Why Obama should treat the car industry like the internet

Posted: December 3, 2008 in society
Tags: , , ,


Bobby Johnson, Guardian Technology Blog, 01.12.2008


Like much of the economy, America’s car industry is in turmoil. Ford and General Motors are begging for a $25bn bailout from the US government, and the clouds are hanging heavy over Detroit. Some hope that innovative new companies will rise to fill the space left by these fallen giants – perhaps small companies like Tesla Motors, the electric car outfit run by PayPal alumnus Elon Musk.

Except struggling Tesla is now applying for $400m in low interest loansas part of the bailout – and a few voices are taking exception to that.

Randall Stross led the charge in the New York Times this weekend, by asking whether the public purse should be used to support a company that builds cars that only the rich can afford. Others, including CNET’s Jon Oltsik, followed suit by accusing Tesla’s investors of treating automotive industry in the same way as they treat hi-tech.

I wonder how Tesla’s course has been influenced by at least some of its investors being helplessly smitten by the world’s quietest dragster. Mr. Musk said: “I’m not doing this because I think the world has a shortage of sports cars.” But his customers must be loaded with green in order to go green.

Sounds good, doesn’t it? After all, why should the public fund a company that has only handed out a spattering of $100,000+ sports cars to the super-rich?

It shouldn’t: Stross is right on the fundamentals here. But he’s also missing the larger point. Right now electric vehicles are merely the playthings of billionaires and bleeding hearts, but it’s worth the long-term investment – and here’s why:

First things first – regardless of Tesla’s financial health, they’d be stupidnot to apply for help from the bailout package; there’s money on the table that will otherwise only go to propping up ailing car giants. And Tesla is already the beneficiary of some low-interest help from the government and tax breaks, so this is nothing new.

But beyond the financials, and the underlying issues of class, the real problem isn’t that the US government might give a helping hand to a fancypants companies that makes hi-tech sports cars for rich nobs. It’s that it should be investing in the infrastructure, not the people who want to use it.

New technologies are always adopted by those who can afford them. The more of them who buy stuff, the more the cost of production goes down. Prices fall and more people buy, ad nauseum. That’s basic economics.

Electric cars are massively important if American economy wants to be free of its dependence on oil – a strategic move in energy, economy, security and environmental policy which should be Obama’s moon shot. But right now it isn’t car manufacturers who need supporting – it’s the new systems that might help the best of them to thrive. What’s the point in buying an electric car if there’s nowhere to plug it in?

Barack Obama should be sitting down with the car industry and telling it to them straight: You want a future in America? Then change. The strategy you’ve been following for the past decade hasn’t worked, or else you wouldn’t need a bailout. Instead of funding Ford and GM and anybody else to carry on doing what they do badly, we’ll build a system that lets ordinary people drive electric cars, not just treehuggers and the super-rich.

You make the cars to run on that system, and you’ll be able to sell them because the structure will be in place.

This is the same strategy that led to the explosion of the internet; an independent infrastructure supported by the US government that bred innovation. There were no government loans for Yahoo or Microsoft or Google (or even Pets.com) – even during the darkest days of the dotcom bust – but the world continued anyway, and America forged itself a position at the heart of a new hi-tech industry.

This isn’t just a pipe dream. It’s already happening at a regional level – just look at the recent announcement by the mayors of San Francisco, San Jose and Oakland. Ordinary people don’t need guarantees that Ford will stay in business, but they should know that if they buy electric, there will be places to plug in.

So, forget toys for very rich boys. Forget saving jobs today just so that you can face the same question in another five years. And forget bailing out the car manufacturers.

Give them this one chance to innovate – and if they can’t be bothered, then leave them to die.

  1. marion says:

    I think that Obama should help all the car industries out in there time of need. Of course he does not have to worry as for gets driven. Do not give up one of the dealers has to remain so we can still have american cars to buy. Lets not lose our Mustang like we are losing all our other cars. M

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s