The Money Pit

Tesla Motors just borrowed another half-billion. What was it the late great comic San Kinison used to say?

It never ends! Oh! Ohhhh!

Elon Musk’s electric car operation suffers from Lack of Profit. It is a problem for a business. Unless you have friends in government. Elon relies on these to fund his Iron Man fantasies, which encompass not only his electric cars — which are pretty and quick but preposterous as economic competition to internal combustion-powered cars — but also his very own privatized, for-his-profit NASA, SpaceX.

They make money in the same sense that the IRS has “customers.”

Even so, Elon must borrow. Again. According to the industry publication Automotive News, Deutsche Bank AG has extended Tesla a $1.2 billion credit line.

Serious money.

Why can’t Elon raise money?

Where are the investors?

If what Elon’s selling — trying to sell — isn’t fool’s gold, he ought to have no trouble finding people (not government people) willing to back him, because there’s money in it for them. Hence investment. The fact that Elon can’t find such people (except for government people) says a lot about what he’s not selling.

The real Iron Man was Steve Jobs. He did not need “help” from friends in government. He had no trouble finding investors.

He had trouble shooing them away. People lined up (still do line up) to give him money.

iPhones aren’t cheap, but they sell without subsidies. The latest Macs get snapped up by people using their own money — instead of other people’s. This is because Apple products make economic sense, defined objectively as something which enough people are willing to freely buy at a price point sufficient to cover the costs of designing and making the item, plus a profit sufficient to make that item worth making.

By this market criteria, every single thing made by Tesla is a loser — an economic lemon.

Cue fanboy outrage. It alters nothing.

Fanboys can talk up the Tesla’s looks, tout how quick it is. Compose haikus about them being “the future.” None of this dents the economic indictment against Tesla and Elon Musk himself. Take away the IV line to the taxpayers’ main vein, insist that the “patient” get off the gurney and stand on his own two feet… and we all know what will happen.

This includes fanboys.

Who, by the way, will get a jolt when the endlessly-almost-here Model 3 — Tesla’s first “affordable” electric car — finally becomes available maybe sometime later next year (it has already been delayed several times).

The Model 3’s “affordability” depends hugely on the $7,500 tax write-off that is available to people who “buy” (in air quotes to emphasize the abuse of language) electric cars. But the subsidy is limited to the first 200,000 marks (whoops, “buyers”). Once the 200,000 mark is reached, the company is no longer eligible and the buyer (no air quotes now) must pay full freight.

This means whatever the Model 3’s sticker price turns out to be, that’s what you’ll actually pay for the thing. Not discounted by $7,500.

Musk has stated that the Model X will sticker for “around” $35,000 “before” what are euphemistically called “incentives” (subsidies; i.e., the tax write-off). But most of the marks who’ve put down a $1,000 deposit on the maybe-it’ll-get-built Model 3 won’t be eligible for the “incentive.”

They will discover that they are paying a lot to “save.”

Even with the “incentive,” the car would be a market non-starter. Like solar roof panels (another Musk money pit). The idea sounds great. But the expense is titanic and in the marketplace, cost matters everywhere except when it comes to indulgences. And why, pray, should any person be forced to “help” subsidize another person’s indulgence?

That is the core of the problem with Elon Musk and Tesla.

He is a fabulously wealthy guy with grand ideas he thinks other people ought to pay for.

If he (if his engineers; Musk himself has no engineering bona fides, he’s a finance guy) could design and build an electric car that could be sold without subsidies — and at a profit — then he would.

But he can’t.

No one can.

Or at least, no one has.

Electric cars will only be “the future” if either most people somehow become much more affluent and so cost considerations no longer apply or the cost of electric cars comes way down, such that they can be viewed as other than an indulgence. As an economically sensible alternative to an internal combustion-powered car.

That day may come. But for now, it hasn’t.

And until it does come, carny barking crony capitalists like Elon Musk are only pushing off the day when it may come. By distorting the market. By pushing electric car sexiness and quickness…

By pushing indulgence rather than practicality and economic sense.

Comments?

www.ericpetersautos.com

Not an NMA Member yet?

Join today and get these great benefits!

Leave a Comment