Written By the Sam's Clan Staff
Starting and maintaining a car company is about as easy as starting and maintaining a diet. There is a reason why there are around 1,900 U.S. based car manufacturers that have come and gone. That’s right, you read that correctly, 1,900 companies have bit the dust, mostly during the boom years of 1900-1920 when Ford came out the big winner in the market. We are not talking about two-bit companies started by a few guys in their garage either; a lot of these companies were extremely well funded and run by brilliant engineers and businessmen. The odds are definitely stacked against Elon Musk and the management team at Tesla, but then again, Elon Musk is not the kind of guy who believes in odds.
This is a guy who will tell you with a straight face that the U.S. will put a man on Mars within 10 years, even though it is scientifically known that most would die before even arriving there, much less making it home alive. This is a guy who was just awarded a $75 Million contract by NASA for his SpaceX Dragon spacecraft to carry astronauts, and soon humans into space. This is a guy who slept under his desk, usually without showering, for nights on end, while Paypal went from a struggling tech startup, to a billion dollar payment processor that is used by virtually everyone on the internet. The fact is, this is a guy who when he swings, he swings for the fences. What you see is what you get with Elon Musk, a visionary who believes he can transform the U.S. auto industry.
The capitalist amongst us would argue that Musk has already failed in his endeavor. His fledgling startup has been forced to hit more lines of credit than Lenny Dykstra. Last year they had an initial public offering where they raised $226 Million, and since they have launched they have raised an additional $813 Million in loans and equity financing, including an eye popping $465 Million loan from the U.S. Government. Yet, the company managed to lose over $150 Million in 2010. The U.S. Government has essentially guaranteed, with a wink and a smile, that Tesla will be perpetually stay in business as long as they don’t screw up too bad. The question is, will that be good for the car market? Should we be bankrolling startup electric car makers such as Telsa, or Fisker?
Tesla Founder Elon Musk sitting in a Tesla Roadster (Image: The Business Journals)
At Sams Clan we don’t see much of a choice, considering the U.S. tax payer has bailed out the big U.S. automakers many times over the years and still owns much of their stock. I think our readers would agree, if we can bailout failing companies that have been miss-managed for years, we should at least give some new companies a shot to not repeat the same mistakes. If Tesla can negotiate the tricky waters of unions and defined benefits packages, which have doomed the big American automakers for nearly 50 years, while making a product that is cost efficient, beautiful, and fun to drive, we believe they have a good chance at being a huge presence in the market.
The real question is, how much more money is it going to take for Tesla to not become like the 1,900 companies who have failed before it? Cars can take up to 5 years from the drawing board to initial manufacturing, not to mention the rigorous safety testing that needs to occur. There have been a whole slew of problems with production on the Tesla cars, not to mention a pricing hurdle that makes many of their models out of touch to most Americans. From what we read, this is going to soon change, and we hope it does, because the market could use some new blood to shake things up, and Mr. Musk is just the kind of guy to do it.