[tim330i]

Former BMW and GM executive Bob Lutz talked to Road and Track about the state of Tesla. Despite the Model S getting a perfect score from Consumer Reports Mr. Lutz things that Telsa is doomed.

Tesla's showing all the signs of a company in trouble: bleeding cash, securitized assets, and mounting inventory. It's the trifecta of doom for any automaker, and anyone paying attention probably saw this coming a mile away. Like most big puzzles, the company's woes don't have just one source.

This isn't the first questionable prediction that Bob Lutz has made recently. Just a few months ago he slammed Apple's self driving car ambitions as a great way to waste billions.

And then there's the distribution problem. Nobody has ever been successful with company stores, though plenty of manufacturers have tried them. When I came to BMW in the Seventies, it had five factory stores. The idea was, like Tesla, to be in control of the retail environment and give customers an upscale experience. They were all money pits.

I think Tesla CEO Elon Musk figured that if factory stores work for Apple, they'll work for Tesla. But the fixed costs for an Apple store are next to nothing compared with a car dealership's. Smartphones and laptops don't need anything beyond a mall storefront and a staff of kids. A car dealership is very different. It sits on multiple acres. You need a big building with service bays, chargers, and a trained sales force, plus all the necessary finance and accounting people. It ties up a staggering amount of capital, especially when you factor in inventory. Under a traditional franchise arrangement, the factory never has to carry that burden. Right now, Tesla does.

Read more about what Bob Lutz thinks of Tesla

 

[mark_m5]

Only time will tell. I'm not buying stock until the lower-priced, mass-market cars are ready for release.

But if you look around southern California, there are a LOT of Tesla Model S cars on the road.

 

[brkf]

Bob Lutz... not exactly a guy one should trust about what people want in cars. He's a dinosaur with archaic views and has been for decades.

 

[jadnashuanh]

When you're losing thousands on every car you sell, selling more of them doesn't necessarily make things better! Until volume reaches a certain point, there is very little economy of scale. Every model they've come out with had to be sold for more than the original prediction. Expecting a high-volume, low-price EV from them is a risky bet if you go by past performance. The big manufacturers have a wide range of conventional cars to capitalize and support a good portion of the development costs...a one-horse shop doesn't. Even a billionaire has limits on the amount of capitol that can be injected.

FWIW, CU pulled their recommendation because of various issues.

 

[Ninong]

In case you haven't heard, Consumer Reports stripped the Tesla Model S of its "recommended" rating and it is now rated "worse-than-average" reliability. That happened more than a month ago and Tesla's stock dropped 10% the same day. So I'm not sure I would quote an out-of-date rating that has since been changed.

 

[u3b3rg33k]

Bob Lutz... not exactly a guy one should trust about what people want in cars. He's a dinosaur with archaic views and has been for decades.

Hey, is he that guy who was in charge of the company that decided everyone wanted trucks/SUVs while fuel was >$4/gal and then needed a gov't bailout?
Time to change the last name from lutz to lulz :angel:

 

[Autoputzer]

I can't understand whey somebody would pay $80k to $100k for a city car, one not capable of taking on a road trip. But, after talking to somebody who lived in San Francisco who owned one, yeah I guess there are people who do pay that for a commuter car. That doesn't happen on my planet, though.

 

[u3b3rg33k]

I can't understand whey somebody would pay $80k to $100k for a city car, one not capable of taking on a road trip. But, after talking to somebody who lived in San Francisco who owned one, yeah I guess there are people who do pay that for a commuter car. That doesn't happen on my planet, though.

oops.
http://jalopnik.com/they-drove-a-tesla-from-la-to-new-york-in-a-record-58-h-1699782187

 

[Autoputzer]

oops.
http://jalopnik.com/they-drove-a-tesla-from-la-to-new-york-in-a-record-58-h-1699782187

Oops? Really?

"Reese's team logged a mere 12 hours and 48 minutes plugged in. "

Refueling my 535i every 450 miles takes about 12 minutes, and about half of that is me taking a piss and getting some Twinkies or a corndog.

I'll stand by what I said.

 

[Autoputzer]

Hey, is he that guy who was in charge of the company that decided everyone wanted trucks/SUVs while fuel was >$4/gal and then needed a gov't bailout?
Time to change the last name from lutz to lulz :angel:

Trucks and SUV's are huge profit sources. Yeah, their sales tank when gas prices go up. But, when times are good, they're really good.

A neighbor has a long-wheelbase Cadillac Escalade, $90k. A friend bought his wife and left-over 2015 Tahoe all decked out. The window sticker was $59k. He said that the night she got the new truck, sex was the best it's been in months. She must really like that new truck.

Back in 2007, I was tanking up my wife's 27 MPG Honda Accord. The idiot on the other side of the pump was putting gas in his Escalade and boo-hoo-ing about $4/gallon gas. Whatever. Then it happened. The idiot asked Ms. Idiot sitting in the truck how much gas he should put in. Her answer was $20. These two would go hungry before downsizing to a fuel efficient vehicle.

Lutz caught a lot of Hell from enthusiasts a few years ago by advocating that the U.S. government stabilize gas prices (keeping them high) through taxes. His logic was that if gas was as expensive as it is in Europe, U.S. consumers would be willing to pay $40k for a VW Golf, like Europeans do. Thanks, Bob!

 

[u3b3rg33k]

Trucks and SUV's are huge profit sources. Yeah, their sales tank when gas prices go up. But, when times are good, they're really good.

A neighbor has a long-wheelbase Cadillac Escalade, $90k. A friend bought his wife and left-over 2015 Tahoe all decked out. The window sticker was $59k. He said that the night she got the new truck, sex was the best it's been in months. She must really like that new truck.

Back in 2007, I was tanking up my wife's 27 MPG Honda Accord. The idiot on the other side of the pump was putting gas in his Escalade and boo-hoo-ing about $4/gallon gas. Whatever. Then it happened. The idiot asked Ms. Idiot sitting in the truck how much gas he should put in. Her answer was $20. These two would go hungry before downsizing to a fuel efficient vehicle.

Lutz caught a lot of Hell from enthusiasts a few years ago by advocating that the U.S. government stabilize gas prices (keeping them high) through taxes. His logic was that if gas was as expensive as it is in Europe, U.S. consumers would be willing to pay $40k for a VW Golf, like Europeans do. Thanks, Bob!

But the point is GM had NO PLAN for when people stopped buying trucks - like kids in a candy store when their parents left with the checkbook. taking investment advice from someone who couldn't run his own car company doesn't make a whole lot of sense, does it?

if I told you I went bankrupt last year and then started handing out stock tips, how seriously could you take me?

 

[Autoputzer]

But the point is GM had NO PLAN for when people stopped buying trucks - like kids in a candy store when their parents left with the checkbook. taking investment advice from someone who couldn't run his own car company doesn't make a whole lot of sense, does it?

if I told you I went bankrupt last year and then started handing out stock tips, how seriously could you take me?

Car companies cannot drastically change production quantities instantly.

GM had Saturn, a new division specifically to feature small, fuel efficient cars. It went away due to lack of demand and lack of profit. Because gas is historically cheap, fuel efficient cars mean cheap cars. And, with U.S. labor costs, especially before the UAW concessions, cheap U..S. cars meant unprofitable cars.

Lutz actually made a valid point that wide fluctuations in gas prices caused wide fluctuations in the type of vehicles customers demanded.

I'm not making excuses for GM. I bought a Cobalt new in 2007. The only reason I even considered it was that I get $3500 back on my GM cars after my best deal with the dealership. After a few weeks with the Cobalt, including putting it up on a lift for the break-in oil change, it was obvious that GM was heading toward bankruptcy. The bottom of the car has roughly 10,000 holes for road salt to get into and hide, and the bottom of the car is only primered, not painted, and with no PVC dipping like you see on better cars.

But, BMW could learn something from GM about oil consumption. At 97k miles, it's still using less than 1/2 of a quart in 8k miles.

 

[u3b3rg33k]

Car companies cannot drastically change production quantities instantly.

GM had Saturn, a new division specifically to feature small, fuel efficient cars. It went away due to lack of demand and lack of profit. Because gas is historically cheap, fuel efficient cars mean cheap cars. And, with U.S. labor costs, especially before the UAW concessions, cheap U..S. cars meant unprofitable cars.

Lutz actually made a valid point that wide fluctuations in gas prices caused wide fluctuations in the type of vehicles customers demanded.

I'm not making excuses for GM. I bought a Cobalt new in 2007. The only reason I even considered it was that I get $3500 back on my GM cars after my best deal with the dealership. After a few weeks with the Cobalt, including putting it up on a lift for the break-in oil change, it was obvious that GM was heading toward bankruptcy. The bottom of the car has roughly 10,000 holes for road salt to get into and hide, and the bottom of the car is only primered, not painted, and with no PVC dipping like you see on better cars.

But, BMW could learn something from GM about oil consumption. At 97k miles, it's still using less than 1/2 of a quart in 8k miles.

That has been true, but it does not have to be true. It's a fallacy to think (let alone run a company) otherwise. You can make a luxury car that gets good mileage. GM doesn't have to limit itself to the econobox market segment.

Yes, people have stupid buying habits - but look at VW - prior to dieselgate, they had no problem moving every single TDI engine produced. those are anything but cheap (price tag wise).

 

[gkr778]

Hey, is he that guy who was in charge of the company that decided everyone wanted trucks/SUVs while fuel was >$4/gal and then needed a gov't bailout?

No. The guy in charge of General Motors at that time was Rick Wagoner. As for Mr. Lutz, when he was Vice Chairman of Product Development at General Motors starting in 2001, he championed electrification but was shot down repeatedly by naysayers at the company. Lutz eventually persuaded executives at GM (including Wagoner) to green-light the Chevy Volt for production.

In 2007, he said the following about electric cars in a story for Newsweek (the "Silicon Valley start-up" he references is of course Tesla Motors):

"If some Silicon Valley start-up can solve this equation, no one is going to tell me anymore that it's unfeasible."

Also, Mr. Lutz had at least some responsibility in the creation of the E21 3-Series and R90S motorcycle, among other products, as well as the "M" division when he was Executive Vice President of Global Sales and Marketing and a board member at BMW AG in the 1970s.

Mr. Lutz is hardly a "dinosaur with archaic views." All in all, his analysis of Tesla's future is very sagacious indeed.

 

[u3b3rg33k]

The volt is/was an extremely poorly marketed product.

 

[Pat_X5]

The volt is/was an extremely poorly marketed product.

^ +1 GM does not know how to market their cars - they do stupid things like 20% off sticker for the oldest car on the lot specials....

IF they knew how to market the Volt and Cruze Diesel - they would sell tons more the general public who likes Chevy....

 

[u3b3rg33k]

^ +1 GM does not know how to market their cars - they do stupid things like 20% off sticker for the oldest car on the lot specials....

IF they knew how to market the Volt and Cruze Diesel - they would sell tons more the general public who likes Chevy....

Another example - the Chevy SS. I have seen it advertised in exactly zero places. I found it by accident while allowing the internet to re-affirm my faith in the e39 M5 being one of the best cars of all time/e-gawking at e39 M5s.

 

[EdCT]

Only time will tell. I'm not buying stock until the lower-priced, mass-market cars are ready for release.

But if you look around southern California, there are a LOT of Tesla Model S cars on the road.

We have a ton of them here in CT - where they're not even allowed to be sold!

I do wonder what lies ahead though - especially with a new Volt and Bolt coming along (the latter of which seems really promising), and Nissan's redesigned Leaf.

I could see a second car in our home as electric.

 

[shafeeq]

Lutz is absolutely wrong in at least one of his points. "Car dealerships need multiple acres and big buildings with multiple service bays.." The Tesla dealership in Chicago is 2,500 sqft at most. It occupies an old brick building on Grand Avenue. The other suburban dealership is actually in an indoor mall...

 

[Autoputzer]

If Lutz says something is impossible, I tend to believe him. His biggest fault is in the other direction, taking on the impossible with disastrous results (Merkur, Volt, Fisker, etc.).

The process of how new cars are sold in the U.S. is terribly inefficient: huge dealer inventories, acres of prime commercial real estate turned into parking lots, hords of scummy and stupid car salesmen standing shoulder to shoulder, waiting for a potential customer to drive up. My local GM dealership advertises that they have $23M in inventory.

But, things got like they are for a reason, "evolution" if you will. As inefficient as it is, natural selection has determined that the current system is the most productive and profitable way to sell cars.

Back in the 1980's there were a lot of dealers trying to become "factory outlets" without new car inventory, where you made an appointment with a very busy salesman, drove a few demonstrators, and then ordered a car. Because of the efficiencies, they'd sell every car for less than $100 over the published dealer invoice price. The system didn't last long, because the dealers were going broke***8230;.. being so efficient.

The U.S. customer, especially the ones buying inexpensive cars, has a very limited attention span. Most of them prefer to "sign and drive." They want car buying to take less than an hour between driving onto the lot and driving off in a new car. That requires a lot of inventory and a lot of salesmen standing around waiting for customers to show up.

It's not just the Kia customer who wants his new car now. I friend of mine was at his kid's soccer game when one of the other fathers drove up in a 760Li. My friend started talking to the 760's owner, and asked him why he bought the V12 instead of just a V8 750Li which was about $15k less. "The V12 was in stock, the color I liked, and I wanted the car right then."

I grew up in southeastern Virginia. The area's population is probably about 1.5M people now. The area has the typical mega dealerships. But, there's as very small town there, Poquoson, with a population of about 13,000 people sitting on a point sticking out into the Chesapeake Bay. Poquoson is an Indian word meaning "big swamp." I lived in the metropolitan area for 35 years before I knew Poquoson had a Ford dealership. I stumbled upon it one day when I was out exploring after moving to the north side of the James River for my first engineering job.

https://www.google.com/maps/place/R...2!3m1!1s0x89ba813bbd8028dd:0x9eab337440a6d968

They park their new car inventory across the street in a vacant lot. They currently have ten new cars in stock:

http://rigginsmotorco.com/Hampton-and-Newport-News/For-Sale/New/

I'm not sure what their business plan is, but I suspect it's sort of the no-inventory, factory order system that was tried in the 1980's and is currently being used by Tesla. I moved to Florida twenty years ago. I was really surprised to see they are still there. I can't imagine how their parts and service departments work, though. I suspect they make a lot of runs to the nearest Ford mega-dealership's parts department.

BMW has done a lot to change the car buying system. They actively encourage customers to factory order a car, adding the incentive of the "King For A Day" Performance Center Delivery, and discounts for BMW Welt delivery of factory ordered cars. They've also added a $299, "BMW Experience" program at Spartanburg and Thermal. These centers probably have every model, color, and option in their fleets. So, if you want to test drive an M5 with a manual transmission and see what that ghastly orange paint looks like in person before placing an order, for $299, air fare, and a hotel charge, you can do so.