Tesla has had a tough time following the crash on May 7 which resulted in the death of a Florida driver Joshua Brown. But that has not stopped Musk in working toward his ambitious targets. Enough government handouts could be one reason a car company “never has to break even,” reports The Wall Street Journal.
Tesla has big ambitions
Musk makes a reasonable argument that its Autopilot feature is a net improver of safety. But this will not change the thinking of trial lawyers who are making a case that the U.S.-based electric car maker did not sufficiently explain the limitations of the system.
Musk is, however, guilty of statements that could be portrayed as encouraging too much confidence in what he called a “beta” system. Many analysts were wondering what Musk was up to in his frequent exaggerations. A recent report from The Wall Street Journal detailed 20 stories of Musk over the past five years touting production or financial aims the electric car maker failed to meet.
Vanguard’s move into PE may change the landscape forever
Private equity has been growing in popularity in recent years as more and more big-name funds and institutional investors dive in. Now even indexing giant Vanguard is out to take a piece of the PE pie. During a panel at the Morningstar Investment Conference this year, Fran Kinniry of Vanguard, John Rekenthaler of Morningstar and Read More
Musk set an incredible timetable in just the past few weeks for deploying his less expensive and affordable Model 3 sedan. He also talked about a “master plan” to build pickup trucks and tractor trailers. Also he argued why merging with SolarCity would be profitable for the EV firm.
Musk even casually asserted last year that the electric car maker would be worth more than Apple. This week, Musk fan and investor Ron Baron told the Journal that Musk wants to “save the world.”
Musk reminds us of DeLorean case
Economist Graham Brownlow of Queen’s University Belfast revisited the DeLorean case, and that brought another view to light. Brownlow sees beyond the usual faults of John DeLorean. He was the famous renegade General Motors executive who set out in 1975 to make a sports car, now mostly famous for its role in the Back to the Future movies.
“He borrows a concept from the failures of socialism, known as the soft budget constraint, to note the incentives for DeLorean to run his company as if more subsidies could always be extracted from British taxpayers, who were backing the start-up auto maker,” says the WSJ.
At that time, DeLorean said that London was “over a barrel” because large government sums were already invested in the firm. It might sound similar to Musk’s constant exaggerations of the technological and political prominence of his company.
Setting aside the concerns about Tesla’s missed targets, Musk attacked a government agency, the California Air Resources Board, in a conference call this month, saying that its members should “damn well be ashamed of themselves for not arranging for more lucrative zero-emissions credits” for the automaker.
According to Brownlow, “The more [an entrepreneur] expects that the existence and growth of the firm will depend solely on production costs and proceeds from sales, the more he will respect the budget constraint.”