Imagine that you’ve been designing cars for a hundred years, and out of nowhere, some fancy guy in California with no automotive experience thinks he can do your job. And worse yet, he actually can. That’ll get under your skin. Well, a recent finance call with former Chevy Volt chief engineer demonstrated once again that Detroit is still not buying the Tesla hype.
As someone who’s worked in Detroit’s auto industry, I’ve found the general attitude towards Tesla to be one filled with resentment and jealousy. I’ve heard executives say things like “The Tesla Model S is okay. Just okay” (you’ve got to be delusional to call the Model S anything less than “good”), and I’ve heard plenty of Detroit-based automotive employees just brush the automaker off with “Eh, whatever. They’ll go under.”
That doubt permeates the industry in southeast Michigan. Just look at some of the quotes from “Big Three” executives like Bob Lutz, who wrote a column casting doubts on the Palo Alto-based electric car company, even calling it “doomed.”
And then there’s Sergio Marchionne, delusional head of Fiat Chrysler Automobiles, who claimed that he could build a Tesla Model 3 competitor and get it on the market within 12 months, if he felt like it. This makes a lot of sense, much in the same way that I can hit a home run at Comerica Park, I just don’t want to embarrass the professionals on the Detroit Tigers.
Marchionne, like Lutz, just can’t see how Tesla can do what his company cannot. “If we can’t do it, with our hundreds of thousands of employees and unfathomably complicated bureaucracy, neither can they,” is the mentality of these well-established automotive giants.
But whether the Model 3 is profitable or not, for Marchionne to claim that he can design and manufacture a car that competes with it in only a matter of months is not just an insult to Tesla, it’s pretty much an insult to his own investors.
It’s just another old-timer exec from Detroit’s “Big Three” who thinks “if the new guys can do it, so can we.” Never mind that there’s never an explanation as to why they haven’t already.
But we could forgive a CEO for outlandish and dumb statements. That’s pretty much a CEO’s job. But that kind of thinking isn’t limited to those at the top, it permeates through Big Three culture. In a recent financial call first picked up by StreetInsider, the former chief engineer of the Chevrolet Volt broke down his predictions of the Tesla Model 3’s production costs, only to be called out by Tesla’s head of investor relations.
An analyst for a Swiss financial services company hosted a call with the former chief engineering of the Chevrolet Volt, Jon Bereisa. Bereisa, now the CEO of an EV-focused engineering consulting firm, broke down his estimate of Tesla Model 3 costs, ultimately concluding that the car is unprofitable and that—surprise, surprise—the Chevrolet Bolt is likely a better financial move.
The news site describes Bereisa’s cost breakdown, which states that the Model 3’s factory variable costs are over $1,500 higher than the $35,000 base price, and that the Bolt’s are nearly five grand lower than its base price. Here’s their exact quote:
Jon sees the Model 3’s FVC $1,510 above base price of $35k vs. the Bolt’s FVC $4,980 below base price of $37.5k. Compared to the Bolt, the Model 3 adds incremental variable cost from its aluminum content, lack of scale, extra sensors, a faster propulsion system, and higher pack costs.
The site then discusses Bereisa’s assumptions on the companies’ battery pack costs, stating:
Jon estimates TSLA’s pack costs at $260/kWh and GM’s at $215/kWh (due to GM sourcing the cell at-cost from LG).
That’s when Tesla’s VP of Global Investor Relations, Jeff Evanson, allegedly chimed in on the call, calling bullshit on Bereisa’s assumptions. StreetInsider says there were two points with which Evanson took exception:
1) Jeff stated that the Model 3 will only be partially aluminum, not all-aluminum
2) Jeff stated that the Model S’s all-in pack cost today is already <$190/kWh and that the Model 3 will have a battery size below Jon’s estimate of 60kWh.”
So basically, Tesla’s saying Bereisa’s estimate on battery costs per kWh was far too high, his assumption on the car’s battery size was wrong, and his guess on aluminum content was also off. So really, the car should cost significantly less than the former GM employee predicted.
Here comes a surprise: Jon, who spent 35 years at GM, isn’t buying it, saying that there’s no feasible way Tesla could build anything that cheap, and that to get Tesla’s claimed range on the 3, they really can’t go much lower than 60 kWh:
Jon is skeptical about the <$190/kWh cost, as the raw material floor on current chemistries is ~$160 assuming 40% supplier margins. He also sees 55 kWh min. necessary to get to just 200 mile range
I don’t know if the Model 3 will be profitable. It might not be. But regardless, this is another instance of a biased GM veteran in disbelief that Tesla can do something he and his company could not. Even though they’ve done that already, many times over.
Eventually, the Big Three are going to have to stop doubting, and start competing. But I suppose it’s up to Tesla to continue to prove them all wrong.