( With thanks to Rob Maurer at Tesla Daily Podcast (TDPC) 9/19/18, CNBC, Autoline After Hours & John McElroy, Jack Rickard, Sandy Munroe, Patrick C at Cars with Cords, IIHS, and Bob Lutz himself. )
First the September 2018 CNBC Quotes
Lutz recently quoted by Maurer :
"They will never make money on the Model 3, because the cost is way too high. He's (Musk) got 9000 people in that assembly plant producing less than 150,000 cars a year. The whole thing just doesn't compute. It's an automobile company that is headed for the graveyard." (RM TDPC quoting Lutz 2018)
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| He's been cranky at Tesla for years - October 2015 |
Maurer tears this 150,000 number apart nicely, which I'll document. Let's go deeper on the whole statement. I really want to tear this apart to show how this 'expert' statement is quite under analyzed.
So even using Lutz's inaccurate numbers let's get a ratio per car
Tesla Fremont factory - 150,000 / 9000 factory workers = 16.6 cars per factory worker.
GM Lordstown plant made 51,265 Cruzes in 2nd qtr 2017 so next annualize at the best rate:
GM Lordstown factory 205,060 / 5000 factory workers = 41 cars per US factory worker.
( I can't find a number of employees at the plant but GM website says 2017 was a 250 million payroll. Guessing a average of $25 an hr that's 5000 workers before the 2017-2018 layoffs and slowdown. That's where I'm 'computing' an employee estimate. )
https://media.gm.com/media/us/en/gm/company_info/facilities/assembly/lordstown.html
So indeed if Bob's numbers were accurate (they are not), 16.6 cars per for Tesla seems a problem. Wait just a minute though. The GM Cruze sold for $17,800 including destination - let's spitball round that up to $20000 with a couple of thousand in options. Of course GM is sharing that with the dealer network by wholesale selling and dealer holdouts / incentives. The currently available lowest cost Tesla Model 3 starts at $49K. The performance is $79K. The 1st Qtr 2018 reported production from Tesla's Investor reports of 34,494 with 24,728 S and X models - considerable more expensive. Q2 2018 - 53,339 with 28,578 Model 3 and 24,761 S and X models. In other words a Tesla goes for a price 2.5 times the Cruze on the lowest model and Bob should be able read production reports like any adult. If I multiply 16.6 by 2.5 price adjustment I get *surprise* 41.5. Even that is low, we should correct much higher with S and X's selling at least 80,000 this year - 4 to 5 times the cost of a Cruze.
Let's also correct his numbers based just on published numbers that are at least 60 days old and assume no growth (though Bob Lutz should know these too). From Tesla's investor info above the 2018 first half production was 87,833. Double that and an annualized rate of 175,666 would lead to the least rounded estimate of 175,000. That's with no more growth and how likely is that? Still his estimate of 150,000 reeks of either setup or ignorance - neither is pretty. Where did the 25K go Mr. Lutz?
Now let's give it a reasonable ballpark if you've done your homework. Maurer's estimate is of the current annualized rate based on 3Q is 75,000 - that gives 300,000. Doubles the production rate in Lutz's estimate. Heck let's go easy and just look at overall 2018 - we are talking easily 235,000 cars this year. At that point his 2018 car per Tesla worker calculation goes from 16.6 to 26 cars per worker.
Did Lutz do BMW vs GM calculations based on cars per worker? No.
Let's go one further and compare overall company numbers:
Tesla overall - 235,000-300,000 / 30,000 Tesla employees = about 10 cars per worker.
GM sales for 2017 = 9.6 million.
https://www.statista.com/statistics/225326/amount-of-cars-sold-by-general-motors-worldwide/
From Bloomberg auto employee stats for GM
I just don't think you can successfully get an apples to apples comparison with the worker / car metrics when one company is in sustainable solar energy and home battery backup, large scale industrial batteries, and high end electric cars. Plus Tesla does maintenance and delivery functions in house in the company vs separate dealer corporations.
"Tesla is hemorrhaging cash and due to SEC investigation is not able to raise the capital that they need." (RM TDPC quoting Lutz 2018)
Tesla's losses are clearly headed down this quarter, they have cash on hand, and their gross revenue is skyrocketing. Currently the Model 3 provides more revenue dollars than ANY other car model in US sales. I believe there is an excellent chance the final quarter this year will find the Model 3 in top 4 car makes (or better) in numbers too.
"Tesla has no tech advantage, no software advantage, no battery advantage, no advantages whatsoever." (RM TDPC quoting Lutz 2018)
This really is annoying. All recent comparisons of driver assist have given the Model 3 top marks. Tesla makes all the new safety features like emergency braking available standard - who else does this? They are unifying software across their models on in house platform for navigation and car control. They have their huge suite of sensors and driving computer built in standard on every car. Updates such as improving your braking distance are done Over The Air (OTA) - no other manufacturer does this. Munroe US and at least one German automotive evaluation company have torn the cars apart and estimate they are profitable to make. The examinations of the TM3 battery pack are rating it the most advanced in the business. We have tons of stats showing Tesla batteries with the least degradation of all EV's out there (Teslanomics for more info and stats). As Rob Maurer points out on technology Bob Lutz previously predicted the gull wing doors would never work - ha. Lutz thinks his 'Destino' is cutting edge tech - but only if he can make people interested in ICE kit cars. Unproven so far as there no track record for that business I can find. In fact the only tech Tesla doesn't have is Internal Combustion Engines (ICE) because they are no longer the future.
Finally for the Lutz 'no tech in autonomy' opinion look at this August 2018 IIHS article at the bottom test result chart. The Model 3 is ahead of everyone, including older Teslas, and darned near perfect in the stats. I'd call that a tech lead and they are NOT giving away the code. Article here:
IIHS.org Evaluating Autonomy...
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If you want to listen to Rob's whole podcast please check him out on itunes or this Stitcher link.
https://www.stitcher.com/podcast/tesla-daily-tesla-news-analysis
He has great counterpoints on all the above quotes and more.
Next rather than rehash Tesla's advantages I'll let Patrick C, blogger at Cars With Cords and panelist on youtube's The Tesla Life explain the Tesla advantages:
Cars With Cords / Moats - Why Tesla can do...
The Tesla Life
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Next the September 20th Autoline Quotes - Especially the Semi Quotes
I want to add some of Bob Lutz's quotes from the Autoline After Hours show #436 9/20/18 on youtube. I believe this went much deeper than the short interviews and I'd like to quote it some.
At first Lutz discusses general car and truck info and seems generally knowable. Oddly he is not as into the details on the Destino as one would think he might be. He mentions he's 87 - I gotta say he looks good for that and converses well. Perhaps age has him stuck on his old positions, but it hasn't slowed down his wit and general knowledge. Clearly loves American muscle cars - which I can't fault. He also acknowledges electric hybrids for racing - for obvious four wheel and 0-60 reasons.
He bemoans the end of vehicle ownership.
VLF - Destino is now instead a Hummer custom producer. He says low flow production will be there for Middle East and China first. I interpret that as nothing happening now and original Fisker model is dead. Not a lot coming from startup business from a Tesla critic. Lutz admits the Tesla design language is compelling aside from being electric. Loves Franz von Holzhausen (so say we all...). Then they all agree Tesla is a disaster as a business. Then Lutz talks about all the future competitors to Tesla - several cases of which John McElroy tears apart. He admits Teslas have a big margin, but claims the competition will come in lower using ICE to undersell Tesla. He admits to Tesla mindshare but then claims 200,000 cars a year is too tiny. However he just got finished calling that rate 150,000 for CNBC. This really tells me there is some sandbagging for the CNBC 150,000 / 9000 ratio going on. A couple phone calls answered. He makes a case that the Germans are running on rep and that some new Caddies and Lincolns are better but can't compete on exclusivity. Lutz also seems to see his Tesla shtick is fading so he again gets into how sad the loss of the real fans of cars are.
More reminiscing, then back to Tesla. The question is who should acquire Tesla given it's business model is problematic (?) Here we go with again - the quote from Lutz - "I don't know, but, would anybody? The only thing, that they have no technology that nobody else has. Absolutely no technological advantage, not in autonomy, not in batteries, not in control systems, it's just an electric car like everybody else." shtick. John M counters with the Munroe teardown and once again Lutz kinda mumbles. Now we lose sound. Then we are back to reminiscing about Hummers etc.
Mind you that quote was right after Lutz admits how compelling the style and design of Franz von Holzhausen is. Countering the rest of the repeated negative points is spread across this whole article.
Finally because of the tech issues they go over the buying Tesla question again. Henry Payne asks "So Bob, If Tesla's not a viable business proposition on it's own, then, who should buy it?" . Lutz repeats his theme response: "Well ah, First of all you have to ask the counter question 'Why would anyone (buy Tesla)'. and ah.. The only answer I can see is ah.. you'd buy it for the name and reputation. Because I don't think there's any battery technology or autonomous vehicle technology that isn't basically available to everybody else. ah.. So my guess is, if someone were to buy it, it would be to acquire a very valuable brand. Ah.. Would it be GM or Ford? - I doubt that very much. Could be one of the Europeans. Could be an Asian producer. Could be a Chinese producer wanting own a very very powerful and legitimate brand. Or it could even be somebody not in the automotive business like a Google or an Apple or one of the Chinese electronics companies. But that would have the problem that once again it would remain a small car company not embedded in a larger automobile company where you've got shared engineering and shared fixed costs. So it would remain a small vulnerable producer. And, the ownership would be in the hands of people who don't understand the car business, which you know, is always a problem."
John M then asks what he thinks of Powerwalls, Solar City(SC), and the Semi. Lutz then puts down Powerwalls and Solar City/Tesla Solar and calls them "A flop.". He says less than two dozen Americans have Power Walls beside Tesla executives.
I resent that because I own a PowerWall 2 and Tesla Solar and I like it very much and have many other friends with these systems. Yes there are many cheaper solar systems out there but I'm very impressed with the tech in mine acting as both home electric generation and seamless UPS. So again Bob Lutz disparages without presenting facts or stats. I'd love to see them.
Also it's well documented that the battery business is much more than residential. Here's Tesla's Australia 55 million dollar system making 16 million in revenue in 6 months. A flop eh?
Tesla powerpack battery australia...
Then about the Tesla semis then Lutz says quote: "As for the Electric Semi, I think both of those were push mobiles. You know they were elaborate things made out of a wood framework with ah plaster of paris troweled on them. Ah... First of all the total Semi market in the States is so tiny annually that even if you dominated it you're not talking very much volume and secondly every semi manufacturer whether it's Freightliner, (Daimler), Volvo, etc and even Cummins is coming out with a fully electric drivetrain for heavy trucks." (Snip long verbiage saying this is a small and competitive business) " Most Fleet owners tend to stay with the same brand." (Snip - he goes on and moves into issues with Elon with etc. - I find this area subjective and covered above so I'll skip.)
Now I'm frosted again! The semi's are not clay or plaster models. Or course they are prototypes but clearly they are practical enough to drive around the country to and from possible customers. Lutz has to know this if he is at all following electrics. So either he is woefully ignorant of the news on electric freight in the past year and therefore does not know what he is talking about, or he is deliberately false about these development semis. Dozens of articles are documenting months of the Tesla semis crossing the country. Google Electrek and Tesla Semi - it's not hard.
Personally my **guess**, not even having a car background is: Tesla took off the shelf items like axles, suspension, truck wheels, air brakes, etc components. Weld a pair of custom frames and add 2-4 Model 3 battery sleds, high end Model 3 computers, Model 3 steering actuators, and a Model 3 RWD motor for each of 4 of the 6 double wheels. Now add Model 3 AC/Heating steering and screen with custom longer wiring harness again totally based on Model 3 with software tweeks. Add trailer hitch components and lighting/trailer brake hook ups. Finally get some sheet metal guys to make an aerodynamic lightweight body and seating. Lutz the secret sauce is the Model 3 components! The reason Daimler says it can't work is because they, like Lutz is clueless as to how advanced the Model 3 components are. How by pumping out of a giant factory they are becoming the world's most advanced battery sleds at commodity scale and pricing - to Tesla only of course. Why build a special pack? When your off the shelf one in a group can be ganged up to do the job? If you read my previous blogs you know my estimate for the advanced 75 kwh pack in the next two years falls to $10k wholesale within Tesla. $40K for a 300kwh battery with lighting recharge by ganging up 4 Supercharger cords. Not only will it be easy to build 'Truck Superchargers' with your present tech but in a emergency regular SuperCharger stations would be an option.
Does no one have any imagination as to how Tesla would leverage its advantages? Yes they open source their patents but this doesn't give anyone their copyrighted software or manufacturing trade secrets. Just because they are new to trucking is it impossible to add an employee or two with truck experience?
Tesla's 'secret' is they are light years ahead on the battery sled and powerful computer controls - ask battery/electronic expert Jack Rickard and Munroe Automotive.
Rickard on Model 3 Battery Tech
Rickard blog - Tesla model 3 gone battshit
So what's left - yes Tesla may be learning how to build bigger frames and suspensions. Differences in steering, braking, suspension software on a big rig. Reusing all the base software components and refactoring for the new size and physics. A lot of which they have been modeling on a smaller scale for years with their own tools - call it the 'Tesla OS' advantage. Trailer hookups.
You know what isn't an advantage is the new semi business? Diesel motors. Mufflers. 20 gear transmissions. Clutches, Diesel tanks, filters, injectors, etc. Time for a whole generation of employed experts to start drawing early pensions.
So let's look at the next failure of imagination as usual. Lutz in so many words says the market for semi's is small. I would respond that your highest costs are diesel and drivers - not big rigs. The company that cuts your fuel cost in half and allows one driver to lead a fleet of 4 semis across the country using *todays* autonomous highway software with a few tweeks - is Tesla. With that level of advantage you don't just replace this year's worn out semi.
You replace them all. With your already developed, very advanced electric tech.
Even if I disagree with Lutz - and believe me I do, this show is worth watching. The final diatribe starts at 1:22:15 and the sad part is Lutz is a very convincing, well spoken guy - perhaps the advantages we Tesla owners see won't be enough and he'll be right. My money's on Tesla. Get the full answers and context and check it out for yourself:
Autoline AfterHours Lutz interview
Autoline Afterhours is also where you can find Sandy Munroe's analysis of Tesla's computer and battery advantages - I leave finding these as an exercise for the reader.
Enjoy!
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