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Former GM Product Czar: Tesla a "Fringe Brand"

Posted by samzenpus on from the get-a-haircut dept.

cartechboy writes There's been plenty of skepticism when it comes to Tesla. The Silicon Valley startup unveiled an all-electric car that stunned the world and had many other automakers rolling their eyes. Fast forward to 2014 and Tesla's preparing to launch its third model, the Model X. Production of the Model S sedan is humming along, and this new automaker continues to make headlines multiple times a week. Industry veteran Bob Lutz was the champion behind the Chevrolet Volt, and has been quite vocal about Tesla from the beginning. So what's his view on the company now? He said Tesla will remain a "fringe brand" until it launches its next generation of vehicles and the smaller, less expensive Model 3. Speaking Wednesday on CNBC's "Squawk Alley" finance show he said that Tesla's stock price was "kinda high" at the moment.

46 of 267 comments (clear)

  1. How does the quote go...? by Chris+Mattern · · Score: 5, Insightful

    "First they ignore you, then they laugh at you, then they fight you, then you win."

    1. Re:How does the quote go...? by MightyMartian · · Score: 5, Informative

      FTFY

      "First they ignore you, then they laugh at you, then they fight you, then you win, and then their paid lobbyists have you legislated out of business.."

      --
      The world's burning. Moped Jesus spotted on I50. Details at 11.
    2. Re:How does the quote go...? by Jeremiah+Cornelius · · Score: 5, Insightful

      HAHAHA HAHA HA!

      Guy from GM - one of the most heavily subsidized corporations in the HISTORY of CAPITALISM has something to say about building a business and a "brand"?

      Donald Trump has good advice on how to be born rich, and pretend you are a financial wizard, too.

      --
      "Flyin' in just a sweet place,
      Never been known to fail..."
    3. Re:How does the quote go...? by i+kan+reed · · Score: 2

      If it helps, the quote came from a person who was ignored, then fought, then lost, but it commonly misattributed to someone much more successful.

      The quote is so full of bluster, and bravado, you just can't take it seriously.

    4. Re:How does the quote go...? by sinij · · Score: 3, Funny

      Pedantic correction - Donald Trump might actually offer good advice on how to be born rich, as he has first-hand experiences.

    5. Re:How does the quote go...? by ksheff · · Score: 3, Insightful

      Oil changes are very simple and don't really take that long to do. There are much bigger things to worry about with an IC car than oil changes.

      --
      the good ground has been paved over by suicidal maniacs
    6. Re:How does the quote go...? by Archangel+Michael · · Score: 5, Insightful

      Bob Lutz is a ICE car guy. New world is coming.

      --
      Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
    7. Re:How does the quote go...? by ericloewe · · Score: 2

      Being Portuguese, I'm damned happy that my ancestors laughed Columbus out of the country.

      Only a grade A moron arrives in America and says to himself "I have arrived in India!".

      The Earth's radius was known with some precision back then. Nobody with an education really believed that the Earth was flat. Anyone with half a brain who planned exploration would've figured out that the continent whose existence was vaguely known was not far enough to be India.

    8. Re:How does the quote go...? by LWATCDR · · Score: 4, Insightful

      Actually I expected this level of FanBoi response it is a real shame that people don't bother to read anymore.
      "He said Tesla will remain a "fringe brand" until it launches its next generation of vehicles and the smaller, less expensive Model 3. "

      Just how right can anyone be. The current Tesla is in the same price range as the Audi A8, MB S Class, and BMW 7 series. In other words a lot more than the average annual income in the US.
      When it launches the Model 3 and if it can for a good price it will be moving into the mainstream.

      So exactly how is this in anyway ignoring them or even fighting them. Sounds like simple facts and observation to me.

      --
      See my blog http://ilovecookes.blogspot.com/ for light hearted technical information.
    9. Re:How does the quote go...? by Opportunist · · Score: 3, Funny

      He's a car guy?

      Then what the heck was he doing at GM?

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    10. Re:How does the quote go...? by Opportunist · · Score: 2

      It's kinda hard to take someone's opinion on a competing product without a grain of salt. It's like some ex-MS head honcho calling the iPad a fad that will never replace the desktop. He may be right, of course. But it still smells a bit of sour grapes.

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    11. Re:How does the quote go...? by Immerman · · Score: 4, Funny

      Let me guess, you're one of those temporal linearists aren't you? I hate to break it to you, but your ridiculous beliefs have been out of fashion since the 5700's.

      --
      --- Most topics have many sides worth arguing, allow me to take one opposite you.
    12. Re:How does the quote go...? by davydagger · · Score: 3, Insightful

      yeah, but he's more than a little biased.

      Tesla isn't a "fringe" brand. They are a "niche" brand, like apple. Unlike GM, they are extremely profitable for selling extremely expensive, polished products to a niche market.

    13. Re:How does the quote go...? by Anonymous Coward · · Score: 2, Informative

      HIs point was if you're worrying about oil changes in your ICE car you're worrying about the wrong thing. Regular cambelt maintenance, fuel quality, ensuring you (or your SO) doesn't wreck the injectors by misfuelling, wrecking your cat converter, catastrophic coolant loss. All things that can trouble an ICE car which don't trouble a Tesla. Basically a Tesla is a big battery, some motors and an ECU. That's a hell of a lot simpler than an ICE car - and a double hell of a lot simpler than a hybrid, which is basically both an ICE and an EV shoved into one chassis and rudely mated. Yes, I'm sure it's expensive if you need to replace a Tesla motor or its battery (aren't they planning swap in / swap out batteries though?) but that's about the only likely major fault.

    14. Re:How does the quote go...? by lgw · · Score: 2

      New world is coming.

      Eventually. But for now, he's right - Tesla is currently a niche company, only selling expensive vehicles. Most such brands like, say, Maserati, are just brands within a larger mainstream company - Maserati is just the mid-priced Fiat brand. Tesla though only sells the expensive cars, and so remains on the fringe for now.

      If the Model 3 succeeds, this could all change. And while Tesla's stock price already assumes the Model 3 will be a resounding success and Tesla will become a mainstream company, it hasn't happened yet.

      --
      Socialism: a lie told by totalitarians and believed by fools.
    15. Re:How does the quote go...? by Dahamma · · Score: 2

      Until they have a more affordable version, the with be a niche. Bugati is also a niche. Niche doesn't mean bad.

      Bad example. Bugatti isn't a niche, Bugatti is just a marquee brand of the Volkswagen Group.

      And while obviously Tesla will remain relatively small until they have the pricing and capacity to sell more cars, that's not really a very good definition of a niche. They are backordered for months and have already announced longer term plans for their next 2 models. That's called *startup*, not a niche.

      As far as the price - maybe it's high, but also maybe Bob Lutz doesn't quite understand the concept of stock valuation. In theory its price is based on the POTENTIAL value of the company, not it's current state. Or maybe he's just butt hurt his former company's stock (GM) has tanked while Tesla's has skyrocketed.

      Actually, if you want *real* niche, it's Lutz's new company, who's car (I'm not making this up) is basically taking a Fiskar Karma and replacing the electric motor with one from a Corvette ZR1: http://www.autoblog.com/2014/0...

  2. Fringe Brand by nospam007 · · Score: 2

    Look who's talking.
    Somebody from a 'Killer Brand'.

  3. Tesla is worth 60% of GM ! by macpacheco · · Score: 4, Informative

    GM market cap 51.8B
    Ford market cap 58.44B
    Tesla market cap 30.66B and this is after a major drop in stock price, I believe it has been higher than GM !
    A fringe brand that is worth over half of the big auto boys... Fringe my a..
    If only any other brand got rave reviews like Tesla is getting. Specially in customer satisfaction.

    1. Re:Tesla is worth 60% of GM ! by l0ungeb0y · · Score: 5, Funny

      Well from GMs perspective, until Tesla gets a Government Bailout they will remain a fringe brand.

    2. Re:Tesla is worth 60% of GM ! by HornWumpus · · Score: 3, Insightful

      Crispy Cream Donuts was once worth more than the entire remainder of the US baking industry.

      Before you think of shorting, remember 'The market can remain irrational longer then you can remain solvent'. Buy out of the money put options instead, much safer. If you can find someone making the market.

      --
      John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
    3. Re:Tesla is worth 60% of GM ! by Anonymous Coward · · Score: 2, Insightful

      You might want to learn to look at stocks. Market cap is simply a multipler of price x # of shares; if a company is overvalued then it's market cap will be high, so market cap is not a good indicator of if it's actually overvalued; they're measuring the same thing.

      http://finance.yahoo.com/q?s=GM

      http://finance.yahoo.com/q?s=TSLA

      Look at EPS, or earnings per share. Tesla -$1.35, GM $1.19; Tesla is losing $1.35 for every share whereas GM earned $2.39 for every share, and gave to it's shareholders $1.20 each! Tesla has sold ~39,000 Model S's since it's introduction in 2014, meanwhile GM sold 256,000 cars just in July of 2014.

      That's what he means be "fringe brand" and "overpriced". Tesla is on a path towards getting it together, but they have yet to turn a profit and they are a tiny fraction of the big company's sales. As Bob Lutz (one of the smartest men in the auto industry) said, they are and always will be a fringe auto brand until they get a car that's priced for the consumer, not the high end luxury market, hence is comment on the Model 3.

    4. Re:Tesla is worth 60% of GM ! by HornWumpus · · Score: 3, Interesting

      GM's preferential treatment of debt to the union pension fund has not been litigated, don't count it as an unmitigated success yet. The bond holders will still have their day in court.

      --
      John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
    5. Re:Tesla is worth 60% of GM ! by David_Hart · · Score: 5, Insightful

      GM market cap 51.8B
      Ford market cap 58.44B
      Tesla market cap 30.66B and this is after a major drop in stock price, I believe it has been higher than GM !
      A fringe brand that is worth over half of the big auto boys... Fringe my a..
      If only any other brand got rave reviews like Tesla is getting. Specially in customer satisfaction.

      Market cap is nothing but a virtual valuation based on how investors value future revenue. It's basically a bet that the company will continue to grow profitability at an increasing rate. In the case of Tesla, there is a lot of cheer-leading investors in the stock. To maintain that level of growth, Tesla does have to come out with a product that is appealing to a much larger audience than the current product offerings. Today's investors are betting on a mass appeal product, that people will buy the product, and that Tesla will gain a decent share of the overall automobile market.

      The point that the ex GM Czar makes is correct. Until Tesla can execute on this vision, they will remain a fringe or niche brand. There is a risk that Tesla will screw up in execution, misunderstand the market, etc. Only time will tell if they can succeed.

  4. It's true by prelelat · · Score: 5, Insightful

    It's a fringe brand in that Ferrari is a fringe brand. I don't think most people wouldn't want one but I don't know a soul who has one. Very few have seen them. They aren't exactly a larger brand. IF they can mass produce a model in a reasonable price range comparable to a modern model of car it will take off. Right now it is in the fringe but I don't think it will stay there. That's exactly what the guy in the article said. He didn't say Tesla was a bad idea or that it won't take off, he said it's not there yet but this next model could very well take it there.

    It will be exciting to see where we go from here.

    1. Re:It's true by Anonymous Coward · · Score: 2, Interesting

      Pretty much, the Tesla is not the "everyman's car"-maker, not by a long shot.

      In fact, thinking about how they approached the market (i.e. as a guilt free toy for the wealthy to buy online) they may have cracked it, let some other motorcar company sort out how to make a greener Ford, Tesla can enjoy a high end niche and avoid the mistakes other revolutionary car manufacturers made (Mr. Preston Tucker) and patent the shit out of tech, business models and become the 300 lb gorilla of the battery / fuel cell market. Even if the high end car market goes tits up they can rest gently on a well established and growing power industry.

    2. Re:It's true by Animats · · Score: 2

      It's a fringe brand in that Ferrari is a fringe brand. I don't think most people wouldn't want one but I don't know a soul who has one. Very few have seen them.

      We get a warped view here in Silicon Valley. Lots of Teslas. No Supercharger stations, though. There are a fair number of electric car outlets around, of too many varieties.

    3. Re:It's true by Your.Master · · Score: 2

      Why would I want a car I can't afford to drive? A car that costs more than my entire car to repair. A car that's worth more than my house!

      Because then you can do the other thing you said:

      If you gave a Ferrari, I'd sell it ASAP.

    4. Re:It's true by dbc · · Score: 2

      Well, I actually have two friends that have Teslas, see other Teslas on the road often, and Leafs are common as dirt. That has a lot to do with the climate, commute patterns, and infrastructure here in Silicon Valley. That said, the Tesla is a fringe brand for many of the reasons that you say -- it is expensive, its infrastructure needs are scarce in most places, and if you live where cab climate control is necessary, prepare to sacrifice range for that. As Telsa moves down the price curve and Leaf moves up the range curve, they will become more popular and the infrastructure will follow.

  5. Bob's smokin' crack by tekrat · · Score: 2

    GM wishes it could get Tesla's customers... Witness the Cadillac version of the Volt, $70,000 price for a Volt with a better interior -- The Cadillac ELR. How many Volts and ELRs combined does GM have to sell to even come close to the Tesla?

    --
    If telephones are outlawed, then only outlaws will have telephones.
    1. Re:Bob's smokin' crack by HornWumpus · · Score: 4, Funny

      The Volt outsells Teslas. Sorry to burst your bubble.

      --
      John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
  6. Alibaba by oh_my_080980980 · · Score: 2

    And Alibaba isn't over valued?

  7. Yeah ... but ... it's true. by GodInHell · · Score: 4, Insightful

    Check out the chart at Wikipedia the Model S sold about 40,000 cars this year. Compare that to the significantly less sexy Nissan leaf with its 130,000 sales - or GM's total sales for 2014 January - June of 4.9 Million vehicles. See, GM's sales report for Q2-14.

    Tesla is a great car company and likely to be an even bigger deal in the battery market - but compared to GM, it's sales barely register.

    On the stock front - GM's market cap is 51.8B, Tesla's is 30B. So, yes, Tesla is probably a bit overpriced right now - people are buying what Tesla will be, not the company it is today.

    1. Re: Yeah ... but ... it's true. by tysonedwards · · Score: 5, Informative

      Tesla actually has a significant profit margin per car sold (25%) versus GM at 0.7% for this latest quarter across all of their divisions. That's where the massive disparity comes from. When you can sell luxury cars at a much higher price with much higher margins, volume doesn't mean dick.

      --
      Thirty four characters live here.
    2. Re: Yeah ... but ... it's true. by Anonymous Coward · · Score: 2, Informative

      It also doesn't hurt that they are given zero emission car credits from the California government for each car sold that they then turn around and sell to GM, Toyota, etc for about $30K per Model S. That is where they are getting most of their profit.

    3. Re: Yeah ... but ... it's true. by Anonymous Coward · · Score: 5, Informative

      Tesla actually has a significant profit margin per car sold (25%) versus GM at 0.7% for this latest quarter across all of their divisions. That's where the massive disparity comes from. When you can sell luxury cars at a much higher price with much higher margins, volume doesn't mean dick.

      You don't understand their business models.

      If Tesla is claiming a 25% margin, then that's solely on the direct cost of the car and doesn't account for overhead such as the capital depreciation. It doesn't matter how much money they make over the direct cost of the car, what matters is the profitability, money left over after ALL expenses of the company. In accounting circles that's called Net Margin, and Tesla has not has a positive net margin in it's history; they are burning cash to claim market share. That only works for so long.

      Last year Tesla lost $75M, which is an improvement over the $350M they lost last year and the $250M they lost before that:

      http://finance.yahoo.com/q/is?s=TSLA+Income+Statement&annual

      GM makes .7% on their cars. This is a bid for market share. That's ok though, because GM doesn't make money selling cars. They make money on *financing* cars; their auto loan and lease divisions are the real money generators; the physical cars are just an entry point. GM made $5B last year, which was a 3.4% net margin over gross revenues.

      I'm a fan of Tesla, but seriously if you're going to make a comparison at least get the facts right and don't obfuscate it with pointless numbers.

    4. Re: Yeah ... but ... it's true. by tysonedwards · · Score: 5, Insightful

      Tesla made 750m in profits last year off of 40,000 Model S sales.
      GM made 31.8m in profits last year off of 130,000 Nissan Leaf sales alone.

      Tesla is generating 3 billion dollars per year in revenue, and of that 750 million is profit.
      All of GM combined is generating 155.42 billion dollars per year in revenue, and of that 1.087 billion is profit.
      If Tesla sells an additional 18,000 cars per year (58,000 total), they will surpass GM's Combined Yearly Profit.

      That is why Tesla is doing well in the stock market, considering that they don't need much staff to build their products, they just build what is already sold, and they don't need to sell many cars to generate a lot of profit for their investors.

      --
      Thirty four characters live here.
    5. Re: Yeah ... but ... it's true. by GodInHell · · Score: 3, Informative

      According to Yahoo Finance, Tesla is still losing money and recording a -6.82% profit margin. Their margin per car may be positive, but the company isn't making a profit yet. (Key word, yet).

    6. Re: Yeah ... but ... it's true. by Opportunist · · Score: 4, Insightful

      Damn those treehuggers for wanting breathable air! It's so Un-American!

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    7. Re: Yeah ... but ... it's true. by Areyoukiddingme · · Score: 2

      Learn to read. He's claiming Tesla has a significant profit margin per car. That is false as is shown by their SEC filings.

      It's true. Sale price per car minus expenditure per car equals profit per car, and it is indeed 25%.

      The company has negative net revenues because they're busily pouring money into capital investments, tooling up production lines for new cars. It's not like $700 million has vanished down a hole somewhere. They're buying real estate and massive amounts of machinery. Starting a car company from scratch requires investment. You don't just wave a hand and cars start pouring out of a door in the side of a building.

  8. How does the quote go...? by Xac · · Score: 2

    "The fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown." That is how the quote goes. Tesla is for giving rich people a fancy toy. Nothing more.

  9. s/tesla/apple/g by whyde · · Score: 2

    Amara's Law: prov. The effect of a technology will be overestimated in the short run and underestimated in the long run.

    What seems like just a fringe now, from far away, will soon be the whole surrey with the fringe on top when it gets closer.

    1. Re:s/tesla/apple/g by sexconker · · Score: 2

      Dipshit's Law: Quotable "laws" are rarely accurate, rarely referenced properly, and rarely attributed correctly.

      From Murphy to Moore, these "laws" are nothing more than shit for idiots to bandy about in the absence of actual comprehension, thought, or opinion.

  10. Preferred the Volt ? by perpenso · · Score: 4, Interesting

    The Volt outsells Teslas. Sorry to burst your bubble.

    Go ask those Volt owners if they aspired to own the Volt, if they preferred the Volt or if they settled for the Volt?

    1. Re:Preferred the Volt ? by Anonymous Coward · · Score: 2, Informative

      Price of 2015 Chevy Volt - $34,345, 60 month loan price per month $587

      Price of a Model S - $69,900 , 60 month loan price per month $1,187

      Anticpated Price of a Model 3 - $50,000, 60 month loan price per month $855
      http://www.ibtimes.com/2017-tesla-model-3-starting-price-50000-according-sobering-report-teslas-future-challenges-1690822

      I think on a commodity product like an automobile, customer retention will be dictated far more by the average wealth of the consumer and less so on brand. Brand makes a difference when price is comparable.

  11. So? by morgauxo · · Score: 5, Insightful

    What's wrong with calling Tesla a "fringe brand". Sorry but if you can afford a Tesla you ARE on the fringe!

    I don't think that really says anything bad about Tesla itself. Any new car company in the US that can survive as long as Tesla has in the face of the big three has nothing to be ashamed of. The fact that the cars are relatively expensive.. of course they are! They aren't as mass produced as other cars are! Now if Tesla manages to get their cars to a point where they are no longer fringe and a regular person can and is likely to purchase one... that would be awesome! Even if they never get that far, even if Tesla closed up shop tonight I'd say lasting this long in the face of super entrenched and government supported incumbents was a good accomplishment.

  12. Re:Because GM is scared. by The+Grim+Reefer · · Score: 3, Insightful

    GM is in the process of getting disrupted, both in terms of business model and technology. They are afraid of Tesla, and it's obvious and there isn't much to see here.

    No, they are not afraid of Tesla. As TFS stated, they think of Tesla as "fringe" Which at the moment, they are kind of correct. GM has sold almost 80,000 Volts. The Model S is has probably sold 30K units to date. Granted, the Volt is cheaper and has been for sale two years longer. But it's also not something that GM really cares about. And that's just looking at their electric vehicle sales. GM probably averages 200,000+ units sold per month in the US alone.

    That being said. They should take notice. Times are changing and it's hard for large companies who have been around forever to see threats. And Tesla has been and is a very forward thinking company

    GM should have been out of business long ago anyway. Leave it to Ford and Toyota who actually know how to make and sell things. They will be able to compete with Tesla where GM will not.

    I wouldn't count GM out just yet. They still sell a lot of vehicles.They've also been very innovative in the past. It's possible they can do so again.