WEBVTT - Instant Reaction: Tesla Earnings Surpass Expectations

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news.

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<v Speaker 2>Our own Dan Hole, noting that Tesla is giving some

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<v Speaker 2>quasi bullish guidance. The company delivered one point eight million

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<v Speaker 2>cars in twenty twenty three. Average selling prices fell in

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<v Speaker 2>the quarter. There was some FX impact. There was a

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<v Speaker 2>slight top line missus. Ed Ludlow points out on the

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<v Speaker 2>live blog. The company's third quarter automotive automotive gross margin

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<v Speaker 2>excluding credits came in way above estimates at seventeen point

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<v Speaker 2>one percent. Estimates were for fourteen point nine percent. We

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<v Speaker 2>got with us the perfect guest when it comes to

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<v Speaker 2>what's going on with Tesla. Ross Gerber is joining us.

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<v Speaker 2>He's president and CEO of Gerber Kawasaki Wealth Managed, Wealth

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<v Speaker 2>and Investment Management. He joins us from Santa Monica, California. Ross,

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<v Speaker 2>we got a lot to talk about with you. We

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<v Speaker 2>got a good bit of time. First, your reaction to earnings.

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<v Speaker 2>Investors are certainly happy to see this.

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<v Speaker 1>Yeah, I am too. It seems as if, and granted

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<v Speaker 1>they didn't really release a lot of data yet that'll

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<v Speaker 1>come soon, I hope, where they were able to increase

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<v Speaker 1>margins on the vehicle and therefore beat on earnings. So

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<v Speaker 1>I'm not sure where that's coming from, but they seem

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<v Speaker 1>to suggest that their cost of good sold is dropping

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<v Speaker 1>quite rapidly and that's added margin to their vehicles, which

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<v Speaker 1>is good news for Tesla. So it's very possible that

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<v Speaker 1>because you know, like battery demand is down so much

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<v Speaker 1>and lithium prices are down so much, that this is

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<v Speaker 1>finally starting to get into the supply chain for Tesla.

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<v Speaker 1>But you know, once again, I haven't seen all the

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<v Speaker 1>numbers and been able to really parse where the margin

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<v Speaker 1>gain has come from.

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<v Speaker 3>And it's interesting too when it comes to the outlook.

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<v Speaker 3>Tesla continues to state that plans for new vehicles, including

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<v Speaker 3>more affordable models, remain on track for the start of

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<v Speaker 3>production in the first half of twenty twenty five. More

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<v Speaker 3>affordable models ross. Obviously that has been a major focal

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<v Speaker 3>point for this company.

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<v Speaker 1>Yeah, I mean, there's a more affordable model, why on

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<v Speaker 1>sale use the three year old for an incredibly good

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<v Speaker 1>price under abound twenty five thousand or so. So, you know,

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<v Speaker 1>really Tesla runs into the problem of cannibalizing its other cars,

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<v Speaker 1>and that I think is what's causing them to pause. Now,

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<v Speaker 1>what I've been saying is if they would have put

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<v Speaker 1>a steering wheel on that robocab. It would have been

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<v Speaker 1>a much more exciting launch for me and I think

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<v Speaker 1>for customers knowing that this two seater, cheaper car could

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<v Speaker 1>be something we could actually just buy and drive. The

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<v Speaker 1>robotaxi business is not a business that I'm excited about.

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<v Speaker 1>It's not really what I think Tesla should be doing.

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<v Speaker 1>There already are robotaxes that exist called Weimo, and Uber

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<v Speaker 1>is already the master of transportation. So to me, Tesla

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<v Speaker 1>should be selling evs, focusing on making great evs with

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<v Speaker 1>grade software, and not trying to pivot into being some

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<v Speaker 1>sort of robotaxi company. But you know, once again, I

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<v Speaker 1>think people want to buy the cars and they worried

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<v Speaker 1>about selling the cars will do just fine.

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<v Speaker 2>Russ. I have a question for you that I've wanted

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<v Speaker 2>to ask you for a few days now.

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<v Speaker 3>Somebody did pause, so I'm excited.

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<v Speaker 2>Yeah, Well, I'm interested to hear what Ross has to

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<v Speaker 2>say about this. Okay, Elon Musk. In politics, he's donated,

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<v Speaker 2>he's one of the largest donors to the Trump candidacy,

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<v Speaker 2>to the Trump campaign, He's got his America Political Action

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<v Speaker 2>Committee a super pack. He's become incredibly active. I'm wondering,

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<v Speaker 2>from the perspective of business, if, in a time when

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<v Speaker 2>we're so divided as a nation, if taking such a

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<v Speaker 2>clear stance and doing so much to elect one candidate

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<v Speaker 2>is a risk to the company.

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<v Speaker 1>Yes, of course, you know why are you laughing? Strategic? Well,

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<v Speaker 1>because I think it's an absurd risk to put your

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<v Speaker 1>company in that you could avoid, right, So, you know,

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<v Speaker 1>I I've personally tried to stay out of this election.

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<v Speaker 1>I don't get any positive from my clients expressing my

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<v Speaker 1>liberal opinions, which are liberal, and you know, I think

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<v Speaker 1>people who work at my firm know that. And but

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<v Speaker 1>you know, as a business person, it doesn't really serve

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<v Speaker 1>my purposes to spouse my liberal beliefs on everybody. And

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<v Speaker 1>that said, Elon's extremely right wing beliefs turn off a

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<v Speaker 1>lot of his core demo. Now a lot of people

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<v Speaker 1>don't believe that's happening. But I mean, look at what

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<v Speaker 1>the effort they have to do to sell a car

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<v Speaker 1>today and they still refuse to advertise. So taking this

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<v Speaker 1>stance for Elon is kind of a lose lose for

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<v Speaker 1>Tesla because if Trump wins, you know, doesn't give a

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<v Speaker 1>crap about evs, he supports oil, and Elon's gonna learn

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<v Speaker 1>about Trump, which is that he's a liar. And so

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<v Speaker 1>all this money Elon's putting into Trump to hopefully have

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<v Speaker 1>some power, he's gonna learn the hard way about Trump,

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<v Speaker 1>just asked Juliani. So that's a lose, And if Trump loses,

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<v Speaker 1>it's a disaster for Elon, just per and for his

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<v Speaker 1>personal brand and for everything that he's been working on.

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<v Speaker 1>And it really puts Tesla in a tough position because

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<v Speaker 1>the administration isn't going to do anything to help them,

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<v Speaker 1>that's for sure. So I don't get it other than

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<v Speaker 1>I guess he thinks the America is in this horrible place,

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<v Speaker 1>but the stock market's hitting all time highs every day,

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<v Speaker 1>and I think America is in a wonderful place. But

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<v Speaker 1>it's all a matter of perception, you know, And so

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<v Speaker 1>I think this is the most political I've ever seen

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<v Speaker 1>a CEO. And that's one of the reasons we've lowered

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<v Speaker 1>our position in Tesla is we do think it affects

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<v Speaker 1>sales and affects the brand and ultimately margins, And we're

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<v Speaker 1>excited about margins going up instead of going down for

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<v Speaker 1>a quarter which is great news, you know, but this

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<v Speaker 1>is coming from the fact that the car market is

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<v Speaker 1>so difficult that the cost of goods has gone down,

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<v Speaker 1>not because Tesla is making more margin because people are

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<v Speaker 1>willing to pay more for a Tesla.

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<v Speaker 3>I want to talk a little bit more about Elon Musk.

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<v Speaker 3>Matt Levine calls it the attention auction, you know, the

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<v Speaker 3>there's just a lot of things competing for Elon Musk's attention.

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<v Speaker 3>And you know, he's been involved with multiple companies for

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<v Speaker 3>many years, of course, but now politics feels like a

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<v Speaker 3>new wrinkle there, of course, and he is heavily involved

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<v Speaker 3>when it comes to the Trump campaign. This has been

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<v Speaker 3>discussed before, but I am curious to hear your opinion

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<v Speaker 3>on whether or not the fact that Elon is so

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<v Speaker 3>spread thin across these different efforts, how you're thinking about

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<v Speaker 3>that when you're taking to look at your Tesla position.

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<v Speaker 1>Well, this is probably one of the biggest issues is

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<v Speaker 1>he doesn't actually work at Tesla, you know, like you

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<v Speaker 1>go to work at your company every day like you're

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<v Speaker 1>the CEO. I don't think that's what he does. And

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<v Speaker 1>I don't think that Elon gets more hours in a

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<v Speaker 1>day than you or I do so, so he might

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<v Speaker 1>sleep four hours a day instead of eight. Well, you

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<v Speaker 1>know where that's going to cost him is at the

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<v Speaker 1>end of his life, because it's super unhealthy to live

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<v Speaker 1>this way. You know. There's this sort of opinion that,

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<v Speaker 1>you know, like he has some super human ability. He doesn't.

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<v Speaker 1>So he's spending his time working for Trump right now

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<v Speaker 1>and doing politics, and he's not spending his time getting

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<v Speaker 1>his full self driving to work, which it still doesn't.

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<v Speaker 1>And so this is really the issue for me as

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<v Speaker 1>an investor, is shouldn't the CEO of your company be

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<v Speaker 1>there every day or at least pretend, you know. And

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<v Speaker 1>then the second thing is and I was just talking

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<v Speaker 1>to a guy about this who's been following Tesla for

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<v Speaker 1>a long time, and we were having a nice discussion

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<v Speaker 1>about Tesla, and I said, the biggest difference between Tesla

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<v Speaker 1>now and the Tesla of twenty nineteen, twenty twenty that

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<v Speaker 1>made us all really wealthy was that Elon worked at

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<v Speaker 1>Tesla every day. It was the fundamental thing he focused

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<v Speaker 1>on one hundred percent of his energies and efforts. And

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<v Speaker 1>that's why Tesla became successful because they were about to fail. Okay,

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<v Speaker 1>so this lack of attention to what needs to be done,

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<v Speaker 1>especially around full self driving, is really troubling to me

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<v Speaker 1>because I see the competitors all over the place. I'm

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<v Speaker 1>here in the heart of EVS right, and Rogue taxis

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<v Speaker 1>away moo just drove by me just a second ago,

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<v Speaker 1>you know, like they're everywhere. They're working in extremely difficult

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<v Speaker 1>driving conditions that my cyber truck can't even come close

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<v Speaker 1>to tackling. So I just am like, get back to work,

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<v Speaker 1>focus on the job, or maybe it's time to just

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<v Speaker 1>get a real CEO like when shot Well, you know

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<v Speaker 1>she hasn't Yeah, yeah, I mean I think she deserves

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<v Speaker 1>a metal Russ.

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<v Speaker 2>Gotta we gotta go. We gotta let you get back

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<v Speaker 2>to work. We do appreciate you joining us. It's always

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<v Speaker 2>a treat when you are on our air, especially post

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<v Speaker 2>Tesla learnings. Ross Gerber, president and CEO over at Gerber

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<v Speaker 2>Kawasaki Wealth and Investment Management. I want to go now

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<v Speaker 2>to Ed Ludlow, who's standing by in San Francisco, because

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<v Speaker 2>he has had his eye on the live blog. He's

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<v Speaker 2>had his eye on the numbers. ED shares surging in

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<v Speaker 2>the after hours. Now, good report for Tesla what sticks

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<v Speaker 2>out to you.

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<v Speaker 4>Yeah, I think we still need to do the math

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<v Speaker 4>on like all of it. So where would you got

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<v Speaker 4>me to stop?

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<v Speaker 2>I mean, Mark, let's do it. Where are those gross margins?

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<v Speaker 2>Where did that beat come?

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<v Speaker 1>Yeah?

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<v Speaker 4>Actually, I think at the end of the day, remember

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<v Speaker 4>that Tester is a public company and it prepares a

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<v Speaker 4>very thorough earnings deck for investors. In that deck, there

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<v Speaker 4>is a section about revenue and profit, the headwinds and

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<v Speaker 4>tailwinds for the top and bottom line. And what they're

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<v Speaker 4>telling us about the bottom line is that while there

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<v Speaker 4>were lower average selling prices for their consumer cars, the

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<v Speaker 4>cost of producing them is also coming down, both from

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<v Speaker 4>sort of the technology they use to manufacture in the process,

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<v Speaker 4>but also raw materials. The thing that really jumps out

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<v Speaker 4>at me is they're now listing the sale of full

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<v Speaker 4>self driving software as a direct contributor to profit, which

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<v Speaker 4>I find really interesting because of two recent catalysts. FSD

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<v Speaker 4>is available to cybertruck owners very recently, and they also

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<v Speaker 4>have this actual smart sum and I won't give you

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<v Speaker 4>the acronym feature that is also contributing to the bottom line.

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<v Speaker 4>And I think that Ross was talking about that right,

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<v Speaker 4>He was trying to understand where this margin boost was

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<v Speaker 4>coming from if you strip out the impact of regulatory credits.

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<v Speaker 2>Okay, Yeah, So that's where we're trying to figure out,

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<v Speaker 2>and certainly there's going to be a lot of number

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<v Speaker 2>crunching that happens, and I imagine a lot of questions

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<v Speaker 2>from analysts too. I did want to get your thoughts

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<v Speaker 2>on my line of questioning to Ross about political risk here,

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<v Speaker 2>because I cannot name a CEO. In fact, you have

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<v Speaker 2>CEOs right now coming out and avoiding talking about the election,

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<v Speaker 2>whereas Elon Musk is going all in on this. In

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<v Speaker 2>a different time, maybe that would make sense. But incredibly

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<v Speaker 2>polarized country right now. Are analysts talking apart from Ross

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<v Speaker 2>talking about the risk here? Yeah?

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<v Speaker 4>I think that you know, whether they are sell side

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<v Speaker 4>analysts or retail investors and institution investors, that there is

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<v Speaker 4>a likely chance that Musk is asked a question about

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<v Speaker 4>this on the call within the next hour. There's no

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<v Speaker 4>mention of the election or either candidate. Sorry my mobile

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<v Speaker 4>phone is ringing. Who knows who that is?

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<v Speaker 3>You?

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<v Speaker 4>Either candidate could be doubt it, either candidate in the deck.

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<v Speaker 4>I think what's interesting that the important point to note

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<v Speaker 4>here is that throughout the period of the administration, and

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<v Speaker 4>the impact already to consumers are the benefit of the

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<v Speaker 4>Inflation Reduction Act. There has not been a lot of

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<v Speaker 4>sort of vocal support of the Biden administration for Musk.

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<v Speaker 4>That's gone very quiet. The Harris camp has not talked

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<v Speaker 4>much about Musk, where the Musk practically talks about them

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<v Speaker 4>in the context of earning school, I would say, on balance,

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<v Speaker 4>he probably will, but we'll have to find out.

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<v Speaker 2>I mean, given given Elon's comments over the last few

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<v Speaker 2>months about Kamala Harris, I don't imagine if she wins

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<v Speaker 2>that they're going to have a very friendly relationship. Ed

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<v Speaker 2>before we let you go, there's still a lot of

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<v Speaker 2>you know, we're still wedding on the call. There's still

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<v Speaker 2>a lot to get to when it comes to understanding

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<v Speaker 2>more about these numbers. But is Tesla on its way

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<v Speaker 2>out of the woods yet?

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<v Speaker 4>Well, it's really interesting. So the stock's down year to date,

0:11:46.040 --> 0:11:48.280
<v Speaker 4>but look at prior years of performance on the stock.

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<v Speaker 4>They're telling us that they're going to grow modestly on

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<v Speaker 4>the ev side, And if you do the math, as

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<v Speaker 4>our bn F colleague Corey Cantor has done, they're going

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<v Speaker 4>to have to have a record breaking fourth quarter to

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<v Speaker 4>achieve that growth or beat the one point eight million

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<v Speaker 4>units they did last year. No one ever really talks

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<v Speaker 4>about the energy storage print that seems to be doing

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<v Speaker 4>really well record energy storage and energy generation, and I

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<v Speaker 4>go back to my earlier comment. They're listing it as

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<v Speaker 4>a contributing factor to profit in a positive way in

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<v Speaker 4>the earnings deck. Maybe we'll hear a bit more about that.

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<v Speaker 4>But at the end of the day, the frustration Ross

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<v Speaker 4>gave you is shared by many types of investors, which is,

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<v Speaker 4>you keep steering us to a future where you are

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<v Speaker 4>not doing the thing you currently do, which is selling

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<v Speaker 4>cars to consumers. In the future, you're going to be

0:12:30.960 --> 0:12:34.000
<v Speaker 4>an AI and robotics company with a proprietary ride hailing app.

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<v Speaker 4>There's not a lot of mention of that in the deck,

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<v Speaker 4>and I think on the call that that will be

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<v Speaker 4>at least where the questions are asked whether or not

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<v Speaker 4>Musk wants to go there of his own volition.

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<v Speaker 2>Hi Ludlow. He is the co host of Bloomberg Technology

0:12:44.880 --> 0:12:49.120
<v Speaker 2>on a Bloomberg TV each and every day. Also check

0:12:49.200 --> 0:12:51.800
<v Speaker 2>them out on Twitter, Instagram and the like. Tesla shares

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<v Speaker 2>right now surging in the after hours,