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Bitcoins continue to be accepted by more businesses, but does subsequent conversion to USD show them to be a fad?

UPDATE 12/10/2013 7:50 a.m. (Tuesday)

As a reader points out there's been a twist in this story.  While the headline still appears accurate, details of the story have shifted.

According to Pietro Frigerio, general manager of Lamborghini Newport Beach, his dealership didn't actually accept bitcoins at an point in the transaction.  According to a clarification he issued in comments to Squawk on the Street, the customer did buy the vehicle with bitcoins, but he did the conversion to USD, not the dealership.  This seems to contradict/correct the earlier comments of a sales manager at the dealership.

"The transaction in our bank account, we received a wire in U.S. dollars.  So you could say that I didn't want bitcoins. And I never touched bitcoins," Mr. Frigerio explains.

So strike one business that accepts bitcoin; the dealership treated the bitcoins like foreign currency or gold bars, asking the customer to take care of the exchange to U.S. currency.  Still it's an intriguing tale that illustrates the rising value of the bitcoin.

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In Orange County, Calif. suburb Costa Mesa a Lamborghini dealership is making headlines after it began to accept bitcoins -- a popular electronic cryptocurrency -- for purchases.

An anonymous buyer from the Orlando, Fla. area purchased a decked-out Tesla Motors Inc. (TSLA) Model S from the dealership last week for bitcoins (reportedly 91.4 bitcoins, which works out to about $103,000 USD at last week's exchange prices).  This believed to be the first time that a premium electric vehicle (EV) has been sold for bitcoins.  The car came with a tan leather interior and a glass sunroof.

Much like Tesla, a bit of scrutiny from the media and government hasn't hurt the bitcoin value.  In fact it appears to have driven it to fresh highs.  A year ago those bitcoins would have been worth $1280 USD, when the currency dipped to $14 USD, but thanks to a surge in value and interest, Bitcoins were trading at all time highs of over $1,000 last week.


Tesla Model S

Virgin Galactic also announced in recent weeks that it would accept bitcoins to book suborbital flights.  Founder Richard Branson is a bullish support of bitcoins.

Last week's Model S purchase worked out like this: the Orange County luxury vehicle dealership sent the man an invoice, received the payment in bitcoins, exchanged the coins for U.S. currency at an undisclosed exchange, and finalized the purchase.  General sales manager Nick Jones told The OC Register, "It’s just another method to sell cars.  [The buyer is] happy."

Bitcoin smaller
Bitcoins continue to be accepted by more and more businesses, although most promptly trade the digital currency for USD. [Image Source: Getty Images]

The Model S is arguably the most successful luxury electric vehicle, having won Motor Trend's and Automobile magazine's 2013 "Car of the Year".
 
In Q3 Tesla delivered 5,500 Model S sedans, including 1,000 to the European market.  Tesla is now producing over 550 Model S EVs per week.  Still the automaker posted a $38M USD loss on revenue of $431M USD, in the midst of production expansions.  The loss reversed a profitable Q2.  But the company is still pretty well positioned having paid off its $465M USD in low-interest U.S. federal government loans early via the cash from initial Model S sales.
 
Tesla is eyeing its first try at an affordable mass-market EV.  Tesla in May promised a sub-$40,000 USD EV in 3 to 4 years with a range identical to GM's proposed one -- 200 miles.

Model S dealership
A Tesla Store [Image Source: Electric Cars Report]

The company is also looking to navigate two key struggles -- a controversy over dealership sales and a string of incidents in which its battery packs caught fire after collisions.
 
U.S. National Highway Traffic Safety Administration (NHTSA) investigation determined that a trio of recent vehicle fires were due to collisions with large road debris (e.g. a trailer hitch in one case), which prevented the aluminum plate protecting the lithium ion battery pack.  The fires were black mark on a vehicle that had achieved extremely high safety ratings in crash tests.  Tesla responded by issuing a mid-November software update to raise the underbody of its cars (clearance) higher off the road when traveling at highway speeds.
 
Tesla also has been in high profile battles with a number of states, who after being lobbied by traditional automakers/dealerships passed or proposed passing bans on sales of automakers like Tesla who don't have physical dealerships in state.  Still Tesla has weathered these storms and seems to be finding no shortage of buyers for its Model S.

Sources: OC Register, CNN Money



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This article is over a month old, voting and posting comments is disabled

RE: Did it really happen?
By tanjali on 12/9/2013 6:37:47 PM , Rating: 2
Explain, printing paper money as something of value?
I can’t figure out and trust, with what is that hidden value supported with.
Do you really trusting the feds after all this market fluctuations and socialistic bailouts?


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