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Bob Lutz in Road & Track.

Hank42

Member
Sep 30, 2012
518
272
United States - NY
First I though maybe, maybe Lutz has a point but then I saw his thing about building a hybrid, which proves that he doesn't grasp what Tesla is about. So I disregard all of his statements as ignorant.
For Tesla to build an ICE hybrid is so utterly far fetched and against all logic so one can't even begin commenting on it.

If Tesla would build ICE hybrids then Lutz needs to start a company that builds horse /gasoline hybrids.

Spot on! I saw that at the end and contrasted that to his first paragraph about service centers being too costly.
That may be true of an ICE service center, but what has Tesla got in theirs Service centers? A few specialized computers and a handful of wrenches. There's non of the equipment that is needed to support a conventional ICE car, and hence the cost is less - probably even less than an Apple store!
So when he gets into the point that Tesla should build a Hybrid - wow, does he totally prove he has no idea what Tesla is all about. Tesla would surly fail if they tried - Tesla's support infrastructure is designed for Electrics only, and to introduce ICE's into the support model would be a disastrous step backwards. It _WOULD_ make them more appealing as a buyout target however, because then the other automakers would be buying something they are more familiar with - outdated technology.

ANd don't even get me started on the $loss per vehicle- we all know how to "lets have fun with charts and numbers" - I'm sure BMW et al is losing $$ as well, the difference is, they have more fat on the bone and can afford to dilute the market with garbage.
 

SpiceWare

Member
Sep 5, 2015
822
1,049
Fresno, Texas

Nice retort.

I do quesiton this bit -
We typically utilize most of our cars 5-10 percent of the time, or about 1-2 hours per day. This means out of 253 million-plus cars in the U.S., 225 million-plus are sitting idle at any given moment.

Seems to be discounting that the 1-2 hours usage per day tends to be at the same time for a lot of people, hence traffic jams at rush hour.
 

asus389

Member
May 17, 2014
93
37
Ann Arbor, MI
Spot on! I saw that at the end and contrasted that to his first paragraph about service centers being too costly.
That may be true of an ICE service center, but what has Tesla got in theirs Service centers? A few specialized computers and a handful of wrenches. There's non of the equipment that is needed to support a conventional ICE car, and hence the cost is less - probably even less than an Apple store!
So when he gets into the point that Tesla should build a Hybrid - wow, does he totally prove he has no idea what Tesla is all about. Tesla would surly fail if they tried - Tesla's support infrastructure is designed for Electrics only, and to introduce ICE's into the support model would be a disastrous step backwards. It _WOULD_ make them more appealing as a buyout target however, because then the other automakers would be buying something they are more familiar with - outdated technology.

ANd don't even get me started on the $loss per vehicle- we all know how to "lets have fun with charts and numbers" - I'm sure BMW et al is losing $$ as well, the difference is, they have more fat on the bone and can afford to dilute the market with garbage.

I thought the same thing regarding cost of service centers/stores. He keeps saying that "running a car dealer is more expensive than selling electronics" but in the case of electric cars i'm not sure thats true. I'd wager that selling/servicing an electric car is much more like running an Apple store than the same for an ICE car. Recent reports about rattles aside, ICE cars are way more complex and unreliable. They have thousands of moving parts, toxic, fluids and gasses, heat, etc.
 

Takumi

Member
Aug 25, 2006
681
328
IL
I thought the same thing regarding cost of service centers/stores. He keeps saying that "running a car dealer is more expensive than selling electronics" but in the case of electric cars i'm not sure thats true. I'd wager that selling/servicing an electric car is much more like running an Apple store than the same for an ICE car. Recent reports about rattles aside, ICE cars are way more complex and unreliable. They have thousands of moving parts, toxic, fluids and gasses, heat, etc.

Musk's track record so far has been leaning toward making the EV as complex as the ICE is. Did anyone really ask for the "improvements" he's shown with the X? Hopefully, he goes back to KISS principle on the ≡.
 

wdolson

Well-Known Member
Jul 24, 2015
7,451
9,941
Clark Co, WA
Tesla hires college gratuates... still gets accused of employing children. What am I missing here?

I've never heard any accusations they employ children, but considering all the other smack some people have said about Tesla, I wouldn't be surprised.

In the case of the guy who gave us the test drive, his degree is in Mechanical Engineering. I asked him why they had an engineer doing sales and he said he was taking a year off school before getting his Masters and he thought working in the Tesla store would be easier than working on the tech side. He said he did a 6 month internship at the Palo Alto office while he was in school.

- - - Updated - - -

Spot on! I saw that at the end and contrasted that to his first paragraph about service centers being too costly.
That may be true of an ICE service center, but what has Tesla got in theirs Service centers? A few specialized computers and a handful of wrenches. There's non of the equipment that is needed to support a conventional ICE car, and hence the cost is less - probably even less than an Apple store!
So when he gets into the point that Tesla should build a Hybrid - wow, does he totally prove he has no idea what Tesla is all about. Tesla would surly fail if they tried - Tesla's support infrastructure is designed for Electrics only, and to introduce ICE's into the support model would be a disastrous step backwards. It _WOULD_ make them more appealing as a buyout target however, because then the other automakers would be buying something they are more familiar with - outdated technology.

ANd don't even get me started on the $loss per vehicle- we all know how to "lets have fun with charts and numbers" - I'm sure BMW et al is losing $$ as well, the difference is, they have more fat on the bone and can afford to dilute the market with garbage.

Tesla's loss per vehicle should go down in the coming months as the Model X development shuts down and they start delivering the Model X in numbers. Less money going out the door and income coming in. The Gigafactory construction will go on for a while, but it will start producing in the finished portion next spring. I believe the plans are to produce batteries for stationary storage as well as cars and until the Model 3 is up to full capacity, there will probably be a year or two when the Gigafactory is able to produce a lot of stationary batteries, which Tesla can sell as another revenue source.

They will continue to burn cash until 2020, but I expect the rate to taper off unless something outside of their control like another world financial meltdown happens.

BMW's profits are down for 2015, but they are still making a profit of over $1 billion Euros a quarter
http://www.wsj.com/articles/bmw-profit-falls-amid-fierce-competition-1438668206

 

Caligula

Member
Oct 14, 2015
596
149
San Diego
I've never heard any accusations they employ children, but considering all the other smack some people have said about Tesla, I wouldn't be surprised.
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You're right. The original term used was "kids". My apologies, however I think my point still stands.
 

sandpiper

Active Member
Sep 25, 2014
2,833
2,139
Ontario, Canada

He makes some interesting points but I think a fails on the whole:

1. The automotive industry has changed radically before and survived. The introduction, in the 80s, of Japanese style production systems was enormous. It was a full retooling of the entire US automotive industry. This will be just such another shift and you can't diminish the capacity that people have to adapt. Some of the old guard are frightened, but the best will always embrace change and new ideas.

2. Nobody needs to own cars. But most people will still want to. Cars aren't just transportation any more than clothes are just a way to keep warm.

3. Truly autonomous cars are a long way away yet and there are going to have to be huge infrastructural/legal hurdles cleared before they become common. And even if/when they do, traffic will not diminish any more than computers reduced paper consumption. If you make something cheaper and easier, people will consume more of it.

4. It's naive to imagine that the big 3 will be subservient to Apple/Google/whomever. Information technology is easy and cheap to purchase. The self-driving aspects of a car will become commodities very quickly once the tech is mature and the legal/physical infrastructure is in place to support them. The only aspects of the car where Apple/Google could possibly have interest or an advantage would be in the operator interface and maybe infotainment systems. But those are not the central aspect of what a car is about.

5. Building cars is a very different business than selling phones & internet ads. It involves enormous supply chains, demands enormous in-house manufacturing capacity, a great deal of capital investment, and even with EVs it will demand a solid service and support infrastructure. Apple and Google have no experience at all with this sort of production work. And Foxconning it to Magna or whomever is simply not practical for anything more than low volume boutique vehicles.

6. Because cars are a very large expenditure, the auto industry will always be massively competitive. People might be willing to cough up a couple hundred bucks extra every year or two for a higher end phone over a lower end one. But the bulk of the market is made up of people who will aggressively shop/whipsaw car sellers to squeeze out every $ of savings.

Don't get me wrong. I'm a big fan of Tesla and the Silicon Valley culture. But auto mfg is simply not the same thing. Simply dismissing Lutz as a dinosaur who has nothing to say is no different than the behavior of the 14 year-old who assumes that the old man is an idiot. I don't fully agree with him either, but be VERY careful about simply dismissing him.
 

electracity

Active Member
Jun 8, 2015
4,028
2,531
60606
At worst Tesla becomes is a subsidiary of Alphabet. That might be better anyways from the shareholders perspective, especially when Musk steps away from CEO. It looks to me that Tesla fits very well with google. Google doesn't have a real car, and isn't particularly good at UI. The two companies are working autonomy from the opposite ends. Google is fabulous at the network aspect and voice recognition.

I don't know why Lutz seems to believe that Tesla would completely fail like Delorean.

The downside for investors might be that Musk wouldn't sell unless he had to. That could mean, prior to selling, a lot of rounds of acquiring capital at high cost.
 
Last edited:

Chickenlittle

Banned
Sep 10, 2013
2,781
4,943
Virginia
Spot on! I saw that at the end and contrasted that to his first paragraph about service centers being too costly.
That may be true of an ICE service center, but what has Tesla got in theirs Service centers? A few specialized computers and a handful of wrenches. There's non of the equipment that is needed to support a conventional ICE car, and hence the cost is less - probably even less than an Apple store!
So when he gets into the point that Tesla should build a Hybrid - wow, does he totally prove he has no idea what Tesla is all about. Tesla would surly fail if they tried - Tesla's support infrastructure is designed for Electrics only, and to introduce ICE's into the support model would be a disastrous step backwards. It _WOULD_ make them more appealing as a buyout target however, because then the other automakers would be buying something they are more familiar with - outdated technology.

ANd don't even get me started on the $loss per vehicle- we all know how to "lets have fun with charts and numbers" - I'm sure BMW et al is losing $$ as well, the difference is, they have more fat on the bone and can afford to dilute the market with garbage.
lutz the putz hasn't been right about any of his tesla statements in three years. According to him gm would already have a 200 mile ev on the road by now. Why anyone listens to this person is beyond me
 

Julian Cox

Banned
Jul 17, 2013
1,313
1,497
Cox
I looked at Lutz's arguments and and assuming he is quoted accurately they are pretty sad.

If the only thing you knew about was joining a large established company and trying to run it for trivial annual profits (and then failing in that endeavor) then sure, if you did not have the brains to recognise the difference between that and a massively growing startup then you might come to the same conclusions.

'Bleeding cash'. Wrong. Check the asset line growth and hey presto - There's the cash.

'Securitized Assets'. Wrong. Check the overseas shipment growth line - there's the revolving credit line. Additional assets are a backstop during reconciling customer receipts after the car is handed over. Not to be confused with Ford mortgaging off its assets while GM was going bust.

'It's true that the world may be running light on buyers who will spring for a big-dollar electric vehicle that can't make the hike from Detroit to Chicago without stopping for a [short and free] charge.' Wrong, Demand is at an all time high and growing.

"cheap gasoline isn't helping Tesla's case". Wrong. Cheap gasoline is not helping gasoline's case. Tesla demand at an all time high.

"Right now, prices around the country are hovering close to $2 a gallon. If that's bad news for the Prius and the Volt, it's worse for the Model S."
Wrong. Prius and the Volt exist to just save gas. Model S is not bought just to save gas, demand at an all time high and growing.

"In addition, there's never been any secret sauce to the company's battery technology." Wrong. Tesla's battery tech clubs the tech available to other auto makers to death like a baby seal. Not just in chemistry, energy density and price but in electronics and software, and in first mover advantage with all sorts of benefits when it comes to scaling.

"Now that Audi has announced it's getting into the EV game, Tesla should be even more concerned." Wrong. The Audi concept vehicle slated for 2018 is beaten hands down by Tesla's 2016 products. By 2018 Audi will be abysmally behind.

"If you're a luxury buyer, which car would you rather have?" No brainer. The Tesla, DUH. Anyone want to be a guinea pig for an untested me too EV product from Audi? I think not.

"Nobody has ever been successful with company stores". Tesla has.

"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." And they said Elon insulted Apple.

"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." OK, the guy has clearly lost the entire plot. Maybe he should visit a Tesla store. A Tesla store sits in an upscale mall. It typically has 2 cars and a chassis on display and perhaps five demo cars in the adjacent parking lot. That's it. The rest is online, and the cars are good enough for customers to order and wait in line for them. Inventory problem? Dinosaur problem. Advantage Tesla.

"Under a traditional franchise arrangement, the factory never has to carry that burden. " What burden? The burden of an outdated business model. See above. What Tesla has for is pains is direct customer relationships, full retail margins on its products and most importantly cost control and direct technical feedback from its service centres. We will see in future how much of an encumbrance it is on auto makers trying to compete with Tesla's autonomous fleet operations with dealerships claiming rights to all sales and to all service as a profit center. Franchised dealers are the bane of the auto industry. Hear me on this.

"[Model X] A big, expensive vehicle with a compromised structure to accommodate gullwing doors can hardly be a sales knockout." Wrong. Safest SUV on the planet, 30,000 waiting customers.

"If I were sitting in Musk's seat, I would take an urgent look at cutting cost. Not just taking cost out of the car, but reducing expense in general." Lutz. That is why Musk is worth $13 billion and climbing at the beginning of an automotive career to rival that of Henry Ford, and you are a semi-retired ex employee of a failed GM griping from an armchair. The man is in an entirely different league, might be an idea to show some respect. Musk makes big bets and wins while lesser men pinch pennies and lose. Way of the world.

"I would seriously consider an entry-level model with a cheaper, range-extended hybrid driveline.". Lack of product integrity is a losing strategy. customers are not as dim as you think they are. Take a look your failed Volt program, Lutz.

"but can carry on under gasoline power". Sad.

"Would an internal-combustion engine dilute the Tesla brand?" Obviously, just as it diluted the Volt brand and will kill GM entirely.

"Unless Tesla rights its organization and products in a hurry, it'll join those ranks." What a sour loser. I think Musk can figure it out just fine without the advice of a guy that ran GM into the wall.

- - - Updated - - -

Another way to put it is that Lutz's comments have nothing to do with Tesla.

They are a commentary on what it would be like if a Legacy car maker was unable to do channel stuffing.

On a technical point that may have gone under the radar. Lutz appears to be confused about Tesla's revolving credit line which it uses to ship cars abroad while keeping the sale cash flow positive. The facility allows them to ship up to $750 million per month without finished goods inventory touching the bank balance assuming the time from factory to customer is one month. He seems to have it mixed up with Ford mortgaging its assets to stave off the bankruptcy Lutz and his cohorts landed on GM / the taxpayer.

When last seen Tesla had drawn down only $50M of that $750M revolving credit line. The primary security for that revolving credit line is of course the cars in transit to customers while car is still owned by Tesla. Once the car is handed over Tesla has pledged additional security as a backstop so that the lenders are always secured even during the time it takes for customer cash to be reconciled after the ownership of the car passes to the customer (hence the incredibly cheap terms).

This is what Lutz is talking about when he says 'Tesla is securtitizing its assets'. Essentially Lutz has it completely backwards. The same thing goes regards Tesla's in-house 'dealerships'. They do not function to carry sales inventory. They typically have one or two display vehicles and two to five test drive demonstrators in an adjacent car park. All new car inventory is processed from factory to consumer direct. There are no acres of inventory at Tesla's sales locations.
 

electracity

Active Member
Jun 8, 2015
4,028
2,531
60606
"burden" means overhead in manufacturing speak.

When did GM fail? They made 2,300,000 vehicles last quarter at record revenues, while Tesla made 12,000.

We don't know yet what Tesla's need for a lot more capital will do to shareholder value. Lutz evaluates Tesla as a business, which perhaps it is not.
 

sandpiper

Active Member
Sep 25, 2014
2,833
2,139
Ontario, Canada
"burden" means overhead in manufacturing speak.

When did GM fail? They made 2,300,000 vehicles last quarter at record revenues, while Tesla made 12,000.

We don't know yet what Tesla's need for a lot more capital will do to shareholder value. Lutz evaluates Tesla as a business, which perhaps it is not.

Yep... the jury is still out on Tesla. I love the products and so do many here. But that's completely different from it's ability to function long term as a successful business. Silicon Valley is littered with companies that built great products but could not survive as a business. And bear in mind that building near 10M cars per year is vastly, VASTLY different than building 50,000.

But! I do think Elon and crew are smart enough to navigate the challenges. Otherwise I would not own one!
 

wdolson

Well-Known Member
Jul 24, 2015
7,451
9,941
Clark Co, WA
Yep... the jury is still out on Tesla. I love the products and so do many here. But that's completely different from it's ability to function long term as a successful business. Silicon Valley is littered with companies that built great products but could not survive as a business. And bear in mind that building near 10M cars per year is vastly, VASTLY different than building 50,000.

But! I do think Elon and crew are smart enough to navigate the challenges. Otherwise I would not own one!

I agree. Tesla can still fail. The odds for success are better now than a few years ago, but a lot of things can happen. GM is a much humbler company than before the bankruptcy and Ford is mortgaged to the hilt, but their sheer size allows them to survive some things that could kill a small upstart like Tesla.

Elon thinks big and I'm sure he has mapped out a very detailed strategy to get from 50,000 cars a year to 1 million or more, but it has a lot of new challenges they have never faced before. I see signs of Tesla taking the steps. They just bought one of their tool and die suppliers in Michigan and they bought the old Solyndra building. They are definitely thinking ahead for a much bigger company. The factory they are in now was built to build 500,000 cars a year and the current production lines are tooled to build 100,000. Tesla is thinking ahead to when that factory is maxxed out, which gives me better hope they will scale up successfully.

Elon is a massive risk taker, but he's also a careful planner. What he does requires some luck, but less luck that people think because he has done some much homework before taking the risk in the first place. That's a rare quality, most people are one or the other, or neither.
 
Lutz has his head in the sand. The old guard doesn't get it, never will. He's a flip phone guy in a smart phone world, and nothing is going to change that. Road and Track just proved they are only interested in promoting the old car sales and service model.
 

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