Tesla Slams Breaks on Driverless Cars

The numerous automakers competing to get self-driving cars on the road want to achieve the same thing: Acquire the best possible database of autonomous behavior to ensure their cars are safer than the competition’s. That’s one reason why the industry is wary of a push by U.S. regulators to get them to share more data: The proposal essentially asks them to surrender their competitive advantage.

By encouraging drivers to give up more control to their vehicle, Tesla’s Autopilot mode may have given it an edge in data-collection over the more passive lane-assist and sensing systems employed by the likes of Volvo, BMW, GM and Toyota. But the costs of that high-stakes strategy have been outweighing the benefits: Aside from the rising toll of accidents, Mobileye blamed Musk’s over-enthusiasm about the technology for ending their relationship, and Germany last week asked Tesla to drop the term Autopilot in case it was leading drivers to reduce their attention.

Giving up on autonomous mode in new cars will reduce Tesla’s ability to overcome its numerical disadvantage in data collection against the major volume automakers. But it will ensure the entire industry is able to develop more prudently, and give regulators faith that engineers aren’t putting inter-company competition ahead of road safety. That can only be a good thing.

The Only Thing on Autopilot at Tesla Is the Hype Machine

Just over a year ago, Tesla sent out a software update to its cars that made its “Autopilot” features available to customers, in what the company called a “public beta test.” In the intervening 12 months, at least one customer died while the Tesla was in autopilot mode. Cars have crashed, regulators have cracked down, and the headlines proclaiming that “Self-Driving Cars Are Here” were replaced with Tesla’s assurances that autopilot was nothing but a particularly advanced driver-assist system.

Given all this, one might assume that a chastened Tesla would take things more cautiously with its next iteration of autonomous technology. But in a launch event this week, Tesla introduced its Autopilot 2.0 hardware with the promise that all the cars it builds from now on will have hardware capable of “the highest levels of autonomy.”

Tesla’s proof that its new hardware is capable of driving in the “complex urban environment” was a brief, edited video of the system navigating the area around its headquarters near Stanford University in California. Though exciting for enthusiasts who can’t wait to own a self-driving car, the video is hardly proof that Tesla’s system is ready to handle all the complexities that are holding back other companies that have been working on autonomous technology for longer than Tesla. As impressive as Tesla’s system is — and make no mistake, it is deeply impressive — navigating the Stanford campus is a hurdle that even graduate school projects are able to clear.

Tesla’s new sensor suite upgrades what was a single forward-facing camera to eight cameras giving a 360-degree view around the car. It also updates the 12 ultrasonic sensors, while keeping a single forward-facing radar. Yet independent experts and representatives from competitor firms tell me this system is still insufficient for full level 5 autonomy- the National Highway Traffic Safety Administration’s highest rating — which requires more (and better) radar, multiple cameras with different apertures at each position and 360-degree laser-sensing capabilities.

Elon Musk’s Subsidy Aggregation

Elon Musk didn’t become a billionaire without brass, and this week he floated one of his most outrageous bets: an offer by his taxpayer-subsidized Tesla Motors to buy his taxpayer-subsidized SolarCity. Tesla shareholders and Wall Street analysts are howling, but didn’t they always know they were buying a business model that depended on the kindness of politicians?

The electric-car maker offered to acquire the solar panel company at a more than 20% premium over SolarCity’s previous share price in an all-stock transaction. “Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently,” the company said in a blog post, “but they still need access to the most sustainable energy source that’s available: the sun.”

The ostensible plan is to set up a one-stop shop so folks buying $85,000 Teslas don’t have to walk across the street to buy solar panels, among other “synergies.” Mr. Musk predicted, with his typically modest ambition, that the merger will lead to a Tesla valuation of $1 trillion, or about 34 times what it was Wednesday.

He may need one of his SpaceX rockets to get there. Tesla shares fell 10% Wednesday, or more than the $2.8 billion value of SolarCity, as investors asked why one money-losing company would be better off buying another money-losing company. SolarCity was once a darling of the green energy set, but its shares have fallen more than 50% in the past year as its political advantage ebbs.

CNBC Tears Down Elon Musk’s Snarky Response To A Coal CEO

CNBC corrected Tesla CEO Elon Musk Monday after he falsely claimed in a tweet that the coal industry receives more government handouts than renewable energy companies.

Musk, who owns more than 20 percent of Tesla, tweeted out a response to comments made by Murray Energy CEO Robert E. Murray on “Squawk Box” suggesting that Tesla “has gotten $2 billion from the taxpayer,” and “has not made a penny yet in cash flow.”

The government could shutter every single coal plant in the country, Murray added, and not see any discernible reduction in the Earth’s temperature.

Musk apparently didn’t take kindly to the inference that one of his companies is failing despite being recipients of heavy government subsidies, so he took to Twitter, and wrote: the “real fraud going on is denial of climate science.” He attached the video of Murray to the tweet.

Tesla receives far less in subsidies than the coal industry, Musk added, “How about we both go to zero?”

The High Cost of Rooftop Solar Subsidies

Section VII: Conclusion

Current solar subsidies and net metering schemes through U.S. states continue to draw capital away from its most efficient use, often at the benefit of U.S. solar panel producers and installation companies, such as SolarCity, but at the expense of electricity consumers.

The costs associated with facilitating these distortions are numerous. Given that solar customers are often paid the retail rate for excess electricity produced, and do not share the burden of maintenance costs, electrical grids are finding they cannot keep up with the current dichotomy they are facing of rising costs and a decreasing customer base. Thus, many studies conducted by states have found evidence of cross-subsidization between non-solar customers, who are often less-affluent, and solar customers, who are often more-affluent.

Proponents of government assistance of solar energy have attempted to highlight job growth as a means to justify the immense support needed by the solar industry in order to stay afloat. These job growth estimates not only employ skewed survey data, but also fail to take into account many of the dynamic effects that result from the government’s intervention, such as the consequences of draining tax revenues and foregone investments, increased cost of energy utilizing a greater share of consumers’ budgets, jobs foregone by investing in solar energy production, and jobs created in the base case scenario if solar energy were not subsidized in its current form.

States should seek to restructure their net metering schemes and subsidies in order to promote the most efficient use of taxpayer dollars and normalize investments based on the fundamentals of different electricity generating methods. While utility-scale solar has proven more efficient than residential solar installations, both continue to lag behind traditional electricity generation methods that are able to generate greater output per dollar.

Any future technological development of solar energy alternatives relies heavily on whether the government will be able to take a step back and allow the market to distribute capital efficiently, thereby allowing the most competitive electricity options to survive and facilitate effective progress of solar power and other electricity options.

Major Updates For This Month

Tom Pyle from the Institute for Energy Research (IER) wrote a great blog on The Hill about the high cost of private solar subsidies. Tom’s conclusion: “…our public utility policies don’t reflect the costs that net metering imposes. It’s time to reform net metering policies so that the general public no longer subsidizes those wealthy […]

Overview

Elon Musk has controlling stakes in 3 companies: Tesla, SolarCity, and SpaceX. Tesla and SolarCity are publicly traded. SpaceX is not publicly traded. This document’s focus will be soley on the financial interdependencies of the companies. There are also incestuous business practices, and nepotism within the leadership of each company Musk controls.

We hope to illustrate simply and clearly the immense risk the US government has taken with your money by giving it to a man who is essentially telling them what they want to hear while picking their pockets doing it.

Background

Tesla borrowed Venture Capital (VC) money from Elon Musk at VC rates. It borrowed VC money from taxpayers at non-VC rates

Tesla needed $500MM to get started in 2008. The US Government lent $465MM to Tesla at 3% interest under its push for Green Energy. Elon Musk lent the company $38MM at10% interest plus stock options. Here are the profits on those loans:

Elon Musk’s $38MM generates profit of $1.4BB, or 3,600% ROR- a VC payout
Taxpayers’ $465MM- generates profits of $12MM or 2.6%ROR- not a VC Payout

Taxpayers took VC risk without VC returns. The table is set for Elon to arbitrage the Government’s largesse much more. All in, the US Government committed about $4.9BB to finance Tesla’s operations

Musk Gets More Government Money

Using Government loans, Elon Musk creates 2 more companies; SolarCity and SpaceX. He now controls three government sponsored clean energy companies financed by taxpayer money.

The Companies

Tesla- makes electrical cars, develops technology for same. Loses money hoping for future profits

Loans money to SolarCity via its own stock
Borrowed $465MM from Gov’t at 3% and $38MM from Elon Musk at 10% plus stock options
Does not make money

SolarCity- makes and leases solar panels to homeowners. Loses money hoping for a back-end profit

Borrows money from Tesla
Borrows Money from SpaceX
Does not make money

SpaceX- will provide future service related to satellite launches. It makes money via prepaying customers

Loans money to SolarCity at approx. 10%
Borrows Money from Government at approx. 4%
Makes money

Elon Musk now has 2 companies that do not make money. He has 1 that makes money from prepayments for services yet to be given. All are financed by the US taxpayer at ridiculously below market rates. The table is now set for financing using inflated currency (sound familiar?) in the form of Tesla stock to get real cash in Mr. Musk’s pockets.

The SolarCity Problem

Despite gov’t subsidies SolarCity still needs money to operate. SpaceX, while not profitable, has cash on hand form prepayments and Gov’t subsidies. Tesla, also not profitable, has no cash, but has highly (over)valued stock it can use as currency or loans for cash. Elon Musk owns major stakes in all 3 companies.

SolarCity borrows $165MM from SpaceX at market rates of about 4.4%
SpaceX uses govt loans (2.0%?) to lend $165MM SolarCity
SolarCity borrows another $90MM from SpaceX to avoid defaulting on first SpaceX loan

Yet SolarCity is still in trouble. It needs cash. Government subsidies are on hold. Its stock price is sinking and it is in danger of defaulting on existing loans. Enter Tesla and Elon Musk

Tesla and Musk Bail Out SolarCity

Elon Musk and Tesla loan stock to SolarCity. SolarCity margins that stock for cash so they can make their loan payments to SpaceX.

Elon Musk used money loaned to him at 2.6% to generate 3,600% from Tesla stock sales
SolarCity was failing. If It failed, it likely would take SpaceX with it.
Elon Musk and Tesla used his govt sponsored inflated currency (Tesla stock) to prop up a failing SolarCity.

Not Enough

But that was not enough money. Tesla then makes a bid outright to buy all of SolarCity at above market valuations using Tesla stock. This essentially ensures a payout to himself and his partners at SolarCity while eliminating the SpaceX debt. Now it all depends on the price of Tesla stock. And Tesla has been punished by the market since the announcement.

Finally there is the loaned stock by Elon Musk to SolarCity. If Tesla drops enough for amargin call, it is all over in our opinion. what we have not covered includes the valuation offerred to buy SolarCity. Public shareholders of Tesla should be incensed atthe price being paid for SolarCity. Meanwhile, much of SolarCity’s stock is still in the hands of Musk and family members.

If Tesla stock drops enough, it could take out potentially all 3 companies. Essentialy Musk is at the center of an American Keiretsu.

Conclusion

The interdependent relationships between the 3 government subsidized companies Elon Musk owns or has a controlling stake in are an abuse ofgovernment largesse towards Green Energy. Taxpayer money is being used at market risk without market returns to prop up 3 unprofitable companies. While we do not debate the technology Tesla has developed, we question the leverage with which these companies are able to operate under. If something were to go wrong, we feel an eventual Solyndra Greenmail situation would occur. Tesla would be TBTF to the Government and have to pay. We feel Elon Musk knows this and is will play that card if need be.

Stop Elon From Failing Again

THE ONE STOP DATABASE ON STOPPING ELON MUSK

Elon Musk