Last I checked the residuals on S class Mercendes were in the low forty percent. Throw in the funny math needed to get your drive costs down to the five hundred dollar amount and I get less impressed by the minute.
Then to top it off, all with my money too boot! So for everyone who can afford a one thousand dollar monthly lease; before taxes; they get my help to pay for it.
Sorry, he is all in with our help. That isn't exactly courageous. He wants to capitalize on that tax credit before the money ends up elsewhere.
Look, I am all for having an electric car do well, but I would much rather finance the world of Leafs and similar affordable cars than a luxury vehicle to people who could make the payment regardless. People on sites like this bitch up a storm all the time about subsidies to various businesses but somehow this one gets a pass.
The model S has captured people's mindshare and has increased publicly perceived legitimacy of electric vehicles in ways that the Leaf or Volt weren't able to. Its success and continued success is important in promoting and achieving the kind of infrastructure support and economies of scale needed to take EVs to the next stage and beyond.
To that end, even though the current state of Tesla and Model S may not be picture perfect, its success is certainly more desirable than its failure, particularly given that both its Nissan and GM counterparts have basically flopped in people's minds.
Whatever the hell it is you're talking about with mindshare and flops in peoples minds, I'm pretty sure GM and Nissan have sold a lot more electric cars than Tesla.
You might need desire. What I (and millions of ordinary people) need when it comes to cars is a cost-effective solution, which means resale value, parts, cost, petrol etc. Desire comes last.
Agree - Tesla taps the passion of the die hard enthusiasts. The range and performance of the Model S is comparatively exceptional to that of the Volt and Leaf. Model S is sexy and exciting and I WANT to drive it, I don't simply concede to drive it as a best option.
> Look, I am all for having an electric car do well, but I would much rather finance the world of Leafs and similar affordable cars than a luxury vehicle to people who could make the payment regardless.
So what? The Leaf is still about 1/3 the price of the Tesla car, so it's inarguably more affordable. Pointing out that the average buyer is reasonably well off is beside the point.
From an environmental standpoint it's going to lead to a greater reduction in fossil fuel use in the aggregate, assuming it sees the same pattern of takeup as the Prius did.
The simplest way to make electric cars more successful is to increase the artificially low price of gasoline, e.g. By factoring in the costs of our mid-east foreign policy and a good deal of our navy since both are driven in large part by our need for oil.
> They still don't have roads full of electric cars.
yet. Government subsidizes 100% electrical cars heavily in the form of low / no road taxes or lease tax, and with a high amount of <100 km commuter traffic, electrical cars with their limited range make sense.
It's also a space thing. As a Brit the thing I didn't get so well before going there is how sodding big the US is, and how normal it's citizens think it is to drive to the next town over which just happens to be an hour or so away.
I was doing just this with a German foreign exchange student in Missouri once. He commented about halfway there that, if he were at home, we'd be in Poland already.
Americans will continue to drive automobiles more than Europeans if gas prices were to go to parity. Our mass transit infrastructure is laughable by comparison. Also, we're way more spread out than Europe is.
Taxing carbon emissions is a fine idea, but gasoline (and other petroleum products such as diesel) also need to pay for the costs of US mid-east policy. We've never had terrorists blow up buildings or a marine barracks because of our coal mining activity.
The costs of Middle East policy doesnt need factoring in, they are there already. And the cost of petrol isn't the same everywhere as it is in the US, and is significantly inflated by taxes in many places. Over 50% of what I pay is tax.
The best place to invest your money including tax dollars is in the company with the highest chance of success. For many reasons I believe Tesla will disrupt the car industry and lead the transition to making the electric car the new standard : amazing founder, 100% focused on the electrical car, the best technology (with a true viable range),a good financial situation, good early traction and a sexy car!
Electric cars are an order or magnitude simpler mechanical devices as compared to IC engine cars. Once an affordable battery chemistry (or any other cheap energy storage mechanism) is figured out, a lot more electric car companies will get started (I am hoping for a healthy 'car-kit' market). Tesla is the 'best' in the sense that it has the best technology to handle the idiosyncrasies of Li-ion battery (they like to burn themselves the first opportunity they get!).
Is the government going to see a return on those? Or is it an investment because you think they are going to be a net improvement for society? To be honest if I had a choice I would give most tax dollars to the EFF and ACLU, but if Tesla can improve battery technology and adoption of electric cars I would consider it a win.
Here Elon speaks at TED. Somewhere in the talk he explains the reasoning behind the more expensive vehicles at this moment. (spoiler: He plans on getting less expensive, less elegant versions on the market, with the help of these more expensive versions.)
Claiming that getting a tax credit is equivalent to taking "your" money is a totally absurd notion. Neither it is your money, because you didn't earn it in the first place (the person receiving the credit did), nor would eliminating the tax credit lead to you having to pay less taxes - the government would just be spent the money for other useless crap instead.
A positive corollary is that this kind of consistent, push the envelope behaviour by the founding CEO and the company as a whole draws other ambitious people to the company.
Not only is this story a great business and strategic move, it has an added bonus of marketing/PR/goodwill + hiring benefits.
There's probably a lot we can all learn from the kind of decisions/announcements that are continuously being made from Elon Musk and Tesla.
You're kidding, right? They're making the best of a bad situation. They'd love to have a normal leasing program like all other car companies, but they can't--they cannot finance leases themselves and no bank wants to risk losing money reselling the car at the end of the lease. The best they can do is offer to buy the car back at 40% of the purchase price in three years--and you have to take out a five year loan, put $10K down, and get that $10K back one year later, with none of the lower monthly payments of a normal lease. This is strictly worse than the financing options from every other manufacturer.
Except for the fact that the 'monthly payment' is a lie based on fudging the numbers Groupon style. My opinion of Tesla has gone down after reading this and the fine print.
On the minus side, the initial values in the calculator are heavily shaded towards Tesla. Who spends 15 minutes at a gas stop? Using the average cost for electricity instead of the marginal cost?
Except, the calculator isn't great at true telling, lying by omission.
Try making the cost of gas low, and electricity high, and the "savings per month" simply drops to 0 and stays there, instead of wrapping around and becoming a cost.
Yeah it's an estimate, but it doesn't cover any of the basic possibilities.
What I want to know his how much I'm writing a check for every month. The rest I can figure out on my own.
The fact that they shaded the initial number in order to close the sale is deceiving, and honestly, surprising from a company I previously held in high esteem.
It's not that this practice is uncommon, it's that I wouldn't expect it from Tesla.
Minor niggle, but it says "Time spent driving to a gas station and refueling". The nearest gas station to my house would take about 5 minutes to drive to, so 15 minutes isn't that unrealistic.
Having a $222 business tax discount selected by default seems questionable to me though.
I think I average 15 min per fill up when you include how far out of the way I need to drive. The gas station I use is only about 2 miles from my house but there are a lot of stop lights between here and there.
This type of loan used to be quite common but for a completely different reason. Prior to 2005, in many states the owner of the vehicle could be held liable for any damage caused by the vehicle (vicarious liability laws). With a lease, the credit company holds the title, thus for a period of several years, NY and NJ residents were forced into balloon/option loans instead of traditional leases.
It is really interesting to see balloon/option loans coming back, but for a different reason.
As far as I know, no bank does leases and only the captives do them. In this case, you owe wells fargo for the full amount of the loan, but Tesla and Musk are personally guaranteeing to buy the car back. A clever way to create a lease product backed by a company that won't do leases.
Elon Musk is such a great entrepreneur, he could probably make a fortune selling cologne. They could call it, um, well, I'm sure they'll think of something.
2) Is it available for longer than 36-month period?
If I decide to buy Tesla, it's unlikely I'm going to be replacing it in 3 years, more like 6-8 years. And I think that there is a good change that in 6 years resale value will be 0 - with more advanced battery tech available and with cheaper models around, and with old battery Model S may turn out to have no value in 6 years. So this kinda stops me from considering it.
Are you reserving one? The negative to this offering is I am limited to 2 lenders so I might pay alittle more in interest versus a credit union. I think this program requires an additional $8/month as well. It gives me an exit plan if for some reason I want to get rid of the car relatively easily.
There is no reason why this structured financing entity would sell a put (taking on a liability) without an offsetting asset, the loan receivable. Nobody wants to be in the cash and carry downside vol business with an unhedgeable underlying.
Well, may be offer this options for a price or something.
They did bet that resale value will be higher than certain amount. Moreover, if it's higher, than what stops you from selling yourself and just returning the loan? I.e. it seems that they are not going to benefit from upside, but will suffer from downside - if resale value is lower, all people having this option will execute it.
On other hand if enough buyers will buy this option, this will effectively set the market price of the used car (as lease does for 3yo BMWs, for example).
Anyway, it seems they punish current cash buyers if this option is not available for them.
As you pointed out, given how fast electric vehicle technology is changing, it seems unlikely the typical Tesla S owner would want to own one for more than three years.
What you're doing is subsidizing the technology. Without these incentives, it is more difficult for the Teslas of the world (of which there is really only one) to become viable and advance this technology. If Tesla wins here, we all win. It's just that the well off get to play with it first. That's not so bad to me. I've got a long list of areas that my tax dollars don't belong before this is a concern.
I'd rather subsidize technology that's going to make our lives more sustainable in the future, than continue to cover the externalities for gas driving car owners.
The flip side to this lament is that those who can afford it generally are subsidizing it a bit more than those who can't. More in taxes, and they actually buy the product, directly subsidizing it.
Both Tesla and SpaceX receive heavy government subsidy. Tesla is not operating at a profit once government subsidies and tax breaks are removed.
I do not consider significant reliance on the state for funding the mark of a great entrepreneur. Musk has a bold vision, and the tenacity to execute on it, and that is commendable. But not without significant aid.
So what you're saying is that Elon Musk isn't capable of revolutionizing two long-standing American industries (arguably the two long-standing American industries) at the same time, single-handedly and without help, and that this is evidence that he is not a great entrepreneur.
That's not correct. The US government doesn't subsidize SpaceX, it purchases launches and technology. It's just a customer. And it buys those things for much cheaper than before. You as the tax payer are actually saving money compared to what NASA and the DoD were spending on the big contractors.
There's no sharp distinction between selling to the government as your sole customer, and subsidies. One bleeds into the other, and it's nothing like an efficient market against which one would hope to measure entrepreneurs.
Tesla recieves a subsidy to offset the implicit subsidy received by other car manufacturers, because doing the straightforward thing and banning all pollution is politically impractical. If you added the cost of global warming and people poisoned by oil refineries to the price of gas cars, tesla wouldn't need a subsidy.
Indeed. I think a recent IMF study suggested the U.S. would have to raise taxes $500B annually to account for pre- and post-consumer 'subsidies', mostly to compensate for externalities.
In U.S. budget-ese, you describe costs over a 10 year span, so that's a "$5 trillon tax hike".
The point being that the EV subsidy is small potatoes. I still think it's a bad idea. Tax the gas. Let producers and consumers figure out how to use less, and let governments figure out how to compensate for the regressiveness of the tax.
How much and to whom? Some poor people drive a lot. Some poor people don't drive at all.
EDIT: Also, you can't just give it all back. As long as emissions continue at something near current levels, you have to spend it on amelioration. It doesn't just become a slush fund.
I'd say as much of it as we can, equally per-capita.
> Some poor people drive a lot.
And either they will change their behavior, or be hurt less than if we didn't give the money back. As people generally change their behavior they will likely have more options, as demand rises for alternative modes of transportation (and for goods and services that involve burning less gas) leading to greater economies of scale.
> Some poor people don't drive at all.
But they still buy goods that were shipped by burning gas. Even so, they'll benefit more than others, but I don't think that's a problem.
> Also, you can't just give it all back. As long as emissions continue at something near current levels, you have to spend it on amelioration. It doesn't just become a slush fund.
We can certainly talk about taking a piece for amelioration, but I don't think paying that out of the general fund is unrealistic; it's what we'd be doing otherwise, and it'll be way cheaper if people have adjusted their behavior to reflect the true costs of their actions.
Why? Just give it back equally, and finance amelioration out of general revenue. (Not saying that's a good idea. You could finance amelioration out of a specific percentage of that tax.)
I suspect that would cause problems for the urban poor. Possibly also anyone for whom food makes up a large proportion of their annual budget, given both how reliant growing and transporting that is on oil and how reliant farmers are on internal-combustion vehicles.
Unfortunately, I'm not finding the numbers I need to get a good estimate. The important question is what portion of petroleum use winds up servicing those poor people versus the rest of the economy, because while it is certainly true that a small percentage increase in the costs of necessities hurts these people disproportionately, the money returned is a much greater portion of their income, and could very well dwarf the increased costs (indeed, this is what I would expect).
The very worst case, of course, is any who find themselves paying higher prices but unable for whatever reason to access the stipend.
Subsidies, tax breaks, issuing debts, give aways (pork), purchases, loans, war profiteering, patents, etc.
Everything.
Government even protects people's property rights.
Without governments, there is no wealth.
Personally, I'm quite proud that the US Govt is funding alternate energy, electric transportation, and space exploration. Many of the past investments have worked out quite well. I'm bullish about these investments too.
I have to disagree on that. Governments are the arbiter of most wealth, via taxation, subsidies, spending, the court system, etc. "Wealth" comes from production, transformation, and trade. I've taken a tree and nurtured it so that it produces fruit. The world is now one fruit-producing tree wealthier. I trade fruit with my neighbor for wool, because I value some quantity of wool higher than I value some quantity of fruit, and my neighbor values the fruit more than the wool. We are now each wealthier for trading something we have in excess for something we do not have.
The government then takes some of my fruit to feed the soldiers defending my land. Government's role in the economy is mandatory trade for the benefit of the society as a whole. I must provide fruit to the soldiers whether I want to or not. Sometimes there is a net gain through these trades (see space exploration, for example). Other times the gain from this trade is disputed (see California's high speed rail project).
He's not paying everything out of pocket, therefore he is not a great entrepreneur? My understanding is that great entrepreneurs find ways to distribute the risk.
Great entrepreneurs, in my opinion, Deal with others peacefully. They don't use the power of government to force people to invest. Or "distribute the risk" (a euphemism for overriding people's choice over what risks they choose to take).
Our government distributes enough risk to me already, while letting the pseudo entrepreneurs keep all the upside. That's the reason all those credit default swaps made by Goldman Sachs and others were paid for by the taxpayer.
SpaceX is a supplier to the US government. That is not the same thing a subsidy. They're actually saving them money.
Tesla is a recipient of government subsidy, but you pretty much have to operate in the auto market. Everybody else (big auto companies, big oil) are the recipients of massive subsidies too.
True, subsidized means a portion of the cost is absorbed by other party. SpaceX provides a service the customer needs at a competitive market rate. It is not much different from how Lockheed-Martin operates.
They received 450M$ to build a luxury vehicle from scratch in two years. In the same program, other companies got 1B$ just to retrofit some fucking factory.
But I don't understand ... if he's personally guaranteeing the put, why is the partnership with the two huge banks necessary? Aren't they just an interchangeable loan provider in this?
> why is the partnership with the two huge banks necessary?
The banks are providing: 1) cash 2) loan origination and servicing.
Tesla doesn't have a cool $1B in cash laying around to make 15,000 car loans. The banks do as they lend from customer deposits. Tesla needs the cash immediately to buy more parts / pay employees.
Also, Tesla doesn't have a team of people that know how to review and check credit. Nor do they have call centers to remind people to make their payments, and if they can't arrange a repossession.
>Tesla doesn't have a cool $1B in cash laying around to make 15,000 car loans.
Tesla doesn't need the cash in reserve to make loans to buy Tesla cars; such a "loan" in that case would simply mean "not requiring (immediate) payment". It certainly means forgoing some liquidity, but that's not the same as them having to come up with the purchase price for all their cars; they're paying themselves anyway.
Because Tesla do not have the privilege of printing money like banks do. Banks do not directly loan out money from depositors, they keep that money and print(punch in numbers in a computer) 10x that amount for loaning out.
That is a powerful privilege and the reason why it is smart to partner with a bank, even if you have money to spare.
> Banks do not directly loan out money from depositors, they keep that money and print(punch in numbers in a computer) 10x that amount for loaning out.
No. Only central banks can create money by printing it.
An ordinary bank (commercial, S&L, or credit union) cannot loan out more money than they take in. That's why it's called "fractional reserve" banking -- i.e., a "fraction" of deposits is not loaned out, but is instead held in reserve.
The 10-fold expansion of the money supply is caused by the multiplier effect, not by banks printing money. The only way to avoid that is for the bank to make no loans at all. Any fraction -- whether 1/10 or 9/10 -- will still lead to a multiplier effect. It's just a matter of how large you want the multiple to be.
Elon Musk is great. He's always all-in.