Bob Lutz: Tesla "going out of business"

[bro1999]

Tesla is 'going out of business,' says former GM exec Bob Lutz

Ouch, them fightin' words! Is he off his rocker, or closer to the truth than most people think? Discuss.

 

[Zaxxon]

In the End Days, we can look back and recall that Lutz lutzed his mind completely sometime in mid-2017.

 

[outdoors]

Seeing that Block M in the background from A2 has me embarrassed. A city looking to the future with a relic from the past in the interview.

He should have done the interview from the Bakken oil fields in North Dakota with the nat gas flaring in the background. That would be a more appropriate setting.

 

[MSEV]

I believe this is one of the issues with Bob Lutz: he can't see how Tesla will work, it is doing the car business so differently than what he knows. I also think, even though he knows a lot about some electric cars (the Volt), he doesn't believe there is a tipping point from fossil fuels to electric cars in the near future, or as soon as some others do. One of the interesting parts of his statement: Tesla will fail because it doesn't have dealerships. As a person who hates buying a car through a dealership, has not done so for 7 or 8 years, and who hopes to never do so again, I don't think Bob understands me. (There is a bit of a wink in this last statement.) Or maybe I don't understand him...

 

[PhatCat]

Maximum Bob, as he was known is his auto czar days, is a dinosaur. Yes, he jammed the Volt thru GM when everyone said it would never happen, but he is a prisoner of his past. He is always entertaining, these days mostly in an unintentionally humorous fashion.

When i hear him now i picture T Rex looking up at the asteroid flaming through the atmosphere towards the Yucatan peninsula thinking, "What, me worry?"

 

[Rockster]

Why does the media insist on wheeling out this turd every time Tesla makes headlines? Click bait? Entertainment value? It's wearying.

 

[McRat]

Lutz can't even build a vehicle folk are requesting. VIA Motors would be a money maker if it were managed correctly.

 

[PhatCat]

Why does the media insist on wheeling out this turd every time Tesla makes headlines? Click bait? Entertainment value? It's wearying.

For the same reason they trot out Wozniak or Scully whenever something big happens with Apple. They had an important role in the past so that makes their opinions relevant in the present. They fall victim to the logical fallacy: Post hoc ergo helicopter prop.

 

[ItsNotAboutTheMoney]

He's been saying the same thing for a long time.

It's obvious that Tesla is all about the Model 3. If it gets the production issues fixed, it'll keep investors and lenders interested. If it doesn't, it'll fail.

The thing that makes his opinion worth ignoring is his insistence that Tesla needs dealerships.

The average number of new vehicle sales per dealership per year in the USA is 945. And that's a _record_. 3 sales per day is a record.

What's needed is a fresh structure that separates sales and service.

 

[jelloslug]

I love how through the interview he says that GM has lower battery costs and then right at the end, he says that by the roll out of all the "future cars" in 202(who knows) that they will be as low as Tesla or lower.

 

[Barklikeadog]

I'm with him on the dealerships. when you get to a certain volume, service becomes a problem. dealerships can handle those problems and take care of the costs
with only a small markup on the price and sellign used cars.

 

[Zaxxon]

I love how through the interview he says that GM has lower battery costs and then right at the end, he says that by the roll out of all the "future cars" in 202(who knows) that they will be as low as Tesla or lower.

Yep, this was the point at which you know his whole point is bullshit.

Lutz: "Tesla has no secret sauce. GM's batteries today are cheaper and more capable. GM launches on-time and with great design. There's nothing Tesla does that GM and others couldn't immediately replicate."

Host: "Then why doesn't GM do it? Why doesn't GM have a car that's as coveted as a Tesla?"

Lutz: "They will, in 2021."

Ok, brother. Ok.

 

[Saghost]

I'm with him on the dealerships. when you get to a certain volume, service becomes a problem. dealerships can handle those problems and take care of the costs
with only a small markup on the price and sellign used cars.

Why? How is an independently managed dealership that has to negotiate with the manufacturer for parts and technical support superior to a company owner service center of the same size in terms of service provided to the final customer?

 

[OlderThanDirt]

When i hear him now i picture T Rex looking up at the asteroid flaming through the atmosphere towards the Yucatan peninsula thinking, "What, me worry?"

In Bob's case and the legacy manufactures mentality he represents....... that flaming asteroid is the Tesla Roadster

 

[Barklikeadog]

Why? How is an independently managed dealership that has to negotiate with the manufacturer for parts and technical support superior to a company owner service center of the same size in terms of service provided to the final customer?

because the dealership pays for itself by selling used cars.
and owners won't have to drive 400 miles
or call random person on the phone
and dealerships will keep an inventory on the lot for people to purchase.
This may be surprising news, but most people don't want to order a car and wait months, they'd rather kick the tires and drive it home.

Ive only had good experiences at dealerships. The only issue Ive had with my F150s in the last 17 years is the alternator going out and
breaking down on a roadtrip. I had it towed to the dealership at 11pm... called my friend who worked there. He met us at the lot in the middle
of the night. Gave me the keys to a loaner, and 18 hours later I picked up my repaired vehicle.

I'm sure tesla service centers perform the same way.

 

[Saghost]

because the dealership pays for itself by selling used cars.
and owners won't have to drive 400 miles
or call random person on the phone
and dealerships will keep an inventory on the lot for people to purchase.
This may be surprising news, but most people don't want to order a car and wait months, they'd rather kick the tires and drive it home.

Ive only had good experiences at dealerships. The only issue Ive had with my F150s in the last 17 years is the alternator going out and
breaking down on a roadtrip. I had it towed to the dealership at 11pm... called my friend who worked there. He met us at the lot in the middle
of the night. Gave me the keys to a loaner, and 18 hours later I picked up my repaired vehicle.

I'm sure tesla service centers perform the same way.

I'm interested by your claim that the dealerships pay for themselves with used car sales (which is somehow different from Tesla's CPO sales?) - do you have a study on dealership income/expenses that backs this up? The conventional wisdom is that Dealers make most of their profit from the service side.

Not sure how the 400 miles is relevant here - as I understood your argument, you're saying that above a certain volume independent dealerships are necessary for good service, while I'm thinking that an equal number of Tesla owned service centers will provide at least as good and likely better service. Given that paradigm, you'd be driving the same distance either way...

Maybe you've been lucky at dealerships. I've never had a buying experience there that didn't involve hours of paperwork and annoyances. My Tesla purchase was very different, even though it did involve a trade in.

Somehow I suspect that folks who don't know your friend that works at the dealership and have his personal cell number wouldn't have had the same experience late at night...

 

[jbcarioca]

I'm interested by your claim that the dealerships pay for themselves with used car sales (which is somehow different from Tesla's CPO sales?) - do you have a study on dealership income/expenses that backs this up? The conventional wisdom is that Dealers make most of their profit from the service side...

...

This information was true a decade ago. I do not know for certain that it still is. I how just looked up the data from a 2005 study regarding US distribution:

These are averages by category for all US dealers for one specific large manufacturer (the statute of limitations on NDI may be over but I don't want to burn my credibility completely):
All figures are in percentage of net income contribution (does not add to 100% because I left out several categories not relevant to this discussion)
New Car sales: (3.1%)
New car F&I. 31.0%
Warranty service 8.1%
Used car sales 5.3%
Used car F&I. 34.0

Used car volumes are far less than new car volumes but margins are positive in used, most of which is off-lease and own-brand trades.
In both cases the following generalities hold:
1. In F&I dealer markup on loans is average of 100bp, high quality near zero sub-prime 200bp or more;
2. dealer markup on extended warranties is typically >100% of dealer cost;
3. almost every dealer add has margins of >100% of dealer cost.
4. the only partial exceptions are the half dozen huge national standardised dealers.

Decades of experience with dealers big and small, located in a dozen countries as well as several major captives and their parents has taught me the following:
1. No manufacturer truly likes having dealer distribution (else why my firm was hired by multiple manufacturers to find out how to establish direct sales in one situation or another?)
2. If F&I income disappears from US sales the dealers fold!
3. Significant parts of major manufacturers sales come from 'manufacturing' high quality used cars through leasing, company cars, fleets and other tactics.

My opinion: Tesla has a cost advantage of 5-8% gross due to direct distribution. It also has a swollen balance sheet because of that. Every manufacturer understands that the single most important Tesla innovation is in distribution. All else, including product, follows. GM, Ford and Chrysler are the ones most seriously disadvantaged by that, followed closely by Toyota (long story, not relevant here: Google Jim Moran- JM Family Enterprises)

The advantage for Tesla Semi will be even greater...

 

[cpa]

I prepared a handful of automobile dealer income tax returns 10-15 years ago. The income statement was segregated into new sales, used sales, parts and service, and other.

Within each segment were the sales figures and cost of sales figures. New car sales had the worst profit margin. Used sales were about twice as good, followed by a substantial contribution from parts and service.

The dealers received new car inventory from the manufacturers and had (I think) 25 days to pay for their inventory before the manufacturer started charging the dealer interest. Conversely, if the dealer could blow out this inventory sooner, the manufacturer allowed a reduction in purchase price. The manufacturer also back loaded the inventory price with such global costs like national advertising programs.

Now, other income. By and large the largest contributor to other income were manufacturer incentives. These figures were easily $400-$500 K per year if the dealership moved enough new cars. Typically, the manufacturer would establish a quarterly or semi-annual quota for units sold. Meeting or exceeding this quota would generate these incentives. While the sales, financing, parts and service folks all received commission based compensation, these incentives went right to the owner's pockets.

I took from all this that if the dealership can show a 2-5% gross profit on new car sales that is OK by ownership because the owners will make out just fine, thank you very much, on the back end.

 

[Dutchie]

Well, it really doesn't matter..

Nibiru to trigger 'end of the world' on SUNDAY with 'apocalyptic earthquakes'

 

[ItsNotAboutTheMoney]

I'm with him on the dealerships. when you get to a certain volume, service becomes a problem. dealerships can handle those problems and take care of the costs
with only a small markup on the price and sellign used cars.

Service needs service centers and service technicians. It doesn't need dealerships.