Posted by: Dirk | July 29, 2008

Comparative advantages of the US

The low dollar and the high oil price opens up new comparative advantages. Tesla Motors from California produces a electric sports car that will now be available for purchase in Europe. Tesla claims the car is more efficient than the Prius (relatively). The car costs 99,000 euros inside the EU and 109,000 US-$ in the US. Hopefully, the US automobile industry can adjust and deliver cars for the mass markets as well.

One problem ahead might be financing. As the NY Times reports, business loans have been sharply reduced by worried banks. Without loans it is hard to finance innovation. Since capital markets are global, at least the competitors will find themselves in the same situation. If they do not finance their R&D through retained earnings, that is. Some car makers are still profitable. However, here’s a graph showing loans of banks in the US:

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