Streetwise Professor

July 20, 2017

Hyperloop Hype. What Else Do You Expect From Elon?

Filed under: Energy,Politics — The Professor @ 6:59 pm

The classic sign of a con man is that he always responds to information or developments that undermine his previous promises with new!, better! promises. Elon Musk fits this template to a T.

Most of the news from Tesla lately has been less than favorable, and all of it contradicts previous pronouncements. Vehicle shipments have failed to make forecast, and it is  trying to manage expectations about Model 3 production and sales. It is becoming clear that Tesla will face considerable competition in electric cars, and from companies that have a proven ability to build automobiles in quantity with quality–both of which Tesla has yet to do. As a result, the price has cracked considerably in the past few weeks.

So Elon needs a distraction, and another fantastical statement about Tesla would probably be ill-advised. So what to do? Tweet tantalizing trash about Hyperloop, of course! (I have to rely on press reports, because Elon blocked me long, long ago. I’m so proud.)

Musk stated that he had received “verbal govt approval” to build the NY-DC Hyperloop.

Approval from whom, exactly? Elon didn’t say. Approval to do what, exactly? Elon didn’t say.

Forget the what: the whom question is amusing enough. I can imagine a conversation between Elon and an alderman in say, Applegarth, NJ. “Hey. I’d like to drill a tunnel under your town and run high speed capsules carrying passengers underneath it. What do you think?” “COOL! Go for it!” Then Elon whips out his iPhone and tweets that he got “verbal govt approval.”

Just think how many jurisdictions there are between New York and DC. (And how many of those are corrupt as hell.)  This is also the Land of NIMBY. So unless there is some supersecret Regional Subterranean Construction Authority that can approve–verbally, no less–the building of something like Hyperloop, can override local government in NY, NJ, PA, DE, and the Federal government as well, there is no single body to give the approval that Elon claims he has.

But reality doesn’t matter in ElonWorld. He needed something to feed the fanboyz, and he did. And non-fanboyz (e.g., the WSJ) actually treat these utterances seriously.

Note that Elon’s Hyperloop Tweet gets wall-to-wall coverage, but the fact that his brother-in-law Peter Rive has left Tesla to–wait for it–“spend more time with his family” has barely registered in the news.

Rive was a co-founder of Solar City, and was in charge of one of the projects that Elon had hyped earlier–the Solar Roof, which was supposedly about ready to be installed en masse.  Has anyone actually seen such a roof? I thought not. Yet more hype, the failure to deliver on which requires hyping Hyperloop.

Musk has gone through execs like Kleenex during a bad cold. And now he can’t even keep his relatives.

But Elon always has rent-seeking to fall back on. Of all his bullshit, the biggest is his claim that the company does not depend on government largesse: “And I should perhaps touch again on this whole notion of – it’s almost like over the years there’s been all these sort of irritating articles like Tesla survives because of government subsidies and tax credits. It drives me crazy.”

So I presume you sent back those CA ZEV and US subsidy checks, right Elon? For the sake of your sanity.

Thought not.

Take Elon’s pronouncements at face value (I know, I know) and you would think that the impending phase out of Federal subsidies would be great news for his mental health. But given the fact that EV sales have this tendency to collapse when subsidies go away (recent examples being Hong Kong, China, and Denmark), the loss of this revenue stream is a grave threat to the company. But never fear, California, which hasn’t met an idiotic green technology that it won’t throw money at, is getting ready to throw large green Elon’s way:

The California state Assembly passed a $3-billion subsidy program for electric vehicles, dwarfing the existing program. The bill is now in the state Senate. If passed, it will head to Governor Jerry Brown, who has not yet indicated if he’d sign what is ostensibly an effort to put EV sales into high gear, but below the surface appears to be a Tesla bailout.

. . . .

This is how the taxpayer-funded rebates in the “California Electric Vehicle Initiative” (AB1184) would work, according to the Mercury News:

The [California Air Resources Board] would determine the size of a rebate based on equalizing the cost of an EV and a comparable gas-powered car. For example, a new, $40,000 electric vehicle might have the same features as a $25,000 gas-powered car. The EV buyer would receive a $7,500 federal rebate, and the state would kick in an additional $7,500 to even out the bottom line.

And for instance, a $100,000 Tesla might be deemed to have the same features as a $65,000 gas-powered car. The rebate would cover the difference, minus the federal rebate (so $27,500). Because rebates for Teslas will soon be gone, the program would cover the entire difference – $35,000. This is where Senator Vidak got his “$30,000 to $40,000.”

The Tesla Model 3 would be tough to sell without the federal $7,500. But this new bill would push Californian taxpayers into filling the void. It would be a godsend for Tesla.

AB1184 would be a huge expansion of the current Clean Vehicle Rebate Project which has doled out 115,000 rebates for $295 million to buyers of EVs and hybrids since 2010, averaging about $2,550 per rebate.

Under AB1184, hybrids and hydrogen powered cars are not included, and rebates for plug-in hybrids are slashed – perhaps to keep Toyota’s technologies at bay.

Even the current, relatively small Clean Vehicle Rebate Project has been lambasted as a subsidy for the wealthy who can afford to spend $100,000 on a set of wheels. A study, cited by the Mercury News, showed that of nearly 100,000 rebates, over 80% went to Californians with incomes over $100,000. This notion of a subsidy for the wealthy also applies to the federal rebate.

So of course Elon threw himself across the Assembly door in Sacramento, right? He’s bombarding Jerry Brown with calls begging him to veto right?

Yeah, sure. No this smells for all the world like California doing a solid for a local company (and the wealthy Californians that buy its cars). And we know how Elon can work governments to get him to shovel money his way.

In some ways, you can’t blame Elon. As transparent as his shtick is, it seems to work. P.T. Barnum’s dictum about a sucker being born every minute seems to be a low-ball estimate when it comes to Musk’s con. So until it doesn’t work, he’ll keep doing it. Given that reality isn’t an option, what else is he going to do?

If Elon fools you once, shame on him. If he fools you twice, three times, four times . . . shame on you.

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  1. I wonder about the legalities regarding the subterranean extent of municipal jurisdiction. Some cursory googling suggests there is some established law related to water rights, but I wonder if it’s really necessary to obtain easements from all municipalities one seeks to tunnel beneath, whether a state-level easement can bypass municipal law, etc. I kind of doubt the law is actually very settled on these questions.

    Comment by Sam — July 20, 2017 @ 7:46 pm

  2. @Sam. 1. I think you underestimate the legal creativity of municipal, county, and state governments. 2. One thing that Musk crows about his multiple exits in major cities. Gotta get to the surface somewhere. 3. This may be part of Elon’s con. He knows he doesn’t need approval, but it sounds good and it’s easy to get some pol to give “permission”, knowing it means doodly squat.

    Reminds me of when I was 10 and my parents took my to Dinosaur National Monument in Utah. The Park Ranger gave me a very official looking document saying I had permission to hunt dinosaurs, signed by Ranger Al E. Oop.

    The ProfessorComment by The Professor — July 20, 2017 @ 8:29 pm

  3. Sure they’ll want their piece of the pie, but it seems to me that a big aspect of this sort of venture is “getting permission in advance” versus “working out the distribution of proceeds ex post facto”. If you can get this balance right, from a legal point of view (i.e. preventing big delays from judicial stays), seems to me you can make a lot of money even if you have to pay off a lot of local gangsters.

    Comment by Sam — July 20, 2017 @ 8:42 pm

  4. Unfortunately for South Australia, Elon has decided to “help” solve the power crisis created by an over reliance on renewables. His largesse has gone global!

    Comment by Felicity — July 21, 2017 @ 6:00 am

  5. in Australian compensation is required to the property owner based on the depth of the tunnel.

    Because the easement reduces future ability to develop.

    Comment by Mike — July 21, 2017 @ 10:04 pm

  6. @Felicity-Reminds me of the crack dealer giving away free samples by the schoolyard.

    The ProfessorComment by The Professor — July 22, 2017 @ 2:28 pm

  7. If you think Elon Musk makes no sense, wait until you hear the European Commission

    > the European Commission warned of possibly “wide and indiscriminate” “unintended consequences”, notably on the EU’s efforts to diversify energy sources away from Russia.

    > Germany has already warned of possible retaliation if the United States moves to sanction German firms involved with building a new Baltic pipeline for Russian gas.

    So, apparently building a new pipeline for Russian gas is a critical element of the EU effort to diversify energy away from Russia. Let’s hope there is no EU anti-terrorism effort centered around uncontrolled influx of terrorists into the EU. Oh, wait…

    Comment by Ivan — July 23, 2017 @ 9:54 am

  8. Hyperloop – Busted 29 min
    The engineering is extreme and the slightest failure would be deadly.

    === ===
    Published on Jul 24, 2016

    All the problems of deep space travel, bought down to the surface of the planet, such that you can travel about the speed of a bullet within a couple of cm of a gun barrel.

    Sadly almost no one in the main stream media assessed this stuff critically from a scientific/ engineering point of view. They just took them at their word when they said they could construct the completely untested large scale hyperloop for 1/10th the cost of a regular high speed rail connection. They took them at their word when they said it would only cost 20 bux, and take only 25 minutes.

    In reality the engineering problems are probably insurmountable. It would be like proposing a floating roadway across the Mediterranean or something.
    === ===

    Comment by Andrew Garland — July 24, 2017 @ 1:17 am

  9. I’m a huge Elon fan. Fiscal rectitude be damned – if we get space-age electric and partially-autonomous cars and… well, space-age space-rockets out of it then I’d say it’s worth the trade-off. Lots of companies are engaged in this kind of skulduggery without even 1% of the landmark achievements to show for it.

    Also, making high-end cars at scale is hard: Look how long it has taken the Chinese to elevate their indigenous automotive industry, and even then they rely heavily on partnerships with big western brands for anything above mid-range. So I think it’s wilfully oblivious to complain about a few months of delay from Tesla, considering what it is they’re actually doing. Also, the model 3 has sold like hot-cakes all over the US and the world, even in places with much more restrictive subsidies, or none at all. So I think it’s unfair to pick on the subsidy from one state and claim that Tesla is dependent…

    …California is just doing what California does: Wasting tax-payer money on already-wealthy citizens/industries. That’s hardly Tesla’s fault. And as the Prof points out: There will soon be plenty of other automakers fattening themselves on that plate – it seems a bit prejudiced to single-out Tesla.

    That said, the Hyperloop, while a nice idea in theory is:
    A: Not being run by Musk himself (Who, whether genius or charlatan, is able to keep ambitious projects going, and that’s what Hyperloop needs).
    B: Outrageously difficult.
    I can easily believe that they can improve tunnelling speeds (they’ve hardly improved in 50 years!) and if they go deep enough the property-rights issue might be easier to solve. But the Hyperloop’s problems have stubbornly resisted huge investment and years of engineering work.

    Also not sure what’s going on with the solar roof. Gotta be one of the easiest projects he’s ever setup for himself…

    Comment by Hiberno Frog — July 24, 2017 @ 2:56 am

  10. It’s the technical side of things that are truly Barnamesque. Maintain a partial vacuum in a 250 mile underground tube with human carrying capsules moving at bullet speed? Sounds easy and cheap. Wonder what’s supposed to happen if a capsule gets stuck somewhere? Or the tube is punctured and debris gets sucked into the tube while hundreds of capsules are flying through it. I can’t find it now but there was a great quote along the lines of “hyperloop – bringing all the technical difficulties and expense of space travel to a railway project”.

    Comment by derriz — July 24, 2017 @ 4:16 am

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