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Sunday, November 30, 2008

MSN Autos Editorial Bashes Tesla Motors, skeptical of GM's Volt

Auto critic Lawrence Ulrich tells us to "get read to pull the plug" on Tesla motors. Mr. Ulrich says that transmission glitches and the delayed roll out of its model "S" roadster is proof that the demise of Tesla is around the corner:

While the fledgling electrocar specialists haven’t hung a “gone fishing” sign on the front door just yet, it might be just a matter of time. That isn’t changing anytime soon, regardless of how much money company founder and newly appointed CEO Elon Musk can scare up for his pet project. And this group of Silicon Valley geniuses isn’t alone. You can simply add Tesla’s name to the long list of electric car builders that have talked a big game and failed to deliver.
Yes, the production delays and the issues with the model S's transmission have made Tesla motor's customers, fans, and followers like myself a little anxious. We want to see this company succeed and live to be a model for 21st Century American auto manufacturing. One reason I think Ulrich is too quick to write off Tesla motors is the man behind the company - Elon Musk. I've read several interviews and stories about him in magazines such as Fast Company. He may come off to some as arrogant but you can't argue with success - and someone who puts his money where his mouth is. In his latest interview Musk discloses that has invested $55 million of his personal money in the company, which has raised close to $200 million overall. Musk also listed a string of his accomplishments and successes, which include PayPal, which he co-founded, and added "I've never had a failure, and I'm not going to add one now." Do you think that this guy would let Tesla Motors fail this early in the game?

Ulrich does expect them to fail, and it is clear that he doesn't think tech geeks belong in the auto industry. He says that starting a real car company takes billions. Well, eventually, yes, it does, but a brief history lesson is in order here. If Mr. Ulrich studied some history of the struggles of Henry Ford he would realize that starting a car company from scratch is a journey of ups and downs, and, as Ford showed, it takes perseverance and dedication to see it through. In fact, Ford's first auto company, The Detroit Automobile Company, failed soon after it was started due to financing issues.

So, while the road has been bumpy and the company is already on CEO #4, there are plenty of reasons to be optimistic. First, Tesla Motors will survive the devastation of our capital markets. The company did have to lay off a lot of its employees and delay its production of its 4 door $70k Sedan, but it was recently able to secure another round of financing and will soon be on the receiving end of a DOE loan, and may very well see a small slice ($400mm) of the proposed $25 billion auto industry bailout. Secondly - they are rolling vehicles off the production line, and they are still taking orders and offering test drives for potential customers. These facts seem to be absent from Ulrich's column, and while he does think GM's Volt is more likely to be accepted by consumers than Tesla's pure plug-in vehicle, he is also skeptical of GM having much success with the Volt, even saying that sales of 10,000 units in its first full year would be a "monumental success." I doubt this guy feels the same way, and I have a strong feeling that if GM can stay afloat and produce the Volt closer to the $30k price point, they will have difficulty producing enough vehicles to meet demand. The Volt is really the future of GM, they are putting all their chips on its success, and if you combine that with the Volt's range extending gasoline/E85 tank, not to mention a federal tax credit of $7500, it is difficult to think that the Volt will be a flop. Forget Ulrich's column where he is trying to hard to be a contrarian, and forget about the demise of the electric car, because the revenge of the electric car is around right around the corner!

Update: I may have found an even more ridiculous column, this time in the New York Times Business section, that is critical of Tesla Motors for requesting $400 million of the $25 billion auto industry bailout. The column's writer, Randall Stross, is so short sighted in his analysis it is painful:
The program is intended to encourage automakers to improve fuel efficiency, but should it be used for a purpose like this, as the 2008 Bailout of Very, Very High-Net-Worth Individuals Who Invested in Tesla Motors Act? Can you conceive any way that federal dollars could be put at greater risk — and for no equity in return, keep in mind — to benefit fewer people?
Does Stross really think tax payer money is in better hands if all of it goes to the big 3? Hello McFly!!! Does Stross realize that Tesla is requesting less than 2% of the total package? It is clear that he doesn't know much about Tesla Motors, and that they will be producing two electric vehicles to be sold lower price points within the next 2 to 5 years, and that the survival of Tesla Motors is actually more important than the big 3 in terms of the technological advancement of America's auto industry. Two tech heavyweights offer their take on Stross's column, including Jason Calcanis, an owner of a Tesla model S, who wrote a point by point retort of Stross at his blog. His conclusion is worth re-posting here:
Randall says “Can you conceive any way that federal dollars could be
put at greater risk — and for no equity in return, keep in mind — to
benefit fewer people?”

Sure, how about the Iraq war, which costs around $400m a day–dollars
that we have no chance of ever seeing again (as opposed to a loan,
which is paid back with interest).

Your editorial should have started with this fact: if we leave Iraq a
week early, we can give two billion dollars in loans to *five*
electric car companies. That’s your lead right there, Randy. That’s
leadership, that’s the truth and that’s your job as a journalist. Not
this “damn the billionaires” crap. In fact, the billionaires in this
country have done a hell of a lot (see Gates, Buffet, Turner and
countless others)…But that’s for another email. Let’s get back on
the subject.

You need to put things back in their proper perspective instead of
obsessing about the fact that some of the investors in Tesla are
really rich, that the first version of the car is slightly more
expensive than a luxury car, and that battery power is *only* going to
*double* every ten years.

You really should rewrite the editorial and give the public a fair
world view instead of one warped by some short-term populist
propaganda. Tesla isn’t about rich Silicon Valley guys in sports cars:
it’s about extracting ourselves from the environment-killing,
human-rights violating, terrorist-supporting regimes in the Middle
East. The only reason we deal with countries that suppress women and
homosexuals and give money to terrorists who kill based on a religion
is because we are dependent on their oil. If we didn’t need their oil,
we would treat them like we treat other rogue regimes–isolate them
until they got their act together.

Companies like Tesla are the direct path to our independence from such


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