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Comment by ccc3 | Hacker News Reader

It will be interesting, a few years down the line, to compare what Tesla does with its $465m compared to what GM does with its billions. Obviously not an apples-to-apples comparison, but it might illustrate the cost of the inherent friction in massively bureaucratic companies.

Regarding Tesla's profitability, it's EBITDA profitability, and in the words of Warren Buffet:

"References to ebitda make us shudder-does management think the tooth fairy pays for capital expenditures?"

Certainly this is an important milestone for Tesla. It means that they're getting a handle on their supply chain, but this doesn't make them anything close to a stable company. They still have to get to a point where their cars aren't just profitable, but profitable enough to pay for the factories they're built in. Hopefully this latest influx of cash will be enough to get them there.

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GM will use it's billions to come out with the Volt with production in hundreds of thousands. A car for the public that has the best of both worlds, Electric for short range trips, with gas as backup for when you run out of charge.

Tesla will use it's millions to come out with the Model S, with production of 1-2000 units a year. A car for the more luxurious segment, that's electric only, that'll leave you stranded if you forget to recharge the battery.

Re GM: That's quite optimistic. Most of the money and effort with GM will go into making it a stable employer for as many as possible.

Re Tesla: Quite possibly true, but you shouldn't build infrastructure from scratch to build millions of cars. They should validate their business and market at 2000 units/yr and expand if it works.

Comparing the two, the GM money is to prevent downside, the Tesla is to capture upside. Both are valid reasons for investment and only hindsight will tell if either was a good bet.

GM will use government money to build a mass market car because that is what GM is in a position to do.

Tesla will use its millions to build a luxury car because that is what Tesla is in a position to do.

Tesla is not in a position to compete head-on with the Volt, because Tesla has almost none of the infrastructure that GM has. If Tesla tried to build a Volt competitor, it would fail. If, by some miracle, it succeeded in building a supply chain and manufacturing operation that could turn out hundreds of thousands of cars, it would quickly go out of business competing for a low-margin segment of the market against the largest automotive conglomerate in the world.

The point of Tesla isn't to provide you with a car. The point of Tesla is to develop the technology that other companies will use to provide you with cars later on down the road.

The Tesla Roadster and Model S are big red herrings.

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