In an interview with Bernama, the 84-year-old statesman showed little mercy in ripping apart his long-time friend, who only yesterday had reiterated his admiration for the former premier.
Mahathir said he was concerned that support for BN would decline in the coming elections because Samy Vellu continued to helm MIC.
The former premier said the 73-year-old MIC president should relinquish his post for his party's failure in the last elections, where Samy Vellu was also defeated in his parliamentary stronghold of Sungai Siput.
"In other countries, when a leader fails, he resigns voluntarily. In Japan, he would commit harakiri (suicide). We are not asking him (Samy Vellu) to commit harakiri.
"You have failed to lead MIC to the point that you lost yourself," he said.
Comparing Samy Vellu to his successor and former premier Abdullah Ahmad Badawi, Mahathir said Abdullah had resigned due to his poor performance.
"Samy's performance is worse than Pak Lah (Abdullah), but he still does not want to give up his post," he said, adding: "He should have resigned before things got to this stage."
Mahathir stressed that he had a right to criticise anyone for the sake of BN, and added: "I've criticised Pak Lah, who's Samy Vellu that I cannot criticise?"
The former premier said leaders must realise that the post they held was not for life. "This is not directed at Samy Vellu alone because there are others who are like him," he added.
As for himself, Mahathir said he had wanted to resign in 1998 but because of the economic crisis and the Anwar Ibrahim issue, he had to continue leading the nation until 2003.
"I resigned not when people criticised me. I resigned because I had stayed too long.
"Malaysian leaders still do not understand that when they fail they should resign of their own volition, no need for others to tell them. When you fail, your party fails. You are responsible," he said.
BN leaders should interfere
Asked what BN could do in view of its principle not to interfere in the affairs of component parties, he said when the matter became a problem for BN, the coalition would become the victim if it did not intervene.
He said BN leaders must admonish Samy Vellu because as BN leaders they were responsible not only for the performance of their own parties but also that of BN as a whole.
"If I know that a person will cause BN to lose, that is already a BN problem, no longer a MIC problem. We cannot keep saying don't interfere. This is a BN affair. Because of him, the BN lost.
"Previously there was no Hindraf. Now there are scores (of pressure groups from the Indian community.) It's him that the people don't want but he still wants to be president," he added.
He said leaders who resorted to money, pressure, abuse of power and threats could remain as party presidents but would not win elections.
On Samy Vellu's chosen leaders winning the party elections last week, Mahathir said they could win party elections but would lose in general elections because the people would not support them.
He also criticised Samy Vellu for not playing a role to stop the building of temples without approval despite having promised to do so.
According to Mahathir, Samy Vellu became popular because he (Mahathir) had helped him.
"He wanted to build a university, I persuaded the government to give a RM50 million allocation and I've helped in many more of his projects," he said.
Mahathir said he had to persuade the Malays to allow BN to place MIC candidates in Malay-majority areas because no constituency in the country had an Indian majority.
"Besides that, I also strove to get MIC candidates supported by the Malays. Without support from Umno members and the other Malays, MIC could not win. So that's is my service to MIC.
"But when the MIC does something that will cause it not to be supported by the Indians, Chinese and Malays, I have to criticise," he said.