SoylentNews is people
SoylentNews
Bob Lutz, car-guy-to-the-max, former VP of GM and Chrysler, with time at BMW before that, wrote this recent article --
http://www.roadandtrack.com/car-culture/a26859/bob-lutz-tesla/
The opening paragraph is gloomy:
Tesla's 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. Like most big puzzles, the company's woes don't have just one source.
and the prognosis goes downhill from there mentioning competition from Audi, the lack of enough dealers to attract more buyers and other problems.
This discussion has been archived.
No new comments can be posted.
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
You will have a long and boring life.
(Score: 3, Interesting) by gman003 on Friday October 30 2015, @05:58PM
The first major claim is that company-owned stores are intrinsically unprofitable. This may be the historic trend, but it is not impossible. This can be proven simply by commutation - a business's profitability does not depend on who owns it, and there are a large number of franchised car dealerships making quite a bit of profit. An intrinsically unprofitable business will be unprofitable no matter who owns it. In fact, the laws of economics indicate that, all else being equal, a franchised dealership should be *less* profitable than a manufacturer-owned one, due to additional overhead and inefficiencies.
Moreover, many of the costs of a traditional dealership are not born by Tesla. Because they serve more as a try-before-you-buy for a limited number of models, they require far less real estate (the cost is slightly offset by the increased cost of delivering direct-to-customer, but this is negligible at current sales volume). As the cars require significantly less maintenance than combustion-engine cars, they require far less service center throughput, meaning fewer, smaller service centers.
One conclusion he makes is correct: Tesla needs to produce a lower-cost, high-volume vehicle. Where he errs is in his proposed technical design. He starts by (correctly) identifying the battery as the largest cost in the bill of materials. Reducing the battery size reduces capacity, which reduces range. To compensate for the reduced range, he proposes a combustion-engine generator. While this would indeed decrease the sale price of the car, it would also drastically increase ongoing costs - chiefly in maintenance, negating all the advantages of Tesla's current business model.
Tesla's *actual* plan starts from the same point. They need a high-volume, low-cost car, and the biggest cost to reduce is the battery. So they're going long on high-volume, with the Gigafactory, to drive down the cost of batteries without compromising capacity. This could also make them profitable even if other companies make better electric cars and drive them out of the market - by owning the factory that produces the parts, Tesla will profit from almost any electric vehicle, or even high-electric-capacity hybrids.
In short, these suggestions are what one would expect to see from a traditional car company executive: make the car more like a "traditional" car, make the company more like a "traditional" company, and then over-extrapolate on historic trends to arrive at a conclusion that directly contradicts actual economics.