An auto industry legend questioned Tesla's eye watering stock rally, and said it has 'nothing to do with reality'

• Automotive veteran Bob Lutz has questioned how Tesla has surged to have the highest market cap of any automotive company in the US while only producing 300,000 cars a year.
• He told CNBC's Squawk box: "The fact that Tesla is worth more than Fiat Chrysler, General Motors and Ford combined is worth more than Volkswagen and Toyota has nothing to do with reality."
• Tesla's stock price has exploded over 250% since the start of 2020.

Tesla's stock has exploded more than 250% since the start of 2020 alone, but an automotive legend who has frequently questioned the electric car maker once again slammed the firm's breathless rally, which has made it the most valuable auto company in the world.

Bob Lutz, who held top positions at the Big Three US automotive companies, told CNBC's "Squawk Box" Tuesday: "Tesla is not a very profitable company that creates a decent return for shareholders. It is always struggling for profitability, yet it has a huge market cap."

Lutz, who served as executive vice president at Ford, vice chairman at Chrysler Corporation and vice chairman of General Motors, added: "The rise in stock price and the fact that Tesla is worth more than Fiat Chrysler, General Motors and Ford combined is worth more than Volkswagen and Toyota has nothing to do with reality."

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He pointed out while Tesla has "very good technology" other automotive giants such as GM, Ford, Toyota, Volkswagen, Porsche also have comparable technology.

Lutz added: "Tesla may be giants in the electric car business but annually they [make] 300,000 cars compared to 10 million a year for Toyota, about 8 million a year for GM. Fiat Chrysler, Ford and GM combined [make] about 20 million a year, so Tesla is not very big," Lutz said.

The soaring stock price has also pushed the market capitalization of the company to more than $280 billion, making it the highest-valued automaker in the world.

This is not the first time Lutz has criticized Tesla for being grossly overvalued.

In February this year he likened Tesla's stock market rally to "almost a mass psychosis" when prices were trading in a range of $700-900 at the time. It is now trading at $1516.80.

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Piper Sandler said this week in a note it expects the monster rally to continue and put a price target of $2,322 on the stock, an increase of more than 50% from current levels.