Bitcoin, the virtual money former Federal Reserve Chairman Alan Greenspan called “a bubble,” was accepted as payment in the purchase of a Tesla Motors Inc. Model S electric car at a California Lamborghini dealership.
Lamborghini Newport Beach sold the car for about $103,000, or 91.4 Bitcoins, in a transaction handled by payment processor BitPay, said Cedric Davy, marketing director for the Costa Mesa, California-based dealership. The sale cleared yesterday and the Model S will be delivered to its Florida-based buyer, who asked not to be identified, Davy said by telephone.
“We’re a dealership — we’re not in the business of doing any speculation,” he said. “For us, it was just important that the money could be transferred into U.S. dollars.”
While Bitcoin has been embraced by some as a way to pay for goods using smartphone applications, the money has had a harder time winning acceptance from governments and banks. This week China’s central bank barred financial institutions from handling Bitcoin transactions. Baidu Inc., the owner of that nation’s largest Internet search engine, yesterday halted acceptance of payments using Bitcoins for its website-acceleration service.
Bitcoins exist as software and aren’t regulated by any country or banking authority. They had climbed more than 80-fold this year before trading at $865, down 16 percent, at 5:36 p.m. New York time yesterday on Bitstamp, is one of the more active online exchanges where the digital money is traded for dollars and other currencies.
“Some people want to get out before they get burnt, I feel, so this is probably why we’re going to see some sales in the very near future” of more cars using Bitcoins, Davy said.
Bitcoin “has to have intrinsic value,” Greenspan said Dec. 4 in a Bloomberg TV interview. “You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can.”
The dealership doesn’t know if it is one of the first and possibly only dealerships to sell a car in exchange for Bitcoins, Davy said. Charles Cyrill, a spokesman for the National Automobile Dealers Association, which represents almost 16,000 new-car dealers, said he couldn’t immediately comment.
Davy said he’s heard from “a couple” other dealers who were interested in how the Model S transaction worked after Lamborghini Newport Beach posted about it on its blog.
“It doesn’t seem like it’s hit the car world as much as it hit probably the finance or the tech world,” he said of interest in Bitcoin.
Blogs including MotorAuthority and Zero Hedge and the Orange County Business Journal reported on the Model S transaction earlier this week. The dealership has taken about 10 phone calls from potential customers interested in buying cars with Bitcoins, and it’s open to doing more such sales, Davy said. The Model S buyer had been turned down by other dealers who didn’t want to accept Bitcoins, he said.
“I’ve heard about Bitcoins before, but I was not very familiar with what it is,” Davy said. “It’s still a little abstract to me, to be honest.”
Bitcoin has received other endorsements, including from analysts at Bank of America Corp.’s Merrill Lynch unit. Bitcoins should have a maximum market value of about $1,300, assuming they become a major e-commerce instrument and a significant “store of value” that’s similar to silver, David Woo, a foreign exchange strategist, and other analysts at Merrill Lynch wrote in a report Dec. 5.
The People’s Bank of China also said this week that the public is free to participate in Internet transactions provided they take on risk themselves.
Tesla’s stock has had its own roller coaster ride as U.S. regulators investigate the Model S for a possible recall after at least three accidents that ended in fires, and fourth-quarter earnings guidance that trailed some analysts’ estimates.
While the Palo Alto, California-based company’s shares have risen more than fourfold this year, the stock fell 2.2 percent yesterday to $137.36, and is down from a closing peak of $193.37 on Sept. 30.
Liz Jarvis-Shean, a Tesla spokeswoman, declined to comment on the Bitcoin sale.