Bob Lutz in Road & Track.

[eye.surgeon]

1) Tesla will almost surely survive as an independent company if not they will be acquired by Google or Apple. 95% chance they remain independent. Every time Tesla goes to the capital markets they get better terms than they were anticipating.

2) BMW may have failed with company stores pre-internet. The time and price to acquire data, move data,sort data,and manipulate data has fallen through the floor. Tesla's problem is not company stores but growing at a compounded 50% rate. Specifically manufacturing at a compounded annual growth rate of 50%. When Musk has mentioned in the past he will not discount dealers in the future it is in the context of not sounding inflexible in dealing with State legislatures and dealership groups in the political process.

3) Bob Lutz is a man of the 20th century. At BMW he was part of the team that created the 3 Series, at Ford he initiated the Ford Explorer project, at Chrysler he not only fathered the Viper but the LH cars including the 300, and at GM not only Volt but Equinox and corporate twins the most financially successful new product at GM in years. But when Lutz speaks of fuel cell technology or battery technology or really any fast moving auto related technology he speaks at least 5 years out of date. He thinks Tesla energy has zero possibility to succeed because lead acid batteries are so much cheaper. LOL.

Let's revisit this post in about 12 months when Musk announces the first of many new Tesla sanctioned independent sales/service centers...aka dealerships. Do you really think that when the M3 is launched and selling 10,000 every month that each will be picked up in a ceremony at the factory? Or trucked to buyer's homes? Of course that model is unsustainable at projected sales levels.

 

[Olle]

First I though maybe, maybe Lutz has a point but then I saw his thing about building a hybrid, which proves that he doesn't grasp what Tesla is about. So I disregard all of his statements as ignorant.
For Tesla to build an ICE hybrid is so utterly far fetched and against all logic so one can't even begin commenting on it.

If Tesla would build ICE hybrids then Lutz needs to start a company that builds horse /gasoline hybrids.

 

[ZachShahan]

You then go down a series of projections, like PHEVs that are nonsensical if you really think about it.

I think you'd love the presentation I'm going to give at the EV Transportation & Technology Summit next week. Will share a video of it at some point for those who can't make it (i.e., almost all of you ).

 

[Ampster]

He is involved as Chairman of this startup:
VIA Motors | Extended-Range Electric Truck 402HP/100mpg
No surpise, it is a hybrid. I had a chance to drive one yesterday. It costs almost $100,000 and is being market to fleet owners.

 

[physicsfita]

2) BMW may have failed with company stores pre-internet. The time and price to acquire data, move data,sort data,and manipulate data has fallen through the floor. Tesla's problem is not company stores but growing at a compounded 50% rate. Specifically manufacturing at a compounded annual growth rate of 50%. When Musk has mentioned in the past he will not discount dealers in the future it is in the context of not sounding inflexible in dealing with State legislatures and dealership groups in the political process.

Speaking of the political process to get in to states like Michigan, I have to say that I haven't seen much going on. There was a report in the Detroit News a few weeks ago that indicated that Tesla sent a lobbyist to talk with some key legislators when they were having a conference, asking for a 10-15 store carve-out from MI's dealership law. I sounded like the legislators at least met with them, but that was about it. Given how about a year ago only one legislator voted against banning galleries, and he was going out on term limits, I find it highly unlikely that any real progress has been made. The dealers, who are also major campaign donors, won't stand for it. Unless Tesla/Musk start making major campaign donations themselves, I am really at a loss as to how they are going to enter a state like MI without playing ball with the dealers. I guess they could threaten to pull all Michigan-based supplier contracts, but I don't know if that's enough pull to go against the dealers given that Tesla's contracts are so much smaller than the Big 3's. I can't even think of what levers they could try to pull in other states.

 

[Darren Donovan]

Not sure if anyone here has the Road & Track issue in hand, mine's at home. There's an article about new car profit being in the single digit %, and that the majority of profit at dealership is through finance, used cars, and service. There's a mention that Tesla will not be able to sustain the direct sales model, and that EM himself has wavered a bit and had said that he'd be willing to consider a "hybrid" franchise model where Tesla holds the majority of ownership. That's news to me!

 

[jvonbokel]

Previously, Tesla did a lot more regional batching, where overseas markets get a higher allocation of builds at the beginning of a quarter and the North American market was concentrated in the last month of a quarter.

InsideEVs.com's data shows they still may be doing some of this. I posted a chart of their US deliveries here.

That said, I agree that you have to be careful about the data, and that the pattern does seem to be changing, at least to some degree. I hope that sometime next year it becomes stable enough that Tesla can start publishing their own monthly numbers like the other automakers, but I'm not holding my breath.

- - - Updated - - -

Let's revisit this post in about 12 months when Musk announces the first of many new Tesla sanctioned independent sales/service centers...aka dealerships. Do you really think that when the M3 is launched and selling 10,000 every month that each will be picked up in a ceremony at the factory? Or trucked to buyer's homes? Of course that model is unsustainable at projected sales levels.

I have no idea whether Tesla will eventually succumb to the dealer model or not, but I don't think it will have anything to do with factory pickup or home delivery. I think home delivery is already mostly a thing of the past. Most people seem to be picking up at their local store or service center. And I don't see how that's any less sustainable than the dealership model. They may need more locations to support higher volumes, but they're continuing to build out their network.

 

[wdolson]

InsideEVs.com's data shows they still may be doing some of this. I posted a chart of their US deliveries here.

That said, I agree that you have to be careful about the data, and that the pattern does seem to be changing, at least to some degree. I hope that sometime next year it becomes stable enough that Tesla can start publishing their own monthly numbers like the other automakers, but I'm not holding my breath.

- - - Updated - - -



I have no idea whether Tesla will eventually succumb to the dealer model or not, but I don't think it will have anything to do with factory pickup or home delivery. I think home delivery is already mostly a thing of the past. Most people seem to be picking up at their local store or service center. And I don't see how that's any less sustainable than the dealership model. They may need more locations to support higher volumes, but they're continuing to build out their network.

I suspect the drop in deliveries in July and August this year had to do with getting the new factory in the Netherlands going. It's building Model Ss with parts shipped from California. I suspect they were building parts sets to ship to the Netherlands where final assembly is done. Having most if not all Teslas delivered in Europe built there will change the up and down nature of North American deliveries. They will still build the cars for the rest of the world in California, but at the moment that's a fairly small piece of the pie. It will grow with time and they will probably start a final production facility somewhere in Australia or Asia for deliveries to the western Pacific Rim at some point.

I suspect Tesla only does the delivery to you in states where you can't do a pick up at the store or service center, or in places more than some set distance from a Tesla facility. I expect as the Model 3 comes online, Tesla will build out it's store network. At least in areas where Tesla sales have been strong. I could see another 4-5 stores in the Oregon/Washington area for example. As sales for the Model 3 increase and production gets up there, they will probably have stores close to most auto malls.

Right now Tesla's production is about 1/20 Subaru's, but when the Model 3 is being produced at 500,000 a year, their total production will be around 60% of Subaru's. Assuming about the same volume per store as a Subaru dealership, that would mean about 1/2 the Tesla stores as Subaru dealerships. Though that isn't a complete 1:1 because a lot of dealerships combine multiple brands, though around here most Subaru dealerships are stand alone (they sell very well in the Northwest).

The states that are trying to hurt Tesla will have to give in eventually. Right now Tesla sales are a flyspeck compared to the rest of the car market, but when yearly sales of Teslas are an actual blip on the sales radar and the public wants them, it will be like banning the internet in a community in 1995, that community will quickly fall behind. At the moment Tesla is around where the internet was about 1990. It's there and some people are passionate about it and even more have heard about it, but only a few realize how much it's going to change society. The curve will be more drawn out that it was for the internet because of the capital requirements and you are dealing with physical commodities rather than something all electronic. It's not a perfect analogy, but it's tough to come up with analogies for revolutionary things.

 

[jvonbokel]

The states that are trying to hurt Tesla will have to give in eventually. Right now Tesla sales are a flyspeck compared to the rest of the car market, but when yearly sales of Teslas are an actual blip on the sales radar and the public wants them, it will be like banning the internet in a community in 1995, that community will quickly fall behind. At the moment Tesla is around where the internet was about 1990. It's there and some people are passionate about it and even more have heard about it, but only a few realize how much it's going to change society. The curve will be more drawn out that it was for the internet because of the capital requirements and you are dealing with physical commodities rather than something all electronic. It's not a perfect analogy, but it's tough to come up with analogies for revolutionary things.

I like your analysis in general, and I specifically like this analogy. I've been thinking the same thing, that public demand will force them to accept Tesla's model in time, but I hadn't thought to make this comparison. Already, even people who don't want or can't afford a Tesla seem to almost universally agree they should be allowed to sell direct. As they become more affordable, those complaints will get loud enough that lawmakers won't be able to ignore them and hide behind the talking points handed to them by the dealer associations.

 

[physicsfita]

I like your analysis in general, and I specifically like this analogy. I've been thinking the same thing, that public demand will force them to accept Tesla's model in time, but I hadn't thought to make this comparison. Already, even people who don't want or can't afford a Tesla seem to almost universally agree they should be allowed to sell direct. As they become more affordable, those complaints will get loud enough that lawmakers won't be able to ignore them and hide behind the talking points handed to them by the dealer associations.

While I agree that a large percentage of the public thinks Tesla should be able to sell direct, they aren't the people writing the campaign donation checks and it's not likely to be a litmus-test issue for voters.

 

[muleferg]

Like a married man constantly concerned about gays.

Bob really wants a Tesla.

Bob's take on dealerships is interesting. My take is that most senior auto execs hate dealers.

HeHaw HeHaw

 

[30seconds]

I don't think that all Model 3 cars will be build to order. It would be easy for Tesla to build and regionally stock hundreds (if not thousands) of highest demand colors & configurations for immediate sale. Basically what they are doing with the CPOs but also sell new, non-discounted cars. This would really allow them to ramp deliveries.

 

[wdolson]

I don't think that all Model 3 cars will be build to order. It would be easy for Tesla to build and regionally stock hundreds (if not thousands) of highest demand colors & configurations for immediate sale. Basically what they are doing with the CPOs but also sell new, non-discounted cars. This would really allow them to ramp deliveries.

Most mainstream car makers have had the ability to order a car and have it built for many years. My father did it from the 1950s to his 1983 Oldmobile. He then bought a lightly used car in the late 90s, but he ordered a Ford Fusion about two years ago. I've only bought one car, but I factory ordered it.

Car dealers like having cars in stock because they can pressure people into impulse buys. Tesla isn't interested in that sales tactic, and their cars are so popular, they don't really need it anyway. From my experience talking to people, the pent up demand for the Model 3 is so huge, they will likely be building all cars to order for the first few years at least. I have met or know so many people who want a Tesla and the only thing holding them back is the price. I suspect if the Model S sold for the price of a Ford Taurus or Chevy Impala, they would easily sell 500,000 a year with a waiting list.

If they got caught up on orders, they might make some Model 3s on spec and send them to regional distribution centers, but that would probably be 5 years or more into the production run and after they had multiple factories building cars in North America alone (as well as factories in other parts of the world).

 

[wdolson]

It looks like this article was published online by R&T October 26.

 

[Noneduck]

I don't think that all Model 3 cars will be build to order. It would be easy for Tesla to build and regionally stock hundreds (if not thousands) of highest demand colors & configurations for immediate sale.

The wait to buy a Model S/X is a stumbling block for most people, including relatives of mine, who are used to taking immediate delivery. Tesla will eventually allow more people to buy more new cars on the spot, I am sure.

 

[Mad Hungarian]

It looks like this article was published online by R&T October 26.

Link: http://www.roadandtrack.com/car-culture/a26859/bob-lutz-tesla/

 

[lolachampcar]

What happened the last time Lutz tried to put an ICE in a car with a battery???
How many V8 Fiskers did the "top level" manager deliver? How did that genius idea work out?

 

[dsm363]

He's definitely the past. The car business is moving on without him.

 

[igotzzoom]

I will give credit for the Volt, which is an innovative "bridge" technology. I think it works for many people, and kind of puts a band-aid on the issue of inadequate charging infrastructure. But I don't think there's any question the end game is BEVs. Nobody has advanced long-range BEVs as much as Tesla. GM may have a decent shot with the Bolt. But I would venture to say if it weren't for Tesla giving them a swift kick in the @$$, they wouldn't be moving as fast on it.

 

[sandpiper]

We ought to be careful about shooting the messenger before reading the message. Bob does have some valid points. There are very good reasons why there hasn't been a fully new auto maker since the 1920s.

Elon & crew are very knowingly betting the farm in a very high risk game. I figure that Tesla has a 50/50 shot (at best!) at surviving for another 5 years as an independent company. But I also think that they are too big and have done too well to die; the brand alone is incredibly valuable. If they were to financially collapse, they could be purchased and live on as an "electric brand" subsidiary of a larger automaker. Or they could become part of Google or Apple - either of which could pay whatever is required to see Tesla through to time where they have enough mass to become fully profitable. Either way, I'd be willing to bet a lot of money that the Tesla brand will still be attached to high end electrics in a decade.

That said, Bob's assertion that Tesla should make something that sounds very suspiciously like a new Volt is a bit disingenuous. It's not like anybody from GM is in a position to lecture the world on how to be successful and innovative automaker.