For those who may have missed it, GM's former Vice Chairman Bob Lutz dropped a whole lot of reality on some unsuspecting Tesla cheerleaders on CNBC this morning. A rather blunt Lutz shared his views, as have we on several occasions, that Tesla's constant cash burn combined with a barrage of competitive models that are about to hit the market likely indicate that the company is "doomed." As for Tesla's gravity-defying stock price, Lutz attributed the company's soaring market cap solely to Musk being the "greatest salesman in the world" along with his being "aided and abetted by some analysts."
"I am a well known Tesla skeptic. Somehow it's levitating and I think it's Elon Musk is the greatest salesman in the world. He paints this vision of an unlimited future, aided and abetted by some analysts. It's like Elon Musk has been beamed down from another planet to show us mortals how to run a company."
"The fact is it's a constant cash drain. They're highly dependent on federal government and state incentives for money which constantly flows in. They have capital raises all the time."
"Even the high-end cars that they build now cost more to build than they're able to sell them for."
"Mercedes, BWM, Volkswagen, GM, Audi and Porsche are all coming out with 300-mile [range] electric luxury sedans...I think they're doomed."
At that point, an incredulous CNBC host was forced to step in asking "what does doomed mean?"
"What does doomed mean? Their stock price comes in? They go out of business? They have regular competition like other companies? What do you mean by doomed?"
Fortunately, Lutz was happy to entertain the question and explained to the shocked CNBC hosts that when your variable production costs exceed your products sales price...well, that's a problem.
"Their upside on pricing is limited because everybody else sells electric vehicles at a loss to get the credits to be able to sell the sport utility vehicles and the pickup trucks. So that puts a ceiling on your possible pricing."
"And if he can't make money on the high-end Model S and Model X's which sell up to $100,000, how in the world is he going to make money on a $35,000 small car? Because I have news for you, 42 years of experience, the cost of a car doesn't come down proportional to it's price."
"If you have a situation where the cost of producing a car, labor and materials, is higher than your sell price, your business model is flawed. And it's doomed and it's going to fail."
Finally, the stunned CNBC anchors offered up one more defense by highlighting the massive value of Tesla's battery and solar operations, but were once again shut down in epic fashion...
"The battery plant, in my estimation, is a joke. There are no cost savings from making a lithium ion plant bigger than other people lithium ion plants, because making lithium ion cells is a fully automated process anyway. So, whether you got full automative in a small building or 10x full automation in a big building, you're not saving any money."