Bob Lutz Foresees ‘Doom’ for Tesla, Suggests PHEV and Franchised Dealerships

Bob Lutz says he likes Elon Musk personally, agrees the Tesla Model S is a “fabulous car,” but he thinks Tesla is flirting with a “trifecta of doom.”

In an opinion piece posted Monday on Road and Track, the former vice chairman of General Motors who once championed the Chevy Volt offers sweeping commentary, advice, including that Tesla should consider building an extended-range EV like the Volt.

The reason? To stave off what he says is Tesla “showing all the signs of a company in trouble: bleeding cash, securitized assets, and mounting inventory.”

“It’s the trifecta of doom for any automaker, and anyone paying attention probably saw this coming a mile away,” continues Lutz. “Like most big puzzles, the company’s woes don’t have just one source.”

Among its “woes” are cheap U.S. gas prices, limited range for 240-270-mile EVs compared to gas cars, and a direct-sales business model that could represent “a money pit.” These are some of the reasons why, said Lutz, Tesla should think beyond expensive pure EVs.

“I would seriously consider an entry-level model with a cheaper, range-extended hybrid driveline,” said Lutz. “Something with a much smaller battery that also looks great and drives great. Something that’s electric most of the time, say 50 or 60 miles, but can carry on under gasoline power past that. Would an internal-combustion engine dilute the Tesla brand? Maybe, but everyone said Porsche could never build a front-engine car, and look how that turned out.”

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Lutz never mentions the Model 3 Musk has said would be shown next year and to sell in the ballpark of what the Volt now does, but he does cite the Model X as no help for Tesla’s bottom line.

“Stockholders may be clinging to the hope that the company’s upcoming crossover will help put Tesla back on track, but there’s little evidence to bolster that optimism,” said Lutz. “A big, expensive vehicle with a compromised structure to accommodate gullwing doors can hardly be a sales knockout.”

The Model X with its falcon wing doors does have over 30,000 reservations, but once shown, some – even Tesla fans – have said it’s not as attractive as the Model S and the interior seating utility has been a problem for some.

Others defend it, but saying Tesla tech is not so special, Lutz cites Audi as one carmaker waking up to meet global regs who will also threaten Tesla.

“In addition, there’s never been any secret sauce to the company’s battery technology,” said Lutz. “The automakers that bought into Tesla’s tech early did so to avoid having to pony up development dollars on first-generation battery packs of their own. Now that Audi has announced it’s getting into the EV game, Tesla should be even more concerned. If you’re a luxury buyer, which car would you rather have?”

The implication is established brands, which might also include Mercedes-Benz, BMW, and perhaps others, will catch up in due time, and take a significant chunk of Tesla’s finite business away.

With so much working against Tesla, said Lutz, Musk needs to reduce expenses immediately.

“If I were sitting in Musk’s seat, I would take an urgent look at cutting cost,” said Lutz. “Not just taking cost out of the car, but reducing expense in general. When they have a situation where, on an operating basis, they’re losing $4,000 per car, they’re in trouble. At some point, they’re not going to get any more money.”

Elon Musk has at times called hybrids “amphibians,” so for Lutz to suggest an extended-range EV might be an idea Tesla will not readily accept.

If Bob Lutz upsets anyone, it may not be an accident, but part of a long-held way for him: "“I think they [GM PR] were worried I would say the wrong thing, you know, because generally, our communications strategy is in the direction of risk of widths — in other words, a TV interview where nobody says the wrong thing and you get off relatively unscathed is considered a success. The problem is you haven’t used the opportunity to convey any positive information. So i’m not a proponent of the risk-free communications approach.”

If Bob Lutz upsets anyone, it may not be an accident, but part of a long-held way for him: “I think they [GM PR] were worried I would say the wrong thing, you know, because generally, our communications strategy is in the direction of risk of widths — in other words, a TV interview where nobody says the wrong thing and you get off relatively unscathed is considered a success,” said Lutz. “The problem is you haven’t used the opportunity to convey any positive information. So I’m not a proponent of the risk-free communications approach.”

Lutz also suggests going to franchised dealers who will defray costs.

“I think Tesla CEO Elon Musk figured that if factory stores work for Apple, they’ll work for Tesla. But the fixed costs for an Apple store are next to nothing compared with a car dealership’s,” said Lutz. “Smartphones and laptops don’t need anything beyond a mall storefront and a staff of kids. 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. Under a traditional franchise arrangement, the factory never has to carry that burden. Right now, Tesla does.”

R&T’s tagline for Lutz reads: “Bob Lutz has been The Man at several car companies, so your problems are cake. Bring ’em on.”

SEE ALSO: Bob Lutz: Instead Of Volt, GM Should Have Built An E-REV Truck

A former U.S. marine pilot, and risk taker in his own right, “maximum Bob” has been behind several automotive successes and has shown himself unafraid to express opinions some will find controversial.

He once denied “global warming” with the most pungent of terms, and to be sure, he is a product of the traditional automotive business.

If he’s right or wrong, only time will tell, but that he knows how to bat a hornet’s nest with the best of them is probably less in dispute.

Road&Track