How could loans from the federal government possibly be a bad thing for automakers? According to special adviser for Coda Automotive Darryl Siry, whose words appeared in an article he wrote for Wired.com, loans from the US Department of Energy could be stifling innovation by reducing the amount of private capital investors. The private capital investors have difficulty investing into a venture or company that has not received DOE support.
Darryl Siry previously held the position of chief marketing officer for Tesla Motors from 2006-2008. According to Siry, a potential problem exists when the government decides to hand out large loans to select automakers. Siry is referring to the $8 billion in loans handed out to Nissan, Ford, Tesla, and Fisker under the DOE AVTM program. As Siry said, "This massive government intervention in private capital markets may have the unintended consequence of stifling innovation by reducing the flow of private capital into ventures that are not anointed by the DOE."
Siry's words ring true in many ways. If the DOE decides to support an automaker, it must be a low risk situation. The DOE has taken into account the risk versus reward for each investment it makes. Private investors understand that the DOE is now careful with its loans. If the government will invest into a company, private investors decide that it is likely a strong investment. Many private investors are reluctant to put their money into smaller startups who were denied DOE funding.
Additionally, Siry adds, "Several sources within startup companies seeking DOE loans or grants have admitted that private fundraising is complicated by investor expectations of government support." This quote appears to be most fitting for Aptera who has had difficulties raising capital in lieu of their initial rejection by the DOE. Aptera has since reapplied for DOE funding under new guidelines. As Siry speaks about Aptera from info from an undisclosed source close to the company he said, "All of the engineers are working on documentation for the DOE loan. Not on the vehicle itself. Another highly placed source at Aptera told Wired.com many potential investors wanted to see approval of the DOE loan before committing to invest."
The AVTM loans have been meet with criticism before. Many feel it is unfair to fund only certain companies while ignoring others. Others feel that government intervention is plain unfair in an open market system. At least some companies believe the funding from the government limits outside funding from others. It's unclear how the government can make satisfy everyone.
Darryl Siry is currently a special adviser to Coda Automotive. Coda has not received loans from the DOE AVTM program nor have they applied for loans.