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You have got to wonder if the Obama administration is out to get Tesla (NASDAQ:TSLA) founder Elon Musk. Following remarks by Fed Chairwoman Janet Yellen, Tesla’s share price plunged to 219.58 from it’s previous close of 226.45 on 14 July. It may be difficult to prove that Yellen’s ineptness caused the significant reduction in the company’s market cap, but there is enough prima facia evidence beginning to accumulate to suggest that neither she nor the Obama administration are particularly interested in seeing Tesla Motors succeed.
What Yellen Said
Bear with me for a minute until I you read the rest of the story. I am not saying that Janet Yellen has some kind of focused agenda to hinder Tesla Motors. However, I am suggesting that the Obama administration, in its headship and in its entirety is not particularly enamored with the success of big business so much as it is in promoting entitlements, illegal immigration, government spending and redistributing wealth through government welfare systems. Oddly, that sounds more like communism than free enterprise. It is the policies of the Obama administration that worry me, because they are decidedly not in the interest of economic growth through free enterprise.
As Yellen was delivering her testimony yesterday before the Senate Committe on Banking, Housing and Urban Affairs, she said, “The Committee recognizes that low interest rates may provide incentives for some investors to “reach for yield,” and those actions could increase vulnerabilities in the financial system to adverse events. While prices of real estate, equities, and corporate bonds have risen appreciably and valuation metrics have increased, they remain generally in line with historical norms. In some sectors, such as lower-rated corporate debt, valuations appear stretched.”
She put an exclamation on her statement by adding that valuations for “smaller firms in the social media and biotechnology industries appear to be substantially stretched.” That would include stocks on the NASDAQ, the Russell 2000 and Tesla, all of which began to fall almost immediately.
What the White House Did
In May 2013 Tesla repaid a Department of Energy loan of $451.8 million nine years early, making it the only American automotive manufacturer to fully repay their government loans.
Following the repayment, advocacy group We The People gathered 138,000 signatures within one month on a petition to the White House, asking for the Obama administration to open the doors for Tesla to be able to open showrooms in all 50 states. “States should not be allowed to prevent Tesla Motors from selling cars directly to customers. The state legislators are trying to unfairly protect automobile dealers in their states from competition. Tesla is providing competition, which is good for consumers.”
After a year of waiting for a response, the White House refused. And Tesla responded: “Rather than seize an opportunity to promote innovation and support the first successful American car company to be started in more than a century, the White House issued a response that was even more timid than its rejection of a petition to begin construction of a Death Star. Instead of showing the sort of leadership exhibited by senior officials at the Federal Trade Commission who declared their support for consumer freedom of choice, the White House merely passed the buck to Congress and trumpeted its advances in promoting vehicle efficiency. Given the economic and environmental principles at stake, we would have hoped for stronger leadership and more action.”
I find it ironic that the White House claims to espouse a stronger economy and eco-friendly efforts, yet it will do nothing to support the most eco-friendly auto manufacturer in the world. Instead, the White House hosts publicity events and photo ops like maker faires to demonstrate “its commitment” to entrepreneurial endeavers, most of which will have little impact on the U.S. economy.
What Tesla Is Doing
This is the best part of the story.
- Tesla has appealed to state legislatures and is, one by one, being granted approval to open showrooms in their states. Pennsylvania has already granted that approval. (The National Automobile Dealers Association (NADA) and its lobbying group are opposed to Tesla showrooms, because other manufacturers distribute through dealerships, whilst Tesla sells direct to the consumer).
- Elon Musk unveiled Tesla’s plan to introduce what is currently known as Model 3 with sales expected to start sometime in 2016. The Model 3 with be smaller that the Model S and will be able to travel more than 200 miles on a single charge.
- Tesla is continuing to develop its Supercharger infrastructureat a rapid pace that will encourage the sales of its vehicles. As of 24 April 2014 Tesla had opened its 100th Supercharger station. As of today it has opened 143. By the end of 2014 it plans to have 300. In the same spirit of generosity that has exemplified Tesla, the company has openly offered to share the stations with other electric vehicle manufacturers.
Image source: Tesla Motor
Lest I forget, Tesla’s share price peaked above 224.00 early this morning and is now at 220.50. I continue to favor Tesla. It is a company led by a genius with integrity. The Obama administration, not so much.
