete with the Model S.

  • avatar
    nine11c2

    I saw this headline and thought “they ahven’t sold but a couple hundred cars tops – best their REVENUE is is a few million”, they must have done a placement.

    Hey Tesla – this may be a bit premature. You may need some of this money sooner rather than later..if you paid the interest, why not hang on to it a bit to be sure?

    • 0 avatar
      DeeDub

      They sold 4900 cars last quarter and are expecting sales of 4500 this quarter. At $100K a pop that starts to add up, especially since they’re selling direct-to-consumer with no dealership middlemen.

      • 0 avatar
        nine11c2

        thats Revenue number – out of that they pay for the people, and the cost of goods that goes into the cars. what they have left to pay off the loan is profit. which on the first 4500 cars is little if anything. Even at a very high 10-15% after EBITA its $45$70M available to pay back the loan..

        • 0 avatar
          DeeDub

          Yes, it’s the revenue number, and it’s considerably higher than “a few million” as you wrote.

          • 0 avatar
            nine11c2

            you are right – they SAY they sold far more cars then I thought so it is more than a few million. Not sure how many $100,000 cars with limited range they can sell..I have but one word of caution..this whole thing reminds me of one thing “DeLorean”..

          • 0 avatar
            Russycle

            Delorean. Really? The Delorean was a dog, aside from the stainless steel body and gull wings(both of which look cool but are a PIA to actually live with) it had nothing going for it. The Tesla is crazy fast, gorgeous, and has the longest range of any electric car I’ve heard of. It’s not perfect, it’s not for everyone, but it’s no Delorean.

          • 0 avatar
            nine11c2

            Russycle, when I said Delorean, I was talking about the illegal crap John did, not the car itself..

    • 0 avatar

      They have delivered more than 10,000 cars and are on course to sell over 20,000 cars this year.

      20,000 cars is sufficient for breakeven.

      Conventional car companies could dust off their electric car plans if electric cars prove popular, but nobody save Tesla has tried a full-on luxury EV. All the plans I’ve seen are for compact cars. Furthermore, all of those plans I’m aware of are variations on an existing conventional car.

      Tesla is the only company I know of with bespoke electric car platforms, and I think that’s the only way to fully exploit the technology’s advantages. So I think Tesla will continue to have a significant competitive advantage in the future.

      Just as importantly, Tesla has nurtured a sizable contingent of fanatically loyal customers. They act remarkably like Apple customers, who have sold a lot of Apple gear for the company. As long as Tesla continues to execute as well as it has, those customers are not going to be easily turned back to traditional automakers.

  • avatar
    danio3834

    Well done on pulling a Marchionne. Can’t have tax payer money hanging over your head. I believe that’s called GM syndrome.

  • avatar
    Skink

    Big deal. They refinanced with Goldman Sachs. It’s nice they paid off taxpayers, though. The optics of this loan payoff may relate more to SpaceX getting government contracts than any other consideration.

  • avatar
    carinator

    Fully repaid? Bullshit. Let Tesla repay the massive subsidies on every car. Those cost the Fed and state treasuries thousands per car.

  • avatar
    fredtal

    There is still something about Mr Musk I don’t like or trust. I’ve never met him so I don’t really know, it’s just a feeling I have. Unfortunately that personal opinion reflects down to his cars, which I have never driven or actually seen in person. Doesn’t really matter as I can’t afford his cars anyway, nor do I see an electric car in my future given my current driving habits. So take this rather lame post with a grain of salt.

    • 0 avatar
      gslippy

      “So take this rather lame post with a grain of salt.”

      I do, and thanks for your honesty.

      Do you like and trust the CEO of the mfr who made your car?

      • 0 avatar
        fredtal

        I had to look up the Audi chairman Rupert Stadler. Some of the family squabbles and the Porsche vs VW affair are distasteful. I don’t remember who was in charge of GM or Chevy in 1999 when I bought by truck. I might like them, but they don’t put them selves out to the public like Mr Musk does with his girlfriend and Hollywood style, suing Top Gear and the such.

    • 0 avatar

      I didn’t like Elon Musk, either. He seemed a bit shady, a trifle dishonest. And he pushed out Martin Eberhard, who I really liked, from Tesla.

      And then I realized I recognized him! Many years ago, I had read Robert Heinlein’s book/short story “The Man Who Sold the Moon”. Only about 60 years before Musk got on the scene, Heinlein created a picture-perfect portrait of a likable but ethically flexible person with an intense drive to do great things.

      He was dishonest in some of the the details, but in the end got to the moon and of course all was forgiven.

      I think that was a perfect character study of Elon Musk, written decades before he was born! Nice job, RAH :). I don’t think anyone would be willing to bet against Elon Musk winding up on the moon at some point, would you?

      Love him or hate him, in other words, a truly admirable man who did (and is doing) great things. And I have to admit, his business plan for Tesla – create Model S – was the right one, and Martin Eberhard’s – be cautious, keep selling Roadsters – was wrong. Amazing.

      D

    • 0 avatar
      Beerboy12

      Lack of trust comes from lack of knowledge. I suggest doing some reading up on Elon Musk. Start with Wikipedia. Once you have some knowledge then you can make a better judgment. I believe he comes by his success honestly, hard work and he is a smart guy.

  • avatar
    Beerboy12

    I fear for the day Elon Musk does make a mistake. Reminds me of that joke about the guy who built the school, built the road, Built the town hall. A hero in every sense except for that one unfortunate incident involving a goat…
    In Musk’s case the goat is a Government loan.

    • 0 avatar
      gslippy

      The media loves blood more than anything else. Climbs make news, tumbles make big news.

    • 0 avatar
      stuki

      Who cares about Mr Musk himself. It’s not like he’s either designing or building the darned cars. He’s one heck of a gambler, with a Silicon Valley like willingness to overlook every potential flaw in whatever new-new thing he is currently interested in; and just happens to have enough money to place bets sizable enough to sometimes matter.

      But Tesla’s success is ultimately going to depend more on the viability of electric cars overall, than on any kind of magic mojo emanating from some dude with a wallet he’s willing to throw around.

      Tesla is currently living off of investor money. They build electric cars for the bailed out classes exclusively; hence is maximally compelling as an investment for said bailout beneficiaries.

      No mainline automaker is in that position. They have to fund electric programs from general funds mixed with every other line of business. Hence will inevitably be more cautious about how much they are willing to bet. If Tesla succeeds in poaching enough high margin bailout babies from the established luxury makes; that’s probably where the first wave of competition will come from. At which point volumes will rise, which will put the depth of electric car parts supply chains to the test.

      While at the same time incentivizing improving infrastructures for electric cars. Which could possibly make less elaborate, hence less costly electrics viable. Who knows where it all will go. But regardless, neither Mr Musks personal failures or successes, nor the willingness of Goldman Sachs executives to throw some bucks his way has very much to do with the viability of electric cars on a larger scale.


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