Short Circuits for Tesla

The latest clean-tech, venture-backed company to feel the bite of the economic downturn, electric roadster maker Tesla, today announced layoffs and cutbacks. The company is losing money and is at a “critical stage” — not too different from the economy as a whole.

Back in 2006, the Tesla electric sportscar company was the epitome of clean-tech geek chic. The first seven “founders series” cars were earmarked for a roster of all-star Silicon Valley investors like chairman and Paypal founder Elon Musk, eBay’s first employee Jeff Skoll, and Google founders Sergey Brin and Larry Page.


But times have changed. The $109,000 Tesla Roadster was repeatedly delayed . There were reports of transmission problems and some (like Bob Kanode of Valence, who I talked with on Tuesday and who makes a different kind of lithium battery) say the lithium ion batteries used in the car are potentially dangerous.

Then, of course, there’s the economic downturn and market craziness, which has put Silicon Valley VCs into a defensive crouch. Firms like Sequoia Capital have put their companies on notice that they must cut costs and get to profitability sooner rather than later.

Today Musk admitted on his blog that Tesla’s losing money (which includes a reported $55 million of his own dough that he’s poured into the company to date). He says he’ll step up from Chairman to CEO, cut jobs and rein in costs in an attempt to get to profitability within 6 to 9 months. 

It’s not just Tesla, but green technologies as a whole, that have reached a critical phase. The need to combat climate change and high energy prices has only increased. Venture firms like Sequoia and Kleiner Perkins have done a great job of identifying the challenges and opportunities inherent in the new green economy, but do they have the deep pockets and patience to bring these technologies up to scale?

Many are looking for help from another quarter–<gasp>–the government. Putting a price on carbon would instantly make a range of technologies cost-competitive, from wind farms to energy retrofits. And the right government investments and incentives could help private enterprise come up with solutions. Case in point? Part of Musk’s plan for getting to profitability is expected approval of a Department of Energy loan guarantee, providing low-cost capital for developing Tesla’s more family-friendly five passenger sedan.   




About the author

She’s the author of Generation Debt (Riverhead, 2006) and DIY U: Edupunks, Edupreneurs, and the Coming Transformation of Higher Education, (Chelsea Green, 2010). Her next book, The Test, about standardized testing, will be published by Public Affairs in 2015.