Tesla applying for new loan?

[Norbert]

2 days ago, Tesla posted this article on Tesla's website, in the light of the recent political discussions of the ATVM Loan Program, pointing out the value of the loan TEsla has already received for the Model S production:

How We See It - Changes to the ATVM Loan Program | Forums | Tesla Motors

San Francisco Chronicle reports Tesla is apparently (also) applying for a new loan (perhaps, I'm speculating, as long as the program still exists):

Tesla: another loan, please. | Fossils Energy and Clean Tech | an SFGate.com blog

I found both links in this article:
Tesla Promotes DOE Loans, Asks For More Money

While it asks if this could be for the Model S or X, I'm getting the impression it will be to be able to start work on Bluestar sooner, based on this quote in the SF Chronicle article:

“Tesla has applied for a loan, in our continued mission to make more affordable electric vehicles,” Tesla spokeswoman Khobi Brooklyn confirmed in an e-mail to the Chronicle.

 

[zack]

And I bet they'll get it, too.

The faster the better.

 

[Arnold Panz]

2 days ago, Tesla posted this article on Tesla's website, in the light of the recent political discussions of the ATVM Loan Program, pointing out the value of the loan TEsla has already received for the Model S production:

How We See It - Changes to the ATVM Loan Program | Forums | Tesla Motors

I thought Tesla posted that article because somehow the ATVM became the sacrificial lamb for Republicans in the House of Representatives on what they wanted to cut to help pay for disaster relief for the victims of the floods/hurricaines from this summer. That's why Tesla is so emphatic at the end about it being a "loan" that they're going to repay, because it would be silly of the House to cut a loan program that's actually getting its money back (with interest!).

It's a new tactic by House Republicans to try to cut spending -- attach cuts to any new spending measure. Not to get too wonky, but this could actually lead to a shutdown of the federal government in a couple of weeks because they can't agree with the Senate on the proper amount of $$ for disaster relief, and the money to keep the government operating is the bill to which the disaster relief is attached.

 

[Norbert]

I thought Tesla posted that article because somehow the ATVM became the sacrificial lamb [...]

I think we are talking about the same thing... Tesla's article starts:

Given the latest buzz about possible changes to the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing Program, Tesla would like to highlight the invaluable impact its ATVM loan has had on job creation and the acceleration of U.S.-based, gas free, electric vehicle technology:

 

[doug]

That's why Tesla is so emphatic at the end about it being a "loan" that they're going to repay, because it would be silly of the House to cut a loan program that's actually getting its money back (with interest!).

Unless they go bankrupt like Solyndra did. That's thankfully unlikely at this point, but it is within the realm of possibilities. I'm not exactly sure Fisker deserved a loan. But cheap money is certainly a competitive advantage.

 

[Arnold Panz]

Unless they go bankrupt like Solyndra did. That's thankfully unlikely at this point, but it is within the realm of possibilities. I'm not exactly sure Fisker deserved a loan. But cheap money is certainly a competitive advantage.

Indeed -- Fisker got ATVM money on much shakier grounds than Tesla (or Ford and Nissan, for that matter). Use of a former GM plant with a pre-arranged agreement to use union UAW workers from that plant was very savvy by Fisker to help secure the loan. Fortunately, like Solyndra, Fisker's loan is a small fraction of the overall ATVM program, so even if it goes belly up, it doesn't mean the loan program was an overall failure.

 

[NigelM]

Tesla will be fine without another loan, but it's prudent of them to want to keep their options open and to apply for further loans in any event. For a private entity it's cheap cash, they'd be dumb not to apply. The reality is that the primary risk with Tesla is that they have a continuous rise in R&D costs plus unexpected capex requirements (read: Model S delays)- this would leave the company short of cash and require them to raise more capital, the obvious route being to issue more shares which would dilute existing equity for the shareholders. Get Model S out on time and they're basically fine.

I came across the table below in Morgan Stanley's August report, which illustrates the above pretty well:

P.S. Instead of trying to type out a page of disclaimers, I'm just going to declare that I'm an idiot and you shouldn't take any of the above as investment advice!

 

[Norbert]

Tesla will be fine without another loan, but it's prudent of them to want to keep their options open and to apply for further loans in any event.

That is also the impression I was getting. They are (more than) fine for Model S and X, however a loan would enable them to start work on Bluestar (and on the required mass-manufacturing facilities) much sooner. Without the loan (or other additional financing), they'd have to wait until enough profit from the Model S/X accumulates to allow the new investments. And while the anti-EV crowd currently seems very busy in the comments sections of articles, using the "tax-dollar" argument for their purpose, to me it appears that this loan would be the best possible way for the government to support american companies in getting into the EV mass-manufacturing business. And last time I checked, there still was bipartisan support for EVs in general, even in previous times where those article-commenters have been very active as well.

 

[PopSmith]

I don't see any problems with giving Tesla an additional loan. The reason being it will more-than-likely help accelerate the creation of BlueStar; and that means Tesla (and EVs in general) can target a bigger market.

 

[NigelM]

Without the loan (or other additional financing), they'd have to wait until enough profit from the Model S/X accumulates....

Being pedantic: IMO cash flow is more important for Tesla than profit right now. That's why it makes so much sense for them to a) sell a Sig series and b) prioritize the bigger battery packs ahead of other reservations. Obviously there are brand ambassador and economy of scale benefits also; but the push for cash flow boost is good business practice.

 

[Norbert]

Update to the article greencarreports: (The loan is indeed not meant for Model S/X.)

UPDATE: Tesla's Ricardo Reyes contacted us over the paragraph below, to point out that the company has said it has enough cash on hand to finish development of both the upcoming 2012 Model S and the subsequent Model X crossover.

The requested loan, Reyes said, is to help the company "build increasingly affordable electric vehicles," but he gave no other details.

 

[Norbert]

U.S. House votes to cut $1.5 billion from Federal advanced auto loan program

Democrats opposed the bill's cutting of $1.5 billion of the remaining $4 billion in the DOE's AVTM program and warn that at least ten loan applicants could be in jeopardy of losing out, including Chrysler with its pending $3.5-billion application.

Autos Insider | House OKs bill cutting auto industry loans | The Detroit News

The program has awarded $9.2 billion in loans to six companies — including $5.9 billion to Ford Motor Co. and $1.4 billion to Nissan Motor Co. About 10 applications are in the final stages of approval — including a request by Chrysler Group LLC, which has sought about $3.5 billion.

 

[vfx]

Indeed -- Fisker got ATVM money on much shakier grounds than Tesla (or Ford and Nissan, for that matter). ... Fortunately, like Solyndra, Fisker's loan is a small fraction of the overall ATVM program, so even if it goes belly up,....

If Fisker were to die the political haters would have a field day with Al Gore's name attached to the company.

 

[AnOutsider]

If Fisker were to die the political haters would have a field day with Al Gore's name attached to the company.

Wouldn't matter to me. I like a company to stand on their merits, not political backing. Biden supports Fisker too

 

[NigelM]

Tesla Motors secretly asks for more government money

Not really "secret" if the info is widely available on the internet....

 

[AnOutsider]

Not really "secret" if the info is widely available on the internet....

good ole jalopnik

No electric vehicle start-up has been as successful at mining cash so far as Tesla

I haven't been tallying, but Fisker has raised a boatload as well no? They also fail to mention Elon himself invested a LOT

 

[Norbert]

Never mind Chrysler is currently asking for $3.5 billion (surely far more than Tesla might be asking for), and there seem to be 10 other companies asking. Since Tesla is in fact developing "advanced technology", it would be strange if it did *not* apply for Bluestar under this program. I'm not aware of any project that would fit better, and the programs intention isn't to sit there and wait for better times, but (also) to help make times better. Have other companies made their application public? Maybe, but I didn't hear anything so far.

Yet, who cares, a headline like "Tesla asks for more money" is close to saying "insert your Tesla bashing here".

 

[TEG]

By the way, related old thread:
Tesla Motors and Government Money

 

[Norbert]

Maybe a piece of information which people are missing is that the ATVM loan program is more or less of a fixed size (although the amount might get reduced per the current political discussion), and that any company may apply for being one of the companies which will get a loan. It is up to the DOE to decide which of the applying projects (if any) are the most qualified for the program. Although I'm not familiar with the finer details, it seems that if the political decision is to make a certain budget available to support advanced technology projects, then any car company being able to meaningfully use such a loan for a meaningful project, even has a certain obligation to file an application. Or is this just one of several different ways of looking at it?

 

[AnOutsider]

If I'm not mistaken (only being guilty of watching CNN when @ the gym), it's down to FEMA vs ATVM for money. Personally... I see where they're coming from, but electric cars won't mean much if our country is in disarray because there weren't funds around to support a rescue effort in the face of a disaster.

I don't get political, but I do feel as if one of the things I look to my government to do is to provide protection and assistance in times of war or disaster. We saw what happened with Katrina. So if my understanding of the situation is correct, I'd actually prefer the money earmarked for Katrina than another Fisker, Solyndra, GM, Chrysler, or even Tesla.