WEBVTT - BNEF's Morsy on Tesla: Investors Want Numbers vs. Vision(Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg Business Flag blom Bloomberg World Handquarters.

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<v Speaker 1>I'm Charlie Pellett. Tesla Motors says it's on track for

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<v Speaker 1>fifty thousand deliveries in the second half, shares of about

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<v Speaker 1>one and a half percent. It did report a second

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<v Speaker 1>quarter adjusted loss of a dollar six versus estimates for

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<v Speaker 1>a loss of sixty cents. Stocks halted a two days

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<v Speaker 1>slide as a rebounding crude oil lifted energy producers West

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<v Speaker 1>Texas Intermediate back about forty one dollars of barrel that

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<v Speaker 1>offset declines in defensive industries. Gold snapped its longest rally

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<v Speaker 1>in six weeks. Gold down six tenths of one percent,

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<v Speaker 1>down thirteen fifty nine, SMP five hundred Index up six

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<v Speaker 1>to sixty three, a gain of three tents of one

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<v Speaker 1>percent down. Industrial is up forty one to eighteen thousand,

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<v Speaker 1>three hundred fifty five, a gain of two tenths of

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<v Speaker 1>one percent, and has stack up by four tenths of

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<v Speaker 1>one percent. I'm Charlie Pellett. That's a Bloomberg Business flash.

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<v Speaker 1>You're listening to Stock with Kathleen Bloomberg Radio at Boston

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<v Speaker 1>Live at Smith and Lesky Restaurant here in the Boston

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<v Speaker 1>Seaport district. During our attention to Tesla now, as Charlie

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<v Speaker 1>Pellett just reported Tessa saying it's on track for five

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<v Speaker 1>hundred thousand vehicles this year. If you're on your Bloomberg

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<v Speaker 1>and you're watching Top Live, you can see some very

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<v Speaker 1>interesting comments from a lot of our team at Bloomberg

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<v Speaker 1>News covering this. Jamie Butters, you know, det Bureau saying

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<v Speaker 1>that Tesla forecast cards per week by the end of

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<v Speaker 1>Q three and by the end of the year in

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<v Speaker 1>an average of twenty five weeks. That would be decent

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<v Speaker 1>number if it can be delivered. It seems to be

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<v Speaker 1>echoing the sentiment of our next guest, Aleen Morrisey, advanced

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<v Speaker 1>transport analysts at Bloomberg New Energy Finance, we call it BNF.

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<v Speaker 1>He joined us in Bloomberg World Headquarters in New York

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<v Speaker 1>City this afternoon. Slen, welcome, thanks for having me. So

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<v Speaker 1>let's start with the kind of painting, painting with a

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<v Speaker 1>broad brush what we've seen in the headlines on the

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<v Speaker 1>earnings report. So far. Yeah, so listen, they missed the earnings,

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<v Speaker 1>but they did keep their guidance on the fifty thou

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<v Speaker 1>vehicles to be delivered this year. Remember that they had

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<v Speaker 1>missed both their targets for quarter one and quarter two.

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<v Speaker 1>They came in at fourteen thousand or a little bit

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<v Speaker 1>above in quarter two against the guidance of seventeen thousands,

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<v Speaker 1>so they're really gonna have to wrap up in the

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<v Speaker 1>second half of the year. To targets are the opening

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<v Speaker 1>of their retail locations tied directly to their ability to

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<v Speaker 1>get these production numbers to where they want them to be. Well,

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<v Speaker 1>I think there's generally there's been a little bit of

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<v Speaker 1>a slowdown in the electric vehicle market, broadly in the

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<v Speaker 1>United States as energy prices have been lower, even though

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<v Speaker 1>vehicle sales are higher. But they've also had trouble um

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<v Speaker 1>selling their vehicles and key markets like China. To give

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<v Speaker 1>you an indication of what I'm talking about, Yeah, test

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<v Speaker 1>corners about twenty percent of battery electric vehicle sales globally,

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<v Speaker 1>but about in the US, And I think what may

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<v Speaker 1>be happening is that they're plateauing in their addressable market

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<v Speaker 1>in the US and having trouble catching up in in

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<v Speaker 1>other markets well data whole autos report. A reporter for

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<v Speaker 1>the Bluebrig News team notes in this top live feed

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<v Speaker 1>from the from the Tesla shareholder letter that says, we

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<v Speaker 1>are also accelerating store opening, some planned at a new

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<v Speaker 1>retail location every four days on average during the remainder

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<v Speaker 1>of Q three and through Q four. Does this maybe

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<v Speaker 1>address their need to sell better in markets like China?

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<v Speaker 1>This is I mean, it's important obviously to have retail

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<v Speaker 1>locations for their vehicles, and they're dealing also with conflicts

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<v Speaker 1>with American UH, with American dealerships because the test to

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<v Speaker 1>sell directly to customers, I think more importantly, at the

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<v Speaker 1>price points of the vehicle. I mean they've come down

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<v Speaker 1>market with the two flagship models, the Model X and

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<v Speaker 1>the Model S. They've come down about nine thousand dollars

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<v Speaker 1>on the starting price of the Model X starting at

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<v Speaker 1>four thousand dollars at about sixty seven thousand dollars on

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<v Speaker 1>the Model U S sixtk our pack about four thousand

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<v Speaker 1>dollars lower, or four thousand dollars lower than the previous one.

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<v Speaker 1>But these are still vehicles that are super expensive. I

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<v Speaker 1>mean we're talking about the medium price of a car

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<v Speaker 1>in the US is thirties thousand dollars. That they just

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<v Speaker 1>need to get those price points down. And the only

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<v Speaker 1>way they're really going to start telling more cars is

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<v Speaker 1>with the rollout of the Model three in twenty seventeen

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<v Speaker 1>and eighteen. How's their frecash flow doing? Uh? So, you know,

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<v Speaker 1>they're about negative half a billion quarter at the moment.

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<v Speaker 1>I haven't. I really haven't seen the latest numbers for

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<v Speaker 1>this quarter, but I think the expectation is that that's

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<v Speaker 1>going to keep stay negative for the time being. And

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<v Speaker 1>this rate is actually the other which is the justification

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<v Speaker 1>they need to bring to the analysts for the acquisition

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<v Speaker 1>of Solar City, another kind of free cash flow negative

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<v Speaker 1>business that they want to add to the test, to

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<v Speaker 1>the test of brand. You know something, You're quoted recently

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<v Speaker 1>um saying that elons master plan reads more like a

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<v Speaker 1>wish list than anything remotely execute able in the medium term,

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<v Speaker 1>as you note the company's last two billion dollar or

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<v Speaker 1>in his last year of operation. Yeah, and I think

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<v Speaker 1>you know the on the call that we're gonna here

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<v Speaker 1>in an hour, I'm sure that there will be questions

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<v Speaker 1>about the execution of this master plant. You know, he's

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<v Speaker 1>talking about building semi trucks for all electric semi trucks,

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<v Speaker 1>you know, class vehicles, think of like the big Walmart

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<v Speaker 1>trucks that you see on the highways driving in the

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<v Speaker 1>American Midwest. He's talking about building buses, he's talking about

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<v Speaker 1>having sharing car sharing. You saw the news of d

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<v Speaker 1>D absorbing the Uber business in China. These are super competitive,

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<v Speaker 1>cutthroat businesses. And again with free cash flow negative businesses

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<v Speaker 1>as it is, I think it's going to be uh,

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<v Speaker 1>you know, a tall order to convince, uh, convinced investors

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<v Speaker 1>that they should even more money into the business when

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<v Speaker 1>it's losing uh cash flow at the moment. So just quickly.

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<v Speaker 1>The Giga factory near Reno, Nevada, it opened, I believe

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<v Speaker 1>last week. Any inference as to how that's going and

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<v Speaker 1>whether that's going to suck even more money out of

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<v Speaker 1>testless operations, so you know, it's a it's a five

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<v Speaker 1>billion dollar factory. It's uh. The equity investments are from

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<v Speaker 1>Hannasonic or Filift in my own battery supplier and tested themselves,

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<v Speaker 1>as well as some subsidies from the state of Nevada. Uh,

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<v Speaker 1>it's not complete yet. Actually far from its complete. They

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<v Speaker 1>think they will be producing battery cells out of that

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<v Speaker 1>location by the end of the year, but the thirty

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<v Speaker 1>five gigawatt our capacity that the factory will be producing

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<v Speaker 1>won't be for another two two and a half years. Uh.

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<v Speaker 1>And that's and you're right, it's critical because uh it

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<v Speaker 1>will help lower the cost of production of the Model

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<v Speaker 1>three and hopefully make it make a Model three uh

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<v Speaker 1>profit of at least on a you know, an operating basis.

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<v Speaker 1>So how long do you think investors are going to

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<v Speaker 1>be uh on on lest side be patient with him.

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<v Speaker 1>I can't answer that question, but I will say, you know,

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<v Speaker 1>it's it's the camps are broadly divided between those who

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<v Speaker 1>buy his vision and those who are more interested in

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<v Speaker 1>the financials than expect returns on their investment. UH. So far,

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<v Speaker 1>you know, and uh in the last few years the

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<v Speaker 1>kind of visionary month winning over investors. But frankly, I

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<v Speaker 1>think since you know, these issues of autopilot, of casualty,

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<v Speaker 1>than regulatory uh federal investigations, the issue of UM of

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<v Speaker 1>of other issues kind of affecting the business um and

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<v Speaker 1>the master plan itself, you know, basically asking for free

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<v Speaker 1>or blank check I think more questions are going to

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<v Speaker 1>be asked, and that balance may tip now in favor

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<v Speaker 1>of investors really want hard numbers from We've got to

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<v Speaker 1>leave it there, So leave Morse Advanced Transport Analysts, Bloomberg

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<v Speaker 1>New Energy Finance. This is Bloomberg coming up. Bloomberg Law.

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