By Jacob Hayutin
Senior Student of Philosophy, Politics & Law/ History
Tesla, the California-based company that manufactures electric cars, has out performed expectations and speculators remain bullish. A luxury electric car has come to market with premium ascetics and a practical range of over 200 miles. TSLA had an initial public offering (IPO) under $20 per share three years ago and is now trading above $180.
CEO and founder Elon Musk’s success can be explained by his devotion to his company, as evidenced by his skin-in-the-game from the very beginning. The story of Tesla is really one of humble origins, with financial backing by tiny banks like Goldman Sachs. Musk made the brave and courageous decision to court legislators for huge subsidies at a critical juncture in early development, rather than actually see if customers wanted to buy Tesla products.
Bold risk taking and a willingness to fail in the process of success is his ethos. In 2004, before the IPO, Musk acquired $278 million dollars in private financing of which a grand total of $74 came from his own pocket, showing Musk’s great personal sacrifice in starting Tesla. As such, he is reluctant to acknowledge the government’s crucial role in funding his enterprise that began in 2010 in the early stages of development of the Model S. Like in sport, arrogance is a favorable characteristic of hot-shots in D.C. and Wall Street.
Before the release of the Model S and its IPO, Musk received $465 million loan from the Department of Energy, which in an interview with Popular Mechanics, he described merely “as helpful as an accelerant.” Additionally, TSLA is propped up by more obscure subsides, including those to Japanese based Panasonic that develops the lithium-ion batteries that power each car, the $7,500 federal tax break to owners of electric cars and $51 millions in Zero Emission Vehicle (ZEV) credits. Suffice it to say, the $70,000 sticker price would be upward of $100,000 if not for both state and federal subsidies. There is no wonder the stock took off.
Going green is a good thing and Tesla’s success certainly proves an admirable social nudge — for the elite. Although, investing in Tesla may be marginally eco-friendly is it people friendly?
Considering that by 2010 major market indices including the Dow Jones and S&P 500 indicated that the U.S. was still only about half way recovered to pre recession levels, unemployment was still above 9% and some 42 million American were on food stamps I’m not so sure it is justifiable for the Department of Energy to spend $465 million subsidizing a product only accessible to the 1%.
The marginal effect Tesla’s success may (or may not) have in preventing a global ecological catastrophe isn’t particularly compelling compared to the suffering of millions of American as a result of the Great Recession.
Toyota Camry defines a normal car for the middle class. It is a mid-sized sedan that starts at $22,235. An inferior transportation good could be the bus or a bicycle for the most socioeconomically marginalized. On the other hand what is considered a luxury car– something German — starts at around $30,000.
I venture to say the Model S is more than a luxury good, it is a decadent good. In the climate of the worst economic collapse since the Great Depression, where states around the world and cities within our boarders (namely Detroit) have defaulted on their debt, and millions of retirees’ will no longer collect their promised pensions, the state’ ssupport of Tesla reeks of pungent Nietzschean decadence.
Tesla’s success only benefits the super wealthy. The average Model S owner makes over $150,000/yr. Its purchase likely includes an heir of narcissism that accompanied the early Prius owners in South Park’s “Smug Alert” episode. So while celebrities, politicians and other bon vivants bask in the fresh leather musk of their new Model S, the majority of Americans are still struggling to pay their bills on time.