Bob Lutz: Tesla "going out of business"

[macpacheco]

I loved the recent article:
Why Does Tesla Do Everything Better?

Where they state outright that Tesla is out to make great EVs, while the competitors offer EVs but don't really want to sell a lot of them.
The competition is still betting on ICEs and hybrids because they're more profitable to them and dealers.

That's why I firmly agree with Tyl's post that Tesla must be serious about becoming profitable soon. Ideally full FY2018 profit and last big loss in Q1'18, with Q2 a little loss or a little profit, and from then on a big enough profit the naysayers will be silenced.

Just get M3 production scaled to 5k cars a week (250k cars/year) that even if MS/MX sales stagnate they will still turnout a profit while funding a GF in Europe and one in Asia as well as going full throttle with Semi and Roadster NG. M3 production gets to 10k/week then M3 alone pay all the bills with ease. I hope they moderate other project's schedule to keep the whole thing profitable and focus on having Model 3 with high production and high quality.

 

[TaoJones]

Ever wonder how much a Mercedes service writer makes at a busy stealership?

The service revenue dwarfs new car sales. $18M/year is what we came up with for just one SoCal location.

Then you’ll get the tired line from independent shops - “Why can’t you get your Tesla serviced somewhere other than Tesla? Why do they force you to do that?”

It’s such crap. Remember how wearing seat belts got spun into a personal freedom issue that then got glommed onto by the tobacco companies “because it’s your *right* to smoke - don’t let “them” take that away from *you*”.

And here we are in present day. NADA and GM doing everything they can to promote stealerships as good for local families (by asking why Tesla hates same), and Roy fooking Moore saying that *they* in DC are trying to stop Alabamans from exercising their right to choose.

The ironies in all of the above are almost too numerous to list. Pro choice Alabama - who woulda thunk it!

Suffice it to say, whenever someone tells me that I’m supposed to “take something back” or to “protect my right” to spend more for less (see stealerships), the ol’ BS-o-meter starts working overtime.

Stealerships instead of Tesla’s brilliance
Not wearing seat belts
Smoking
Voting for party over principles

Who knew that the common theme would be scumbag lobbyists, eh?

I hope Tesla never caves to the stealership model. It pains me to consider how much they have to spend to fight the good fight state by state plus overseas. But spend they must.

And as far as Bobby Putz goes, how bout that CCS infrastructure, eh Bobby? Once again he’s bet on the wrong short-term hoss.

 

[trayloader]

Old senile hypocrite fart.
He was once adamant of Musk, guess the fusion talks went nowhere and now he´s on a lifelong vendetta.

 

[Barklikeadog]

Yup, about $10K added to a $30K car.

dealership markups are typically 2 to 5 percent.

 

[Barklikeadog]

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

I'll think about that the next thousand times I see a post here begging for help, wondering who to call.

 

[jeffro01]

I'll think about that the next thousand times I see a post here begging for help, wondering who to call.

Great. You do that. I hope it helps you sleep better. The rest of us though will continue to carry on the fight to keep stealerships out of the Tesla sales model. There is absolutely NOTHING you gain by adding a middle man other than spending more for the same product so the middle man can get a cut...

There is no such thing as an ethical stealership, they simply do not exist. They exist entirely due to unconstitutional laws that violate the interstate commerce clause of the Constitution. Tesla has largely tried to avoid the inevitable federal case that will eventually end up in SCOTUS's lap but I believe that very case is now pending in Michigan due to their egregious actions.

Jeff

 

[bhzmark]

Lutz is such a great example of how technology progresses one funeral at a time.

 

[Esme Es Mejor]

How many times has Lutz called for Tesla's death? It's comical now...

Jeff

 

[ItsNotAboutTheMoney]

dealership markups are typically 2 to 5 percent.

Over what?

 

[buttershrimp]

Maybe the fact that Franz had worked for GM for a number of years and eventually ended up at Tesla is a sore spot for Lutz. Business Insider has a nice article on Franz: The secret to how Tesla gets its cars to look so good

Dang... this thing keeps getting more and more easy to explain. Bob Lutz is a tool of epic proportions... He probably pleasures himself to Lee Iococa audiobooks.

 

[gigglehertz]

Lutz is such a great example of how technology progresses one funeral at a time.

I hope Lutz lives long enough to see how tragically wrong he is.

 

[AnxietyRanger]

I think Bob Lutz is likely wrong on his Tesla prognosis. But the question on third-party sales and service is still an interesting one to ponder.

Exactly. Tesla Stores >= Dealerships. To the end consumer, it's the same...only better.

I'm still not convinced of this automatically.

One thing is, Tesla looks at sales location demand from a very different perspective than a local entrepreneur would. Which means, there are many places without Tesla sales and service locations at all, where a local dealership would be happy to cater to that market. If you are a consumer in such an under-served area, then you are not benefiting. This is the same reason why an only centrally-driven government doesn't work for the benefit of all people...

Second thing is, I'm not sure even the service is better. Tesla sales and service are more bureacratic than any dealership I've even bought cars from. Everything needs permission from somewhere abroad, the CPO progress is crazy rigid compared to usual trade-ins and userd car sales etc. The centrally driven model is definitely not nearly as flexible as previous encounters with other brand's local dealerships and (for us elsewhere) local importer organizations, who work in local conditions, not in California ones.

And the third question is, can Tesla truly scale this model as it is? I mean, even Apple, who is often credited for realizing the value of their own stores (for reasons not dissimilar to Tesla's, and who has a similarly lop-sided employee count inflated by store personnel), sells at third-party locations. If the only place to buy or service a Mac or an iPhone would be an Apple store, that would be a sorry state indeed for much of the world.

Any distributorship legal questions aside, I believe Tesla and consumers would be well-served by some hybrid model. If not for sales (perhaps Internet can solve a lot of that), at least for service.

 

[AnxietyRanger]

One last set of comments I'll make about this topic. Tesla and Apple are the only companies that I would sit, stand, travel, watch a live streaming event of or wait in line for to see their products. Says something about the products, the design of them, and the people leading the companies.

That probably tells more about your personal interests than the market, though. That you selected Apple only and dismissed a lot of other interesting players, probably tells even more. Nothing wrong with that, of course. They are halo companies where you live. Some might argue Apple is much less a halo-company these days, but they do have a lot of brand cachet.

This shows on TMC a lot, I've never really considered this a car forum - and I guess many of you would gladly agree - due to much of the people being from quite a different background and interest group. But that does result in a rather limited worldview much of the time, it must be said.

I'm not saying Apple or Tesla aren't special or haven't done many things successfully, but many car brands evoke great passions and have done so long before even Apple was born. They are not really comparable to the grey mass of computer makers pre-Apple's rise.

Certainly a lot of people tune into watch car announcements from many companies and travel to see them. When Audi launched the second-generation Audi TT at the Brandenburg gate, that certainly was both a local and an online hit.

I don't drive a semi or won't ever probably get to own one of the new Roadsters, but I tuned in all the same to watch the live streaming of the semi event and found it fascinating.

We tend to be abnormally interested in brands that we identify with, I have experienced this too with other brands. Tesla has done very well in brand building and in ushering in the EV era. They deserve tremendeous credit for that. Nothing wrong with enjoying it as a consumer either.

 

[dmode]

I sincerely hope Tesla never embraces the dealership model. After my harrowing experience purchasing a 60K BMW from a dealership, I just cannot go back to dealership and deal with the shenanigans. I was trading my old car and the shady salesperson falsely claimed that my trade-in had an accident that I was hiding (no record on Carfax). And that he has to "discuss" the deal that we had arranged with the manager as the numbers won't work anymore.

Also, let's not talk about service. They would nickel and dime you to death.

 

[AnxietyRanger]

Also, let's not talk about service. They would nickel and dime you to death.

But my point is: Even if we assume Tesla's sales and service is always better (which IMO clearly it is not), what is one to do if Tesla doesn't deem it fit - or is unable to stretch - to build a store or service center in your area?

This, of course, why third-party networks are born in the first place, because third-parties have different reasons and cost-structures to cater locations that otherwise might not make sense to centrally-driven operators situated elsewhere.

Again, imagine if the only place to buy and service Apple products were Apple stores. Great if you live near one, not so great for the rest of the world.

 

[sandpiper]

I think Bob Lutz is likely wrong on his Tesla prognosis. But the question on third-party sales and service is still an interesting one to ponder.



I'm still not convinced of this automatically.

One thing is, Tesla looks at sales location demand from a very different perspective than a local entrepreneur would. Which means, there are many places without Tesla sales and service locations at all, where a local dealership would be happy to cater to that market. If you are a consumer in such an under-served area, then you are not benefiting. This is the same reason why an only centrally-driven government doesn't work for the benefit of all people...

Second thing is, I'm not sure even the service is better. Tesla sales and service are more bureacratic than any dealership I've even bought cars from. Everything needs permission from somewhere abroad, the CPO progress is crazy rigid compared to usual trade-ins and userd car sales etc. The centrally driven model is definitely not nearly as flexible as previous encounters with other brand's local dealerships and (for us elsewhere) local importer organizations, who work in local conditions, not in California ones.

And the third question is, can Tesla truly scale this model as it is? I mean, even Apple, who is often credited for realizing the value of their own stores (for reasons not dissimilar to Tesla's, and who has a similarly lop-sided employee count inflated by store personnel), sells at third-party locations. If the only place to buy or service a Mac or an iPhone would be an Apple store, that would be a sorry state indeed for much of the world.

Any distributorship legal questions aside, I believe Tesla and consumers would be well-served by some hybrid model. If not for sales (perhaps Internet can solve a lot of that), at least for service.

I agree with this. The theory is that removing the middle man saves cost. But centralizing things inevitably creates a bureaucracy that adds cost and usually destroys the advantage. And there is a bit of a Darwinian process with the dealerships that forces them to keep costs under control.

I think that Tesla will, at some point, have to embrace certified third party service centers, if not dealerships. Cars are not TVs. EVs, when mature, will need less service, but it won't go away.

 

[cpa]

One of the advantages of the stealership model from the manufacturer's side is that the manufacturer can recognize a sale (subject to the usual allowances required by GAAP) when they deliver new vehicles to the local dealers. The manufacturers can foist the quantities delivered upon the dealers. The ultimate purchase price that the dealership pays is not determinable upon delivery; there are other factors like interest charged or credited, buy backs, and reimbursements for costs incurred by the manufacturer that benefit the local dealers, like advertising.

At present Tesla does not have much if any inventory to sell to these putative dealers. It may very well be that Tesla will have a demand that outstrips supply for the foreseeable future. I mean this to say that anyone who wishes to buy a Tesla must configure it and then it will be manufactured, even if the wait is ten days or less. There will always be some inventory vehicles around due to last-minute cancellations or other reasons, but I would think that Tesla does not want to see thousands of undelivered cars gathering dust at the back of a large parking lot, waiting to be sold to dealers across the globe.

The capital investment for an independent dealership is significant, and if Tesla cannot provide a lot full of new vehicles to sell, there won't be many takers.

Independent service centers are a much more likely possibility in a few more years, however. Just my opinion. . . .

 

[AnxietyRanger]

OTOH, premium cars in Europe are often sold by dealers based on custom orders. Buying premium cars from the lot is not really that usual for new cars in many places in the world.

 

[voip-ninja]

I agree with this. The theory is that removing the middle man saves cost. But centralizing things inevitably creates a bureaucracy that adds cost and usually destroys the advantage. And there is a bit of a Darwinian process with the dealerships that forces them to keep costs under control.

I think that Tesla will, at some point, have to embrace certified third party service centers, if not dealerships. Cars are not TVs. EVs, when mature, will need less service, but it won't go away.

The number of M3s that are supposed to be on the road in the next year or two will force the issue.

Not everyone is going to be happy driving for hours for service or waiting weeks or longer for basic repairs.

The only person I know with a P100D was without it for six months after getting rear ended due to a combination of Tesla service incompetence and parts availability. The icing on the cake was the body work. I don’t hear too many commenting on the travesty of Tesla letting scummy body shops repair cosmetic damage on their cars.

 

[kinho]

In reply to Lutz' point where Tesla has no special sauce, I'd like to add that they have a growing network of superchargers, a great design and engineering team, a CEO with a vision that appeals to a sizable audience. Are those not Tesla's special ingredients? Not to mention the gigafactory. Maybe I'm just clueless.

Btw, I'm proud of Musk for successfully bringing to market a highly desirable car that's designed and manufactured in America...AND I'M FROM HONG KONG!!!!! Baffles me how so many Americans are not rooting for this company...sigh.