Speaker 1: Bloomberg Audio, Studios, podcasts, radio news.
Speaker 2: Get to it because this is one of the other
Speaker 2: big companies reporting here after the close and what was
Speaker 2: a busy earnings aftermarket day. Bloomberg Intelligence Global autos analyst
Speaker 2: Steve Man joining us FROMBI headquarters in Princeton, New Jersey.
Speaker 2: All right, Steve, come on in on this. So Tesla
Speaker 2: shares down about three point four percent as we speak.
Speaker 2: Why is it that there's some disappointment here?
Speaker 1: Well, if you look at their earnings, they did take
Speaker 1: a restructuring charge of about six hundred and twenty two
Speaker 1: million used to exclude that.
Speaker 3: They did beat consensus.
Speaker 1: But I think if you look into the numbers, the
Speaker 1: automotive gross margin continues to fall, and I think the
Speaker 1: street was expecting it to kind of stabilize given that
Speaker 1: price cuts have slowed down and battery costs have come down.
Speaker 1: So there's still some concern and it's you know, when
Speaker 1: is this gross margin gonna stop dropping?
Speaker 4: Yeah, fourteen point six percent in the second quarter compared
Speaker 4: to sixteen point four percent in the first quarter. What
Speaker 4: do analysts want to see in terms of gross margin, like,
Speaker 4: what's a realistic percentage?
Speaker 1: Well, they did have they did reach as high as
Speaker 1: twenty percent about a couple of years ago. It's gonna
Speaker 1: be really tough to get back to that range. They're
Speaker 1: gonna have to do a lot, you know. One of
Speaker 1: the things that you know that I think the streets
Speaker 1: talking about is the optimist humanoid robot that they're gonna
Speaker 1: bring online internally and hopefully to cut cut some of
Speaker 1: the fixed costs.
Speaker 3: But that's gonna be a while.
Speaker 1: I think they're gonna Tesla's gonna have to contend with,
Speaker 1: you know, the continued price war in in China, continue
Speaker 1: price decline in the US. But one of the things
Speaker 1: that they're doing that could help, that could help is
Speaker 1: expanding into markets like self. They just shipped more vehicles
Speaker 1: in the UK and the now into the Middle East.
Speaker 1: Hopefully the increased scale, and I think that would be
Speaker 1: some of the questions we're going to have at the
Speaker 1: earnings call is are they going to be able to
Speaker 1: increase scale to drop to improve the gross margins?
Speaker 2: So, Steve, is this a report from a Tesla that
Speaker 2: is just maturing in a more competitive market, or is
Speaker 2: this a Tesla showing signs of some strains, some struggle
Speaker 2: struggles if you will, And some questions about the output.
Speaker 1: Well, it's definitely getting more competitive. I think the concern
Speaker 1: is that they're maturing. Auto business is maturing. GM reported
Speaker 1: earnings today and you know their automotive gross margin is
Speaker 1: fourteen percent. Tesla is around sixteen percent, So it's getting
Speaker 1: awfully close to what GM, the legacy automaker's gross margins are.
Speaker 1: So the concerns are there. The outlook, I think there's
Speaker 1: there's gonna be a lot of focus on you know,
Speaker 1: like I said earlier, are they able to build scale
Speaker 1: in new markets? And then secondly their AI endeavors. You know,
Speaker 1: they've delayed the August eighth event on AI to a
Speaker 1: couple of months. I think a lot of investors will
Speaker 1: want to probe a little bit more to to get
Speaker 1: a glimpse of what they want to what they plan
Speaker 1: to talk about in October.
Speaker 4: Well, let's talk a little bit about that. You're talking
Speaker 4: about an AI event. Some people refer to it as
Speaker 4: the Robotaxi event.
Speaker 2: How do they refer to it?
Speaker 4: I don't know how how do they refer to it
Speaker 4: internally the way you said it, Steve? How do they
Speaker 4: refer to it though? Because it's I mean, this is
Speaker 4: something Elon Musk has talked about for the better part
Speaker 4: of a decade.
Speaker 1: Yeah, I think I think they are referring to an
Speaker 1: AI event. I think they want they do want to pivot. Uh.
Speaker 1: They know the auto industry. It's not new to to
Speaker 1: to to US, auto industry is a commoditized business.
Speaker 3: You get the Chinese.
Speaker 1: Uh, you know, I'm able to build cars for much cheaper.
Speaker 3: So they know he knows that there's a lot.
Speaker 1: Of value to be had in AI and so he
Speaker 1: does want to start pivoting the company to be an
Speaker 1: AI company, uh, less so of an auto company.
Speaker 4: So can can But are you confident from an analyst
Speaker 4: perspective that he can realistically do that because the joke
Speaker 4: with robotaxi self driving has been next year, next year,
Speaker 4: next year, and it hasn't shown up yet.
Speaker 3: Yeah.
Speaker 1: Yeah, I think there's a lot lot of hurdles. One
Speaker 1: of the biggest hurdles to getting robo taxi uh to
Speaker 1: be on a across the board on the roads is
Speaker 1: really the regulations. And I know, you know, not the
Speaker 1: only Tesla, but every automaker is trying to trying to
Speaker 1: convince the government that you know, these are safe much
Speaker 1: more much safer vehicles than they are operated by humans.
Speaker 1: So uh, I think I think if you look at AI,
Speaker 1: I think what Elon must is trying to do is
Speaker 1: uh you know, introduce AI even beyond robotaxi. Right, there's
Speaker 1: you know, at the end of the day, the company
Speaker 1: is trying to try to lower energy consumption and increase
Speaker 1: sustainable uh energy usage. Uh So if you can imagine,
Speaker 1: for example, one thing is you know, all these vehicles
Speaker 1: have large batteries in them, and if you know, if
Speaker 1: we can get AI to actually maneuver these vehicles to
Speaker 1: say where you know, there's a deficit of power and
Speaker 1: these charge up batteries can actually uh offset some of
Speaker 1: the peaks and and and fill some of the.
Speaker 3: The deficit power deficit.
Speaker 1: You know, that's that's one way of achieving sustainable energy
Speaker 1: one of his goal. So you can't, I think, for us,
Speaker 1: we can't just think of its robo taxi.
Speaker 3: You got to think of.
Speaker 1: It as you know, you have energy store ghorich in
Speaker 1: a vehicle, in a moving vehicle. Plus the computers in
Speaker 1: these vehicles are probably more powerful than some of our PCs,
Speaker 1: So there's there's other ways of you you know, he
Speaker 1: talked about using you know, putting, you know, putting a
Speaker 1: number of these vehicles together. Yeah, to for example mind bitcoin.
Speaker 3: Yeah.
Speaker 2: Well, I'm looking at our live blog here and our
Speaker 2: Dana Hall, who obviously covers Tesla and Elon Musk notes
Speaker 2: something from Gene Munster of deep water asset managements as
Speaker 2: a whole story here is about what else is to
Speaker 2: come again these This is from Gene. The stock is
Speaker 2: drifting because of the run up, but there are a
Speaker 2: lot of questions about the unboxed manufacturing strategy and what
Speaker 2: that means for the Robotaxi, which means you probably won't
Speaker 2: see a Robotaxi until twenty twenty six or twenty twenty seven.
Speaker 2: Munster a Dana Ads is referring to this line in
Speaker 2: the deck quote our purpose built Robotaxi product will continue
Speaker 2: to pursue a revolutionary unboxed manufacturing strategy. It sounds very
Speaker 2: Elon Musk, right, like we don't, I mean, like don't
Speaker 2: really quite know exactly what that means.
Speaker 1: Right, Yeah, I you know, I think you know, in
Speaker 1: our assumptions, I don't think grobal Taxi is going to
Speaker 1: be even profitable, not until the next decade. But the
Speaker 1: one more thing I think the investor would want to
Speaker 1: know is, you know, when are they going to introduce
Speaker 1: a more affordable EV. I think that's one of the
Speaker 1: things that's plaguing the industry right now. You know, we've
Speaker 1: lowered prices a lot and and and hasn't and hasn't
Speaker 1: really lifted sales. But I think there's still not enough
Speaker 1: choices for the consumer at the sub thirty thousand dollars range.
Speaker 4: So who makes you know, Steve, who makes the most
Speaker 4: affordable EV out there?
Speaker 3: Is it?
Speaker 4: Is it Hyundai? Is it Kia?
Speaker 1: Yeah, it's Hunda, and the Asians do Hunda in Kia,
Speaker 1: And I think I think if you look at globally,
Speaker 1: the Chinese actually makes the most.
Speaker 4: They can't get that in the US.
Speaker 1: Yeah, it's well, we'll have to see. I think the
Speaker 1: election is going to have He's going to have a
Speaker 1: play and that.
Speaker 4: So it always goes back to the election.
Speaker 2: Yeah, Ed Love though it's also noting that he says,
Speaker 2: I guess when it comes to the more affordable models
Speaker 2: remaining on track for the start of production in twenty
Speaker 2: twenty five, says those products will be built on quote
Speaker 2: the same manufacturing lines as current vehicles, but it's kind
Speaker 2: of always a wait and see good stuff, Steve. We'll
Speaker 2: look for some of your research certainly tomorrow. Thank you
Speaker 2: for coming along and helping him make some sense of
Speaker 2: this Bloomberg Intelligence Global autos and industrial analyst Steve Mann,