Former GM vice chairman Bob Lutz says Tesla will go out of business by 2019

Article by Christian A., on November 22, 2017

Automotive industry veteran Bob Lutz has once again spoken out against Tesla. Known as one of Tesla Motors’ greatest skeptics, Lutz had stated two years ago that the Silicon Valley carmaker is doomed. Now, Lutz is saying flat out that Tesla is going out of business and won’t even get to 2019 at this rate.

In an interview with the show “Power Lunch” at CNBC, Lutz cited a number of issues or reasons why Tesla would not be able to last long in the automotive industry. The electric carmaker has been facing these issues for quite some time, and some of these have been known to the public.

According to Lutz, Tesla is burning its cash fast, no thanks to fixed costs that are now out of control. In fact, Tesla is also spending around $1 billion a quarter, which is at par with what GM spends. However, there is a big difference in the number of vehicles and models that the two carmakers are selling. For instance, Tesla is effectively selling just three models while GM has dozens on its lineup. While GM is raking profits, Tesla posted $619 million in losses in the third quarter of 2017 while managing to build just 260 examples of the Model 3.

As Lutz noted, while the design of Tesla’s vehicles is good, the carmaker’s business model is terrible. He noted that Tesla has some trouble selling the Model X and has even a harder time selling the long-delayed Model 3. He also remarked that Tesla is selling its vehicles below cost, which is why the company is a losing enterprise. Lutz said that with the high cash burn rate, Tesla might have to implement another capital increase.

Furthermore, Lutz told CNBC that Tesla has an inefficient manufacturing operation. Currently, the company is experiencing production delays for its Model 3. Elon Musk, Tesla’s chief executive, had written that the first 30 examples of the Model 3 would be delivered to customers in July 2017. He quipped that after that, production of the Model 3 would grow exponentially, and the carmaker would be able to deliver 100 cars in August and over 1,500 units in September. But instead of producing and delivering 1,630 units of the Model 3 in the third quarter of 2017, only about 200 units reached customers’ driveways.

Just recently, the carmaker unveiled both the next-generation Tesla Roadster and its all-electric Semi. However, Lutz claimed the event was simply a way to deflect attention from its production issues with the Model 3.

Lutz remarked that Tesla holds no advantage over other carmakers, even when it comes to building electric vehicles. He quipped that Tesla has no “secret sauce,” noting that e carmaker employs the same lithium-ion batteries as other carmakers. He also noted that GM might even hold the advantage since its batteries are more capable and less costly.

Lutz was a former Vice Chairman of GM responsible for global product development. Lutz also had experienced working at BMW, Ford Motor Company and Chrysler.

Source: cnbc.com

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