Tesla: The Government Gets Its Money Back

by Bertel Schmitt

Published: May 23rd, 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.

#BertelSchmitt #Musk #Tesla

Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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8 of 33 comments

Fred on May 23, 2013

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.

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- SCE to AUX on May 23, 2013
  
  "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?
  
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- Fred on May 23, 2013
  
  @SCE to AUX 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.
  
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- David Dennis on May 23, 2013
  
  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
  
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- Beerboy12 on May 23, 2013
  
  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.
  
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Beerboy12 on May 23, 2013

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.

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- SCE to AUX on May 23, 2013
  
  The media loves blood more than anything else. Climbs make news, tumbles make big news.
  
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- Stuki on May 25, 2013
  
  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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