Former General Motors executive and automotive icon Bob Lutz has never been a fan of Tesla, but now he says the automaker is “going out of business” by his analysis.
In an interview with CNBC Maximum Bob made his feelings very clear by saying he doesn’t think Tesla will be around by 2019 if its current trajectory continues. The notoriously outspoken Lutz said there’s no “secret sauce” with Tesla and that everything it is doing can be easily duplicated by other automakers for lower costs.
Lutz’s remarks do not seem that far off given Tesla’s financial performance. Analysts estimate Tesla will burn through $4.6 billion in cash this year, bringing the total cash burn to $10 billion since becoming a publicly traded company. This is an unprecedented cash burn rate for a firm with a $60 billion market capitalization.
While there may be no “secret sauce” in Tesla’s business model, the sauce may lie in the company’s ability to raise capital. Tesla has, thus far, had no issue getting investors to fork over more cash for the company to burn through. CEO Elon Musk has masterfully kept the public eye on the next future product each time the company hits operational snags. Deflect and cover up.
Most recently the company has attempted to shift investor focus from its Model 3 launch failure to a new electric semi truck and second-generation Roadster. So while the company is hemorrhaging cash and missing production deadlines, headlines are about the next great thing from Tesla.
While Lutz’s comments can take root in the facts surrounding Tesla, there is no denying that investors have had an extreme amount of patience with the firm. While it isn’t uncommon for startups to have a prolonged negative net income, having negative totals on the operating statement and cash flow statement for years is certainly unusual.
Tesla will likely have to raise additional cash within the next year. The best barometer for the company’s future may be in its ability to win over additional patience from Wall Street.