By on April 2, 2009

Now you may think that Tesla Motors, makers of the $109K+ lithium-ion powered Roadster, are acting in good faith re: taking deposits for their recently revealed Model S sedan. If so, GreenTech Media’s report that the Musk-scented company has secured 520 advance orders for the vehicle is a good thing: a sign of early adopters’ faith in Tesla’s ability to design, build and, eventually, sell the all-electric foor-door. Leaving aside Tesla’s past history of missing deadlines and changing announced specifications. With eyes wide shut, the fact that Tesla has collected $5K per car from 520 prospective customers, generating some $2.6M, is a good thing. Nothing wrong with raising a little—and in the car business $2.6 million is  microscopic—working capital. The fact that Tesla’s first model, the Roadster, isn’t profitable, and that the new money may be helping to prop-up THAT side of the business, is neither here nor there nor the subject of a court case. So . . . good news! There may be more money on Tesla’s table!

You can plunk down $5,000 for a regular Model S or 40,000 for a “Signature Edition,” which is supposed to come with some nifty features that Tesla has yet to disclose. The company plans to make 2,000 of the special edition cars – half of them for the U.S. market and the other half for Europe.

Figuring half of those 520 orders are for the we-won’t-tell-you-what-that-means “Signature Edition,” Tesla may have recapitalized off its true believers’ backs to the tune of $6.5 million. Still not much. But better.

And what if Tesla doesn’t receive a dime of federal financing and goes belly-up? Although Musk has publicly pledged to back up deposits with his personal fortune, our sources say there is no such language on the deposit contract.

That said, if Tesla would like to email a jpeg or pdf of same to [email protected], I’d be happy to put the document up here for TTAC’s Best and Brightest to see for themselves.

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40 Comments on “Tesla’s Model S Ponzi Scheme Rakes in $2.6M. At Least...”


  • avatar
    rehposolihp

    I wish Tesla would stop being so sketchy, they are a company that I would otherwise be enamored with.

    As it is, I think they will probably go belly up in the next year and a half.

  • avatar
    Rod Panhard

    Tesla will continue to be opaque as long as the Greenies continue to be as fundamentally challenged by basic math. Once the Greenies start to ask basic questions like, “Where is all this electricity going to come from to run all our cars?” while the lights dim on a hot day, then they’ll start asking hard questions, such as, “When will my car be finished?”

    That’s a long road, though. You’re asking people to make logical conclusions that overrun their emotional needs.

  • avatar
    andrichrose

    currently to charge an electric car takes about
    the same current as a domestic air conditioning
    system ! its all about the efficiency , electric motors
    give so much more than ICE for less fuel !

    And Robert you can’t really knock this car, it
    really is stunningly beautiful !

  • avatar
    TRL

    It’s really a good looking car. Put a 4 cyl turbo under the hood and take all the snake oil out of the trunk and I would probably get in line.

  • avatar
    Richard Chen

    @andrichrose: theoretically, yes. Sadly, auto manufacturers are more likely to go out of business than not. Tesla’s deliveries have far exceeded Tucker, but that’s not saying much. DeLorean and Bricklin are just the more recent independent and larger attempts that have floundered.

  • avatar
    andrichrose

    Robert,
    Of course what you failed to mention is that a lot of the people who have ordered the model S are already owners of the roadster ! Does this confirm that the Tesla Roadster
    is indeed a pretty good car , if customer satisfaction is taken into account ? Or as the motoring press would like us to believe everyone who owns a Tesla or who has ordered one is a total dick and knows nothing about cars !

    Having just spent the weekend tooling around the streets of Monte Carlo in a collection
    of electric cars , Im a Believer ! The future is definitely electric !

  • avatar
    fallout11

    The depositors would have done better in Vegas with the same $$ (and better odds of ever seeing a nickel of their ‘investment’ again).
    Fewer than 20% of the “sold” Roadsters have been delivered.

  • avatar
    HankScorpio

    andrichrose,

    This is the exact line of thought the other posters are referring to. Tesla is not a religion to “believe” in, it is a business. The primary function of a business is to generate profit for the shareholders. In this regard, Tesla has a long way to go. That is why it takes a believer to give the company a $5000 interest free loan without any thought as to how this company is going to produce the vehicle at the stated price. If you were to invest (not as a deposit on the car) $5000 with Tesla, at least there is a chance of making more money.

  • avatar
    GeeDashOff

    I have a feeling that the people who are making these down payments have plenty of money and the $5000 is less than what they spend on their personal trainer in a week.

  • avatar
    brownie

    The future may be electric, but that doesn’t mean the future is Tesla. I do want them to succeed, but I would never do business with a company that behaves like this.

  • avatar
    RetardedSparks

    Musk was quoted in the NYT (I think I actually quoted this in a previous comment) when asked about the deposits: “In the worst case, they would be lost” or words to that effect.

    I guess being honest is better than not, but it is still essentially an unsecured loan.

    Also, I wish the viability of electric cars would stop being conflated with the viability of Tesla. This company makes very limited production toys for rich people (just like Bugatti and Lamborghini) and there is no correlation between their commercial success and the entire concept of EV’s or PHEVs… any more than Bugatti going under would be a condemnation of internal combustion.

  • avatar
    psarhjinian

    Tesla will continue to be opaque as long as the Greenies continue to be as fundamentally challenged by basic math.

    Just to clarify: I’m a greenie and my problem with Tesla’s product isn’t the math, it’s the sustainability: like a zero-watt house, it’s out of “normal, everyday useful” and well into “you have to be a rich eccentric to make it work.” And thusly, it does more to harm the green movement by emphasizing that being environmentally conscious isn’t possible.

    It’s the opposite of the Prius; a car that brought more sustainable mass private transit to the general population. But where the Prius made people think “Yes, I can do this”, Tesla does the opposite, and makes people think “Been green is only for rich, Silicon Valley Lords Of the Universe.”

    If the Prius is a curbside recycling box, Tesla is a backyard compost pile with an on-staff gardener to take care of it.

    Once the Greenies start to ask basic questions like, “Where is all this electricity going to come from to run all our cars?” while the lights dim on a hot day,

    Between powertrain intelligence (regen-braking, idle-stop), improved and off-peak usage, that’s not so much a problem as people believe. And that’s before we get into the kind of nickel-and-dime savings that can be afforded through small, simple improvements like, you know, having decent insulation in your house.

  • avatar
    sutski

    Go Tesla!

    Tesla have already DELIVERED ALL-ELECTRIC CARS TO THEIR CUSTOMERS and not many (if any) companies can say that. That is a HUGE achievement. They should all be knighted for services to the Auto industry !! (perhaps Sir Elon, arise and take your place as the BO Car Czar is taking it too far though eh??!! or maybe not….

    Of course deadlines were missed and problems have been encountered, but they are battling on as far as I can see, and by confirming the S is on the way, they are already bringing down the future electric “membership fee” for all of us.

    Stick with it Tesla, most of us are behind you !!!

  • avatar
    Robstar

    As a techie, I’m interested in this from a technical perspective, but they are crazy if they think I’m plunking down $5k without test driving a version of the final product first.

  • avatar
    hazard

    Just to clarify: I’m a greenie and my problem with Tesla’s product isn’t the math, it’s the sustainability: like a zero-watt house, it’s out of “normal, everyday useful” and well into “you have to be a rich eccentric to make it work.”

    psarhjinian, here I think you are totally wrong. Tesla and Fisker and all those people building high-performance EVs and hybrids are doing a good thing as far as the image of green tech is concerned. Because let’s face it, to most people, the Prius is not cool. People are not rational about a lot of things (otherwise free market economics would function perfectly, but it doesn’t), and “coolness” is a big factor for a lot of people when cars are in question. The Tesla Roadster shows EVs can be cool, fast, sporty, sexy. It changes the perception of EVs as being more or less golfcarts. I think that’s why Tesla pisses off a lot of staunch anti-EV gearheads, because it takes away their standard criticisms of the electric car (slow, weak, can’t go far, boring, bland). If you can aspire to or dream of owning a Tesla, or Fisker, or whatever, than owning any other future “normal” EV will come easier to you. That’s from the perspective of the average buyer.

    The Tesla and similar projects are good because they aim to show that EVs are better cars than the ICE variety. Now just that they are greener, more efficient, etc. Better. Of course, this annoys hardcore greenies who take EVs as a necessary evil and would rather we all bike everywhere, but hey, can’t please everybody…

  • avatar
    hazard

    Besides, why rip on the people who put the downpayment? First of all, they’re probably folks that have plenty of money. Second, I’m sure they’re smart enough to know that they might lose that payment. Third, every new technology needs early adopters, that will stick with it out of enthusiasm, faith, or even stupidity. Without the early adopters trying things out and working through a lot of the difficulties, a lot of technologies and products would’ve never gone off the ground.

    If I was a millionaire, I’d give them $5k just to support the cause of EVs. And maybe I get a cool car at the end. Why not?

  • avatar
    psarhjinian

    psarhjinian, here I think you are totally wrong. Tesla and Fisker and all those people building high-performance EVs and hybrids are doing a good thing as far as the image of green tech is concerned. Because let’s face it, to most people, the Prius is not cool.

    The Prius is not supposed to be ultra-cool. Cool, must as it pains people to believe, does not sell unless it’s cheap and practical. Think about the iPhone: it’s cool, yes, but it’s also relatively inexpensive and fairly practical. Now think about the Satellite phones: cool as well, but hideously expensive and useful only to a small subset of the population. One is a commercial success, the other only works by charging the bejeezus out of a select few customers who need them.

    I won’t dispute that the Roadster, S and Karma are cool cars, but they’re not going to inspire anything when it comes to the green movement. A Prius or Insight parked in on your street will do that because they’re just cool enough and lack just enough compromises to convince people that they’re a real car. What Tesla and Fisker sell are, fundamentally, toys for either well-off car nuts, or for well-off techno-barons. They reinforce the idea the “green” walks hand-in-hand with “elitist”

    The Tesla and similar projects are good because they aim to show that EVs are better cars than the ICE variety. Now just that they are greener, more efficient, etc. Better.

    But they’re not. They’re cramped, slow to recharge, crushingly expensive and sold either by coachbuilders or by a company that behaves more like a Valley start-up than a “real” manufacturing firm.

    If they were a) better and b) workable, Toyota would be making them. That they aren’t is telling.

    Of course, this annoys hardcore greenies who take EVs as a necessary evil and would rather we all bike everywhere, but hey, can’t please everybody…

    So this is where we get to a fundamental point. Ron’s point is that Greenies buy things like Teslas, damn the impracticality. Yours is that Greenies want everyone to ride a bike. If I’m a Greenie and drove into work today in a Honda Fit on ambitious tires, and a greenie friend of mine drives all over Northern Ontario in a Ford Ranger every day, where do we fit? Are you really a “Green” buyer if the Tesla is parked between an F43 and an H1?

    Or is it perhaps that “Greenies” aren’t who we think, or wish, them to be?

  • avatar
    gslippy

    I would hardly call receiving a few million dollars in downpayments for the Model S a Ponzi scheme. It would be if Tesla kept taking money while producing little if any product. But they are producing product, and will be tooling up for the Model S.

    But the mysterious “Signature Edition” stuff is hocus-pocus.

  • avatar
    brownie

    Hazard: The problem is not the people making the downpayment (though if I want to be charitable I will find a charity, not a for-profit company), it’s that leading edge technology (green or otherwise) is no excuse for deceptive business practices. I don’t care if the Tesla sedan will save kittens and puppies from euthanasia while also curing cancer – Tesla is deceptively using “deposits” for working capital unrelated to the sedan, Musk lied about guaranteeing the deposits, and that’s just the latest bit of bad behavior on their part.

    Being “green” does not give you a free pass for being sleazy, and Tesla should be held accountable.

  • avatar
    TZ

    Ponzi scheme? I don’t think that term means what you think it means. If they deliver product, it isn’t a Ponzi scheme.

  • avatar
    Pch101

    Because let’s face it, to most people, the Prius is not cool.

    To you, it may not be. But to those who buy them, it most certainly is.

    Toyota did an excellent job of designing the Prius to appeal to the types of buyers who would not just buy the car, but who would extol its virtues to their friends, carry the message and develop loyalty to the brand. The cool factor is certainly there, but it is a tech-green sort of cool, as opposed to a swooping curves/ high horsepower version of the message.

  • avatar
    John Horner

    If the deposits being collected today for future deliveries are in fact being used to subsidize the losses on current Roadster sales then yes, this is a Ponzi scheme. A Ponzi scheme uses funds from new “investors” to pay off previous “investors”.

  • avatar
    Brendon from Canada

    @psarhjinian: I think you may have missed hazard‘s point – it’s that Tesla can appeal to the “non-greenies”, and take away arguments from the anti-EV movement. The reality of the cars being coachbuilt and expensive is a bit irrelevent – it’s analogous to Joe Average Pistonhead deriding the Lambo for being to expensive or awkward; it is generally accepted despite it’s short-comings (cost, availability, usefulness, etc, etc) because it is viewed as an exceptional performance machine – since few people own them, the reality doesn’t come into play. This is the same rationale as the average halo car for larger manufacturer – the guy on the street doesn’t drive the halo car, but believes that there is some sort of pedigree involved in owning something of the same brand.

    Frankly, I have absolutely no interest in either offering from Honda/Toyota – just too ugly for me (but then I don’t consider myself a “greenie” at all – even if I ride/rollerblade to work in the summers!). I’d consider a Tesla if the price was significantly cheaper, just because it’s a good looking machine with respectable performance that I’ll seldom ever use!

  • avatar
    wsn

    Rod Panhard :
    April 2nd, 2009 at 7:43 am

    Tesla will continue to be opaque as long as the Greenies continue to be as fundamentally challenged by basic math.

    ————————————————

    Who is Greenie? What’s his/her name?

  • avatar
    wsn

    hazard :
    April 2nd, 2009 at 9:31 am

    Because let’s face it, to most people, the Prius is not cool.
    ———————————————–

    Please, prove it with hard data.

    I think that to most people, the Prius is a very cool $20k car. I don’t have any survey data either. But since you started it first, you should provide your evidence first.

  • avatar
    guyincognito

    “I think that to most people, the Prius is a very cool $20k car.”

    The car traveling at 45mph in the fast lane is not, nor will it ever be cool.

    Other than the greenie stuff, I agree with psar, in order to succeed, and 20K cars at $40-50K would be quite successful, the car has to be practical, useable, and reliable, more than just cool. What celebrities who have 3 or 4 cars will tolerate for the sake of seeming green far exceeds what a normal BMW/Lexus/Mercedes/Audi owner will tolerate.

  • avatar
    T2

    The way Elon musk is running this company sometimes if I were an investor would give me pause to have second thoughts.

    First thing, this Model S has always seemed an unecessary diversion from the Tesla core business which should be to satisfy the first round of buyers.

    Then, when the gearbox problem showed up, his Plan B should have been to offer a middling gear of 10:1 since the EV1 was not around to raise a performance threat.
    Then sales should have temporarily abandoned the first in, first out customer delivery program in preference to those who would trade a lesser performing vehicle in exchange for an early delivery. The release should also free Tesla from a commitment to provide a free upgrade post delivery. While in the interim it gets things moving along so that the procurement and testing out of a larger electric motor can be made.

    Whether it was Musk or not, who made the fateful decision on cost reasons to risk the use of an untried twin ratio gearbox with a smaller motor is neither here nor there. It was comcomitant that chief of engineering staff or somebody should have walked out to call attention to the oncoming trainwreck. Easy to say, but I have done that when an unwise engineering decision was forced on me. In essence someone wanted to avoid doing 10 hours work that would, further up the road, make 100’s of hours of work for me necessary instead.
    The sky didn’t fall. Two days later I was back in my old job under a revised management structure.
    However I’ve noticed that most of us do have a comfort zone that allows poor decision making to pass over our heads with the thinking that however bad management screws up somehow I can work extra hard and circumvent the inevitable problems. Sometimes that is just not possible as proved here. And it sure slowed up production. In the event heads rolled at Tesla anyway.

    Anyway i doubt this will be the last time that someone comments on the focus at Tesla.

  • avatar
    Robstar

    psarhjinian>

    The Prius is not supposed to be ultra-cool. Cool, must as it pains people to believe, does not sell unless it’s cheap and practical. Think about the iPhone: it’s cool, yes, but it’s also relatively inexpensive and fairly practical. Now think about the Satellite phones: cool as well, but hideously expensive and useful only to a small subset of the population. One is a commercial success, the other only works by charging the bejeezus out of a select few customers who need them.

    The Prius is neither cool nor ultra cool. I’d say I’d consider it “interesting” more than anything. It’s not economical & it is not particularly fuel efficient compared to other modes of non-4-wheeled-not-necessarily-individual transport.

    I also disagree with you with the iphone being cheap. On my last contract renewal, t-mobile PAID ME $30 to take 2 phones. ($70 upfront & $100 in rebates). With the iphone being “cool” thats debatable. I personally think the N95 is a ton more “cool” with more features, but it really is subjective. Sat phones are very cool, but indeed impractical (cost-wise).

    I won’t dispute that the Roadster, S and Karma are cool cars, but they’re not going to inspire anything when it comes to the green movement. A Prius or Insight parked in on your street will do that because they’re just cool enough and lack just enough compromises to convince people that they’re a real car.

    So are the other tons of other fuel efficient, conventional, proven techs that do not take batteries. Prius(pluralalized how you like) are EVERYWHERE here. I barely even notice them anymore. They are just another car. Maybe this is why I don’t think they are cool either.

    I DO think 40k is expensive for an unproven sedan, but not necessarily a luxury one that is reliable. The tesla sedan doesn’t necessarily fit that definition which is why I wouldn’t consider it.

  • avatar
    Lokki

    I don’t think the Tesla is significant in any way. The cars are novelty item for the rich, and that’s pretty much the end of their value.

    I believe that Musk is following his Silicon Valley paradigm when he does things like introduce a new model before the old one is fully rolled out. Selling ‘vaporware’ is an old and accepted practice in the software business.

    I am not so sure that this business model works as well on cars as it does with software. With software, once the engineering(programming) is done, the product exists and the rest is just packaging. With cars, there’s still the sourcing, manufacturing, and assembly to reckon with. Sometimes I feel that Mr. Musk doesn’t fully grasp that distinction.

    With software, getting the merchandise on the shelf is the most important thing. You can debug and offer free upgrades to early customers later, but does that work with cars?

  • avatar
    psarhjinian

    I believe that Musk is following his Silicon Valley paradigm when he does things like introduce a new model before the old one is fully rolled out.

    If Musk is such a Valley hotshot, he should be familiar with the Osborne Effect.
    * Talking up how great your product is when you’ve got nothing but napkin sketches is good.
    * Talking up how great your product vis a vis the competition is when you’ve got nothing but napkin sketches and your less-dominant competitor is already selling something is better.
    * Talking up how great your next product is when you’ve got nothing but napkin sketches and you can’t make money off of your existing product, well, that’s Osborne territory. It’s also what Tesla is doing right now. And it’s suicide.

  • avatar
    fallout11

    Well said, Psarhjinian and Lokki.
    I like electric cars and really want EV’s to succeed, I have PV panels on my roof and a superinsulated home made of recycled materials, I even compost my own trash. But Musk/Tesla is doing both greens and EV proponents a tremendous disservice with his Daikatana style hype and ponzi-style financing scheme, providing a small number of overly-expensive novelty vehicles to Hollywood airheads and a lot of empty promises.

  • avatar
    reality_bites

    Surprise and delight features that Elon wanted on Model S:

    – Lickable display; yes in a meeting with the new head of infotainment they got from Nissan Elon described the display as needing to be “lickable”, draw your own conclusions.

    – Child roaster – In all of his infinite wisdom and as a loving father, Elon pressed the team to find a way to put two child seats in the rear of the car. No not the rear seat, but in the rear hatch area. Against everyone’s concern for safety, and maybe roasted children, Elon pushed to have a design. The team found the Orbit car seat system from a California company and packaged it in the rough architecture. So you may be able to order your own roast a kid feature for when that toddler acts up.

  • avatar
    psarhjinian

    Lickable display; yes in a meeting with the new head of infotainment they got from Nissan Elon described the display as needing to be “lickable”, draw your own conclusions.

    To be fair, that’s a term that refers to candy-esque on-screen buttons. It also very dated; it was used to refer to the MacOS look-and-feel around 1999.

    I haven’t heard it in a while, at least not since dittoheads in middle-management were parroting it eight or nine years ago.

  • avatar
    wsn

    guyincognito :
    April 2nd, 2009 at 11:11 am

    “I think that to most people, the Prius is a very cool $20k car.”

    The car traveling at 45mph in the fast lane is not, nor will it ever be cool.

    ————————————————

    Well then, a Porsche 911 is just as un-cool as a Prius. Yes, I did see a 45mph fast lane 911 once, and I never saw a 45mph fast lane Prius.

  • avatar
    wsn

    Robstar :
    April 2nd, 2009 at 11:47 am

    The Prius is neither cool nor ultra cool. I’d say I’d consider it “interesting” more than anything. It’s not economical & it is not particularly fuel efficient compared to other modes of non-4-wheeled-not-necessarily-individual transport.

    ————————————————

    I’d consider it a lie more than anything.

    The Prius is more economical and fuel efficient than a Camry, or a Accord, or an Altima, or a Malibu … You get the idea.

    As for non-4-wheeled-not-necessarily-individual transport, no, that’s not Prius’ competitor.

  • avatar

    If they were a) better and b) workable, Toyota would be making them. That they aren’t is telling.

    So now Toyota is the measure of all things automotive?

    It seems to me that cutting edge technologies are more likely to be embraced by smaller specialty firms than large, full-line manufacturers like Toyota. Toyota is considered by most to be risk adverse, and it’s not surprising that they would go with a parallel hybrid drivetrain rather than swing for the fences with a complete EV.

    A smaller company like, let’s say, Lotus, can be technologically advanced and contribute to the state of the art.

  • avatar
    G.D.

    Tesla is ramping-up production of their roadsters, delivering over 100 in March, nearly a third of all Teslas currently on the road. Unless I am given hard data as to why this will not continue, this progress is indisputable.

    Moreover, many car companies raise money for their upcoming models through deposits. Ferrari and Bugatti, to name a few. Given that Tesla is well on its way to fulfilling their initial orders for the roadster, I have a hard time seeing what the problem is

  • avatar
    BMW325I

    If I wanted a car that looked like a Maserati I would just get a Maserati.

  • avatar
    psarhjinian

    It seems to me that cutting edge technologies are more likely to be embraced by smaller specialty firms than large, full-line manufacturers like Toyota.

    You’d think that, but as much or more cutting-edge work comes out of larger organizations than out of smaller ones, and generally with more polish and certainly more commercially viable.

    The Rogue Valley Entrepreneur isn’t nearly the phenomenon it once was, especially now that a) larger companies are more favourable to R&D than they used to, if for no other reason than it provides patent fodder and b) it’s nice to work for someone who can facilitate your every whim.

    You’ll certainly see the occasional out-of-left-field win (like, say, Twitter) but that’s not what Tesla is pitching. They’re just a glorified coachbuilder/integrator with a good PR machine, and wouldn’t stand a chance against the likes of Toyota, Honda or even GM’s depth of engineering and research resources—if the big boys thought that the market Tesla and Fisker were playing in was commercially viable.

  • avatar
    joeaverage

    GO TESLA!!!

    They are delivering product and people want to place deposits. I’d say whether this is right or not is between the customer and the company.

    Right now I have more faith in them than I do GM delivering the Volt or in Phoenix Motor Cars delivering their SUT.

    The “S” is really, really nice looking. Might not be as good in person – dunno. Have always liked GM products better in pics than in person…

    I’m glad to see a company putting usable, refined EVs on the road. Not GEMs, not little pyramid looking things from the 1970s, not spacey Apteras (though congrats to them to for getting them out there).

    I’d buy an “S” but they belong to another tax bracket. I suppose I’m more likely convert my daily driver as it’s value approaches nil in a few years.

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