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Former car industry legend explains why Tesla is in deep trouble

Published Oct 26th, 2015 4:25PM EDT

Tesla is a hard company to figure out. It’s a company filled with brilliant people who are doing amazing and innovative things… and for various reasons, it might also be completely screwed. Writing over at Road & Track, legendary auto industry executive Bob Lutz makes the case that Tesla is really in big trouble and is about to get run over by experienced auto companies’ own fleets of electric cars.

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The first part of his critique isn’t exactly novel: He thinks that once the big car companies get seriously involved in making their own electric cars, they will positively eat Tesla for lunch. Added to this, he says that Musk’s decision to only sell his cars at factory stores is creating a “money pit” for the company the same way he says factory stores burned through money during his tenure at Porsche.

“I think Tesla CEO Elon Musk figured that if factory stores work for Apple, they’ll work for Tesla,” he writes. “But the fixed costs for an Apple store are next to nothing compared with a car dealership’s. Smartphones and laptops don’t need anything beyond a mall storefront and a staff of kids. A car dealership is very different. It sits on multiple acres. You need a big building with service bays, chargers, and a trained sales force, plus all the necessary finance and accounting people. It ties up a staggering amount of capital, especially when you factor in inventory.”

At the end, Lutz notes that “history’s filled with defunct companies with great products run by brilliant people” and he suggests Tesla could very well be one of them. Even though Lutz’s essay is a classic example of someone who represents an established industry bashing an exciting up-and-coming company, it’s still very well reasoned. Check out the whole piece here.

Prior to joining BGR as News Editor, Brad Reed spent five years covering the wireless industry for Network World. His first smartphone was a BlackBerry but he has since become a loyal Android user.