Ta ta, Tesla
Tesla Motors, a start-up focused on high-performance electric cars, appears to be in a bit of trouble.
Although Tesla just raised an additional $40 million, it is asking for $400 million in low-interest loans from the federal government as part of the $25 billion loan package to the auto industry.
Yeah, I know that Tesla is working on cool electric technology for high-performance cars that could help our country ease its heroin-like addiction to foreign oil. That said, are the Valley-based VCs and big-wigs who back Tesla really serious?
Tesla may be a technological marvel and it is located in Silicon Valley, but Tesla is not an IT start-up per se. In the automotive industry, it can take billions of dollars and many years to get a product to market. Didn't the VCs anticipate this type of money and time commitment up front?
As the old saying goes, "When the only tool you have is a hammer, everything looks like a nail." Valley VCs seem to live by this mantra, believing that all business is like the technology business. You know, fund some smart guys with an idea and development chops, get a 1.0 product out, and then enhance the product as you create a sales and marketing team, build channels, and sign customers.
If you execute well with this formula, you may have a lucrative exit in three to five years. The problem is that other industries don't work this way. The next wave of technology breakthroughs will require big dough and lots of patience--a combination that is really an anathema to VCs.
Good luck, Tesla, but Washington ain't Interop. You can throw lots of clean-energy market hype around, but there won't be much support in Congress to bail out VC firms, Valley multimillionaires, and a shoe-string manufacturer of cars for fat cats. There are too many others who really need the money.
Jon Oltsik is a senior analyst at the Enterprise Strategy Group. He is not an employee of CNET. 
The government doesn't have money of its own - it takes our money in the form of taxes. I disagree with most social programs, and I certainly don't believe that the government should be handing out my money to businesses. If the government has money for something like this, it's probably time for my taxes to be cut.
At the moment, the country needs jobs more than anything else, including electric vehicles. As incomes decrease or disappear, even "fat cats" will feel the impact.
In addition to not listening to their customers, and, given the wrangling in Washington over the bailout, the so-called "auto czar", <i>and</i> the history of the "Big Three", (as well as their prior - but long-gone - competition), I think this proves that <i>no one</i> in the U.S. truly understands the auto industry, even those who were "raised" in it. (And, BTW, what does <i>that</i> history say about the chances for success in the auto industry of a former Home Depot exec, with experience in big-box, home improvement retail? I suspect it bodes worse for Chrysler's future than Ford's and GM's).
They are a true pioneer in the auto industry!
I'm surprised that GM et al, haven't teamed up with them,
or bought them out! Geesh!
I am puzzled though, it seems like no one is even talking about the previous electric cars the big three produced, then collectively killed off, in the not too recent past.
The Tesla is a cute car. It is not affordable to those who really need an electric car. They are certainly not "Pioneers".
GM and other major automobile manufacturers have invested huge amounts of R&D both internally and in other battery companies to get batteries that will give the range needed to win over the public, that are affordable, and reliable. Tesla does not have to worry about these details, not at $100K + a car.
Rather, give the $400 Million to Aptera Motors. They produce the most sensible affordable cars.
As a hint at what I'm thinking, when I first saw the title of this piece, I thought it was going to be about Tesla being acquired by the Indian industrial giant. Someone with a big enough wallet - and big enough stones, could remake the whole transportation ecosystem - and own much of it for decades to come.
But as of right now they have shown that A) they don't know how to run their business and B) They make bad decisions.
Knowing that why should we the people pay for a company to keep to its failing formula?
That being said, I think Tesla asking the goverment for money is a ballsy move, but as far as I'm concerned, Tesla can have GM and Chrysler's share of the bailout money. The only big 3 company that has made any significant safety advances is Ford, and that's only because they bought Volvo.
The problem is these bailouts are now replacing the normal venture capital channels. If Tesla really is 'that geat', then they should have no problem raising $400 million. But they apparently arent very good at making smart business decisions (look at their target price point), so that $400 million will probably just get run through in a couple of years and they'll still go under.
And those complaining about lack of innovation from Detroit may want to read up on the Chevy Volt. Fleet vehicle Volt prototypes (assuming GM survives) are now less than a year away. Fleet vehicle Volts may even out-number Tesla Roadsters by the end of 2009.
As for the Volt being "too little too late", I don't understand why people and the media choose to ignore the many reliable and fuel efficient designs from Detroit. I see them for sale, yet to the media they don't exist. The only thing missing from Detroit is a Prius equivalent, and the Volt (as designed) should leap-frog that. Toyota has publicly stated the Volt project and time-line is too ambitious to be possible, and that's why they're not making any similar promises. Guess we'll see.
Agree with you on the Freddie Fannie mess. I don't understand why mismanaged financial institutions seem to deserve unlimited funds with almost no preconditions.
- by russ960 December 1, 2008 11:33 AM PST
- Certainly if this car and company is worth the money it's investors will find the funds. It seems they are just taking this opportunity to take tax payer money rather than putting their own money at risk. Just the same we should not be supporting the big 3 with bailouts.
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Showing 1 of 2 pages (59 Comments)One item the internet was given as an example of government investment in technology. It was developed for a specific purpose to foster innovation for the Dept of Defense. I don't think the two are the same.
http://www.rightsideoftech.com