Writing in the current issue of Road & Track, automotive executive Bob Lutz says that Tesla is doomed to failure, and soon. Lutz has been a prominent person in the world of auto manufacturing for more than four decades having worked at General Motors, BMW, Ford and Chrysler throughout his career. He is credited with being directly involved with the development of the BMW 3 Series, the Holden Manero based Pontiac GTO, the Ford Explorer, the Dodge Viper, and the Saturn Sky. His signature car was the stillborn Cadillac Sixteen.
In his essay, Lutz writes, “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.” He is especially critical of Tesla’s sales model that uses company stores. He understands that Elon Musk is using Apple stores as his marketing model, but says the car business and the computer business are completely different animals.
He claims the franchised dealer system that Tesla so vehemently opposes is actually smart business for manufacturers, because it transfers a great deal of the financial burden involved with selling cars — inventory, floor planning, administrative expense and sales force costs — to the dealers. “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.”
According to Lutz he would do things very differently if he were to run Tesla. For one thing, he would cut costs drastically, which probably means eliminating the Tesla Supercharger network. He’s also opposed to the Tesla model of building expensive cars now so it can build more affordable cars later.
“I would seriously consider an entry level model with a cheaper, range extended hybrid driveline,” Lutz writes. “Something with a much smaller battery that also looks great and drives great. Something that’s electric most of the time, say 50 or 60 miles, but can carry on under gasoline power past that.” That sounds a lot like a Chevy Volt, doesn’t it? “Would an internal combustion engine dilute the Tesla brand?” he asks. “Maybe, but everyone said Porsche could never build a front engine car, and look how that turned out.”
Lutz says he likes Elon Musk personally, but cautions, “history’s filled with defunct companies with great products run by brilliant people. Unless Tesla rights its organization and products in a hurry, it’ll join those ranks.” It is unlikely Lutz’s comments will be well received by the Tesla faithful, but he is a man with enormous experience in the auto industry. Perhaps his opinions at least deserve a respectful hearing. Or perhaps he simply does not understand the breadth and scope of Elon Musk’s vision.
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