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Bob Lutz: Tesla 'Going out of Business'

Bob Lutz: Tesla 'Going out of Business'

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.

Bob Lutz: Tesla’s going out of business from CNBC.





 

About Nick Saporito

AutoVerdict Senior Editor Nick Saporito began writing about cars at age 13. Nick ran a couple of automotive enthusiast sites for several years, before taking some time off to focus on his career and education. By day he's a marketing executive in the telecom world and by night he hangs out here at AV. You'll find him focusing on tech, design and the industry's future.
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  1. Tone
    nsaporito
    I don't entirely disagree, but Amazon had/has an innovative business model. Tesla is an automaker by definition, not a tech company. 99% of their revenue is coming from automotive sales/leasing, just like everyone else. It is highly debatable if that is a model that can be molded to the Silicon Valley startup concept.


    Well, for a time, a significant amount of their revenue came from selling credits to other car companies. Under a Trump presidency, that's clearly not a solid business plan!

    But, it's still not clear what Tesla's ultimate strategy might be. Just because they manufacture cars right now (as that's the best way to build a BEV industry) doesn't mean that's where there business will ultimately end up.

    Take the Amazon example again. Amazon started selling books. Then, they started building the infrastructure to support expansion and realized they could sell that as a service (Amazon Web Services). AWS is where the profits are for Amazon; while it accounts for about 10 percent of Amazon's total revenue last quarter, it generated operating income of $1.17 billion, while the company as a whole had operating profit of just $347 million. Amazon is in the web infrastructure business and also happens to sell stuff to consumers! BTW: they are also a leader in industrial robots, using autonomous robots to make their fulfillment operations more efficient. While they haven't (yet) started to offer that tech to others, it doesn't mean they won't one day.

    Where Tesla will ultimately find a profitable business is still to be determined. Maybe they focus on the battery and associated management tech and become more of a Tier 1 supplier to others. Or, maybe the Supercharger network hits an inflection point (if they could convince the rest of the industry to adopt their standard) and they monitize that. Or -- long shot -- maybe they really do figure out a way to manufacture cars with better margins than the rest of the industry and become faster and more profitable at building cars than people are expecting. Seems like a long shot, I'll admit. But so did Toyota!
    2b2
    nsaporito
    ...Tesla is an automaker by definition, not a tech company...


    umm

    did I miss another "Car Mfg" that builds spacecraft?

    Andrew_L
    Lutz has been getting a bit extreme with his comments. However I do partially agree with the fact that they haven't made a profit and you have to wonder how long investors will put up with it. No I don't think they will be gone in 2 years.
    nsaporito
    Tone
    Amazon has famously prospered while growing -- and not returning much (if any) profits. See Amazon’s epic 20-year run as a public company, explained in five charts. My understanding of Tesla is that it is following a very similar philosophy to Amazon -- reinvest heavily in new products and markets, fuel growth and not worry too much about profitability.



    I don't entirely disagree, but Amazon had/has an innovative business model. Tesla is an automaker by definition, not a tech company. 99% of their revenue is coming from automotive sales/leasing, just like everyone else. It is highly debatable if that is a model that can be molded to the Silicon Valley startup concept.
    CobaltSSKing
    0fxxk0
    Lutz needs to shut up and people need to stop giving him attention.


    Thank you. I'm glad I'm not the only one.
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