When Tesla Motors announced intentions to build a $5-billion battery factory somewhere in the Southwest this past March, I knew -- as sure as a politician will arrogate another person's accomplishment -- government operatives of the states in play would respond with a cornucopia of tax breaks and other monetary incentives. I'm sure Tesla executives were equally prescient on the political Pavlovian response, because that's exactly what happened -- and a bidding war ensued.
Six months hence we've been informed that Nevada has won (or lost?) the war, and is working to incorporate the coveted Tesla factory that will manufacture power few of us want within its landmass, but not before committing $1.3 billion of other people's money to Tesla's coffers over the next 20 years. Republican Governor Brian Sandoval, he of the putatively free-market party claimed the "investment" would change Nevada's economic climate and spur $100 billion in economic benefits over the next 20 years.Which Keynesian economist whispered $100 billion into Governor Sandoval's ear, I have no idea. Anyway, it's a nice round, impressive number... even if it is totally fabricated.
Of course, most large corporations are competent political entrepreneurs, but here Tesla has one up on the competition. Tesla has the advantage of political correctness. Politicians so want Tesla to succeed that Tesla not only has its foot in the door, but three-quarters of the attached leg to boot. Politicians simply want a plausible reason (no matter how spurious it may appear to those without a political agenda) to give Tesla other people's money so the politicians have a big shiny factory to point to come election time.
That's good news for Tesla, because if it were not for political patronage,the company would be as market relevant to consumers as a whaling harpoon. It continually loses money, so something is amiss in its business plan. Tesla appears to follow the confused merchant's mantra when it comes to selling cars: We lose money on every sale, but we make up for it in volume. And it loses money on every sale despite a $7,500 head-start (federal tax credit) on the competition. When you peruse the 10-K (pages 23 through 58 are particularly enlightening), you get a sense of the extent the business model is built on government largesse and privilege.
To be sure, start ups frequently lose money out of the gate, and then for years afterward, before earning a profit. But most are predicated on reality -- make it in the market, or else. Tesla's business of the battery-powered car (and even batteries in general) is predicated on a chimera and wishful thinking that's existed since the late 19th century. Yes, even then people wanted to populate what roads there were with automobiles powered by Nikola Tesla's new discovery. (This alone should provide insight to the forward thinking of government and the businesses it supports: 19th-century electric cars, 12th-century windmills, 5,000-B.C. solar power.)
The same problems that existed in 1899 persist in 2014: the power plant remains grossly expensive and grossly inefficient. To replace the battery pack on the Model S will run over $30,000. And if the battery pack lasts over 100,000 miles, as Tesla claims, the efficiency of the pack on mile 100,001 will be far inferior to that at mile one.
Buy a Tesla, get 300 miles a charge on day one; day 1,500 get 150 miles a charge. Over time, all batteries continually lose their ability to hold a charge. A brand new Honda 2.4L DOHC I-4 engine, on the other hand, gets over 30 miles to the gallon and will easily last to 200,000 miles with little lost of efficiency if properly maintained (which doesn't take much). To replace Honda's clean-burning 185-HP gem (highly unlikely) with a new unit will cost around $8,000.
Whatever supplants the internal-combustion engine, if anything, is unfounded in 19th, 20th, and early-21st century technology. It resides in the future, and it is likely on no one's radar at the moment. But never mind. As long as investors and politicians continue to believe in unicorns, and have no compunction about funding monuments to unicorns, Tesla Motors will exist. The risk is that one day they will stop believing and stop funding. After all, faddish thought is fickle.
Six months hence we've been informed that Nevada has won (or lost?) the war, and is working to incorporate the coveted Tesla factory that will manufacture power few of us want within its landmass, but not before committing $1.3 billion of other people's money to Tesla's coffers over the next 20 years. Republican Governor Brian Sandoval, he of the putatively free-market party claimed the "investment" would change Nevada's economic climate and spur $100 billion in economic benefits over the next 20 years.Which Keynesian economist whispered $100 billion into Governor Sandoval's ear, I have no idea. Anyway, it's a nice round, impressive number... even if it is totally fabricated.
Of course, most large corporations are competent political entrepreneurs, but here Tesla has one up on the competition. Tesla has the advantage of political correctness. Politicians so want Tesla to succeed that Tesla not only has its foot in the door, but three-quarters of the attached leg to boot. Politicians simply want a plausible reason (no matter how spurious it may appear to those without a political agenda) to give Tesla other people's money so the politicians have a big shiny factory to point to come election time.
That's good news for Tesla, because if it were not for political patronage,the company would be as market relevant to consumers as a whaling harpoon. It continually loses money, so something is amiss in its business plan. Tesla appears to follow the confused merchant's mantra when it comes to selling cars: We lose money on every sale, but we make up for it in volume. And it loses money on every sale despite a $7,500 head-start (federal tax credit) on the competition. When you peruse the 10-K (pages 23 through 58 are particularly enlightening), you get a sense of the extent the business model is built on government largesse and privilege.
To be sure, start ups frequently lose money out of the gate, and then for years afterward, before earning a profit. But most are predicated on reality -- make it in the market, or else. Tesla's business of the battery-powered car (and even batteries in general) is predicated on a chimera and wishful thinking that's existed since the late 19th century. Yes, even then people wanted to populate what roads there were with automobiles powered by Nikola Tesla's new discovery. (This alone should provide insight to the forward thinking of government and the businesses it supports: 19th-century electric cars, 12th-century windmills, 5,000-B.C. solar power.)
The same problems that existed in 1899 persist in 2014: the power plant remains grossly expensive and grossly inefficient. To replace the battery pack on the Model S will run over $30,000. And if the battery pack lasts over 100,000 miles, as Tesla claims, the efficiency of the pack on mile 100,001 will be far inferior to that at mile one.
Buy a Tesla, get 300 miles a charge on day one; day 1,500 get 150 miles a charge. Over time, all batteries continually lose their ability to hold a charge. A brand new Honda 2.4L DOHC I-4 engine, on the other hand, gets over 30 miles to the gallon and will easily last to 200,000 miles with little lost of efficiency if properly maintained (which doesn't take much). To replace Honda's clean-burning 185-HP gem (highly unlikely) with a new unit will cost around $8,000.
Whatever supplants the internal-combustion engine, if anything, is unfounded in 19th, 20th, and early-21st century technology. It resides in the future, and it is likely on no one's radar at the moment. But never mind. As long as investors and politicians continue to believe in unicorns, and have no compunction about funding monuments to unicorns, Tesla Motors will exist. The risk is that one day they will stop believing and stop funding. After all, faddish thought is fickle.
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