Tesla Bailout Request Spurs Class-Warfare Backlash

By · December 14, 2008

Critics argue that Tesla's request to use taxpayer money to help a company making cars for wealthy patrons is elitist and wrong.

Elon Musk

Elon Musk, Tesla CEO, behind the wheel of the $109,000 Tesla Roadster. (Photo via flickr)

Tesla Motors CEO Elon Musk is drawing fire over his request for a $350 million loan from the federal government. Although the company receives widespread support for its leadership role in the burgeoning electric car industry, a growing number of observers believe that any funds given to Tesla, regardless of how the money would be used, are unwarranted. The Tesla Roadster sells for $109,000, but the company hopes to build a more affordable plug-in vehicle.

The backlash began with Randall Stross's opinion piece in the New York Times, in which he wrote that Tesla's "all-electric technology remains woefully immature and don’t-even-ask expensive." Stross characterizes the Tesla Roadster and the company as elitist. He writes that many of the first vehicles "have gone to [Silicon] Valley’s billionaires and centimillionaires who are Tesla investors as well as early customers."

Arnold Schwarzenneger is one of the first owners of a Tesla Roadster. He said, "It's so nice when you sit in this sexy car and you drive from zero to 60 in 3.9 seconds, which is faster than a turbo Porsche. And no engine sound or greenhouse gas emissions." Schwarzenneger chastised Detroit for not building electric cars. He said, "Arnold to Detroit: Get off your butt!"

Web Insiders Exchange Angry Arguments

At least one of those wealthy first customers, Jason Calacanis, the founder of Weblogs, Inc., came to Tesla's defense in his blog, accusing Stross of demonstrating a "kill the wealthy ethos." In the blog post (which was republished on Huffington Post), Calacanis wrote: "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."

CenterNetworks.com, an information resource about Web 2.0 and social media, later disclosed that Jason Calacanis's new company Mahalo received funding from Tesla Motors CEO Elon Musk, and that Mr. Calacanis's brother-in-law Ryan Scott is an investor in Tesla.

Another argument espoused by Tesla critics is that Tesla is unlike the Detroit Big Three, because it has an insufficient track record. The critics believe that $350 million is a lot of money to give a company that has delivered only approximately 100 vehicles. These critics, expressing opinions on the blogosphere, argue that Tesla needs to continue pursuing private investment capital, not taxpayer dollars. If it can’t survive by building itself up through private investment, the argument goes, it doesn’t deserve to survive.

Loren Feldman of 1938Media rants that Tesla "doesn't deserve a nickel from the US government."

Tesla's Elon Musk has said that without the federal loan, the company will not be able to proceed with its next generation of all-electric cars, starting with the plug-in Model S sedan. (Loan funds would be applied to development of the Model S, not the Tesla Roadster.) However Allen Stern, CenterNetworks editor, questions the affordability of the Model S—a vehicle with a target price of approximately $60,000. He writes, "I haven't seen anything from Tesla that speaks to the average American family." Stern argues that "instead of dropping hundreds of millions into Tesla," the country should invest in public transportation, efficient air travel, and university-level battery research programs. "Take the millions and billions of dollars and create better transit systems in cities across this country. There's so much that can be done with transit to create real environmental and human savings."

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