Government loans to now defunct solar manufacturer Solyndra didn’t turn out so well when it flopped into the bankruptcy ditch two years back, but more government loans to electric auto maker TESLA turned out much better both for TESLA and the U.S. government.
This upstart automobile manufacturer created in 2003 and run by entrepreneur Elon Musk paid $42 million for the old New United Motors plant in Fremont, the now defunct joint venture between GM and Toyota.
It goes to show that when big companies fail, the “creative destruction” arm of capitalistic free markets allows for greater things to arise from the ashes, and TESLA is that Phoenix risen.
TESLA is going gangbusters and paid the U.S. government back its loan nine years early.
With a backlog of orders and slick designs all wrapped around fuel efficient and fast-charging electric cars, TESLA is making waves in the automobile world, a world dominated by the “Big 3” U.S. carmakers and a host of foreign mega-makers such as Toyota. BMW and Daimler.
That such an upstart could actually survive is a surprise to many. Just look at a history devoid of new automakers, and the only one that did manage to make a few cars, the Delorean Motor Company, is now gone and its cars relegated to movie sets and museums.
What is also surprising is the fact that the Big 3 didn’t use the usual tactics of employing its army of lobbyists to install huge regulatory hurdles for TESLA under the familiar guise of protecting the environment and the consumer.
Such “corporate welfare queens” (as I once heard them called) often make it impossible for smaller upstarts to challenge their positions, engaging in crony capitalism, sucking off the public teat on one hand while pushing for more onerous regulations that their smaller competitors cannot afford on the other. It’s a common trick among mega corporations; just look at the banking sector for a myriad of examples.
My guess is TESLA slipped under the Big 3’s radar until it was too late, and with government money backing TESLA in the form of high profile loans, public scrutiny would have been fierce had any of the Big 3 tried to strong arm a patch of congressmen to put up what would have been fairly obvious financial road blocks.
TESLA appears to be here to stay, and with investors piling into the stock, TESLA has the money to make an honest go of it.
TESLA is a publicly traded company and traded it is, soaring ten-fold or more in the few short years it has been available to stock market participants.
It’s expensive and a super hype story for sure, but buyers of today’s stock are counting on TESLA upping the Big 3 U.S. Automakers to the “Big 4.” It has a long way to go, but it’s off to a roaring start, just like its cars.
This article expresses the opinions of Marc Cuniberti. He hosts “Money Matters” on KVMR FM 89.5 and 105.1 FM on Thursdays at noon and is syndicated on more than 30 radio stations throughout the U.S. His website is www.moneymanagementradio.com.