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Surprised? Taxpayer-Subsidized Automaker to Pay Back Loans 5 Years Ahead of Schedule

Mar. 12, 2013 1:42pm Becket Adams

Tesla Announces Plan to Repay Govt Loans Five Years Ahead of Schedule

This June 22, 2012 file photo shows a Tesla Model S outside the Tesla factory in Fremont, Calif. (AP Photo/Paul Sakuma, File).

Tesla Motors, which was awarded a $465 million loan from the U.S. government in 2009, announced last week its plan to pay back all its loans five years ahead of schedule, according to Bloomberg News.

“The carmaker said in its annual report yesterday that the department approved amended terms of the loan agreements that enable it to complete repayment by December 2017,” the report notes.

“Starting in 2015, the Palo Alto, California-based company will make accelerated payments from excess free cash flow,” the report adds.

“Any remaining balance that’s there at the end of 2017 we’ll pay off as a balloon payment,” Tesla Chief Financial Officer Deepak Ahuja told Bloomberg in phone interview.

But is there more to this story? How does Tesla plan on repaying the feds so early? Simple: The company plans on becoming profitable in Q1 2013.

Yeah, in case you were unaware, this is the first time since its founding in 2003 by billionaire Elon Musk that the maker of battery-powered cars expects to turn a profit.

First time.

Tesla Motors workers assemble a Tesla Roadster at their showroom in Menlo Park, Calif. in this 2008 photo. The electric car manufacturer said that it hopes to raise $244 million when it goes public. (Paul Sakuma/AP/File)

But let’s get back to that government repayment plan.

“The original terms required repayment of the loans by 2022, 10 years after the funds were drawn down. Tesla said on Sept. 25 that it was working with the Energy Department on a modified repayment schedule. Amended terms of the loan agreements were registered on Dec. 20 and March 1,” Bloomberg reports.

The report offers some more background on the deal:

The funds, provided by the Advanced Technology Vehicle Manufacturing program to Tesla as well as Ford Motor Co. (F), Nissan Motor Co. and Fisker Automotive Inc., were approved in 2009.

Warrants Tesla issued to the Energy Department as part of the loan agreements vest in 2018 if the loans aren’t paid off. They would enable the government to buy more than 3 million Tesla shares at a discount.

“The value of those warrants is very substantial,” Ahuja said. “The terms of the original loan had a very good incentive for us to pay off the loan early.”
The loan amendment “formalizes that and avoids the vesting of that warrant,” he said.

Under the agreement, funds for the early payments will be generated from cash above a $200 million threshold “over our reservations balance,” Ahuja said.

But here’s something else worth noting:

Tesla also said in the filing yesterday that sales of so- called Zero-Emission Vehicle credits from its electric cars jumped to $40.5 million last year from $2.7 million in 2011.

California’s environmental rules require large automakers to sell a certain number of electric and plug-in vehicles in the state annually. Those that fall short can buy such credits from companies such as Tesla that generate more than they need.

Wait, wait — Tesla has made roughly $37 million since 2011 from selling credits? Who have they been selling these credits to?

“Ahuja declined to identify which companies bought Tesla credits, and the carmaker didn’t disclose details in its annual report,” Bloomberg notes.

Huh.

“Tesla reported sales last year of 2,650 Model S sedans, which sell for about $60,000 to more than $100,000, before a $7,500 U.S. tax credit,” the report adds.

–

Follow Becket Adams (@BecketAdams) on Twitter

Featured image courtesy Tesla website. This post has been updated.

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Comments (48)

TROONORTH
Posted on March 12, 2013 at 7:58pm
Elon Musk made his billions from founding PayPal and SpaceX. Tesla, another of his companies, will never make money as long as there are government hand-outs available. Corporate welfare, like regular welfare, enslaves the recipient and removes any incentive to actually work or produce anything.

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- dmerwin
  Posted on March 12, 2013 at 10:47pm
  Well if they are doing so well I should not have to pay rich folks a tax credit to buy the car.
  
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- realindependent
  Posted on March 13, 2013 at 4:30am
  Se how government investment works. Yes there are failures like Solyndra, but there are some that succeed. That’s how we develop and grow our economy. by private and government backing of innovative companies. We can get off foreign oil. we can stop destroying our land by drilling and fracking. We just need to invest in battery technology. If we can go to the moon, we can make oil obsolete. Why would we not want to do this? Cause the richest companies in the world are greedy. They have killed the electric car for decades. imagine if we had been developing this technology for that long. We might have had our flying cars by now. Why stay stuck in the 19 century. I want my flying car before i die.
  
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- NoSleeper
  Posted on March 13, 2013 at 5:14am
  LOL – all smoke and mirrors. Zero emissions vehicle credits? Selling nothing to someone who makes something to appease the government, then use the money to pay off taxpayer loans?
  
  Wow. Talk about a scam to line the pockets of those favored by the administration. Enough with the crony capitalism – let the market decide what will be built and sold. Next time you buy a car, try to guess how much of the price is for this frivolous crap…
  
  Report this comment
- Secret Squirrel
  Posted on March 13, 2013 at 8:57pm
  A green company paying a loan back?
  I’ll believe it when I see it.
  
  How many Tesla’s have you seen on the road?
  
  Report this comment
hersey10
Posted on March 12, 2013 at 7:18pm
Sounds an awful lot like Cap And Trade.

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jessieH
Posted on March 12, 2013 at 7:08pm
And the Democrats are already spending it.

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Godfather.1
Posted on March 12, 2013 at 6:47pm
Becket Adams, where did you learn to write? This article is incredibly poorly written. It appears you do not understand the basics of the English language.

However, it is pretty surprising that TheBlaze reported on this story at all since it actually shows that loans to green energy innovators can be successful.

Does Becket Adams know anything about business? It often takes companies many years before turning a profit and yet you are surprised that it took Tesla ten years to turn a profit. Companies that work in the cutting edge of technology often take a while to make a profit because many of the early years consist of R&D without any output.

Then again, no one really expects the “journalists” at TheBlaze to have any real understanding of the issues. They are just expected to shell out his holiness GLENN BECK’S talking points and pen misleading headlines in order to garner clicks and advertising revenue.

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- SandTrout
  Posted on March 12, 2013 at 7:08pm
  Actually, it doesn’t (yet) show that an electric car company can be successful except by robbing other companies via the government forcing other manufacturers to buy ‘credits’ from electric car manufactures in order to prevent the government to shut it down.
  
  Anyone else doing this is called ‘extortion’, and is exactly what the Global Warming Alarmists are trying to enact, on an interstate and international level via ‘Cap and Trade’ legislation, which are still just rackets, when you look at the actual function.
  
  Report this comment
- ALL4FREEDOM
  Posted on March 12, 2013 at 9:00pm
  The point is that Tesla has not made a ‘profit’ by selling it’s PRODUCT, but rather by selling paperwork.
  
  Report this comment
- Jeffersonian in CA
  Posted on March 12, 2013 at 10:16pm
  Tesla is repaying their loan with money sent to them from other car companies. This company has been legislated into a profit by requiring car companies that didn’t get millions of dollars from the Government to send them money for each electric car that they didn’t make ?!?! G-fatherONE, take off your Commie-tinted glasses and see what is really happening here.
  
  Nice trick, capping on the author…. if your mind was open just a little, you’d see the protectionism and guaranteed non-product revenue channeled to Tesla by government mandate.
  
  Report this comment
OKC08GT500
Posted on March 12, 2013 at 6:32pm
Now if only Government Motors would pay the taxpayers the $24 billion that they owe us. I would agree to take my share in the form of a 2014 ZR-1 Corvette.

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- EricStoner
  Posted on March 12, 2013 at 8:34pm
  The administration is selling their stake now. It is a model socialist investment program, buy at $70, sell at $30. I guess better than Solyndra and their other “investments” of our money invested by these genius’s. Most all of these companies are on government life support and if the plug were pulled they would go away. Guess its only seniors they want to pull the plug on?
  
  Report this comment
Outlaw_Josey_Wales
Posted on March 12, 2013 at 6:00pm
My prediction, Tesla Motors will file for bankruptcy before 2017!

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- RLTW
  Posted on March 12, 2013 at 6:30pm
  I would not bet against you, I’d just like to know who they think has money to buy a battery operated Miata?
  
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- pdw
  Posted on March 13, 2013 at 8:52am
  What turned me off from electric cars was while listening to a owner who had his batteries fail just before the Warranty ran out. The cost for those batteries would have been $9,000.
  
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DZ-015
Posted on March 12, 2013 at 5:39pm
It certainly pays to have friends in Sacramento and D.C.!

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- old construction worker
  Posted on March 12, 2013 at 6:25pm
  Welcome to California’s CO2 Cap and Trade. Tesla is nothing more than a goverment “rent seeker”.
  
  Report this comment
ElChupaCabraDeUSA
Posted on March 12, 2013 at 3:39pm
Exactly – This is a marketing ploy because they have been paying attention to the backlash GM received for operating as a welfare queen. Tesla is every bit a welfare queen and it’s investors (AKA Obama Bundlers) will continue to feed at the trough until they recoup all their money and pay for a nice little parachute just before the plane goes down.

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term limits for congress
Posted on March 12, 2013 at 3:35pm
So, their primary product is ‘carbon credits’ and their by-product is a costly golf cart that doesn’t run in the winter. I think we once called this extortion.

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woodyee
Posted on March 12, 2013 at 2:40pm
This is Arnold Schwarzenegger’s Legacy.

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Ghandi was a Republican
Posted on March 12, 2013 at 2:26pm
Talk is cheap. It hasn’t happened yet, it likely will never happen. If the car was feasible at the price they charge they would be able to charge a profitable price in the first place. Lamborgini does it, ferrari does it, Lexus does it. Tesla went public, so why do they need taxpayer funding from Taxpayers who can’t afford it?

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The_Cabrito_Goat
Posted on March 12, 2013 at 2:24pm
UPDATE: Tax-paid loan to be repaid with taxes

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YesLiberalsAreThatDumb
Posted on March 12, 2013 at 2:22pm
“Tesla Motors, which was awarded a $465 million grant from the U.S. government in 2009, announced last week its plan to pay back all its loans five years ahead of schedule…”

The GRANT is NOT A LOAN….
Exactly why are we subsidizing a foreign car company that sells cars ONLY THE WEALTHY CAN AFFORD?
How can they sell these “credits” when their sales in the U.S. are basically ZERO?
When is this INSANITY going to stop?

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woodyee
Posted on March 12, 2013 at 2:19pm
READ THE STORY – Tesla is making money SOLEY on the sale of RECENTLY voter-approved MANDATED green-house gas taxes, called carbon-credits. They’re business isn’t making any money! They’re selling nonsense to other companies.

In other words, lets say BS is a product, and a by-product of BS is carbon-dioxide.- Encinom and BaldEagle1776 are in the BS business and aren’t making any money, but they’re only allowed to produce a ton of CO2 each, per year. Encinom only produces 3/4 ton, but BaldEagle1776 produces 1.25 tons and faces a huge fine. BaldEagle1776 offers to buy Encinom’s excess .25ton ‘credit’ at a profit. Although he made nothing in BS, Encinom finally shows color in his bottom line with the money he made from BaldEagle1776, and BaldEagle1776 avoided a huge fine, and Encinom tells his shareholders that he made money for BS.

Tesla is making NO money, but they’re making a profit selling air credits.

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termyt
Posted on March 12, 2013 at 2:06pm
I was interested until I saw how they became profitable. They are doing nothing. Can I make a car company in my garage that also fails to produce anything worth selling and then sell my emission credits to Ford and GM?

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- Cavallo
  Posted on March 12, 2013 at 2:20pm
  It’s the same BS system that would operate with the Carbon Credits for the Global Warming Cult scam. Produce nothing, sell nothing, make billions off a convoluted government scheme by juggling some books and selling fantasy government favors.
  
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cloudsofwar
Posted on March 12, 2013 at 2:05pm
Tesla?????? never heard of them.

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- RJJinGadsden
  Posted on March 12, 2013 at 2:22pm
  CLOUDSOFWAR, Tesla is that new self propelled fire starter for those major camp outs. Or, is it Fisker, or maybe both?
  
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txswalker
Posted on March 12, 2013 at 2:03pm
Dont look at the man behind the curtain, pay no attention to that man behind the curtain….Holy…. well we all know what goes next

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progressiveslayer
Posted on March 12, 2013 at 2:03pm
There shouldn’t be any subsidizes for Tesla or any company for that matter,if a company can’t make it on it’s own it should fail. This regime has wasted billions on so called green energy companies,it’s all BS and none of them will make it financially. Several have failed and the rest will follow suit,we just need to exploit all our natural resources to bring the cost of energy down but that makes too much sense so this regime or any future progressive president with an R next to his or her name will waste billions on this BS and not allow full exploitation of our natural resources.

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denkat56
Posted on March 12, 2013 at 1:59pm
How come GMC, and Chrysler can’t pay their loans back. And then how is it we can’t use the pay offs of loans toward the sequester , so that people can tour the white house, and the police and fire dept. Can all be back at work. Maybe even keep a few dod , workers on the job. Or even put it toward our national debt.

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- G-WHIZ
  Posted on March 12, 2013 at 2:14pm
  NO Police and Fire departments are paid FEDERALLY!! They are all paid by local and town/city/state governments!! The Sequester has nothing to do with paying town and city and state Police and Firemen!!
  
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Gonzo
Posted on March 12, 2013 at 1:59pm
Get it while you can.

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cemerius
Posted on March 12, 2013 at 1:59pm
Hmmmm send me those millions and I will grow weeds in my yard and call them “carbon credits” for you!!! People like this in the 1800′s would have been tarred and feathered and sent on their way out of town!!!!! Now they are given Nobel Peace Prizes and heralded on high!!!! These are the times that will try men’s souls..BE PREPARED!

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00gabooga
Posted on March 12, 2013 at 1:57pm
Wow, does Tesla also sell gold coins for World of Warcaft and ISK for Eve Online?

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pap pap
Posted on March 12, 2013 at 1:57pm
I’ll believe it when I see it.

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Bonnieblue2A
Posted on March 12, 2013 at 1:51pm
Somewhere behind all of this is another loan from the Obama DOE.

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- gyro
  Posted on March 12, 2013 at 2:06pm
  bingo
  
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4xeverything
Posted on March 12, 2013 at 1:47pm
Hmmm, am I surprised? I guess it all depends on what your definition of is is.

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