Bob Lutz is a former executive at Ford, Chrysler, General Motors, and BMW. As such, he has a lot of industry knowledge and experience that he offers to those who would like a little insight into the workings of major automotive manufacturers. In short, he is an expert. So, when he spoke as a guest on a recent webpisode of Moto-ManTV, people were listening and raising eyebrows when Mr. Lutz said that he expects Tesla to be finished soon.
Mr. Lutz joined the recording of the show to offer a report card of the automotive industry. So, he covered different manufacturers in an interview that lasted nearly an hour. At the forty-five minute mark into the interview, he begins discussing his views on Tesla. He spoke for only about three minutes on that subject and offered three reasons he believes Tesla will go away.
No unique technology
Mr. Lutz claims that Tesla does not have any unique technology. He concedes that Tesla does have attractive vehicles, but they contain no new or unique technology. Everybody is developing Lithium or multipolymer batteries.
Lack of profitability
Mr. Lutz adamantly claims every manufacturer will have 300-mile electric vehicles. This will be necessary to meet government mandates. Most manufacturers will lose money on them. But, that money will be made up through the sales of conventionally powered vehicles, which Tesla does not have. Consequently, it is Mr. Lutz’s expectation that as all the other automotive manufacturers grab a larger portion of the electric pie that Tesla’s stock will tank because the company will not be able to recoup the losses like the more mainstream manufacturers. He says that explains why prices have been rising on conventionally powered cross-over, SUVs, and pickup trucks, to pay for the electric cars in manufacturer lineups. He goes on to say,
“They can’t make money. Every single vehicle they sell, they’re selling at a massive loss.”
“The last time anybody did numbers on [the Tesla Model S], it was a $16,000 loss.”
One of the biggest obstacles to that profitability is the manufacturing system. Mr. Lutz claims that Tesla’s Freemont plant has over 9,000 employees producing a little over 100,000 cars per year. His knowledge of the industry indicates that everybody else’s manufacturing ratio is nearer to 2,500 workers for every 230,000 cars per year. He, therefore, suspects that Tesla’s labor costs must be astronomical.
Elon Musk’s behavior
The third reason Mr. Lutz expects Tesla to die is Elon Musk’s behavior. He says that Musk, Tesla’s head, will need to stop behaving erratically to stabilize investor confidence. He offered no explanation, but it’s not hard to search Musk’s Twitter account and the internet to see Musk’s controversial comments or moments. For example, just a few years ago he was smoking marijuana on camera.
It is important to note that Mr. Lutz was discussing Tesla’s automotive business. Tesla, however, has an energy component to the company. In addition to the automotive interests of its business, it also provides solar wall units, solar roofing, flame throwers, and other products. Mr. Lutz made no mention of those aspects of Tesla.
Regardless of the other business units within Tesla, Lutz was pretty clear in his position that everybody will soon have electric vehicles, and consequently, Tesla’s automotive influence will die off. The company’s lack of unique technology or depth of products will contribute to the company’s inability to turn a profit. Elon Musk‘s unstable behavior will also be a big player in the company’s future. For these three reasons, Mr. Lutz has pretty much written Tesla off the automotive landscape.