1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg P and L 6 00:00:20,840 --> 00:00:32,199 Speaker 1: Podcast on Apple Podcasts, SoundCloud and Bloomberg dot com. Just 7 00:00:32,240 --> 00:00:35,760 Speaker 1: to try to cover all the bases of various things 8 00:00:35,760 --> 00:00:37,680 Speaker 1: that are happening in the world, you know, we want 9 00:00:37,680 --> 00:00:40,560 Speaker 1: an update on the California wildfires. This is an area, 10 00:00:40,560 --> 00:00:43,640 Speaker 1: of course of intense interest for the wine industry. And 11 00:00:43,680 --> 00:00:45,680 Speaker 1: here to help us understand what's going on is Steven 12 00:00:45,840 --> 00:00:49,200 Speaker 1: ron Kliev. He is the global beverages strategist and food 13 00:00:49,200 --> 00:00:53,640 Speaker 1: and agrib business research and advisory group for Rabobank International, 14 00:00:53,720 --> 00:00:57,720 Speaker 1: major Dutch lender lender to the agriculture industry. Stephen, thanks 15 00:00:57,760 --> 00:00:59,720 Speaker 1: for coming into our studios here just give us an 16 00:00:59,760 --> 00:01:02,880 Speaker 1: update on what you know right now about UH wine 17 00:01:03,000 --> 00:01:07,320 Speaker 1: cultivation production. The harvest was almost complete, I believe in 18 00:01:07,800 --> 00:01:11,319 Speaker 1: Napa and Sonoma. That's correct. That's correct. So it's it's 19 00:01:11,360 --> 00:01:14,320 Speaker 1: still very much a fluid situation. And and you know, 20 00:01:14,319 --> 00:01:16,120 Speaker 1: one of the questions that we get asked often is 21 00:01:16,160 --> 00:01:19,840 Speaker 1: you know, what will this mean for overall California wine production? 22 00:01:19,920 --> 00:01:23,480 Speaker 1: And and really, you know, the the short answer is 23 00:01:23,520 --> 00:01:26,680 Speaker 1: probably not that much in terms of volume, right, because 24 00:01:26,920 --> 00:01:29,759 Speaker 1: when you look at Napa and Sonoma, you're talking about 25 00:01:29,800 --> 00:01:33,920 Speaker 1: ten percent of of overall California wine production, and as 26 00:01:33,959 --> 00:01:37,760 Speaker 1: you said, probably eight of that was already harvested. So 27 00:01:37,800 --> 00:01:40,840 Speaker 1: in terms of overall volume, probably doesn't mean much. In 28 00:01:40,920 --> 00:01:44,040 Speaker 1: terms of disruption to the industry, it's enormous. It's it's 29 00:01:44,120 --> 00:01:48,080 Speaker 1: it's enormous impact. And you know, first off, let's I 30 00:01:48,120 --> 00:01:50,280 Speaker 1: think you would share in this. Let's send our condolences 31 00:01:50,360 --> 00:01:53,280 Speaker 1: to the families of forty one people that that lost 32 00:01:53,320 --> 00:01:56,919 Speaker 1: their lives, to the countless people that lost homes and businesses. 33 00:01:57,440 --> 00:02:01,840 Speaker 1: It's it's a tremendous disruption to the industry, mostly because 34 00:02:01,880 --> 00:02:04,920 Speaker 1: of what it's meant for for tourism and disruption to 35 00:02:05,000 --> 00:02:07,640 Speaker 1: operations in one of the most prestigious regions in all 36 00:02:07,640 --> 00:02:11,519 Speaker 1: of California, or the most prestigious regions in all of California. Well, 37 00:02:11,600 --> 00:02:15,200 Speaker 1: let's also talk about future production, because just because there's 38 00:02:15,200 --> 00:02:19,360 Speaker 1: been everything or mostly the vineyards had been already harvested 39 00:02:19,400 --> 00:02:22,640 Speaker 1: doesn't mean that the damage couldn't continue into next year. 40 00:02:22,720 --> 00:02:25,480 Speaker 1: Is there any talk about that? There is some concern, 41 00:02:25,560 --> 00:02:28,120 Speaker 1: and and and there will be small pieces of vineyards 42 00:02:28,120 --> 00:02:32,560 Speaker 1: that will see some some some um long term impact 43 00:02:32,600 --> 00:02:36,440 Speaker 1: on production. But for the most parts, UH, vines tend 44 00:02:36,480 --> 00:02:39,520 Speaker 1: to be fairly resilient. I think they'll they'll come back. 45 00:02:39,600 --> 00:02:42,040 Speaker 1: The The big impact is going to be what does 46 00:02:42,120 --> 00:02:44,440 Speaker 1: this mean for the two thousand and seventeen vintage, which 47 00:02:44,480 --> 00:02:48,079 Speaker 1: was looking really good. Uh, there's concern. You know, most 48 00:02:48,160 --> 00:02:51,560 Speaker 1: of what was out there had been harvested. The challenges 49 00:02:51,680 --> 00:02:55,000 Speaker 1: that you know, it's the ten percent that hadn't been 50 00:02:55,040 --> 00:02:58,240 Speaker 1: harvested is Cabernet sauvignon. And that's, you know, the most 51 00:02:58,320 --> 00:03:01,880 Speaker 1: valuable when you think of the US wine industry, the 52 00:03:01,960 --> 00:03:06,359 Speaker 1: US wine market, the typical consumer, the typical wine sold 53 00:03:06,400 --> 00:03:09,239 Speaker 1: in the market sells for under eight dollars a bottle. 54 00:03:09,800 --> 00:03:13,560 Speaker 1: Napa Valley Cabernet sauvignon sold direct to consumer averages around 55 00:03:13,600 --> 00:03:16,480 Speaker 1: a hundred dollars a bottle. So it's this is the 56 00:03:16,520 --> 00:03:19,960 Speaker 1: most premium wine grape in the market, and that's what's 57 00:03:20,000 --> 00:03:23,280 Speaker 1: out there potentially being affected by smoke Taine. Okay, now 58 00:03:23,520 --> 00:03:25,480 Speaker 1: this is that we were talking about California. Now I 59 00:03:25,480 --> 00:03:28,320 Speaker 1: want to get your thoughts on France, Italy and Spain 60 00:03:28,480 --> 00:03:32,280 Speaker 1: because they have not had a good year. That's been 61 00:03:32,320 --> 00:03:35,440 Speaker 1: a you know when you talk about overall volume and 62 00:03:35,440 --> 00:03:37,400 Speaker 1: people ask me what, you know, what are the what 63 00:03:37,520 --> 00:03:42,760 Speaker 1: does the California wildfires mean for for consumption globally? Their 64 00:03:42,880 --> 00:03:46,720 Speaker 1: volume not much. France, Italy, in Spain. That's really a 65 00:03:46,760 --> 00:03:50,320 Speaker 1: horror terrible weather. Terrible weather. You had, you had frost 66 00:03:50,400 --> 00:03:53,480 Speaker 1: in the spring, you had drought, you had extreme temperatures 67 00:03:53,480 --> 00:03:57,040 Speaker 1: in the summer, hail, all of that, and and it 68 00:03:57,120 --> 00:03:59,160 Speaker 1: really hit all three of them. We've seen years in 69 00:03:59,200 --> 00:04:01,720 Speaker 1: the past when any single one of those might have 70 00:04:01,800 --> 00:04:04,680 Speaker 1: had an off year, but never where you've seen all 71 00:04:04,760 --> 00:04:07,960 Speaker 1: three of them down so much the same time. And 72 00:04:08,480 --> 00:04:11,200 Speaker 1: you know, again you're going back to now the smallest 73 00:04:11,280 --> 00:04:14,800 Speaker 1: vintage that we've seen in over fifty years. So this 74 00:04:14,880 --> 00:04:19,640 Speaker 1: is you know, this will really weigh on wine consumption globally. 75 00:04:20,680 --> 00:04:23,080 Speaker 1: We've seen, you know, with that, just to kind of 76 00:04:23,120 --> 00:04:26,159 Speaker 1: put it in perspective, the decline that we've seen versus 77 00:04:26,240 --> 00:04:29,520 Speaker 1: last year in production globally because of those three countries 78 00:04:29,560 --> 00:04:33,320 Speaker 1: that make up half of all wine production. That decline 79 00:04:33,360 --> 00:04:38,800 Speaker 1: represents something like ten of typical global wine consumption in 80 00:04:38,800 --> 00:04:41,960 Speaker 1: a year. So something's going to have to give globally, 81 00:04:42,000 --> 00:04:45,720 Speaker 1: and wine producers in the industry will look for levers 82 00:04:45,760 --> 00:04:48,320 Speaker 1: to to try to mitigate the effects of that, but 83 00:04:48,800 --> 00:04:52,320 Speaker 1: there will be impacts that will reverberate kind of globally 84 00:04:52,320 --> 00:04:54,919 Speaker 1: and wine consumption because of it. Well, the events this 85 00:04:55,000 --> 00:04:57,960 Speaker 1: year don't make me want to have don't reduce my 86 00:04:58,040 --> 00:04:59,840 Speaker 1: desire to have a drake. It's not that in some 87 00:05:00,240 --> 00:05:03,040 Speaker 1: is necessarily going to go down, just that prices could 88 00:05:03,080 --> 00:05:04,600 Speaker 1: go up, right, I mean, could we see a real 89 00:05:04,720 --> 00:05:07,880 Speaker 1: increase in prices, especially as millennials evidently love wine and 90 00:05:07,920 --> 00:05:12,080 Speaker 1: are drinking lots of it. Absolutely, and thank god for millennials, right, um, 91 00:05:12,600 --> 00:05:17,240 Speaker 1: thank god for wine. Let's forget the millennials. Come on, Yeah, 92 00:05:17,320 --> 00:05:19,680 Speaker 1: I think you know some of the price increases is 93 00:05:19,760 --> 00:05:22,279 Speaker 1: we've looked at it. I think we expect that, you know, 94 00:05:22,400 --> 00:05:25,039 Speaker 1: much of the price increases will see in in the 95 00:05:25,200 --> 00:05:29,000 Speaker 1: very low end segments of the European wine market, right 96 00:05:29,080 --> 00:05:32,240 Speaker 1: the stuff that gets drunk for you know, a Euro 97 00:05:32,440 --> 00:05:34,839 Speaker 1: two or a leader, that's where you'll see it. You 98 00:05:34,920 --> 00:05:38,000 Speaker 1: will see some of the price increases passed on, you 99 00:05:38,040 --> 00:05:40,320 Speaker 1: know in the in the higher end stuff like the 100 00:05:40,640 --> 00:05:42,719 Speaker 1: Bordeaux and the rio Hus, but they have a little 101 00:05:42,760 --> 00:05:45,719 Speaker 1: bit more of a cushion in terms of margin to 102 00:05:45,720 --> 00:05:48,800 Speaker 1: to to take on that price increase just quickly as 103 00:05:48,839 --> 00:05:51,520 Speaker 1: a big lender to the agriculture industry and to the 104 00:05:51,520 --> 00:05:56,239 Speaker 1: wine industry. UM collateral is what grows on the vines, 105 00:05:56,400 --> 00:06:00,000 Speaker 1: right and the land. Is it going to change blending pattern? 106 00:06:01,560 --> 00:06:03,760 Speaker 1: I don't think so so far. When you when you 107 00:06:03,839 --> 00:06:08,880 Speaker 1: think of the UM the wildfires, what it's done, it's 108 00:06:08,880 --> 00:06:13,760 Speaker 1: been the it's been tremendous the impact. But it's it's 109 00:06:13,800 --> 00:06:16,760 Speaker 1: really been When you look at the number of wineries 110 00:06:16,760 --> 00:06:20,799 Speaker 1: and NAPA wineries, it was maybe fifteen that were affected. 111 00:06:20,920 --> 00:06:24,800 Speaker 1: The vineyards are mostly okay. Uh. It's really more the 112 00:06:25,160 --> 00:06:29,160 Speaker 1: destruction of interruption of operations, interruption of tourism, which has 113 00:06:29,240 --> 00:06:33,160 Speaker 1: become really the driver of of route to market for 114 00:06:33,160 --> 00:06:35,719 Speaker 1: for a lot of these wineries. Steven Nickley, thank you 115 00:06:35,760 --> 00:06:38,599 Speaker 1: so much for joining US Global beverage strategist and food 116 00:06:38,880 --> 00:06:43,200 Speaker 1: and aggrib business research and advisory for Robbo Bank International. 117 00:06:43,279 --> 00:06:57,800 Speaker 1: He is their in house wine drinker. I want to 118 00:06:57,839 --> 00:07:00,559 Speaker 1: turn our attention to one tech company that is sitting 119 00:07:00,680 --> 00:07:03,640 Speaker 1: very pretty today. I'm talking about Twitter shares up fourteen 120 00:07:03,640 --> 00:07:07,440 Speaker 1: and a half percent after releasing earnings that beat analysts 121 00:07:07,560 --> 00:07:11,320 Speaker 1: estimates and showed some strength in their user rates. And 122 00:07:11,360 --> 00:07:13,720 Speaker 1: I want to bring into tender we're all global Internet 123 00:07:13,760 --> 00:07:17,400 Speaker 1: and consumer electronics analysts for Bloomberg Intelligence to talk about 124 00:07:17,760 --> 00:07:20,920 Speaker 1: what kind of underpinned the success here that Twitter unveiled. 125 00:07:21,080 --> 00:07:24,360 Speaker 1: So tender, just how good were the earnings today? Quote? 126 00:07:24,360 --> 00:07:27,320 Speaker 1: Are the expectations are very low? Actually, and last quarter 127 00:07:27,480 --> 00:07:31,680 Speaker 1: we saw a deceleration in some user momentum, but this 128 00:07:31,840 --> 00:07:34,520 Speaker 1: quota they just showed that the momentum has come back. 129 00:07:34,960 --> 00:07:39,320 Speaker 1: So a combination of continued cost cuts which happens helping profitability, 130 00:07:39,640 --> 00:07:42,640 Speaker 1: they're making product changes and the numbers are showing that 131 00:07:43,120 --> 00:07:46,200 Speaker 1: they seem to be working. Well, what isn't working? What 132 00:07:46,280 --> 00:07:49,560 Speaker 1: needs to be fixed? So basically, if you look at 133 00:07:49,560 --> 00:07:51,480 Speaker 1: the growth rate right now, it's still you know, we're 134 00:07:51,480 --> 00:07:54,520 Speaker 1: talking about four percent um why hy growth rate and 135 00:07:54,640 --> 00:07:57,440 Speaker 1: users and we have not seen a big secular shift 136 00:07:57,560 --> 00:08:00,320 Speaker 1: like people coming back to Twitter at the same pace 137 00:08:00,400 --> 00:08:04,440 Speaker 1: as peers are experiencing. So that's not working yet. But 138 00:08:05,240 --> 00:08:07,920 Speaker 1: the product changes that they've done in terms of simplifying 139 00:08:07,960 --> 00:08:11,040 Speaker 1: it and notification things like that is showing that these 140 00:08:11,120 --> 00:08:15,360 Speaker 1: changes can drive engagement. What about profitability? What about advertising? 141 00:08:15,520 --> 00:08:18,920 Speaker 1: They show that they were able to monetize more effectively 142 00:08:19,120 --> 00:08:22,080 Speaker 1: the audience that it has. Now that's the big question, right, 143 00:08:22,120 --> 00:08:26,680 Speaker 1: So first step was to sort of resurrective user growth, 144 00:08:26,720 --> 00:08:29,680 Speaker 1: bring in more users on board, and then go convince advertisers. 145 00:08:29,680 --> 00:08:32,000 Speaker 1: So they're doing a good job convincing investors right now. 146 00:08:32,040 --> 00:08:35,040 Speaker 1: Now they have to use that momentum to convince advertisers 147 00:08:35,040 --> 00:08:37,679 Speaker 1: to shift at budgets here. But as far as profitability 148 00:08:37,720 --> 00:08:40,640 Speaker 1: is concerned, I mean, uh, they have done a good 149 00:08:40,720 --> 00:08:42,960 Speaker 1: job in terms of like cost cuts and getting the 150 00:08:43,000 --> 00:08:45,360 Speaker 1: margins up, so that should continue and it's working in 151 00:08:45,360 --> 00:08:48,600 Speaker 1: their favor. Also, one thing to remember is the expectation 152 00:08:48,679 --> 00:08:51,520 Speaker 1: for next year and next or next year are very low, 153 00:08:51,760 --> 00:08:55,360 Speaker 1: you know, single digits, and they're coming from this seventeen 154 00:08:55,400 --> 00:08:59,959 Speaker 1: comparison which is negative. So if they continue this moment 155 00:09:00,000 --> 00:09:02,680 Speaker 1: and um, I think you know, at least in the 156 00:09:02,679 --> 00:09:06,040 Speaker 1: phase of low expectations, they could they could see better 157 00:09:06,040 --> 00:09:08,920 Speaker 1: results to tender. Can we can we just move a 158 00:09:08,960 --> 00:09:11,720 Speaker 1: little bit to the future and get your thoughts on 159 00:09:11,800 --> 00:09:15,000 Speaker 1: alphabet give us a preview of what what analysts are 160 00:09:15,000 --> 00:09:18,920 Speaker 1: going to be looking for. Sure, so the underlying demand here, 161 00:09:18,920 --> 00:09:22,120 Speaker 1: coming mostly from mobile search and YouTube, is pretty strong. 162 00:09:22,400 --> 00:09:25,080 Speaker 1: Um In fact, we saw that last quarter as well. 163 00:09:25,120 --> 00:09:28,800 Speaker 1: They recorded the high the highest growth and paid clicks. 164 00:09:29,480 --> 00:09:32,600 Speaker 1: What would be interesting to see is the traffic acquisition cost, 165 00:09:32,640 --> 00:09:35,640 Speaker 1: which made them sort of miss revenues a little last quarter. 166 00:09:36,240 --> 00:09:38,680 Speaker 1: Uh So the cost that they paid to distribution partners 167 00:09:38,720 --> 00:09:42,840 Speaker 1: including Apple, uh and more and more mobile search at 168 00:09:43,040 --> 00:09:46,640 Speaker 1: basically contribution from mobile search increasing also increases the traffic 169 00:09:46,720 --> 00:09:50,560 Speaker 1: acquisition cost. So the top line expectation is strong, the 170 00:09:50,640 --> 00:09:53,640 Speaker 1: end market demand is strong. There will be a keen 171 00:09:53,720 --> 00:09:56,880 Speaker 1: eye on how these costs are faring, especially in light 172 00:09:56,920 --> 00:09:59,200 Speaker 1: of what we see what we saw last quarter. And 173 00:09:59,240 --> 00:10:01,560 Speaker 1: not to give everyone whiplash, but I also want to 174 00:10:01,559 --> 00:10:04,400 Speaker 1: get a look ahead to Amazon dot Com. They're reporting 175 00:10:04,440 --> 00:10:09,080 Speaker 1: earnings it for one today PM Wall Street time, and 176 00:10:09,440 --> 00:10:12,199 Speaker 1: I am very curious to see how much they're sacrificing 177 00:10:12,240 --> 00:10:14,480 Speaker 1: their margins to gain a competitive edge. What are you 178 00:10:14,480 --> 00:10:17,559 Speaker 1: looking for? Yeah, don't be surprised if they miss on 179 00:10:17,600 --> 00:10:21,199 Speaker 1: the bottom line, I mean, expenses ramp is expected. They 180 00:10:21,200 --> 00:10:25,560 Speaker 1: are increasing expense expenses on a WS as content spending, 181 00:10:25,600 --> 00:10:29,760 Speaker 1: and with double Whole Foods acquisition integration, that should also 182 00:10:30,240 --> 00:10:32,640 Speaker 1: go up. But if you look at the third quarter 183 00:10:33,000 --> 00:10:36,360 Speaker 1: with Amazon Prime Day, with the contribution from Whole Foods, 184 00:10:36,360 --> 00:10:38,600 Speaker 1: and continue growth in a WS, they should be fine. 185 00:10:38,920 --> 00:10:40,880 Speaker 1: The guidance for next quarter is going to be very 186 00:10:40,920 --> 00:10:43,560 Speaker 1: important from a revenue standpoint because we are kind of 187 00:10:43,559 --> 00:10:46,040 Speaker 1: flying blind right now. It's the first full quarter of 188 00:10:46,200 --> 00:10:50,120 Speaker 1: Whole Foods integration, so we need to see what sort 189 00:10:50,120 --> 00:10:54,319 Speaker 1: of impact the price cuts and traffic increase has had 190 00:10:54,360 --> 00:10:57,400 Speaker 1: on the net revenue for Amazon. But all in all, 191 00:10:57,520 --> 00:11:00,800 Speaker 1: the end market demand is strong on all fronts to tender. 192 00:11:01,000 --> 00:11:04,160 Speaker 1: If you pull out Amazon Web Services from Amazon, what 193 00:11:04,320 --> 00:11:09,200 Speaker 1: kind of company is it? Uh, It's not a profitable company. 194 00:11:09,280 --> 00:11:12,959 Speaker 1: So they have seen actually profit margins have been rising 195 00:11:13,080 --> 00:11:17,400 Speaker 1: in North America, but beyond that it's lost making. So 196 00:11:17,640 --> 00:11:20,680 Speaker 1: the idea here is to sort of read scale in 197 00:11:20,760 --> 00:11:24,559 Speaker 1: their prime and FBA cycle internationally so they can replicate 198 00:11:24,559 --> 00:11:26,920 Speaker 1: what they're doing here in North America. But it'll take time, 199 00:11:27,160 --> 00:11:29,880 Speaker 1: and with the Whole Foods push, things are going to 200 00:11:30,000 --> 00:11:34,440 Speaker 1: get even more volatile in terms of spending, So don't 201 00:11:34,440 --> 00:11:37,880 Speaker 1: expect a double x a w S Amazon to uh, 202 00:11:37,920 --> 00:11:41,559 Speaker 1: you know, secularly grow their profits, but it's expected because 203 00:11:41,600 --> 00:11:45,280 Speaker 1: revenue growth has been pretty strong in light of these expenses. 204 00:11:45,520 --> 00:11:48,320 Speaker 1: Any chance that investors will call for Amazon to spin 205 00:11:48,360 --> 00:11:52,280 Speaker 1: off a WS into a separate business at the moment, 206 00:11:52,320 --> 00:11:55,240 Speaker 1: I mean, right now a w S is the sort 207 00:11:55,280 --> 00:12:00,960 Speaker 1: of the profit driver for the company, but still it's 208 00:12:01,200 --> 00:12:04,199 Speaker 1: the country. There are many contributions, very low. Profit contribution 209 00:12:04,320 --> 00:12:07,160 Speaker 1: is high. It actually plugs into a lot of other 210 00:12:07,200 --> 00:12:10,960 Speaker 1: services that Amazon is providing, you know, your Alexa, your 211 00:12:11,040 --> 00:12:13,640 Speaker 1: content spending that they're doing. So a WS is pretty 212 00:12:13,640 --> 00:12:16,760 Speaker 1: plugged into the whole Amazon ecosystem, including logistics. So I 213 00:12:16,800 --> 00:12:19,760 Speaker 1: don't see a reason why that should be done. To 214 00:12:19,800 --> 00:12:23,480 Speaker 1: begin with J Tantra, I'm curious how much information will 215 00:12:23,559 --> 00:12:27,280 Speaker 1: get on how their acquisition with Whole Food of Health 216 00:12:27,320 --> 00:12:29,960 Speaker 1: Foods has been going, you know, and kind of where 217 00:12:30,000 --> 00:12:32,520 Speaker 1: they're thinking, because I know that it's just completely destroyed 218 00:12:33,120 --> 00:12:35,439 Speaker 1: the stocks of a lot of grocery chains out there. 219 00:12:35,480 --> 00:12:38,440 Speaker 1: As people start to guard for whatever disruption they have planned, 220 00:12:38,480 --> 00:12:43,440 Speaker 1: what do you expect to learn so they'll basically the 221 00:12:43,480 --> 00:12:46,920 Speaker 1: revenue guidance should actually help us understand the run rate 222 00:12:46,960 --> 00:12:49,400 Speaker 1: that Whole Foods was doing as a standalone company is 223 00:12:49,440 --> 00:12:53,280 Speaker 1: an increasing or decreasing. Uh. If it's decreasing, it's probably 224 00:12:53,320 --> 00:12:56,319 Speaker 1: coming from the price cuts that they're doing. If it's increasing, 225 00:12:56,360 --> 00:12:59,679 Speaker 1: then the traffic that they're getting because of this acquisition 226 00:12:59,720 --> 00:13:03,000 Speaker 1: is actual outpacing those price cuts. So I guess it's 227 00:13:03,080 --> 00:13:05,880 Speaker 1: not the amount of impact, but the place of impact 228 00:13:05,920 --> 00:13:08,040 Speaker 1: that's what that's what's going to be most important. So 229 00:13:08,080 --> 00:13:11,400 Speaker 1: if they guide higher than what the street is expecting 230 00:13:11,480 --> 00:13:15,080 Speaker 1: right now, I mean we could expect that negative effect 231 00:13:15,120 --> 00:13:19,199 Speaker 1: on others to continue. Do you expect any details at 232 00:13:19,240 --> 00:13:22,520 Speaker 1: all about moving into other businesses such as the prescription 233 00:13:22,640 --> 00:13:27,000 Speaker 1: drug delivery business or indeed even the banking industry. Not much, 234 00:13:27,679 --> 00:13:31,720 Speaker 1: just some color maybe, But it's super early days in 235 00:13:31,720 --> 00:13:33,520 Speaker 1: in in on those regards, and we have to keep 236 00:13:33,559 --> 00:13:35,840 Speaker 1: in mind the Whole food acquisition is start getting a 237 00:13:36,080 --> 00:13:38,880 Speaker 1: eight hundred billions all plus market, and they have the 238 00:13:39,000 --> 00:13:42,360 Speaker 1: last mild delivery problem still to be solved and optimized. 239 00:13:42,360 --> 00:13:46,280 Speaker 1: So until those things are uh done, I I don't see, 240 00:13:46,360 --> 00:13:49,600 Speaker 1: like you know, any color on a big revenue contribution 241 00:13:50,080 --> 00:13:54,160 Speaker 1: coming from you know, any of these other experimentation face. 242 00:13:54,240 --> 00:13:56,160 Speaker 1: I think that they're doing right now, so it's a 243 00:13:56,200 --> 00:13:59,040 Speaker 1: long game that they're playing on those fronts. I'm wondering 244 00:13:59,080 --> 00:14:03,280 Speaker 1: about regular Tory pressure, the idea that an increasing number 245 00:14:03,320 --> 00:14:05,920 Speaker 1: of regulators, both in Europe and the US are starting 246 00:14:05,960 --> 00:14:10,280 Speaker 1: to question, uh, sort of the incredible size and pricing 247 00:14:10,320 --> 00:14:13,240 Speaker 1: power of Amazon, and you know, do you expect them 248 00:14:13,280 --> 00:14:15,920 Speaker 1: to address that or at least nod to that as 249 00:14:15,960 --> 00:14:20,120 Speaker 1: a potential risk. It is a potential risk, and especially 250 00:14:20,120 --> 00:14:23,520 Speaker 1: in eu've we've been seeing uh more and more of 251 00:14:23,600 --> 00:14:26,640 Speaker 1: those examples. But one thing to keep in mind is 252 00:14:26,680 --> 00:14:29,680 Speaker 1: with Amazon, a big chunk of their revenues driven by 253 00:14:29,720 --> 00:14:33,600 Speaker 1: third party sale services, third party sellers on the platform, 254 00:14:33,680 --> 00:14:36,480 Speaker 1: so it's not Amazon selling directly, it's you know, other 255 00:14:36,560 --> 00:14:41,840 Speaker 1: businesses selling through Amazon. So that sort of like dilutes 256 00:14:42,040 --> 00:14:46,200 Speaker 1: the monopolistic sort of argument a bit. But as far 257 00:14:46,240 --> 00:14:50,080 Speaker 1: as examples you have seen in EU, uh, those risks 258 00:14:50,080 --> 00:14:52,960 Speaker 1: will linger not just for like the next couple of quarters, 259 00:14:52,960 --> 00:14:55,040 Speaker 1: but the next couple of years, given you know how 260 00:14:55,080 --> 00:14:57,880 Speaker 1: fast they're growing, and um, the end market still is 261 00:14:57,960 --> 00:15:02,360 Speaker 1: much much bigger. But that will be an ongoing sort 262 00:15:02,400 --> 00:15:06,280 Speaker 1: of argument, if you may. We are awaiting details and 263 00:15:06,320 --> 00:15:09,560 Speaker 1: the comments from House Speaker Paul Ryan having to do 264 00:15:09,680 --> 00:15:13,480 Speaker 1: with the budget resolution that was just recently past, will 265 00:15:13,520 --> 00:15:16,000 Speaker 1: be bringing that to you live. We're speaking with cha 266 00:15:16,080 --> 00:15:19,040 Speaker 1: Tender Warrel. He is our global Internet and consumer electronics 267 00:15:19,040 --> 00:15:22,000 Speaker 1: analysts for Bloomberg Intelligence. He's joining us from our Bloomberg 268 00:15:22,040 --> 00:15:26,160 Speaker 1: nine sixties studio in San Francisco. Tender, you know, I 269 00:15:26,480 --> 00:15:28,480 Speaker 1: keep thinking about what you just said having to do 270 00:15:28,520 --> 00:15:31,640 Speaker 1: with these third party sellers that use Amazon basically for 271 00:15:31,680 --> 00:15:36,160 Speaker 1: all of fulfillment UH needs. But aren't states I mean 272 00:15:36,200 --> 00:15:38,440 Speaker 1: I know that for example, of state in Massachusetts has 273 00:15:38,520 --> 00:15:42,920 Speaker 1: asked for a list of those third party sellers because 274 00:15:43,320 --> 00:15:46,440 Speaker 1: right now they're not paying sales tax. Yeah, so they 275 00:15:46,440 --> 00:15:49,600 Speaker 1: have left it on the sellers the onus of collecting 276 00:15:49,640 --> 00:15:51,720 Speaker 1: the sales tax when it comes to third parties. And 277 00:15:51,840 --> 00:15:55,080 Speaker 1: you know very state by states, so there there are 278 00:15:55,240 --> 00:15:59,200 Speaker 1: some states where you're seeing more scrutiny on that end. 279 00:15:59,520 --> 00:16:02,200 Speaker 1: But in the end, if there is a widespread change 280 00:16:02,240 --> 00:16:06,360 Speaker 1: in terms of tax collection, I think it will basically 281 00:16:06,440 --> 00:16:09,400 Speaker 1: being normalized by the volume growth that these third party 282 00:16:09,440 --> 00:16:11,920 Speaker 1: sellers are seeing. Because you have to keep in mind 283 00:16:11,960 --> 00:16:15,440 Speaker 1: that when third party sellers go on FBA program, they 284 00:16:15,440 --> 00:16:18,960 Speaker 1: get exposed to prime members and Prime members are continuing 285 00:16:18,960 --> 00:16:21,280 Speaker 1: to increase, not just in numbers, but the amount of 286 00:16:21,280 --> 00:16:25,600 Speaker 1: money that they're spending on on on Amazon. So basically 287 00:16:25,840 --> 00:16:29,680 Speaker 1: that exposure, that volume that they're getting should help them 288 00:16:29,680 --> 00:16:33,400 Speaker 1: offset in an instance where uh, the sales tax need 289 00:16:33,480 --> 00:16:36,240 Speaker 1: to be enforced. Just sort of zooming out a little 290 00:16:36,240 --> 00:16:39,680 Speaker 1: bit because today is such a big fang tech stock 291 00:16:39,840 --> 00:16:43,440 Speaker 1: day with you know, both Google and or Alphabet I'm sorry, 292 00:16:43,800 --> 00:16:47,320 Speaker 1: and Amazon reporting after earning today and we got Twitter's already. 293 00:16:47,560 --> 00:16:50,000 Speaker 1: I'm wondering what you're saying. With Twitter, there were really 294 00:16:50,040 --> 00:16:54,640 Speaker 1: low expectations going into this and they exceeded them. Expectations 295 00:16:54,640 --> 00:16:59,200 Speaker 1: are still pretty high for Alphabet and Amazon. That do 296 00:16:59,240 --> 00:17:01,640 Speaker 1: you think will do you think that will create a 297 00:17:01,720 --> 00:17:05,880 Speaker 1: negative surprise? Uh, potential that the market's not prepared for 298 00:17:06,800 --> 00:17:09,760 Speaker 1: the So we have to take both the cases separately. 299 00:17:09,800 --> 00:17:13,880 Speaker 1: So with Alphabet, negative surprise potential could come from these 300 00:17:13,920 --> 00:17:17,560 Speaker 1: traffic acquisition costs and at pricing that we talked about, 301 00:17:18,000 --> 00:17:21,760 Speaker 1: because as more AD dollars come from mobile, they have 302 00:17:21,880 --> 00:17:25,640 Speaker 1: to pay the distribution network to get that and that 303 00:17:26,200 --> 00:17:29,679 Speaker 1: did sort of cause us per last time. If you remember, 304 00:17:29,720 --> 00:17:32,280 Speaker 1: there was a confusion when Google reported in terms of 305 00:17:32,320 --> 00:17:34,680 Speaker 1: what they missed and what they what they beat because 306 00:17:34,680 --> 00:17:37,480 Speaker 1: of this tax, So that issue could surface again with 307 00:17:37,640 --> 00:17:42,400 Speaker 1: Alphabet with Amazon. Like I said, with Whole Foods contribution, 308 00:17:43,240 --> 00:17:45,800 Speaker 1: V are sort of flying in the dark here in 309 00:17:45,880 --> 00:17:48,119 Speaker 1: terms of what the contribution is going to be. So 310 00:17:48,160 --> 00:17:51,000 Speaker 1: any negative surprise in terms of you know, the expectation 311 00:17:51,119 --> 00:17:53,320 Speaker 1: was Whole food will maintain its revenue run rate that 312 00:17:53,400 --> 00:17:56,720 Speaker 1: it had before Amazon bought it. If that expectation is 313 00:17:56,800 --> 00:17:59,560 Speaker 1: much lower, then you could see some surprise on the downside. 314 00:18:00,080 --> 00:18:02,080 Speaker 1: Thank you so much for joining us to Tendra. We're 315 00:18:02,119 --> 00:18:20,160 Speaker 1: all global Internet and consumer electronics analysts for Bloomberg Intelligence. Well, 316 00:18:20,200 --> 00:18:22,680 Speaker 1: we'd like to learn more about the European Central Bank 317 00:18:22,760 --> 00:18:24,840 Speaker 1: as they seem to have decided to slow the pace 318 00:18:24,920 --> 00:18:29,760 Speaker 1: of their quantitative easing program, but they are extending the 319 00:18:29,800 --> 00:18:32,440 Speaker 1: program by nine months here tell us more in detail. 320 00:18:32,640 --> 00:18:37,840 Speaker 1: Is maxim A Spahi, our Euro Area economist for Bloomberg Intelligence, 321 00:18:37,880 --> 00:18:41,040 Speaker 1: and you can follow maxim A at on Twitter at 322 00:18:41,400 --> 00:18:45,200 Speaker 1: m x s b A. Alright, m x s b A, 323 00:18:45,320 --> 00:18:48,680 Speaker 1: tell me about the European Essential Bank and what is 324 00:18:48,720 --> 00:18:53,480 Speaker 1: this plan about extending uh the quantitative easing program? Yes, 325 00:18:53,520 --> 00:18:57,040 Speaker 1: good morning from from London. So the ECB decided today 326 00:18:57,080 --> 00:18:59,359 Speaker 1: to go with the consensus. So I mean that means 327 00:18:59,400 --> 00:19:02,480 Speaker 1: they extended a quee program by nine months, but they 328 00:19:02,560 --> 00:19:07,439 Speaker 1: cut the monthly pace of purchases from sixty to surrey 329 00:19:07,520 --> 00:19:11,160 Speaker 1: starting in January. Most importantly is that drag Is said 330 00:19:11,240 --> 00:19:14,160 Speaker 1: during the press conference that there won't be no sudden 331 00:19:14,280 --> 00:19:18,320 Speaker 1: stop to the quee program, so he basically hinted at 332 00:19:18,440 --> 00:19:21,720 Speaker 1: further extension of the quee program. He basically said that 333 00:19:21,800 --> 00:19:24,440 Speaker 1: September was probably not going to be the end date 334 00:19:24,920 --> 00:19:27,080 Speaker 1: of the quee program. And that's in itself as a 335 00:19:27,160 --> 00:19:30,560 Speaker 1: very dolvish statement. Well, Maximi, I was looking at some 336 00:19:30,680 --> 00:19:34,560 Speaker 1: analyst notes after the announcement by the ECB earlier today, 337 00:19:34,560 --> 00:19:37,040 Speaker 1: and they were saying, you know, yes, it's thirty billion 338 00:19:37,240 --> 00:19:40,600 Speaker 1: euros of as purchase as the purchases, but it's actually 339 00:19:40,640 --> 00:19:42,840 Speaker 1: gonna be forty five billion euros because they're going to 340 00:19:42,880 --> 00:19:46,359 Speaker 1: be reinvesting the proceeds of notes that they currently have. 341 00:19:47,000 --> 00:19:48,800 Speaker 1: Just to give you a sense of how this has 342 00:19:48,840 --> 00:19:52,760 Speaker 1: been received, the two year German bond yield plummeted. It 343 00:19:52,840 --> 00:19:56,920 Speaker 1: went back down to negative uh is the point seven 344 00:19:57,000 --> 00:20:00,280 Speaker 1: to five percent. I mean, this just means that it's tape. 345 00:20:00,280 --> 00:20:03,960 Speaker 1: It it's gonna be que forever in the European Union. Now, yeah, 346 00:20:04,000 --> 00:20:06,439 Speaker 1: the that's the whole debate about the stock and the 347 00:20:06,480 --> 00:20:10,760 Speaker 1: flow of Quie and Mayo. Draggie said very specifically today 348 00:20:10,800 --> 00:20:13,199 Speaker 1: they actually published a press release on on the details 349 00:20:13,240 --> 00:20:16,119 Speaker 1: of this, that they were going to reinvest all the 350 00:20:16,440 --> 00:20:19,080 Speaker 1: bonds that come to maturity and so basically that they 351 00:20:19,080 --> 00:20:20,720 Speaker 1: were going to be in the markets for a long 352 00:20:20,800 --> 00:20:23,840 Speaker 1: time even after stopping the purchase. You hasn't mentioned it, 353 00:20:23,920 --> 00:20:25,480 Speaker 1: but one day they will have to stop. We think 354 00:20:25,520 --> 00:20:27,679 Speaker 1: it's going to be in two thousand nineteen, early two 355 00:20:27,680 --> 00:20:31,280 Speaker 1: thousand nineteen. After that, the huge stock of purchases will 356 00:20:31,320 --> 00:20:34,560 Speaker 1: be reinvested, just like the FED did for a long time. Yes, 357 00:20:35,160 --> 00:20:39,000 Speaker 1: is there any sense of when the European Central Bank 358 00:20:39,200 --> 00:20:42,239 Speaker 1: may start to raise the deposit rate or is that 359 00:20:42,320 --> 00:20:45,520 Speaker 1: just completely off the table at this point. So it's 360 00:20:45,560 --> 00:20:47,679 Speaker 1: it's it's not gonna happen anytime soon. But if you 361 00:20:47,800 --> 00:20:51,680 Speaker 1: add up the nine months extension of today, the fact 362 00:20:51,720 --> 00:20:53,160 Speaker 1: that he said there was going to be no sense 363 00:20:53,160 --> 00:20:55,840 Speaker 1: stop that, so that qu is gonna be it's gonna 364 00:20:55,880 --> 00:20:59,240 Speaker 1: be extended after September. And if you also had to 365 00:20:59,320 --> 00:21:02,520 Speaker 1: that the n change forward guidance, who still promises that 366 00:21:02,680 --> 00:21:05,280 Speaker 1: the rates are gonna stay at the current levels for 367 00:21:05,320 --> 00:21:08,080 Speaker 1: an extended period of time and I quote well past 368 00:21:08,160 --> 00:21:10,960 Speaker 1: the curierizon. If you add everything up, that means they're 369 00:21:10,960 --> 00:21:13,760 Speaker 1: gonna have to wait until two thousand nineteen, we think 370 00:21:13,960 --> 00:21:17,480 Speaker 1: end two thousand nineteen to start hiking rates again. And 371 00:21:17,480 --> 00:21:19,119 Speaker 1: if you think about it, Mario drag is going to 372 00:21:19,240 --> 00:21:21,800 Speaker 1: leave the e CB in October two thousand nineteen. So 373 00:21:21,840 --> 00:21:24,080 Speaker 1: there's actually a high chance now that is going to 374 00:21:24,240 --> 00:21:27,120 Speaker 1: leave after eight years at the ECB head without ever 375 00:21:27,560 --> 00:21:33,320 Speaker 1: having to hike rates. Maxim ay the the Euro Area, 376 00:21:33,400 --> 00:21:37,840 Speaker 1: the Eurozone economy is not homogeneous, and you have the 377 00:21:37,960 --> 00:21:41,080 Speaker 1: enviable task of being the Euro Area economist. So I'm 378 00:21:41,080 --> 00:21:45,680 Speaker 1: wondering if you could describe which countries and which economies 379 00:21:45,720 --> 00:21:48,439 Speaker 1: have benefited the most from the actions of the e 380 00:21:48,560 --> 00:21:51,120 Speaker 1: c B. Well, if you look just at the pure 381 00:21:51,119 --> 00:21:55,679 Speaker 1: composition of QUI um they QUI is mostly oriented towards 382 00:21:55,680 --> 00:21:58,399 Speaker 1: Germany because that's a large economy, and the e c 383 00:21:58,560 --> 00:22:01,639 Speaker 1: B implements the purchases according to its capital keys. That 384 00:22:01,680 --> 00:22:04,440 Speaker 1: means how much the weight of each country in the economy. 385 00:22:04,800 --> 00:22:08,359 Speaker 1: So around purchase are going to Germany, So Germany is 386 00:22:08,359 --> 00:22:11,080 Speaker 1: probably the most the one that benefits the most from it. 387 00:22:11,400 --> 00:22:12,960 Speaker 1: On the other hand, you can also look at what's 388 00:22:12,960 --> 00:22:14,840 Speaker 1: going on in Spain and its Italy, and the fact 389 00:22:14,880 --> 00:22:17,879 Speaker 1: that the growth rate is accelerating in these countries, that 390 00:22:17,960 --> 00:22:21,640 Speaker 1: unemployment is going down, that financial conditions allow less tight 391 00:22:21,680 --> 00:22:25,199 Speaker 1: than before. That's all to put on the e CBS credits. 392 00:22:25,200 --> 00:22:28,199 Speaker 1: So everybody is benefiting from it, just not to the 393 00:22:28,200 --> 00:22:30,760 Speaker 1: same extent. You know, I find it interesting that the 394 00:22:30,840 --> 00:22:34,160 Speaker 1: yield curve in Germany is steepening on this. In other words, 395 00:22:34,160 --> 00:22:38,080 Speaker 1: people expect that this will allow inflation to pick up 396 00:22:38,119 --> 00:22:42,440 Speaker 1: over the longer term much more than it would otherwise. 397 00:22:42,720 --> 00:22:45,159 Speaker 1: Are people pretty abolishtion this and are people saying, you 398 00:22:45,200 --> 00:22:47,439 Speaker 1: know what, this is actually going to bleed into the 399 00:22:47,480 --> 00:22:50,560 Speaker 1: banks and provide a better backdrop for them. Or are 400 00:22:50,640 --> 00:22:53,680 Speaker 1: people raising alarm and saying that the longer this goes on, 401 00:22:54,280 --> 00:22:56,600 Speaker 1: the more fragile the economy becomes. I mean, we're a 402 00:22:56,680 --> 00:22:59,199 Speaker 1: sentiment right now. Well, I think I think what what 403 00:22:59,280 --> 00:23:01,120 Speaker 1: the market is looking at right now? If you look 404 00:23:01,160 --> 00:23:03,600 Speaker 1: at the euro, it's also reacting. It's that's going down 405 00:23:03,640 --> 00:23:06,639 Speaker 1: and gets the dollar after this Starfish press conference. But 406 00:23:06,680 --> 00:23:08,280 Speaker 1: I think the market is reacting to the fact that 407 00:23:08,320 --> 00:23:10,680 Speaker 1: the ECB is gonna stay for longer, that the rate 408 00:23:10,720 --> 00:23:13,560 Speaker 1: hike won't happen anytime soon, but also to the fact 409 00:23:13,640 --> 00:23:16,560 Speaker 1: that Mayo dragging seemed to be very pleased by the 410 00:23:16,600 --> 00:23:20,000 Speaker 1: way the economy was going. Gross is strong, we have 411 00:23:20,119 --> 00:23:23,399 Speaker 1: unemployment continuing to go down, there's a good momentum in 412 00:23:23,400 --> 00:23:26,000 Speaker 1: the region. The only problem again is that inflation is 413 00:23:26,000 --> 00:23:28,840 Speaker 1: not following. We have a V shaped profile of inflation, 414 00:23:28,920 --> 00:23:31,200 Speaker 1: meaning that it's gonna go down over the next month 415 00:23:31,280 --> 00:23:35,439 Speaker 1: before it starts rising again. And all this obviously is 416 00:23:35,480 --> 00:23:41,359 Speaker 1: coming into investors anticipations, and the yield curve obviously reflects that, 417 00:23:41,640 --> 00:23:45,359 Speaker 1: especially Germany, which is the main Euros on assets to 418 00:23:45,440 --> 00:23:48,280 Speaker 1: buy in the market real quick, any commentary on the 419 00:23:48,320 --> 00:23:51,720 Speaker 1: e c B S purchase of CORPORATEBT. Notice that they 420 00:23:51,840 --> 00:23:54,400 Speaker 1: didn't discuss the composition today, which is a bit surprising, 421 00:23:54,440 --> 00:23:56,280 Speaker 1: to be honest, because you would expect them to at 422 00:23:56,320 --> 00:24:00,119 Speaker 1: least address that issue. So they're gonna continue buying them 423 00:24:00,119 --> 00:24:03,960 Speaker 1: and probably not change any parameters anytime soon. Um from 424 00:24:03,960 --> 00:24:06,760 Speaker 1: the QUEI program, Max Masbai, thank you so much for 425 00:24:06,840 --> 00:24:09,800 Speaker 1: joining us. Always a pleasure speaking with you. Max Masbahi, 426 00:24:10,000 --> 00:24:14,680 Speaker 1: euro Area economist for Bloomberg Intelligence, joining us from London, 427 00:24:14,800 --> 00:24:16,639 Speaker 1: and I think back to what Ray Dalio said on 428 00:24:16,640 --> 00:24:19,800 Speaker 1: Bloomberg Surveillance this morning. He said, the longer this goes on, 429 00:24:19,840 --> 00:24:22,359 Speaker 1: the harder will be for central banks to taper as 430 00:24:22,440 --> 00:24:26,080 Speaker 1: yields go up and as the economy start to accelerate. 431 00:24:26,080 --> 00:24:39,320 Speaker 1: Something to keep in mind right now, let's focus on 432 00:24:39,600 --> 00:24:43,600 Speaker 1: the new technology and a new generation of automobile from Audi. 433 00:24:43,680 --> 00:24:46,439 Speaker 1: Joining us is Scott Kio. He is the president of 434 00:24:46,480 --> 00:24:49,520 Speaker 1: Audi of America and he joins us in our studio. Scott, 435 00:24:49,560 --> 00:24:52,520 Speaker 1: thanks for being here. Um, let me see if I 436 00:24:52,560 --> 00:24:56,720 Speaker 1: can just do this in three words, long, low, and wide. 437 00:24:56,800 --> 00:24:59,520 Speaker 1: Would that be a good description of the new generation? 438 00:24:59,600 --> 00:25:02,520 Speaker 1: He saven absolutely textbook, absolute textbook. You want to make 439 00:25:02,560 --> 00:25:05,400 Speaker 1: something beautiful and the automotive business, that's generally what you're doing. 440 00:25:05,480 --> 00:25:07,560 Speaker 1: Why did you do that? Because you've you've really you've 441 00:25:07,680 --> 00:25:10,399 Speaker 1: changed the shape of the automobile. We'll get to the 442 00:25:10,440 --> 00:25:13,480 Speaker 1: cockpit in the second, but the exterior, the shape has changed, 443 00:25:13,880 --> 00:25:15,960 Speaker 1: it has you know, this is our second generation of 444 00:25:15,960 --> 00:25:18,199 Speaker 1: the A seven and when we launched the first generation car, 445 00:25:18,320 --> 00:25:20,399 Speaker 1: people sort of said, we're crazy. It was a sport 446 00:25:20,440 --> 00:25:23,479 Speaker 1: back design. It wasn't your classic three box sedan, and 447 00:25:23,520 --> 00:25:25,760 Speaker 1: we launched it and the market loved it. Our market 448 00:25:25,800 --> 00:25:27,920 Speaker 1: share went up, of course, in that segment, the market 449 00:25:27,960 --> 00:25:30,000 Speaker 1: share went up three or four points. This is now 450 00:25:30,040 --> 00:25:32,159 Speaker 1: the second generation of the car, and what we have 451 00:25:32,320 --> 00:25:34,040 Speaker 1: is an all new head of design, a gentleman by 452 00:25:34,040 --> 00:25:36,959 Speaker 1: the name of Marklita. And you know, his real premise 453 00:25:37,040 --> 00:25:38,679 Speaker 1: is to make beautiful cars. And you see it and 454 00:25:38,680 --> 00:25:40,479 Speaker 1: how we stretched the car out a little bit and 455 00:25:40,480 --> 00:25:43,080 Speaker 1: lowered it. But even if you go back to Da Vinci, 456 00:25:43,160 --> 00:25:46,600 Speaker 1: there is this thing of perfect proportions and an automobiles. 457 00:25:46,720 --> 00:25:49,119 Speaker 1: It's long, low and wide. And if you look at 458 00:25:49,119 --> 00:25:51,879 Speaker 1: beautiful cars, that's almost always what they are, and the 459 00:25:51,920 --> 00:25:54,320 Speaker 1: A seven is one of those simple Scott, I want 460 00:25:54,320 --> 00:25:57,440 Speaker 1: to talk about something that is beautiful. In another way. 461 00:25:57,480 --> 00:26:00,919 Speaker 1: People are seeing electric vehicles as in the future of 462 00:26:01,520 --> 00:26:04,199 Speaker 1: cars and the future of profitability, in the future of 463 00:26:04,760 --> 00:26:08,119 Speaker 1: clean electricity. And I'm wondering, when do you see them 464 00:26:08,119 --> 00:26:11,600 Speaker 1: actually being profitable. We really haven't seen either the demand 465 00:26:11,680 --> 00:26:16,160 Speaker 1: for them from the American public nor the profitability for 466 00:26:16,440 --> 00:26:18,840 Speaker 1: the car companies. Where do you see this going well least. Look, 467 00:26:18,880 --> 00:26:20,720 Speaker 1: I I think you're right. Yeah, you have to walk 468 00:26:20,760 --> 00:26:24,000 Speaker 1: a fine line obviously between compliance and the standards and 469 00:26:24,040 --> 00:26:26,399 Speaker 1: the greenhouse gas emissions. But of course, at the end 470 00:26:26,440 --> 00:26:28,840 Speaker 1: of the day, a customer does not walk into a 471 00:26:28,880 --> 00:26:31,480 Speaker 1: showroom saying, how can I help the automotive industry hit 472 00:26:31,480 --> 00:26:34,680 Speaker 1: their targets. You need a consumer product that a customer 473 00:26:34,760 --> 00:26:36,920 Speaker 1: loves and joys and wants to pay for. But look, 474 00:26:37,320 --> 00:26:40,000 Speaker 1: I'm an optimistic and the reason I'm optimist is if 475 00:26:40,000 --> 00:26:43,680 Speaker 1: you look at out these demographic they are affluent, educated, 476 00:26:43,840 --> 00:26:46,960 Speaker 1: and they believe and want new technologies. And the simple 477 00:26:47,000 --> 00:26:49,560 Speaker 1: thing I see when I drive out these prototype electric 478 00:26:49,600 --> 00:26:52,040 Speaker 1: cars which will be launching in two thousand nineteen, the 479 00:26:52,160 --> 00:26:54,919 Speaker 1: very simple thing is you feel like you're driving the future. 480 00:26:55,040 --> 00:26:57,840 Speaker 1: And I think that's something that's gonna work. I think 481 00:26:57,880 --> 00:26:59,600 Speaker 1: the other point, you know, not to go on too long, 482 00:26:59,680 --> 00:27:02,040 Speaker 1: is I have a very simple criteria. There's twenty six 483 00:27:02,080 --> 00:27:06,040 Speaker 1: million luxury cars navigating America right now, and yearly we 484 00:27:06,119 --> 00:27:09,480 Speaker 1: sell retail about one point four million across the industry. 485 00:27:09,720 --> 00:27:12,440 Speaker 1: That tells me there's the need for some new stimulus. 486 00:27:12,520 --> 00:27:14,760 Speaker 1: And I think this is the new stimulus. So I'm 487 00:27:14,760 --> 00:27:17,760 Speaker 1: an optimist where the break even on profitability, as you know, 488 00:27:18,040 --> 00:27:19,600 Speaker 1: it's going to be a couple of years. We need 489 00:27:19,640 --> 00:27:22,080 Speaker 1: to get more scale, as you know, and costs need 490 00:27:22,119 --> 00:27:24,480 Speaker 1: to continue to come down. All right, So what cost 491 00:27:24,560 --> 00:27:27,120 Speaker 1: do you think electric vehicles have to be sold at 492 00:27:27,480 --> 00:27:30,639 Speaker 1: in order to generate interest from a broader swath of 493 00:27:30,720 --> 00:27:34,439 Speaker 1: public And when, specifically the year do you expect electric 494 00:27:34,560 --> 00:27:37,280 Speaker 1: vehicles to truly take off in the US. Look, the 495 00:27:37,359 --> 00:27:38,919 Speaker 1: year they're going to take off for Auty is going 496 00:27:39,000 --> 00:27:41,120 Speaker 1: to be two thousand nineteen, because that's the year we're 497 00:27:41,200 --> 00:27:44,840 Speaker 1: launching our first electric cars. So from an Audi perspective, Uh, 498 00:27:44,880 --> 00:27:46,800 Speaker 1: you know, I think we did the smart thing. We 499 00:27:46,880 --> 00:27:49,280 Speaker 1: placed the car right in the sweet spot of the 500 00:27:49,320 --> 00:27:51,280 Speaker 1: luxury segment. I think what a lot of people have 501 00:27:51,320 --> 00:27:53,080 Speaker 1: done is they have sort of made what I'll call 502 00:27:53,280 --> 00:27:55,400 Speaker 1: a compliance car. And at the end of the day, 503 00:27:55,400 --> 00:27:57,320 Speaker 1: you have to make a beautiful car. So we've made 504 00:27:57,320 --> 00:28:00,199 Speaker 1: an suv. It's a C segment SUV, which is the 505 00:28:00,240 --> 00:28:03,879 Speaker 1: second largest segment in luxury and so consumers are going 506 00:28:03,920 --> 00:28:05,720 Speaker 1: to desire this and that's when it's going to start 507 00:28:05,720 --> 00:28:08,560 Speaker 1: to go. Now, in terms of percentages, what we've announced, 508 00:28:08,760 --> 00:28:11,560 Speaker 1: I can see AUDI doing twenty five to thirty percent 509 00:28:11,640 --> 00:28:15,520 Speaker 1: of its total business by being electric. I think that's fair. 510 00:28:15,560 --> 00:28:17,560 Speaker 1: I think that's reasonable, and I think we can get 511 00:28:17,560 --> 00:28:21,760 Speaker 1: that done before we get to the future. I just 512 00:28:21,800 --> 00:28:23,840 Speaker 1: want to mention the past. And I don't know whether 513 00:28:23,840 --> 00:28:27,000 Speaker 1: you're familiar with the program night Writer. Remember I remember, 514 00:28:27,040 --> 00:28:29,760 Speaker 1: remember a kid booking around I do, okay, So I 515 00:28:29,760 --> 00:28:34,040 Speaker 1: gotta say that the current updated version reminded me of 516 00:28:34,160 --> 00:28:37,119 Speaker 1: the night Rider because of the lights. You can actually 517 00:28:37,160 --> 00:28:39,400 Speaker 1: do a light show. It's l E ED laser lights 518 00:28:39,960 --> 00:28:43,000 Speaker 1: with the Audi A seven. What what are you doing 519 00:28:43,040 --> 00:28:46,600 Speaker 1: putting laser lights on the car because it's cool, It's 520 00:28:46,600 --> 00:28:49,000 Speaker 1: really cool. Uh No, and who makes I'll give you 521 00:28:49,000 --> 00:28:53,040 Speaker 1: an engineering, I'll give an engineering. Well, but look, I 522 00:28:53,040 --> 00:28:55,040 Speaker 1: think if you look at Audi, we've sort of been 523 00:28:55,360 --> 00:28:57,120 Speaker 1: the innovators of lights. We were the first to do 524 00:28:57,320 --> 00:28:58,920 Speaker 1: l E d s and actually l E d s 525 00:28:58,920 --> 00:29:01,720 Speaker 1: started in the race track with our with our prototype 526 00:29:01,960 --> 00:29:04,160 Speaker 1: race cars in Lama, and then from l E d 527 00:29:04,320 --> 00:29:05,880 Speaker 1: s we put them on our passenger cars. We put 528 00:29:05,920 --> 00:29:07,480 Speaker 1: them on the R eight first, and now it's on 529 00:29:07,520 --> 00:29:10,400 Speaker 1: every single autie and if you look at the industry, 530 00:29:10,840 --> 00:29:13,320 Speaker 1: every single car has LED lights now and usual they 531 00:29:13,320 --> 00:29:14,920 Speaker 1: don't call them l D lights, they call them OUTI 532 00:29:15,000 --> 00:29:17,680 Speaker 1: lights because it's something we innovated. The next phase we 533 00:29:17,760 --> 00:29:20,520 Speaker 1: feel of l d s is laser lights. Now we 534 00:29:20,640 --> 00:29:23,600 Speaker 1: have them on a few hundred r eights today and 535 00:29:23,680 --> 00:29:26,600 Speaker 1: it's simple. You get better visibility to look out and 536 00:29:26,600 --> 00:29:29,160 Speaker 1: you get a more consistent light. And I think this 537 00:29:29,240 --> 00:29:31,400 Speaker 1: is something that will become a standard. But of course 538 00:29:31,560 --> 00:29:33,160 Speaker 1: we need to get the cost right. It's going to 539 00:29:33,240 --> 00:29:34,840 Speaker 1: take a little bit of time, but that's the first 540 00:29:34,840 --> 00:29:36,760 Speaker 1: thing everyone said when we launched l e d s. 541 00:29:36,760 --> 00:29:38,840 Speaker 1: They said, no way. And now it's an industry standard, 542 00:29:38,880 --> 00:29:40,840 Speaker 1: so you've got to roll the dice and take some 543 00:29:40,960 --> 00:29:43,600 Speaker 1: risk on innovation. Scott, thank you so much for joining 544 00:29:43,680 --> 00:29:45,480 Speaker 1: us and for the honest state, why do you have them? 545 00:29:45,520 --> 00:29:50,160 Speaker 1: Because they're cool? Scott Kia, President of Audi of America, Incorporated, 546 00:29:50,200 --> 00:29:56,040 Speaker 1: based in Herndon, Virginia. Thanks for listening to the Bloomberg 547 00:29:56,080 --> 00:29:58,720 Speaker 1: P and L podcast. You can subscribe and listen to 548 00:29:58,760 --> 00:30:03,280 Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 549 00:30:03,680 --> 00:30:07,280 Speaker 1: I'm pim Fox, I'm on Twitter at pim Fox. I'm 550 00:30:07,280 --> 00:30:10,600 Speaker 1: on Twitter at Lisa Abramo wits one Before the podcast. 551 00:30:10,640 --> 00:30:13,240 Speaker 1: You can always catch us worldwide on Bloomberg Radio