02/21/2009 05:12 am ET | Updated May 25, 2011

Why Tesla Motors Won't Likely Get Government Help

Policymakers will need to decide whether Tesla can survive in a cutthroat marketplace. Being small makes the company nimble but not necessarily scalable. Big parts makers typically won't even look at a car that doesn't sell in the tens of thousands. So Tesla has had trouble getting competitive rates from its suppliers. Mike Donoughe, Tesla's chief of product development, says his expanded supplier base could bring down costs.

Even big automakers struggle to make money on cars that sell 20,000 units a year, and so far Tesla has sold 140 Roadsters. "There's a lot more risk for the government with an unknown quantity," says Michael Robinet, vice-president of auto consulting firm CSM Worldwide. "[Tesla lacks] the global sales of mass-market players."

GM--battered as it is--has an advantage over Tesla. The auto giant plans to make up to 10,000 Chevrolet Volt electric cars. That mass-market volume helps GM push down battery costs. What's more, the Volt is built on the chassis of the Chevy Cruze compact. The Cruze should easily sell half a million units a year around the world, so GM can amortize its development costs. Plus, the Volt's high-tech guts will end up in several cars. "We can get scale much faster," says James E. Queen, GM's global engineering chief.

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