NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Beware the Coming Carnage in the Electric Vehicle Industry

Car buyers are no longer beating down dealers’ doors to get in line for the latest electric offerings, regardless of how smart the cars may be.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @HOWARDTULLMAN1

Nov 18, 2025

 

If you ever doubted that the electric automobile industry was rapidly becoming a pedestrian and commoditized business of wrapping steel around smarts, where the software was everything of value and the shell was simply the latest look-alike clone, the signs couldn’t be any clearer than they are today. We are reaching the point where the carnage is about to hit every car manufacturer who is trying to make a go of it in electric vehicles (EVs).  The public is increasingly taking a pass. All the German manufacturers are backing away from their electric-only focus. Mercedes just reported almost a 20 percent year-over-year sales slump.

Buyers are simply no longer beating down dealers’ doors to get in line for the latest electric offerings, regardless of how smart the cars may be. Tesla’s recent profits fell almost 40 percent and, while they sold more cars in the third quarter year-over-year, they earned less money per car due to price cuts and low interest loans.  However, as I suggested many years ago, it’s likely when all the dust settles that Tesla will be the last U.S. player standing that’s making a real business out of EVs and also trying to hold off the Chinese onslaught, even without being able to sell the highly-profitable clean-air credits to all the other carmakers or the other prior government incentives. Mercedes, for example, is getting killed in China by BYD and Xiaomi, with sales off 27 percent in the third quarter.

The tariff problems are substantial for all the foreign automakers, but even if you put the current tariff issues aside for the moment and ignore the expiration of the EV credit that incented domestic sales for quite a while earlier this year, the fact that—according to the Kelley Blue Book—the average price of new cars has risen above $50,000 (driven largely by EVs and luxury models) has nothing to do with the realities that the vast majority of car dealers are seeing every day in their stores. This “real world” scenario is reminiscent of the fact that the continued surge in the stock market is a grossly misleading metric for what life is like for the average American at the grocery store, gas station, or local greasy spoon restaurant. Inflation continues to rise, prices at the pump keep jumping, and every shopper sees the truth regarding the sad shape of the economy despite Trump’s daily lies.

The real early warning signal for the car guys isn’t simply the slowdown in new EV sales, which have not been successfully altered by aggressive price cuts that are simply cutting into the dealers’ profits. It’s what you see in terms of the product sitting on the floors of the showrooms these days. They simply can’t sell anyone on the idea of buying a used EV. Upfront in the store, they may have positioned all the fanciest high-end versions of the 2025 and 2026 models, but if you step into the second or third tiers of demos and used cars, the asking prices for the 2023s and 2024s EVs are simply shocking. These are typically low mileage trade-ins that the dealers had to grudgingly take in to make a new sale—typically not an EV—and the prices look to be around half of what they were originally listed and sold for. Depreciation in luxury cars has always been a dramatic hit in the first year (right after the buyer drives the car off the lot), but these prices are absolute fire sales, and they still can’t move them.

The truth is that if you ask an honest dealer what’s going on, they will admit that the EVs are tough and costly to service; their unhappy owners are still plagued by the scarcity and wait times of charging stations—even though range anxiety is largely a fiction for folks driving six-figure vehicles to begin with—and the dealership owners hate taking these cars back in trades because they can’t do anything with them other than sending them to auction. The very last thing a Cadillac dealer wants to see sitting on his lot is a used Tesla. Dealers make a material portion of their overall income from the sales of pre-owned vehicles and there’s simply no buyer appetite right now for taking in or taking over someone else’s EV problems at any price.

But if anyone is going to come out of these dramatic dips in demand, it’s likely to be Tesla because Elon’s interest and business have always been about the software and the massive amounts of driver data that his systems were capturing. I’m sure he’s interested in selling plenty of cars (although he’s already more likely interested in selling them to fleet operators of trucks and robot taxis), but the long run view—typically tech-centric—is always the same, and that’s a winner-take-all game.

There’s never going to be a future for the majority of the manufacturers in the U.S. to try to build, maintain or enhance their own unique control and software systems. It’s just a matter of time before they begin to license Tesla’s tools and systems just as they’ve all been buying credits from Tesla for some time and since they’ve already begun to provide adapters for their vehicles to use Tesla charging stations. The ultimate value and the critical margins are in the software and the captured data which informs and strengthens the Tesla algorithms—not in the platform/shell that they’re housed in. At the same time, in a very new and rare twist, it appears that Tesla may be getting ready to license Apple’s CarPlay for its vehicles. 

Interestingly enough, in a completely different industry, we’re finally seeing a similar phenomenon where meeting the need and demand for increased access and expanding the reach of the “software” is far more important to all the parties than exclusivity, competitive considerations, or the platform on which the product is delivered and enjoyed. Microsoft is adopting this expansion strategy in the computer gaming industry, where it has bought two leading game studios in order to grow its multi-platform content offerings. But its most dramatic move has been the recent Halo announcement. Microsoft’s Xbox has been the exclusive home of the Halo video game for the last 25 years and Halo’s success has been responsible in part for the successive launches of four generations of updated Xbox consoles.

But Microsoft just announced that the 25th anniversary version of Halo will also be available for Sony’s PlayStation. Sony and Nintendo are Microsoft’s most important direct competitors in the game space. It’s clear that the new MSFT plan is to provide its games, software and other properties everywhere and make them available on all of the various platforms. Selling software, data and games is a lot more lucrative than building cars or consoles. These days, it’s not clear that it makes sense to manufacture anything.

In fact, following the many earlier examples in the mobile phone industry, where Facebook and others struggled and rapidly failed to introduce their own proprietary phone hardware, or the fitness field, where dozens of players entered and quickly exited the dedicated hardware device competition, I wouldn’t be surprised to see Microsoft step away entirely from its console hardware offerings and focus all of its attention on its desktop computers and its online offerings.

Since Microsoft Windows is installed on about 75 percent of all desktops worldwide, it’s a pretty short step to turn them all into mini-Xboxes as well. An early indication is the development of a new genre of video games that sits on your desktop just above the task bar (taking up only a fraction of your screen) so that you can keep one eye on the action and jump back and forth from work to wasting time in no time at all.

This takes multi-tasking to an entirely new level and is a significant step up from the old one-button fake spreadsheets we used to use to hide our screens from roving supervisors. But it’s also a reminder as well that—for too many of us—multi-tasking is simply another word for trying to do a lot of things all at once and doing each of them poorly. The critical key to success is to focus on being productive, not just being busy.

 

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Why Santa Isn’t Going to Save Starbucks 

Former CEO Howard Schultz’s heart was in the right place, but his message seems to have gotten lost in the translation.

NOV 11, 2025

I haven’t been too impressed with Starbucks and its senior management’s various back-and-forth moves since the last time former CEO Howard Schultz left. I’ve been connected with Starbucks for many decades, including stints as one of its many Seattle landlords, while the basic coffee business kept growing at a fierce pace and their real estate guys were leasing every available space in town. I feel like I’ve lived through at least six or seven versions and visions of what the company could be and should be. Ten years ago, I wrote a long piece explaining why I thought Starbucks was doing a better job of serving its customers than almost anyone else.

Right now, I’m not really sure that anyone inside the company has really made up his or her mind as to where it’s headed. One of the toughest tasks when you’re trying to unwind significant changes in a business of this size and scope is that it takes longer and costs much more to go backwards than it does to slowly roll out a new posture, approach, store design or even a new product. It’s like stirring cream into coffee: easy to do, hard to undo.

But, given the recent financial results—where sales for stores open at least a year have finally increased after two years of especially tough times—and the statements by management as to what the latest going-forward plans were, I’m hopeful that it feels a little like they’re headed back to some of the most basic operating fundamentals, which are just as critical for new business builders as for businesses that feel like they’ve been part of our lives forever. The hardest hurdle will be to step back from the concept that each store is a mini-community center serving the world and admitting that they’re running a business—not a charity—and that their attention needs to be directed primarily to paying customers.

One really good place to start the latest retrenchment might be to tell the CEO that it’s a bad joke and a horrible message for him to be commuting to work from Newport Beach to Seattle on a company-owned private plane. This kind of wretched excess makes even Kash Patel (who’s been caught shuttling his girlfriend between dates and gigs on an FBI plane) look like the one of the boys in the band. But apart from the sheer stupidity of rubbing your wealth in your employees’ faces on a daily basis, Starbucks absolutely needs to focus deeply on their best customers and, once again, try to simplify everything they’re doing with an acknowledgement of and a concentration on what Howard Schultz observed a long time ago. He said: “We’re not in the coffee business, serving people. We’re in the people business, serving coffee.” His heart was always in the right place, but I’m not sure as the message was passed down the line that it didn’t get largely lost in the translation.

N.

For sure, the troubles they’ve had for several years in China (its second largest market, with 8,000 stores) are one good example, although their same-store sales did move up a little in the most recent quarter. Their lengthy search for an operator in China to partner with ended in a joint venture deal announced last week where Starbucks will sell 60 percent of the China business to a private equity firm and license its brand and IP to a new entity, which will hopefully be able to deliver a more hands-on and localized approach as well as more direct supervision.

However, the bigger overall risk isn’t simply messaging, it’s that they fall once again into the trap of trying to be all things to all people. If they do, they’ll simply repeat the sins of the past. You can’t be a mile wide and an inch deep across the board and expect undying support and loyalty from your most important, dedicated and regular customers in return. The key customers have seen that movie before. There’s nothing worse than standing in line waiting to place your order while half a dozen mobile customers whiz in and whiz out after grabbing their lattes. It’s at times like this that I think a “coffee” is just a name for someone who’s been coughed on, or worse.

The key actions that we can expect to see over the next year or two in order to hopefully prolong the turnaround and sustain a strong recovery aren’t any mystery or complicated to execute, but they do require a strong commitment by management, a willingness on their part to stay the course during the inevitable bumps along the way, and a strong PR and messaging strategy to offset the likely impression of customers and consumers in general that Starbucks is cutting back rather than rebuilding, revamping, and expanding.

Closing more than 600 U.S. stores already this year and cutting over 1,000 “corporate” jobs can be smart mathematically, but it may be counterproductive if you’re trying to convince impatient and unhappy customers that things are going to get better soon. This is especially true in an environment where the competitive offerings are substantial, readily accessible, and increasing all the time. The company’s plan is to bolster the in-store teams during peak hours and make additional process changes to speed up the entire ordering and delivery processes. But this message needs to get out to the customers and the public stressing that the current actions are actually steps toward improving their overall daily experience and not short-term frugalities or misplaced efforts to “save their way to success” which almost always fail.

Another mixed message, but one that seems to be working quite well, is to remove seating, shrink many of the locations, and basically convert to a “mobile-first” operation where all of the orders are placed using either cellphones or kiosks and no one expects to spend any significant time in the stores at all. This is absolutely contrary to Schultz’s original vision of the stores as the “third place” between home and office, but it’s an important recognition that the pandemic completely changed the entire playing field and that Starbucks was late to the new digital environment. With the holidays just around the corner, we’ll see a huge push for the annual Peppermint and Eggnog lattes which are sales boosters, but fewer and fewer open laptops, lounge chairs and couches in the stores. JD Vance will just have to fulfill his fabric and friction fantasies elsewhere.

I hope Thanksgiving and Christmas go great for them, but I don’t think Santa’s gonna be their long-term solution or salvation. The new emphasis and the path back will be dependent on great beverages and swift and efficient service rather than providing safe spaces, restrooms, and homes away from home for the world.

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

4 Keys to Making a Deal That’s a Keeper

These simple steps to take early on in any negotiation will save time and money and increase the likelihood that the arrangement will be one you can live with.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @HOWARDTULLMAN1

Nov 4, 2025

 

 

One of the first things they teach young corporate lawyers is to leave the ugly and difficult stuff to the very end of negotiations, when the parties are weak, tired and sick of the entire proceedings. In fact, the most experienced M&A attorneys will admit that an even better idea is to paper over the present and future problems, push the tough questions down the line, and leave the heartaches and the lawsuits to the next group of bloodsuckers. They tell you that your litigation partners will thank you in advance for their future fees.

This concept is also a critical part of the ground rules and gospel of all divorce lawyers, regardless of which side of the argument they happen to be on. No one who’s ever been there believes for a moment that these avaricious advocates can serve anyone’s interest but their own. The basic idea—after creating every delay possible in the proceedings and wringing all the fees possible out of their victims—is to get some closure so they can get on to their next case and never look back.

For the perspective of any poor entrepreneur sucked into one of these seemingly endless negotiation sessions, there really isn’t any simple or foolproof way to avoid the mess. There is, however, one rule to absolutely keep top of mind throughout the entire process. The easier the deal is to get done, the harder it will be to implement. This is why it’s your basic job to be difficult when it matters, regardless of what your own attorneys argue or caution and notwithstanding all the pressure from everyone else in the room to just get things done. This is a difficult position to put yourself in and it takes a while and a few different attempts and contexts to develop the thick skin, blank stare, and willingness to ask the same questions over and over until you get a solid and clear answer to them. You need to forsake peace for truth telling. The price you pay for momentary peace is always too high.

All of which is presently and painfully on display as the world watches Trump’s latest deluded lie about bringing peace to the Middle East fall apart in just days after it was touted and paraded everywhere. It was foolish, naïve and embarrassing for experienced negotiators and the public at large to think for a moment that an agreement with dozens of deferred terms and concessions including disarmament of Hamas and its expulsion from Gaza would ever come to pass in the absence of further military intervention. Once again, the Trump art of the deal turns out to be a fraud on us all. It appears that Putin’s not the only one to make a fool repeatedly of the Orange Monster. China’s leader, Xi Jinping, also just made Trump look like a clueless clown by giving back a small fraction of what China took away in exchange for major further concessions by Trump trying to save face as he backs away from a tariff battle that he stupidly started.

But even this miserable example provides simple negotiating lessons for entrepreneurs in their own business dealings. There are a few simple steps to take early on in any negotiation in order to save time and money and significantly increase the likelihood that the ultimate arrangement will be one that you can live with.

1. Start at the end, not the beginning.

Make it clear that certain basics are non-negotiable and that they are absolute requirements for getting any deal done. Don’t let these be deferred or glossed over.  You should never deny your firmest convictions for the sake of peace and quiet. There is zero chance that Hamas will ever give up its weapons and only a fool would believe otherwise. They’ve said it before the ceasefire and now they’ve said it after the ceasefire—even going so far on TV as admitting that it’s only a “hudna” which means a pause. On the other hand, Mamdani campaigned for Mayor in the NYC primary on some very risky propositions and made some over-the-top promises and, to his credit, he has maintained those stances, for better or worse, and even doubled down on some which has made his position abundantly clear to all.

2. Stick to your guns and stand alone if necessary.

Everyone in any meeting will have their own agenda, including the folks on your side and the professionals working for you. It’s rare that all these will be aligned. Open declarations and consistent clarity on your part will save everyone time. It’s far better to be an asshole in the moment and even risk the deal than to suffer years later with an agreement, terms, and conditions that you knew wouldn’t get the job done but settled for in order to keep the peace. Seeking consensus on aggressively contested points is more likely to lead to a mediocre outcome than to a happy ending.

3. Acknowledge that some deals just can never get done.

Wishing, hoping and beating a dead horse aren’t ways to get where you want to go. Sometimes, you just can’t get there from here and it’s smart and prudent to acknowledge that as soon as it’s clear. If you sit there long enough, all that happens is that you get subjected to a constant stream of asks for compromises, small concessions, deferments or flat out give-ups—all in the name of good faith, false hopes and sharing the pain. It’s like being slowly pecked to death by a flock of angry geese.

4. Remember the rule of the slippery slope.

Every negotiation contains a number of detours, rabbit holes, and slippery slopes which all need to be avoided. Detours and rabbit holes merely waste your time. Slippery slopes are outright dangerous because they’re inducements and invitations to settle various matters for everyone’s sake except your own. But even worse is the end result. You need to always remember the rule: the minute you settle for less than you deserve, you get even less than you settled for.

 

NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Marketing

How Automakers and Car Dealers Can Survive the Chinese EV Onslaught 

We’ve seen this movie before. And it’s a lesson for all entrepreneurs about how to position your product for a changing market. 

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @HOWARDTULLMAN1

JAN 7, 2025

Several decades ago, I was directly involved in one of the greatest efforts ever to position and brand entire new lines of luxury vehicles, whose Japanese manufacturers were planning to enter into the U.S. market. I was the CEO of a company that made millions of calls each year to measure the relative satisfaction of car customers with their sales and service experiences.

In the mid-1980s, the overwhelming perception by U.S. vehicle owners was that cars made in Japan were cheap-looking and unstylish, despite their reliability. We advised management at both Nissan and Toyota (and eventually Honda) that to succeed in the luxury space, they needed to establish new brands and new dealership facilities, and to enforce exceptionally high standards of dealer sales and service behavior. An elite group of existing dealers were awarded the opportunity to sell these new brands based on exceptional customer satisfaction levels as measured by our surveys and technology.

It was a given, of course, that the actual quality of the new cars needed to be high, but that was less of a concern than the need to overcome the negative consumer impressions of vehicles made in Asia. Luxury German, Italian, and English cars screamed elegance – but Japan conveyed a different image. 

Remaking that image is the origin story of Infiniti (Nissan), Lexus (Toyota), and Acura (Honda). These brands – at least in the cases of Lexus and Acura – have triumphed in America and come to be regarded as high-end, high-quality luxury lines with most car buyers not making the slightest connection to the parent companies, or to any remnants of their former prejudices and perceptions.  

Can Hyundai’s Genesis Pull Off the Same Branding Trick?

The latest entrant into the luxury branding sweepstakes is Hyundai, and the exceptional job it has done since launching the Genesis luxury brand in 2008 – again without the slightest look backward at its origin as a low-end Korean manufacturer. While most consumers still don’t even recognize the brand or badge, Genesis sales have continued to accelerate. New models have been added to the lineup and massive, flashy TV advertising has driven increased awareness. The cars themselves look largely indistinguishable from the major European luxury players (which the latest Genesis ads insist isn’t the case) while the built-in gimmicks, gadgets, and electronics are actually leading edge.  

Interestingly enough, and a lesson for entrepreneurs and startups, is that much of the new tech in these cars is relatively untested and somewhat unstable, but the advertising and promotion value of being leaders in the space has seemingly overcome the desire to make sure that all the stuff actually worked as promised. The major players are far more concerned, constrained, and even regulated in these areas and – as a result – are far behind. This is very much reminiscent of the Tesla self-driving fiascos, which are instances of the same old “forgiveness rather than permission” philosophy, but sadly, much like Theranos, represent serious ongoing risk to life and limb.  

BYD Is Yet Another Asian Competitor Ready to Crack the U.S. Market

The next vehicle invasion is already underway. This time it’s coming from China with brands and players, like BYD, that most car owners have not yet even heard of. They will soon. While the Musk-hyped media continues to drool over Tesla and bolsters its market cap, Tesla made about 1.8 million vehicles globally in fiscal 2023 while BYD produced more than three million EVs and ranked as the world leader. “Made in China” used to have negative connotations – similar to the earlier Japan issues – before the world learned that everything that Trump sells to the MAGAt suckers is manufactured in China and that’s made things apparently hunky-dory with the cult. 

We’re now watching Tesla sales decline for the first time in a decade, with the often-ridiculed Cybertruck leading the downward spiral. This is partly political, tied to CEO Elon Musk’s hard right turn and his boorish and infantile behavior.  Driving one of those monstrosities may soon be perceived as the vehicular equivalent of a MAGA hat on wheels.  

In fact, especially where certain energy technologies like batteries are concerned, there’s an understanding and even acceptance that China is now leading the pack. So, no one’s worried about hiding the backstory and both Elon and Trump can’t get seem to get enough of Xi Jinping. Tesla has its own very substantial facilities in China and is highly dependent on materials supplied from there as well as the revenue from the many Tesla vehicles sold there.

Trump has been talking big about tariffs on Chinese imports and also eliminating the EV tax credits, but most of that conversation was before he and Elon made their unholy and wholly confusing partnership. I’m not betting that anything adverse to Tesla (or Tik-Tok for that matter) is likely to happen any time soon, since nothing talks louder or more persuasively with the Orange Monster than the money that people put in his pocket. It’s also possible that Chinese firms have already begun planning to create assembly (and possibly manufacturing) facilities in the U.S., which would be expressly designed to get around any Trump tariffs.  

In fact, to give Musk his due, if it weren’t for Tesla’s cumulative edge in data capture, which will be critically important to the next autonomous generations of EVs, the Chinese would probably roll over the entire U.S. vehicle industry. There’s a precedent. Various Asian players have already done so in the steel industry, even as President Biden blocked their latest acquisition actions – Nippon Steel’s attempt to buy U.S. Steel.  

Car Dealers Will Need to Stay Aggressive

The Japanese vehicle invasion of the 1960s and ’70s caught U.S. manufacturers largely flat-footed. On the other hand, the biggest and smartest dealers that had available capital jumped on the new bandwagon, built new dealerships, and largely shut out any new entrants into their respective marketplaces. The captive dealers that were still playing the Detroit game and thus largely dependent on the old-line manufacturers lost several competitive steps and still haven’t really recovered. Today the mega-dealer chains like the Penske Automotive Group (with more than 200 locations in 28 states) have continued to expand and are probably already positioning themselves to add Chinese lines to their domestic offerings.

While some of the best and biggest of these dealer chains may finesse parts of the risk, most dealers won’t be able to resist the invasion by themselves. The prior Japanese history should be more than a fair warning that, if the domestic manufacturers don’t aggressively step up their EV game, they may lose this battle as well. That means millions of Americans will be driving BYD vehicles by 2030, if not sooner.