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Tesla Nabs $465M Government Loan To Build Model S 505

Posted by timothy
from the let's-call-it-the-people's-car dept.
SignalFreq writes "Tesla Motors, based in San Carlos, California, was approved yesterday for $465M in loans from the Department of Energy's Advanced Technology Vehicles Manufacturing program. Tesla plans to use $365M of the money to finance a manufacturing facility for the Model S (review, Letterman video) and $100M for a powertrain manufacturing plant in the SF Bay Area. 'Tesla will use the ATVM loan precisely the way that Congress intended — as the capital needed to build sustainable transport,' said Tesla CEO and Product Architect Elon Musk. Tesla expects the Model S to ship in late 2011 and the base cost to be $57,400 ($49,900 after a federal tax credit). Ford received $5.9B and Nissan received $1.6B under the same program."
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Tesla Nabs $465M Government Loan To Build Model S

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  • should have been a 25K car cost cap.
    That way most people could only barely not afford it.

    • You want to restrict their ability to get paid back for their R&D? Their expensive cars are paying for the R&D for them to make cheaper cars.
      • by ivucica (1001089) on Wednesday June 24, 2009 @05:16PM (#28458857) Homepage

        Well, at least they're having more luck squeezing money out of people than real Nikola Tesla... [wikipedia.org]

        Despite having sold his AC electricity patents, Tesla was destitute and died with significant debts. Later that year the US Supreme Court upheld Tesla's patent number, in effect recognizing him as the inventor of radio.

        Immediately after Tesla's death became known, the government's Alien Property Custodian office took possession of his papers and property, despite his US citizenship. His safe at the hotel was also opened.

        ...

        Tesla's family and the Yugoslav embassy struggled with the American authorities to gain these items after his death due to the potential significance of some of his research.

    • by 644bd346996 (1012333) on Wednesday June 24, 2009 @04:48PM (#28458393)

      The technology does not exist yet to make a $25k electric car that can succeed in the American market. Tesla is right to start with the high-price, high-profit end of the market and work their way down to the high-volume mainstream as the technology matures and the supply chain scales up. Trying to start out by making a capable electric car for the mainstream American market is a much riskier move, and requires much more up-front money - hence the much larger handouts that have gone to the more established automakers. Tesla, on the other hand, has already established their electric vehicle business as profitable, and can use their profits and experience from the Roadster to help subsidize the development of the Model S.

      • by Rei (128717) on Wednesday June 24, 2009 @05:00PM (#28458629) Homepage

        Exactly. Tesla's approach is perfectly cogent. Starting a car company is a *huge* expense. Look at what Coda is having to go through to bring a new car to the US -- they mentioned that they still need to crash another *30 to 40 cars* to get certified. And that's just the half of it. There are no volume parts producers for EV components. Look at the Roadster transmission fiasco -- there literally was no multi-gear transmission in the world that would work with their motor, and when they spent a fortune trying to get a company to engineer one for them, what they ended up with couldn't take the stress.

        The logical approach, then, is to piggyback as much work as you can onto that of an existing manufacturer (in this case, Lotus), focus only on what's different, and start at the high end so that you can absorb the capital costs into the vehicle price without creating sticker shock. People expect a carbon fiber car that does 0-60 in 4 seconds to be expensive. The fact that low-volume EV drivetrain components are super-expensive doesn't matter there, because so are the low-volume ICE components that they compete against.

        This is the next logical step: an independently developed, not-piggybacked, luxury sedan. This means building a large-volume factory, with a chassis developed from scratch that's designed for your EV needs. Of course, this is incredibly expensive. Hence the need to raise a ton of capital. In the middle of a financial crisis. :P

        Once they've retired that risk, even higher volumes/lower prices become realistic. Which is their plan with the Bluestar.

        That seems to be the same approach being taken by Fisker. I think a reasonable alternative approach is that being taken by Aptera. Three wheels to skirt the federal requirements, but put a heavy *independent* focus on safety, with a vehicle that's so uber-streamlined and lightweight that it simply doesn't need a powerful drivetrain or large battery pack to perform well. Hence they can start at near the bottom of the market, where there is a lot less competition. Once they're rolling off the lines, you can expect to see from them what Tesla is doing now -- raising large amounts of money to build a factory for a more mainstream, higher volume sedan (although they'll almost certainly keep their extreme-efficiency focus).

      • Tesla is right to start with the high-price, high-profit end of the market and work their way down to the high-volume mainstream as the technology matures and the supply chain scales up.

        That's exactly how the whole industry started out. Until the Model T, only the very wealthey could afford to buy a car (and the ongoing costs, such as a servant to drive and look after it).

    • by wildsurf (535389) on Wednesday June 24, 2009 @04:50PM (#28458445) Homepage
      should have been a 25K car cost cap.

      In the electric car industry, that's simply too big a jump to make all at once. If your ultimate goal is to produce 200,000 $25k cars a year, and the current state of the art is 2,000 $100k cars a year (the Tesla Roadster), then it's only reasonable to expect to produce 20,000 $50k cars (the Tesla Model S) as a stepping-stone. The market is there, and those early adopters will facilitate the eventual availability of the $25k mass-market car you're talking about. If you do the math, the "rich" purchasers of the Model S will be kicking in about one billion dollars a year towards this goal, double the government loan amount. So think before you knock 'em.
      • Hence the reason those of us who could purchased a Roadster and put money down on the Model S. It's not like you can invest in Tesla personally to help the EV cause out unless you know Elon personally.
    • Re: (Score:3, Interesting)

      by falconwolf (725481)

      should have been a 25K car cost cap.

      As with computers early adopters will help finance more affordable cars.

      In general I oppose subsidies but at least this money has to be repaid, and some of the money will be used to open a factory employing people.

      Falcon

    • Re: (Score:3, Insightful)

      by mattwarden (699984)

      Yes, government price fixing... That's what we need to save the car industry and promote innovation!

  • I'm anti-subsidy for luxury car manufacturers. Starting at $49,900 -- bah! How about spending a fraction of this to rip out the engine of a Chevy Aveo and put in an electric motor? How about an electric car people can actually buy? Innovation not required!
    • by WaywardGeek (1480513) on Wednesday June 24, 2009 @04:45PM (#28458321) Journal

      Tesla is the only company in the world selling production electric cars that are fully street-legal. They started with a $100K car, and now they're doing a $50K car. They have a $30K car planned for after that.

      Basically, you need economies of scale to get the cost of these cars down. Tesla's riding that curve, and plans to eventually have cheaper cars than Ford. This is a potentially great place to invest in American innovation, not to mention the environmental benefits or jobs.

      • by Rei (128717)

        Tesla is the only company in the world selling production electric cars that are fully street-legal.

        BYD F3DM? Mitsubishi MiEV? Subaru Stella EV? AC Propulsion E-Box? Etc?

        • by WaywardGeek (1480513) on Wednesday June 24, 2009 @06:24PM (#28459793) Journal

          BYD F3DM is a hybrid, and only sold in China to the government and corporations.
          The Mitsubishi MiEV is still in research phase, and I wouldn't hold your breath waiting for a US version
          The Subaru Stella EV is still only a concept car, though it may be sold soon in Japan. Again, good luck getting one here.
          AC Propulsion E-Box? Seriously? It's a $55K conversion kit, not a car, and it converts a crummy $15K car into a crummy $70K car.
          Subaru Stella is not yet in production, and it'll be a long time before we get to buy them.

          So long as we're talking about cool future technologies, I'd include the Volt and Aptera. I hope all these companies make it, but high-volume production is key. Tesla has the lead in this area, and they're further along at developing the technology than any other company.

          • Re: (Score:3, Informative)

            by Rei (128717)

            BYD F3DM is a hybrid,

            No, it's an E-REV. Extended-Range Electric Vehicle. It has 40-60 miles of all-electric range. It just happens to *also* have an onboard generator.

            The Mitsubishi MiEV is still in research phase, and I wouldn't hold your breath waiting for a US version

            Wrong and wrong. It's both under production and for sale now in Japan, and they've announced US plans for "before 2012".

            The Subaru Stella EV is still only a concept car, though it may be sold soon in Japan. Again, good luck getting one h

      • Bullshit (Score:3, Interesting)

        by GuyFawkes (729054)
        Smith Electric Vehicles in the UK has been making electric vehicles for 70 something years straight, the current range runs from "sub compact car/van" size right up to articulated good vehicles. One of the better sellers is based on the Ford Transit, a 3500 Kg GVW van, which has a running cost of only 2p per mile and a purchase cost far far far far cheaper than a tesla, and it will earn you a living.
    • by geekoid (135745)

      AS it turns out, electric cars people will buy are costly to make.
      Not teslaa expensive, but expensive.

      How about selling a 45MPG car base model at cost +2000. If they have a working trad in more then 10 years old, drop the price to cost.

    • by WebCowboy (196209) on Wednesday June 24, 2009 @05:24PM (#28458991)

      I'm anti-subsidy for luxury car manufacturers. Starting at $49,900 -- bah! How about spending a fraction of this to rip out the engine of a Chevy Aveo and put in an electric motor? How about an electric car people can actually buy? Innovation not required!

      There is a bit more to the Tesla cars than just ripping out the ICE and putting in a regular electric motor. There is very advanced liquid-cooled Lithium Ion battery technology, a next-gen 3-phase/4 pole motor, etc. It performs at par or better than other cars in its price point, and is also practical (can carry 5 passengers and their luggage comfortably). It is easily 200 to 300 percent more energy efficient than a typical hybrid as well. Luxury or not, getting such a vehicle to market is very worthwhile. Remember the Prius was the favourite toy of green-wannabe celebrities and rich folk in its early adoption phase, and this is a much better alternative.

      Given the nature of the technology this is the ONLY way to bring it forward. I think GM's approach (with bringing out a less exotic Chevy Volt) or yours (an even more austere Aveo) is backwards. Say it costs $5000 to $10000 to implement the advanced battery and drivetrain at this point in development. This means the cost of an electric Aveo would be 50+ percent higher than for a gas one, which is "cheap enough" to run in the first place. NOBODY who is willing to be an "early adopter" would buy an electric aveo at a profitable price point, because green and innovative as the drivetrain would be, the rest of the car is actually rather crappy.

      OTOH, The Tesla S is probably no more tha 10 or 20% more expensive than a comparable car that runs on petroleum fuel. Early adopters tend to be more affluent as well, and when you get to that less-than-20% premium for something cool and new. This car has a realistic chance of making a profit, or at least paying back its loans. The Volt or an electric Aveo would be a guaranteed money loser.

      Remember, that Tesla got its loans specifically because it has committed to re-investing profits from early, more exotic/expensive models into more practical, affordable models. Even in its early stages on the market it has established a track record: It followed up an exotic, very expensive roadster with a luxury sedan that is actually very practical and within the price range of upper-middle class households (the ones who buy Escalades, BMW 5 or 7 series, etc). Ensuring the success of the S means the much more likely possibility of an under $30K vehicle that competes right in the mainstream sedan market.

      If the US is going to get all socialist on us, I'm glad it isn't following the tired old thinking that to support innovation it must have this fixation on immediately addressing the needs of the "masses" or "working poor" or that crap, when it isn't realistic from a business perspective. Certainly better than taking a controlling interest in a loser bankrupt GM or gifting Chrysler to the unions--doing both with massive loans backing the moves (if taxpayers weren't forced to accept such nonsense, thay'd never in their right mind invest in such shaky enterprises). GM in particular has been the ABSOLUTE LEAST INNOVATIVE auto company on the entire planet for decades--even its best products are dependable but very boring and un-innovative, and they've invested the least into new technologies in their plants out of EVERY SINGLE company that builds cars in N America.

      If my gov't is going to throw boatloads of cash around on speculative enterprises, I'd MUCH rather it go do something bold, new, exciting and innovative like Tesla than something tired, old and nothing to show for in terms of innovation than words and vague plans crafted for the purpose of begging for alms from the gov't. as GM and Chrysler have done in the last year.

    • Re: (Score:3, Insightful)

      by Jeremi (14640)

      How about an electric car people can actually buy? Innovation not required!

      It's not sufficient to build a car that people can buy, it also has to be a car they want to buy, or it won't sell.

      Various companies have tried the "rip out the engine of a standard car and replace it with an electric motor" route before, and it doesn't work. You end up selling what looks like a $15,000 car for $35,000, and the car has a top speed of 70 miles an hour, a range of 40 miles, and takes 6 hours to "refill". The public

  • loans for everyone! (Score:2, Interesting)

    by SEAL (88488)

    Anyone left wondering why our tax dollars are funding a loan for Nissan while U.S. auto companies are struggling?

    • by sweatyboatman (457800) <sweatyboatman AT hotmail DOT com> on Wednesday June 24, 2009 @04:48PM (#28458405) Homepage Journal

      just a guess, but it could be because of the 3 manufacturing plants and 1100 dealerships Nissan has in the US.

    • Easy:

      The loans are part of the Advanced Technology Vehicle Manufacturing Program, which provides incentives to new and established automakers to build more fuel-efficient vehicles.

      It's better to give companies loans for actually doing something. Rather then giving them 25 billion dollars [businessweek.com] just for "struggling".

      Especially if the reason they're struggling is because they make shitty cars. At least the when we fund companies that create electric cars we get a quality product out of it.

    • by mzs (595629) on Wednesday June 24, 2009 @05:29PM (#28459067)

      Because the money is going to a Nissan plant in TN that is being retrofitted to develop, manufacture, and test cutting edge batteries. Would you rather that the DOE does not provided to money on some idiotic jingoistic grounds only so that a future industry in and that portion of the economy is cornered in Japan?

    • by Bigjeff5 (1143585) on Wednesday June 24, 2009 @05:35PM (#28459185)

      Loans to people/companies who can actually pay them back yield a lot of money. Average return on a 15 year mortgage, for example, is about double. It's also frontloaded, so they make most of the profit by year 10 and all that is left is the principal that needs to be paid back.

      Corporate loans work similarly, so if Company X pays back a 1 billion dollar loan in 10 years, the loaner has made a profit of probably around 50-75%.

      That's a whole lot different than a grant, in which case the money is free so long as it is used for the specific purpose it was granted for.

      Loans are a good thing as long as there is a good reassurance that the loan will be paid back. I don't mind a loan to Nissan, since they have a number of US factories and have a very solid business. That means more jobs and money for the US.

      Loans should NOT be given to US companies that look like they might fail. That's what got the mortgage industry into trouble and helped cause this crisis in the first place. Propping up a failing business is bad practice, but helping a viable business become more viable and more profitable is good practice, especially when you can get a good return on your investment. All we should care about when granting these loans are two things: Will it create more lasting jobs in the US, and will we get are money back and then some. If we start fudging the second one just because it is a US based company, then we'll be headed for more heartache.

    • Re: (Score:3, Insightful)

      by Slugster (635830)
      I heard on the radio (AM broadcast) that the main reason was to avert anti-trade sanctions that would have been likely, had only US companies been given these handouts.

      (and yes, it is a handout. It's called "gambling with someone else's money". If you go broke anyway, you don't pay it back, because you can't-)

      As to why ANY of them are getting any government money,,,,, that would have to do with a certain musty piece of paper, and of a number of politicians who have no use for it.
      ~
  • We need electric cars, and they will only "happen" with economies of scale. This money will get the ball rolling and hopefully a viable electric vehicle will result. We need them. NOW. Not 10 years from now. NOW.

    Now, if eeStor's ultracapacitors can ramp up, we might actually have a private transportation sector in 10 years.

    RS

    • Re: (Score:2, Informative)

      by WinPimp2K (301497)

      Electric cars will be nice, but putting the plant in California is massively wrong and stinks of rotten pork.

      If Tesla is going to succeed in the long run, they need to be in a pro-busioness climate, and not in a state that needs money so badly the punitive tax burden combined with out of control state regulators will force them to either go belly up, or move their facilities to another state later (at great expense and possibly triggering additional fallout from the Feds for not staying in CA).

  • Tesla Fanboi (Score:2, Informative)

    by 2obvious4u (871996)

    I've been watching Tesla since day one. The make cars the way they should be made. You place an order for your car, then the car is built. It was privately financed until this infusion of funds. For what the model S is and does the price isn't to high. I looked at buying a Mitsubishi Lancer Evo and it clocked in at $42,000, while I was shopping I noticed that entry level BMW's and Audi's were also at the $40,000 mark. So I saved $22,000 and bought a 2009 Corolla. My next car will be a Tesla as soon a

    • by Dunbal (464142)

      without the need to change the oil or pay at the pump.

            You do have to pay for a new battery every once in a while though. Don't remember the estimated price (I think it was every 6 or 12 months), but it was steep. Hopefully if they make more cars the prices for those parts will come down, and it will turn into a real savings. But for now you're substituting fuel costs for battery costs and other maintenance fees.

  • by lordvalrole (886029) on Wednesday June 24, 2009 @04:55PM (#28458543)

    http://webcast.berkeley.edu/course_details_new.php?seriesid=2009-B-51905%7C2009-B-69390&semesterid=2009-B/ [berkeley.edu]

    Lecture 1 - 46 mins in Richard Muller talks about the cost vs pay of an electric vehicle.

  • Fleet Car (Score:5, Insightful)

    by W.Mandamus (536033) on Wednesday June 24, 2009 @04:55PM (#28458555)
    At $50,000 the Model S is more likely to be used as a fleet car then something you use at home. For those who say this is a waste of money I'd like to point three things out: 1. GM spend 1.2 BILLION to build a PROTOTYPE electric car, which they didn't put into productions. This is money to build a factory that will actually um make cars. 2. Tesla is going to use this money to build electric vehicle components in the US for other companies. Having that kind of production is the US is BIG DEAL for our balance ot trade. 3. Tesla is more likely to pay
    • by mzs (595629)

      1: GM never made a production version of the Impact (EV-1) since the CARB changed course mid stream and no longer required any zero emissions vehicles per automaker fleet.

      2: They are using the money for plants. They have almost no money for actual development of the Model S. That money is likely being laundered via those plants at this point. Multiple times now Musk has made claims regarding funding that have proven to be false, like that they had already gotten approved for this program or the VC funds ea

    • Re: (Score:3, Insightful)

      by CodeBuster (516420)
      Even so, it raises the question: If electric vehicles are such a worthwhile and wonderful investment where are the private investors? Why couldn't Tesla have raised their $465 million loan(s) from the billionaire club or the private equity investment markets? Like stem cells in here in California, it is always the public that is asked to "take one for the team" and finance a high-risk investment in exchange for little or no reward a long way down the road. I am very suspicious of people who claim that a p
  • by grumpygrodyguy (603716) on Wednesday June 24, 2009 @05:00PM (#28458623)

    That thing looks hot.

    My only concern is battery replacement. Replacing a UPS battery is roughly half the cost of the UPS. If cars like these get the same battery economy that would mean $25k every 5-7 years according to their FAQ. (I'm just guessing here based on battery life; they made no mention of battery replacement costs)

    Their FAQ claims the car is a great lasting investment due to lack of complexity and moving parts, but having to drop $25k every 6 years for a new battery would be a deal breaker.

    I do wish them luck though, it's way past time we stopped supporting extremists in the middle east. Not to mention that fact that a complete 300 mile recharge would cost about $4.

    • by T Murphy (1054674)
      Fewer moving parts would imply less maintainance (not enough to offset that battery cost), but that brings up the question: what do you do to get your car repaired? I don't know if dealers would be equipped to deal with it, assuming there even would be dealers instead of having to buy the car direct. Low maintainance would be great, but that would quickly be offset if you have to send it to California whenever it does have problems.
  • If they are on "S" now, then the next model in line is "T". The potential confusion cannot be good for marketing. Reminds me of the door company that made a "Commodoor-64".
           

  • Geography (Score:4, Insightful)

    by afabbro (33948) on Wednesday June 24, 2009 @05:31PM (#28459101) Homepage

    $100M for a powertrain manufacturing plant in the SF Bay Area

    How on earth can that be the cheapest place to manufacture something?

    I suspect the factory location is more political than practical ("I've love to help you get that loan, but you know, it'd sure be nice if you located that factory in my state").

    • Re: (Score:3, Interesting)

      by Bemopolis (698691)

      I suspect the factory location is more political than practical.

      Actually my initial thought was the opposite. Who is the most likely to buy (read, afford) these cars? Silicon Valley nerds and Hollywood liberals. (And I don't mean to disparage either of those groups; if I were in either of their socioeconomic strata I would be standing in line with them.) Factor in the stricter emission standards of California as extra incentive, and one has to wonder why it would make sense to build them 2000 miles aw

    • Re:Geography (Score:5, Informative)

      by hguorbray (967940) on Wednesday June 24, 2009 @06:18PM (#28459727)
      Although I don't doubt that there are political reasons for having some Tesla mfg in the US (not to mention tariffs, etc) there are also some practical ones:

      1) You can't just take some laid off Mexican auto assemblers from an old GM plant, put them in a new building and tell them to start making Electric car drivetrains -there are probably entirely new process steps (not to mention components) which would make this a non-starter
      2) they probably need to tweak that process as well as being able to introduce changes in parts as the design is tested and improved

      therefore it makes sense for the factory to be close to where design/engineering takes place -not to mention that there is also a highly trained, technologically able workforce in the Bay Area.

      Also, thanks to Hitech, Lockheed, Lawrence Livermore Labs, etc there are a great many machine tooling shops in the area which are second to none.

      Think of this as a pilot mfg plant -they will no doubt try to go somewhere cheaper when it comes time to produce quantities in the 100ks

      On the other hand, we have the only large scale auto manufacturing plant left on the West Coast just down the street from me: http://www.nummi.com/ , so stranger things have happened.

      -I'm just sayin'
      • Re: (Score:3, Insightful)

        by drinkypoo (153816)

        You can't just take some laid off Mexican auto assemblers from an old GM plant, put them in a new building and tell them to start making Electric car drivetrains -there are probably entirely new process steps (not to mention components) which would make this a non-starter

        Let's also be fair here and mention that cars made in Mexico have repeatedly been shown to have quality problems; this has happened again and again with Fords, GMs, and especially VWs; the Golfs made in Mexico are complete shit piles, so they went back to making them in Germany, and now they're some of the most reliable cars there are.

        I don't know WHY the cars that come out of Mexico are shit, but they are.

  • by Pfhorrest (545131) on Wednesday June 24, 2009 @07:55PM (#28460849) Homepage Journal
    I know this is a tangential question, but I've been wondering about this for a while, and this seems like the best forum to get a decent answer from intelligent people:

    Why is all the development on electric and electric-hybrid cars going into fancy new systems with lithium ion batteries or hydrogen fuel cells and (for hybrids) complicated switching between a conventional drive train and electric motors, instead of using and improving upon the time-tested diesel-electric technology which has efficiently powered many trains for quite some time now?

    Build a simple all-electric car - just a body, steering rack, four wheels with a dynamo on each (there's your propulsion and your regenerative brakes), some circuity to control them all, and a small battery that holds just enough charge to get you up to speed, maybe twice that for a safety margin. Then stick the most efficient diesel or gas generator you've got in it to provide electricity to keep the battery charged. You lose a bunch of weight and mechanical complexity by ditching most of the drive train and transmission system for some simple wiring between the generator and the dynamos; the alternator and the standard car battery become redundant with the generator and main battery; heck you could even replace the radiator with a small steam engine for still increased efficiency, turning that excess heat into electricity instead of just disposing of it to the air.

    Yes, it still uses some fossil fuels, but in the end most of our electricity comes from coal anyway (even for a wall-charged all-electric vehicle like the Model S here, which I am very excited about). This just seems like it would have been far cheaper, more efficient (in terms of both money and thermodynamics), and simpler a solution than the complicated hybrids they've been building for a while now; plus the technology has already existed in widespread use on trains for decades!

    So why isn't anybody doing it in cars? Is there a good technical or economic reason?

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