For those who may have missed it, GM’s former Vice Chairman Bob Lutz dropped a whole lot of reality on some unsuspecting Tesla cheerleaders on CNBC this morning. A rather blunt Lutz shared his views, as have we on several occasions, that Tesla’s constant cash burn combined with a barrage of competitive models that are about to hit the market likely indicate that the company is “doomed.” As for Tesla’s gravity-defying stock price, Lutz attributed the company’s soaring market cap solely to Musk being the “greatest salesman in the world” along with his being “aided and abetted by some analysts.”
“I am a well known Tesla skeptic. Somehow it’s levitating and I think it’s Elon Musk is the greatest salesman in the world. He paints this vision of an unlimited future, aided and abetted by some analysts. It’s like Elon Musk has been beamed down from another planet to show us mortals how to run a company.”
“The fact is it’s a constant cash drain. They’re highly dependent on federal government and state incentives for money which constantly flows in. They have capital raises all the time.”
“Even the high-end cars that they build now cost more to build than they’re able to sell them for.”
“Mercedes, BWM, Volkswagen, GM, Audi and Porsche are all coming out with 300-mile [range] electric luxury sedans…I think they’re doomed.”
At that point, an incredulous CNBC host was forced to step in asking “what does doomed mean?”
“What does doomed mean? Their stock price comes in? They go out of business? They have regular competition like other companies? What do you mean by doomed?”
Fortunately, Lutz was happy to entertain the question and explained to the shocked CNBC hosts that when your variable production costs exceed your products sales price…well, that’s a problem.
“Their upside on pricing is limited because everybody else sells electric vehicles at a loss to get the credits to be able to sell the sport utility vehicles and the pickup trucks. So that puts a ceiling on your possible pricing.”
“And if he can’t make money on the high-end Model S and Model X’s which sell up to $100,000, how in the world is he going to make money on a $35,000 small car? Because I have news for you, 42 years of experience, the cost of a car doesn’t come down proportional to it’s price.”
“If you have a situation where the cost of producing a car, labor and materials, is higher than your sell price, your business model is flawed. And it’s doomed and it’s going to fail.”
Finally, the stunned CNBC anchors offered up one more defense by highlighting the massive value of Tesla’s battery and solar operations, but were once again shut down in epic fashion…
“The battery plant, in my estimation, is a joke. There are no cost savings from making a lithium ion plant bigger than other people lithium ion plants, because making lithium ion cells is a fully automated process anyway. So, whether you got full automative in a small building or 10x full automation in a big building, you’re not saving any money.”
“that Tesla’s constant cash burn combined with a barrage of competitive models that are about to hit the market likely indicate that the company is “doomed.””
Ignoring government bailouts to prevent its failure, something that GM people are apparently unaware can happen.
Thanks for the article. I do enjoy watching (in this case hearing about) those CNBC pimps getting pantzed.
Starfcker to Musk’s rescue with a rant against Lusk in 5,4,3,2,1……..
Of course he will not provide counter facts to Lusk’s points.
Right here boss. Doomed, I tell you. Pickup truck coming in 18 months. Tesla’s Elon Musk says company’s semi truck coming in September – LA Times
http://www.latimes.com/business/la-fi-tesla-semi-truck-20170413-story.html
Now that’s funny. He’s a master huckster. Electric trucks. That’s a good one. Did you buy more stock today. It’s a mortal lock for a quadruple from here.
No stock, but I’d love to have electric pickups. I have golf carts, I know how this stuff works. Lutz is a design genius, a real car guy. Not a number cruncher. I saw him on Charlie Rose a couple of times.
He ran a car company that actually generated profits. He knows the economics inside and out. Musk created paypal, with some other dudes in a basement. He has never produced a profit making physical product in his life. I’ll put my money on Lutz’ assessment.
Lutz never ran a car company. He’s a design guy. Let me look him up. Edit: just look at the name of his book. Car Guys vs. Bean Counters: The Battle for the Soul of American Business
Tesla has never had any earnings. The P/E is -600 no shit.
Thanx for the good laugh – my 1st one today
Lutz was an engineer prior to executive status. Unlike a lot of the idiots in the C Suite that came out of Hawwwwvaaaadd (Harvard for you that don’t speak Thursten Howl) and Yale with absolutely no real world experience, I would listen to what he is saying.
There was another guy that promised an unlimited future, and even had some cool commercials espousing the possibilities of just thinking about energy differently. Hell, they even had a full trading floor so they could trade energy like stocks. Smartest guys in the world right? Well those folks would be Ken Lay and Bob Skilling. They were gods to the analysts just like Elon. WHen they spoke, everyone just listened to every word. And Government loved them….How did that work out.
It is very simple. If it takes more energy / money / resources to make something than what you get out of it, it will eventually fail. The only thing keeping Tesla from failure is peoples “hopes” of the future. Once the hype and BS is questioned, watch out below.
Only the bozos on CNBC would ask: what does doomed mean? Lutz should have said: doomed means the fate of CNBC in about 2 years.
I suggest the days of Government Bailouts/handouts for fake business models based on saving the planet with fake claims of zero emissions (they may be zero at the car but the emissions from the power generation make that claim laughable)…are over.
From Wolfstreet.com
“Tesla Gm Comparison”
Elon Musk is an anti gun libtard, that’s enough stupidity for me not to like him…