Bob Lutz is the former vice chairman of General Motors and he believes Elon Musk’s Tesla business model is doomed. Bob Lutz is also a noted critic and skeptic of Tesla so it’s not much of a surprise that he’d be making the comments he’s making. Tesla has been riding the wave of mostly positive public opinion and Musk is often seen as a playboy billionaire (think Tony Stark references) and both tend to paint a golden picture of the company. I guess those of us who aren’t busy running multi-billion dollar companies aren’t really looking past the front window. Here’s what Bob Lutz has to say about Tesla’s business model.
“Their upside on pricing is limited. Everybody else sells electric vehicles at a loss,” he said. “The puts a ceiling on your possible pricing.”
Since Tesla, co-founded and led by billionaire entrepreneur Elon Musk, can’t make money on the high-end Model S sedan or Model X sport utility vehicle, “how in the world is he going to make money on a $35,000 small car?” asked Lutz, referring to the more affordable, upcoming Model 3 sedan. “The cost of a car does not come down proportionally to price.”
“Somehow it’s levitating. Elon Musk is the greatest salesman in the world. He paints this vision of an unlimited future, aided and abetted by some analysts,” Lutz said. “It’s like Elon Musk has been beamed down from another planet to show us mortals how to run a company.”
But Lutz said real numbers don’t lie. “It’s a constant cash drag. They’re highly dependent on federal government and state incentives for money.” He added, “They have capital raises all the time.”
It’s hard to argue with Lutz on “real numbers” but at the same time, it’s hard to not believe his words aren’t just being thrown out because of his skepticism in Tesla. I guess we’ll just have to see how the real numbers continue to stack up. In the end, it’s the market and investors who will do the talking, either buying into the Tesla dream or checking out of it.