Elon Musk is old enough to remember John DeLorean — and the car he (briefly) made. He apparently does not remember the lessons DeLorean learned.
The hard way.
First, about relying on government to float your business. DeLorean didn’t use regulations — and “mandates” — to rent-seek his cars onto the market, as Elon Musk’s Tesla operation has relied on. Most people have no idea that Tesla — despite its putative value on Wall Street — has made very little money selling cars and almost all of its money selling shares and “carbon credits” — an extortion racket set up by the government for the benefit of Tesla. The latter was able to “sell” these “credits” — for building “zero emissions” electric cars — to other car manufacturers that didn’t manufacture them but which were obliged to manufacture them, in order to comply with “zero emissions” vehicle manufacturing quotas. They had to either build a number of “zero emissions” electric vehicles themselves — or buy “credits” from Elon for building them.
Tesla’s much-touted value on Wall Street is almost entirely a function of its reliance upon government mandates, which have morphed into laws (or rather, bans) at the state level that decree only “zero emissions” vehicles will be legal to sell within not too many years from now.
It’s nice — well, it’s profitable — when you can use the government to create demand for your product. The insurance Mafia bases its business on the same model.
But it’s not necessarily good business, as DeLorean — the man — discovered. His business depended heavily upon government funding, the ’70s-’80s era form of grift, to the tune of $21 million, which the government of the U.K. had promised to deliver — and then didn’t. This created a cash pinch for DeLorean, who based his business plan on having that cash on hand to keep his business afloat. DeLorean — the company — had also agreed to pay extortion to the British government — to the tune of $400 per car, which was a lot of money back in the early ’80s, equivalent to about $1,500 today — as the price of being allowed to make cars in the U.K.
This made the already expensive DeLorean even more expensive, which made it both harder to sell and harder to make money selling. The base price was $25,000 in 1981 — rising (hugely) to just shy of $30,000 by 1982, a sum equivalent in today’s debauched “Federal” Reserve Notes to more than $80,000.
Interestingly, this just happens to be the anticipated/ballpark price of the Cybertruck — which isn’t even available yet and which Elon Musk says might be sometime in 2024.
Even more interestingly, the speculated price of the Cybertruck will be just under the $80,000 threshold below which the “buyer” is eligible for government grift, in the form of a $7,500 tax credit. Back in the early ’80s, this probably would not have flown since, back then, umbrage would have arisen over the suggestion that people who can afford to spend $80,000 on a vehicle deserve to be paid by the government to buy it — using funds extorted from people who cannot afford to buy it.
But the corollary is most interesting of all.
One of the main reasons for the failure of DeLorean — the car — was that it was too expensive a car. It is very difficult to make money selling a handful of such cars to the relatively few people in a position to buy them, especially when — as in DeLorean the man’s case — you cannot use the government to pay people to buy them.
But there is nonetheless a perverse — an artificial — incentive to make them anyhow.
In DeLorean’s case, it was the ephemeral backing of government money that probably encouraged DeLorean to think less about what his car was going to end up costing and how that might affect his ability to make any money selling it.
In Tesla’s case, it amounts to the same — in that Elon Musk continues to rely on mandates and subsidies to make money selling his cars, as well as the new Cybertruck. This allows him to indulge a cost-no-object fantasy, because he assumes someone else will pay it.
Interestingly, one of these costs is the Cybertruck’s stainless steel body. DeLoreans featured the same. It looks “cool” — but it’s very expensive. Especially to work — as in, stamp into shapes other than planes. That is why the DeLorean was so angular. And it is why the Cybertruck is even more so.
And it is less flexible, which means that it does not crumple as well. This latter is a big factor in terms of designing a car body that doesn’t impart impact forces to the people within.
This is why — until now — no other car manufacturer has used stainless steel to make car bodies. It makes the cars more costly and so less affordable — and thereby less saleable. It also makes them less repairable — as stainless steel is harder to repair when damaged, which increases the cost of repairing a car with stainless steel panels. Also the cost of insuring one, too.
DeLorean pursued his dream of making a sleek, stainless-steel-bodied sports car because he thought he could rely on government funding to make it happen. Elon Musk is relying on the same, with the money kicking back to buyers via the government rather than directly from the government, to Elon.
But it amounts to the same business plan and it may end up the same. Well, maybe not for Elon — the man — who has enough of his own money to not need a suitcase full of cocaine to keep his Cybertruck rolling.