Tesla takes a hit

Tesla Motors, poster child of the clean car revolution that is always just around the corner, recently removed its CEO, announced a round of layoffs, and pushed the delivery date of its all-electric sedan back to 2011.

In one sense, this is sad news. A lot of people (myself included) are caught up in Tesla’s story, a kind of david-and-goliath tale of Silicon Valley ingenuity vs. Old Detroit intransigence (never mind that Tesla is backed by several billionaires with PhDs).

In a larger sense, the fate of any one company is a small thing. Society can reap the full benefit of Tesla’s ingenuity even if the company never turns a profit. If Tesla has demonstrated demand for stylish electric cars; or stirred competitors to launch their own products; or helped to accelerate the development of critical components, then they have had a positive impact.

Tesla may very well weather its present problems — the new CEO pledges to be cash-flow positive within nine months — but if it doesn’t, some other company will succeed in its place. GM launches the Volt near the end of 2010. Honda is serious about challenging Toyota’s dominance in the hybrid market. Toyota is serious about extending its dominance in the hybrid market, and will roll out an all-electric vehicle as soon as the technology allows. The recent Paris Motor Show revealed an industry obsessed with electrics.

Unfortunately, there is another big picture that matters: Tesla’s problems demonstrate the chilling effect of the financial crisis on clean tech. It would be an exaggeration to say that the credit crunch alone is responsible for the company’s situation. Tesla has repeatedly missed engineering deadlines, and its main product is a $109,000 two-seater. The company was always making a high-risk gamble. But, like a lot of clean energy ventures struggling to obtain financing, their margin of error has just become a lot smaller.

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  1. Eric - October 22, 2008

    This is why we need to take the subsidy money away from big oil and give it to innovators in renewable energy, and electric transportation.

  2. Eric Edward Carlson - October 22, 2008

    The idea of a new car company, not to mention one born in Silicon Valley promoting a sexy green product, is a highly appealing, but unfortunately a romantic and probably quixotic notion. While the economic crisis has no doubt contributed to Tesla’s woes I imagine they’d have have faced tough going nonetheless. The auto business is a very mature, super – capital intensive industry with long development cycles. Tesla may be able to address the capital issues, given their backers. However I’m not sure it’s prepared to address the development issues. A car isn’t software or a PDA. Alas, this is beginning to sound like another Tucker, or DeLorean. Too bad, but I’ll keep my fingers crossed.

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