Do Fisker and Tesla deserve government money?
Should the government really help build this kind of vehicle?Over the next several years the government is going to dole out many tens of billions of dollars in grants, loans and tax credits to help green the automotive landscape. Thus, startups such as Tesla and Fisker are hoping to obtain as much of this money as possible to increase their green automotive efforts. Yet, after a $7,500 tax credit, neither will offer a vehicle priced much below $50,000.
Does this really help green the auto industry?
Minimally, it will take more than a decade, if everything goes extremely well, for these companies to sell anything priced close enough for mass consumption. Yet, both stand to reap huge IPO rewards with the help of government money.
Still, I cannot help but question the real world prospects of either company. Every major automaker has multiple plug-in options these days in the pipeline. Can either Tesla or Fisker contribute anything to this landscape? Can they really compete at anything but luxury vehicles?
Perhaps. Thus, maybe these companies are deserving of massive government assistance, but I dare say neither Fisker nor Tesla is outside of the box in their automotive thinking these days. All this makes me wonder, are just batteries and a plug the solution to America's auto woes and energy policy? Are we really thinking far enough outside of the box?
posted by Dahcredyns at
9:54 AM
22 Comments:
Dahc,
What do you want - the government to start funding gerbil/treadmill power plants and then flux capacitors?
Come on - if you know anything about Elon Musk, Tesla, and Fisker, they never even started inside the box (well at least certainly not Tesla).
If all they do is force a couple of the dinosaurs to adapt, then the cost of their contributions towards enacting that change will have been more than worth it.
We need companies like them - ones that are hungry and that are not part of the establishment. They are going to be driven by profits, but at least they are not tied to making them by staying with the status quo.
"If all they do is force a couple of the dinosaurs to adapt, then the cost of their contributions towards enacting that change will have been more than worth it."
Minimally, that's been accomplished.
Moreover, the EV was proven long before Tesla. Perhaps Tesla or Fisker will develop some kind of proprietary BMS system or charging system that makes EVs more price competitive sooner, then that might be a bit of out-of-box thinking.
Nonetheless, the economics of EVs are far more forgiving for startups than they are for established automakers. I'm sorry but neither Telsa nor Fiskers' business models make financial sense for any business but a startup or boutique maker.
I mean c'mon. If the US auto industry went forward today only selling $50,000 vehicles, it would be out of business instantly. Tesla hasn't developed a sustainable, mass produceable business model for EVs - not by a long shot.
Nonetheless, my definition of out of the box would be more like aptera or better place, for example.
Something like better place, for instance, makes car sharing a much more interesting idea, and that's just one posibility. It's an entirely different business model for car ownership, fueling, etc. Ultimately, it opens up many new angles. That's what I mean by out of the box.
i also think we should be pushing those dinosaurs far more aggressively as well. i worry the big 3 are going to be getting far too much money for accomplishing relatively small overall gains in efficiency.
so, i'm not just trying to pick on tesla and fisker.
Moreover, the EV was proven long before Tesla.ohhh really. GM failed at this task miserably. Tesla, on the other hand, will be producing a reasonably priced electric sedan, which actually many people will by, within 2 years. Within 5-10 years that might be completely electric with a range of 400-500 miles and price within $30000. I just love the idea.
A lot of people I buying or leasing BMWs with a tag price of 50+ grand. These are the people that you should criticize. Not the guys, how might be creating new American auto industry.
LB makes a good point about higher cost, lower market share brands like BMW. Porsche is probably the most profitable car company in the world.
It would be a mistake to discount the possibility that Tesla and Fisker can become the BMW and Porsche of EV cars, and that would be tremendous for America. Not everything needs to be mass market, even if mass market is needed for energy independence.
As to government support, I say yes, because investing in the high end of the EV market may not be optimum ecological strategy it is great industrial strategy.
How did GM fail, LB?
Technologically, GM's car worked fine, as did EVs from Toyota, Honda, Ford, etc.
Selling them cost-effectively was the problem. GM, nor any other major automaker, could or can, sell EVs in anyway imaginable that would result in a profit, other than the extreme luxury end. Even then profits would be sketchy and sparse.
Many claim that if not for government help, all the success of the prius still wouldn't have recovered development and production costs yet today.
And, in two years, how many cars will Tesla be producing per year?
Again, it's far more financially suitable for a start up to tackle small productions of EVs than it is for established automakers. It's like the dot com boom. People are willing to invest in early positioning in the hopes of an IPO that may or may not play out in the real world. That's why the Internet bust followed the boom.
What percent of BMW owners actually buy their vehicles at 50 grand? Most that I know lease their BMW's. Is that a sustainable way to fund luxury EVs? Plus, there are BMW wagons, convertibles, coupes and sedans in multiple otpions. Combined total sales are a few hundred thousand per year. What percent would really buy an EV with little choice of style, options, etc.
Still, ultimately, I was using Fisker and Tesla to argue a larger point: The US auto industry and the government now managing it are not thinking aggressively about the future. Thinking more aggressively than the last admin. is not enough in my opinion.
The developing world, for instance, isn't going to have the electric capacity to manage their cell phones, let alone EVs, especially big EV sedans.
I think America needs to wake up and realize we are not the model of the future for the rest of the world. We need to change, it isn't the rest of the world that needs to change to be more like us.
Dahc, I quote Wikipeida, hope it is a correct saying:
The EV1 was a 'purpose built' electric vehicle, not a conversion of an existing vehicle or drivetrain. The program was initially administered by Kenneth Baker, a GM Engineer who had previously managed the Electrovette program in the 1970s. This program had been intended as an in-factory conversion of the Chevrolet Chevette to electric power but did not reach production owing to technical and production cost difficulties.Do you see the point: it WAS it failure. They had difficulties they could not overcome. Or did not want too.
Most that I know lease their BMW's. Is that a sustainable way to fund luxury EVs?GM actually leased EV1 car. Why not? Till the point, we can afford cheaper batteries. And you know, the batteries are developing. May be in 20 years, US will be able to produce batteries enough for all its population.
Ask anybody that drove the EV1 whether they thought it was a failure. I think they made a movie about it, didn't they?
And that's right. GM did lease the EV1, but at a fraction of the cost. They leased them so they could maintain ownership.
I'm not arguing against EVs and batteries. I'm arguing that if America moves forward thinking it can replace the ICE with a plug and some batteries, I bet we'll fail.
and I mean replacing our current fleet of vehicles - trucks, SUVs, etc.
i think we'll need smaller vehicles, car sharing, better public transportation, just much smarter transportation at all levels.
alcatholic-
gm is almost certain to roll out a cadillac version of the volt not long after the volt.
toyota quickly launched several luxury hybrids along with the second generation prius. thus, i'd bet that toyota will launch luxury versions of its plug-in hybrids as well.
ultimately, gm is thinking about the same segment as is tesla for its white star with both the volt and the cadillac version. likewise, minimally, i'm sure toyota will have luxury plug-in hybrids as well.
if white star is the marquee tesla brand, can tesla really corner the luxury EV market the way a porsche defined itself in its market?
Well I like that this blog topic spawned a significant amount of discussion.
Aptera - yeah I agree that is way out of the box, but not so far out that significant numbers of the populace won't go for it. Well at least my 11-16 year old kids think it is cool. But Aptera to me is much more in the same league as Tesla and Fisker than they are even further out of the box when compared to the dinosaurs.
But car sharing and the like I cannot get comfortable with. After all my preaching, I don't want to be one of those dinosaurs, but a transportation vehicle to me is an extension of my home/person so it is personal to me.
Dahc wrote:
"if white star is the marquee tesla brand, can tesla really corner the luxury EV market the way a porsche defined itself in its market?"
Yes, White Star can corner the luxury EV market, because they have NO competition. GM and Toyota are going luxury PLUG-IN, not the same as EV. Sure plug-in might be better, but there is no questioning that EV is more expensive and thus more exclusive.
In terms of marketing Tesla can make the case, and I think David Letterman was making the case when he spoke with Elon Musk, that a Tesla EV is a no compromise solution with potential benefits in terms of weight, reliability, simplicity, environmental footprint, technology, etc. just not cost. In terms of branding Tesla is currently the ONLY EV solution and can be THE EV solution in people's minds. Doesn't mean mass market success, but marketing/branding success none the less.
Reasonable people can disagree as to whether the government should support a niche company. I would argue yes, but you know...
Tesla, Fisker have been around for years but are yet to prove their technology. but smaller EV manufacturers like like Mitsubishi i-MiEV and Revai Cars from India looks more promising in the long run.
Rahul
Indian Car Advisor (Carazoo.com)
This post has been removed by the author.
EDIT: I just wanted to correct one thing. I'm not predicting Tesla will corner the high end EV market. I'm not that impressed with their design, to be honest. Fisker Karma is tremendously hotter.
What I meant to write is that the high end EV market is wide open, Tesla has a great head start, and there are pretty good barrier to entry into the market, so that Tesla has an opening.
I would agree that the White Star would probably not be good enough or come soon enough to actually corner the market, but we'll see.
EI-
A couple of years ago I would have argued car sharing was the dumbest idea ever, but I've built my life around LA's subway system the last several years and I love it. I could almost exist without a car, especially if there were a quality car sharing program near by.
I'm not arguing that's feasible to mandate across the nation, especially not today, but i do think america needs to accept a radically different view of personal transportation, especially in large urban areas.
And it could be positive, not a negative - in terms of not owning a car. For instance, I'm usually very productive when commuting and I'm always relaxed. In fact, getting back into a car has become quite stressful!
alcatholic-
i think your argument about tesla being able to corner the luxury EV market is a good one. moreover, if you're going to give gm money to help develop the volt, why not the white star?
still, what i was really wondering is, are we thinking far enough outside of the box?
Development of affordable HEV and EV's has to start somewhere.
The only way to bring the costs down is to continue working on developing better technologies, and to begin mass producing some of the HEV/EV specific components.
If this revolution can be started by first selling to the rich, and priviledged, costs will eventually come down. This idea is supported by history. Remember the television, or personal computer, or LED's etc. etc.
As in any market, more competition will fuel companies to be the first to succeed. The sooner we can get these fleets rolling, the sooner we can reduce our dependance on oil, and save some for plastic making!
by mid-2012 Fisker plans on building 100,000 plug-in hybrids per year using the government's loan. that has to assume a pretty aggressive pricing point.
if Fisker can achieve such a goal by 2012, the government's investment in Fisker might be one of its smartest.
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