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I think you're being a tad disingenuous. If Elon's ideas are so great, why does he need government subsidies? Wouldn't private investment be rushing to captur

I think you're being a tad disingenuous. If Elon's ideas are so great, why does he need government subsidies? Wouldn't private investment be rushing to capture the returns from these so called "huge upsides"?

jblow 11y ago
If regular gas cars are so great, why do they need government subsidies? Hell, if gas is so great, why does it need government subsidies? Do your research. Subsidies for traditional cars and for oil are massive and dwarf anything Tesla has ever gotten.
- tosseraccount 11y ago
  Teslas sell for over $100K a pop. It's a rich man's toy. http://www.nationalreview.com/article/397162/tesla-and-its-subsidies-phil-kerpen http://www.nationalreview.com/article/397162/tesla-and-its-s... ... Every time a Tesla is sold, we witness a transfer of wealth to a rich hobbyist (most Teslas are their owners’ third or fourth car), while average Americans are on the hook for at least $30,000 in federal and state subsidies. Tesla is more a regulatory arbitrageur than an auto manufacturer. In its 2014 annual report, Tesla made clear that continued special tax benefits are critical to the company’s business plan: “Our growth depends in part on the availability and amounts of government subsidies and economic incentives.”
  - zaroth 11y ago
    Technically I would not call it a transfer of wealth to the rich hobbyist. The subsidy doesn't go to the private buyer, it goes to Tesla. No one will buy the (now used) car for the full sticker price from the private buyer, but even if they did you are not allowed to claim the credit if the car was bought for resale. The buyer is not $30k richer after the transaction is complete. And when the subsidy no longer exists, the price will not simply be $30k higher, a significant portion of that lost income will be eaten by Tesla. (which is exactly what they are saying in their risk disclosure) As a country we have a strategic interest in having viable battery powered electric cars. You can personally not believe in it, but it is a stated-goal from the President on down. What's the best way for the government to help make that happen? A subsidy is the classic macro-economic tool, business loans are another. When we give Tesla $30k in government subsidies for each car they sell, we're simply telling Tesla we'll subsidize them more as they sell more. Rewarding market success is the right way to structure a subsidy if you want to encourage companies to make products that people actually want to buy. I'm sure you also know Tesla is burning through cash at an impressive clip, I think they burn about $50k each year per car they sell, and that's net of the sales price! That's not to say that gross margins for the car are negative, it's just to say that their reinvestment rate for R&D is set to '11'. That's partly supported by the early adopters, part investors, and part subsidy. But it is clear they are iterating fast on new technology, and as a bonus they are even putting their patents out for general use, and undoubtedly driving a stagnant and change-resistant industry forward. Finally, it's incorrect to claim that average Americans are on the hook for at least $30,000 in federal and state subsidies. That is looking at just one line on a very long invoice, and what we're actually interested in is the net effect. So we have a "rich hobbyist" paying $70k after-tax cash for a prototype electric vehicle. First, there's perhaps $10k - $15k in local excise taxes over the life of the car, which is a pretty nice bonus for the town. "Cars" as an asset class are taxed especially heavily, and as you say for many the Tesla is an extra car they wouldn't have bought otherwise, so that level of excise tax is not money the town would have seen otherwise. Second, there's increased employment and associated tax revenue from Tesla in general, including things like their battery factory. Maybe down at number 30, we have an extremely safe car that kills less people, which saves taxpayers money too. Somewhere on the list is a blue bird that 20 years down the line the tech has matured to the point where it is a major geopolitical factor in our dependence on foreign oil helping us disengage from the Middle East and potentially saving taxpayers a few Trillion. There are actually many ways you can start off handing out over $30k per vehicle but end up in the black!
    - tosseraccount 11y ago
      To clarify, you don't think private investment is up to solving the better car problem? Government needs to pick the winners and losers in this situation?
      - zaroth 11y ago
        When did the government do that? They offered the subsidy to any business who could build a viable electric car, not just to Tesla. It's not instead of private investment, in fact there's quite a bit of that with Tesla, but rather "more is better". It's a classic subsidizing of positive externalities, a basic role of government. Are you pretending that there haven't been incredible subsidies around oil, gas, and the whole infrastructure which was built up to support the ICE? The government investment into electric vehicles is quite paltry by comparison. I hope I'm in the middle of an economic discussion, not a political one. To me it seems like the subsidy was well thought out to achieve stated strategic goals and appropriately sized -- enough to materially effect the decision making process of what to purchase, but not so much that you basically can't afford not to buy one (e.g. "cash for clunkers").
TeMPOraL 11y ago
Oh come on. We've been over this "government subsides for Elon" bullshit half a year ago. You're late to the party. TL;DR: Tesla is the kind of lendee you want to have more of - uses the money for real R&D, pays loans down quickly and in full, gives back lots of value to economy. It's basically the textbook case of what those loans were made available for in the first place. It's the one company that you shouldn't be complaining about. Government is giving free money that could be used to bring ideas to market faster; why should Musk not take it?
- tosseraccount 11y ago
  Tesla bonds considered junk bonds ... https://encrypted.google.com/search?hl=en&q=tesla%20bond%20ratings#hl=en&q=tesla+bond+ratings+junk https://encrypted.google.com/search?hl=en&q=tesla%20bond%20r...
  - MichaelBurge 11y ago
    Junk bonds sound more negative than they are. It just means they aren't a nation-state or a decades-old multi-billion dollar company, so there is more risk of default. But bondholders get priority over stockholders the same way preferred stockholders get priority over common stockholders. And as a result, it's less risky to buy bonds than to buy the company stock, since they could at least pawn off the factories and cars if the company has to be sold off. A quick Google search shows a market cap of 28 billion, and outstanding bonds worth 1.2 billion. So it seems unlikely to me that the company would be unable to be sold off for 1.2 billion to cover the bonds.

jblow 11y ago

If regular gas cars are so great, why do they need government subsidies? Hell, if gas is so great, why does it need government subsidies? Do your research. Subsidies for traditional cars and for oil are massive and dwarf anything Tesla has ever gotten.

tosseraccount 11y ago
Teslas sell for over $100K a pop. It's a rich man's toy. http://www.nationalreview.com/article/397162/tesla-and-its-subsidies-phil-kerpen http://www.nationalreview.com/article/397162/tesla-and-its-s... ... Every time a Tesla is sold, we witness a transfer of wealth to a rich hobbyist (most Teslas are their owners’ third or fourth car), while average Americans are on the hook for at least $30,000 in federal and state subsidies. Tesla is more a regulatory arbitrageur than an auto manufacturer. In its 2014 annual report, Tesla made clear that continued special tax benefits are critical to the company’s business plan: “Our growth depends in part on the availability and amounts of government subsidies and economic incentives.”
- zaroth 11y ago
  Technically I would not call it a transfer of wealth to the rich hobbyist. The subsidy doesn't go to the private buyer, it goes to Tesla. No one will buy the (now used) car for the full sticker price from the private buyer, but even if they did you are not allowed to claim the credit if the car was bought for resale. The buyer is not $30k richer after the transaction is complete. And when the subsidy no longer exists, the price will not simply be $30k higher, a significant portion of that lost income will be eaten by Tesla. (which is exactly what they are saying in their risk disclosure) As a country we have a strategic interest in having viable battery powered electric cars. You can personally not believe in it, but it is a stated-goal from the President on down. What's the best way for the government to help make that happen? A subsidy is the classic macro-economic tool, business loans are another. When we give Tesla $30k in government subsidies for each car they sell, we're simply telling Tesla we'll subsidize them more as they sell more. Rewarding market success is the right way to structure a subsidy if you want to encourage companies to make products that people actually want to buy. I'm sure you also know Tesla is burning through cash at an impressive clip, I think they burn about $50k each year per car they sell, and that's net of the sales price! That's not to say that gross margins for the car are negative, it's just to say that their reinvestment rate for R&D is set to '11'. That's partly supported by the early adopters, part investors, and part subsidy. But it is clear they are iterating fast on new technology, and as a bonus they are even putting their patents out for general use, and undoubtedly driving a stagnant and change-resistant industry forward. Finally, it's incorrect to claim that average Americans are on the hook for at least $30,000 in federal and state subsidies. That is looking at just one line on a very long invoice, and what we're actually interested in is the net effect. So we have a "rich hobbyist" paying $70k after-tax cash for a prototype electric vehicle. First, there's perhaps $10k - $15k in local excise taxes over the life of the car, which is a pretty nice bonus for the town. "Cars" as an asset class are taxed especially heavily, and as you say for many the Tesla is an extra car they wouldn't have bought otherwise, so that level of excise tax is not money the town would have seen otherwise. Second, there's increased employment and associated tax revenue from Tesla in general, including things like their battery factory. Maybe down at number 30, we have an extremely safe car that kills less people, which saves taxpayers money too. Somewhere on the list is a blue bird that 20 years down the line the tech has matured to the point where it is a major geopolitical factor in our dependence on foreign oil helping us disengage from the Middle East and potentially saving taxpayers a few Trillion. There are actually many ways you can start off handing out over $30k per vehicle but end up in the black!
  - tosseraccount 11y ago
    To clarify, you don't think private investment is up to solving the better car problem? Government needs to pick the winners and losers in this situation?
    - zaroth 11y ago
      When did the government do that? They offered the subsidy to any business who could build a viable electric car, not just to Tesla. It's not instead of private investment, in fact there's quite a bit of that with Tesla, but rather "more is better". It's a classic subsidizing of positive externalities, a basic role of government. Are you pretending that there haven't been incredible subsidies around oil, gas, and the whole infrastructure which was built up to support the ICE? The government investment into electric vehicles is quite paltry by comparison. I hope I'm in the middle of an economic discussion, not a political one. To me it seems like the subsidy was well thought out to achieve stated strategic goals and appropriately sized -- enough to materially effect the decision making process of what to purchase, but not so much that you basically can't afford not to buy one (e.g. "cash for clunkers").

TeMPOraL 11y ago

Oh come on. We've been over this "government subsides for Elon" bullshit half a year ago. You're late to the party. TL;DR: Tesla is the kind of lendee you want to have more of - uses the money for real R&D, pays loans down quickly and in full, gives back lots of value to economy. It's basically the textbook case of what those loans were made available for in the first place. It's the one company that you shouldn't be complaining about. Government is giving free money that could be used to bring ideas to market faster; why should Musk not take it?

tosseraccount 11y ago
Tesla bonds considered junk bonds ... https://encrypted.google.com/search?hl=en&q=tesla%20bond%20ratings#hl=en&q=tesla+bond+ratings+junk https://encrypted.google.com/search?hl=en&q=tesla%20bond%20r...
- MichaelBurge 11y ago
  Junk bonds sound more negative than they are. It just means they aren't a nation-state or a decades-old multi-billion dollar company, so there is more risk of default. But bondholders get priority over stockholders the same way preferred stockholders get priority over common stockholders. And as a result, it's less risky to buy bonds than to buy the company stock, since they could at least pawn off the factories and cars if the company has to be sold off. A quick Google search shows a market cap of 28 billion, and outstanding bonds worth 1.2 billion. So it seems unlikely to me that the company would be unable to be sold off for 1.2 billion to cover the bonds.