WEBVTT - Apple China, Tesla Workforce Cuts 0:00:00.120 --> 0:00:10.440 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:10.520 --> 0:00:13.720 Daybreak Asia podcast. I'm Doug Krisner. You can join Brian 0:00:13.800 --> 0:00:16.640 Curtis and myself for the stories, making news and moving 0:00:16.680 --> 0:00:19.560 markets in the APAC region. You can subscribe to the 0:00:19.600 --> 0:00:23.080 show anywhere you get your podcast and always on Bloomberg Radio, 0:00:23.320 --> 0:00:26.120 the Bloomberg Terminal, and the Bloomberg Business app. 0:00:26.800 --> 0:00:29.560 In our studios in Hong Kong is Julia Wong, executive 0:00:29.600 --> 0:00:32.960 director and global market strategists at JP Morgan Private Bank. 0:00:33.320 --> 0:00:35.440 To take a closer look at markets. We mentioned that 0:00:35.479 --> 0:00:38.639 we saw a lot of selling today. So Julia, at 0:00:38.640 --> 0:00:43.840 the moment, geopolitics and higher rates and possibly the Fed 0:00:44.280 --> 0:00:47.080 not doing what we thought it might do. They're sort 0:00:47.080 --> 0:00:51.599 of carrying the day. But earnings are nigh Will that 0:00:51.760 --> 0:00:55.960 change things? And do you see does JP Morgan Asset 0:00:56.360 --> 0:00:58.960 or Private Bank see this as a good dip to buy? 0:01:00.000 --> 0:01:02.120 Thanks for having me, so I think that you know 0:01:02.400 --> 0:01:06.000 you're absolutely right the over the long run, earnings growth 0:01:06.040 --> 0:01:08.920 matter more for the equity market. Uh, And we don't 0:01:08.959 --> 0:01:13.080 really see that being a hurdle for equities. In fact, 0:01:13.080 --> 0:01:15.560 we do think that the equity market is exiting what 0:01:15.600 --> 0:01:18.960 we call all rolling earnings recession. Uh And there are 0:01:19.000 --> 0:01:21.720 more sectors points to see positive earning growth this year, 0:01:21.959 --> 0:01:24.200 So we do think that it's from an earnings perspective, 0:01:24.280 --> 0:01:28.040 is actually bottoming out and there are more expansions ahead 0:01:28.040 --> 0:01:30.440 for the equity market. So that is our medium to 0:01:30.560 --> 0:01:31.360 longer term view. 0:01:31.800 --> 0:01:31.920 Uh. 0:01:31.959 --> 0:01:34.600 So we do think that the you know, the the 0:01:34.959 --> 0:01:41.600 geopolitical worries, there's back and forth in terms of fat expectations. 0:01:41.600 --> 0:01:45.360 Fat ratcut expectations are sort of near term hurdles in 0:01:45.400 --> 0:01:48.720 the market we have to get through. It could take 0:01:48.960 --> 0:01:51.480 a couple a few more weeks or if not a 0:01:51.520 --> 0:01:53.880 few more months. So I think that you know, for 0:01:54.000 --> 0:01:59.120 investors who are looking to you know, embrace the next 0:01:59.120 --> 0:02:02.920 technology way in terms of artificial intelligence, who are looking 0:02:02.960 --> 0:02:06.400 to position for longer term secular growth both in technology 0:02:06.440 --> 0:02:09.480 as well as in sectors like healthcare, we do advocate 0:02:09.960 --> 0:02:13.000 starting to build positions as the market pullback, but just 0:02:13.040 --> 0:02:15.760 be mindful that you know, these are volatilities that the 0:02:15.800 --> 0:02:18.200 market will have to go through and there are you know, 0:02:18.240 --> 0:02:20.520 there could be periods of volatilities ahead as well. 0:02:20.639 --> 0:02:23.359 Julia, I know you as a pretty as stud economist. 0:02:24.040 --> 0:02:26.200 Later today, for China. We're going to get the monthly 0:02:26.240 --> 0:02:29.200 activity data. Retail sales is going to be very important 0:02:29.200 --> 0:02:31.400 in terms of trying to get a sense of where 0:02:31.400 --> 0:02:34.000 the Chinese consumer is right now. Do you can you 0:02:34.040 --> 0:02:35.240 offer some insight. 0:02:36.160 --> 0:02:40.880 Well, the times consumers are probably still I think rather cautious. 0:02:41.240 --> 0:02:43.440 I do think that there's a marginal There's been some 0:02:43.560 --> 0:02:48.119 marginal evidence that you know, they've been uh, saving less 0:02:48.639 --> 0:02:50.680 and spending a bit more, but that's on the back 0:02:50.760 --> 0:02:55.440 of a significant accumulation of savings the last couple of years. 0:02:55.720 --> 0:02:59.280 So I think it's very slow bottoming out process. I think, 0:02:59.360 --> 0:03:01.480 you know, if we do out into the broader issues, 0:03:01.720 --> 0:03:04.240 there really is a lack of confidence, which is weighing 0:03:04.919 --> 0:03:07.040 weighing on demand, and so we talk about the Chinese 0:03:07.080 --> 0:03:10.120 economy at the moment is being rather imbalanced. There's more 0:03:10.160 --> 0:03:13.480 supply than there is demand, manufacturing production, and everything is 0:03:13.560 --> 0:03:16.440 too reasonably good. And that's why I think some of 0:03:16.480 --> 0:03:18.960 the indicators that tend to reflect or pick up on 0:03:19.000 --> 0:03:23.200 these things more like GDP, like industrial production, like investment, 0:03:23.280 --> 0:03:25.400 this would continue to be quite good, but there is 0:03:25.480 --> 0:03:27.919 really a death stuff demand and that's because confidence is 0:03:27.919 --> 0:03:30.240 still quite low. So we do need to see that 0:03:30.800 --> 0:03:34.440 kind of pickup before we can see a more balanced recovery. 0:03:34.639 --> 0:03:37.360 So not so bullish on China. Perhaps you can call 0:03:37.400 --> 0:03:40.360 that neutral on China at the moment, but you continue 0:03:40.400 --> 0:03:43.839 to like Japan. Japan has had a good run and 0:03:44.040 --> 0:03:47.160 people were buying on yen weakness for a long time. 0:03:47.600 --> 0:03:51.240 But now we've got real yen weakness and dollar strength 0:03:51.240 --> 0:03:52.120 and they're not buying. 0:03:52.280 --> 0:03:54.600 Why No. 0:03:54.880 --> 0:03:57.520 I think if you look at investor positions, there are 0:03:57.520 --> 0:04:01.360 still many investors are shorty, they're boring again, and they're 0:04:01.560 --> 0:04:05.160 buying Japanese assets. So I think that actually there there 0:04:05.480 --> 0:04:09.160 is a decent chunk composition in that. I do think that, 0:04:09.200 --> 0:04:11.880 you know, we talk about the near term, it's worth 0:04:11.960 --> 0:04:15.160 remembering just how far we've come in terms of dollars yen, right, 0:04:15.520 --> 0:04:17.520 you know, we were much much lower in terms of 0:04:17.520 --> 0:04:19.640 the level just a couple of months ago. So I 0:04:19.680 --> 0:04:23.760 do think that some of the structural factors driving young 0:04:23.839 --> 0:04:27.040 weaknesses are better understood now, so such as inter sure differential, 0:04:27.400 --> 0:04:30.039 such as the fact that Japan's trade deficit you know, 0:04:30.080 --> 0:04:34.000 looks to be persisting. So as these become better understood, 0:04:34.080 --> 0:04:36.440 and in the face of all these geopolitical tension and 0:04:36.520 --> 0:04:39.760 dollar spike. I think it possibly it's reasonable to expect 0:04:39.760 --> 0:04:42.760 that the government might try to interven, And that's why 0:04:42.800 --> 0:04:46.839 we also don't advocate taking a spectative position to be 0:04:46.880 --> 0:04:49.440 short yen at this point. With a longer term perspective, 0:04:49.520 --> 0:04:51.520 I think yen is still going to be a care currency. 0:04:51.920 --> 0:04:54.279 We had a portfolio manager we quoted in the Bloomberg 0:04:54.320 --> 0:04:56.680 story today from over a t rowe price saying that 0:04:56.720 --> 0:04:59.480 the end will continue to drop, maybe another ten percent, 0:05:00.160 --> 0:05:02.760 to levels not seen since the nineteen nineties, and he 0:05:03.320 --> 0:05:05.640 really points the finger at the Bank of Japan and 0:05:05.720 --> 0:05:09.000 the BOJ being reluctant to raise rates in a significant fashion. 0:05:09.560 --> 0:05:12.160 Does this particular person have a point right now that 0:05:12.720 --> 0:05:16.040 there is so much conservative thinking at the BOJ that 0:05:16.080 --> 0:05:18.520 we could see even more yen weakness. 0:05:20.680 --> 0:05:22.600 So I think that, you know, he has a point 0:05:22.640 --> 0:05:25.560 in terms of the structural factors driving yen weakness, which 0:05:25.600 --> 0:05:27.520 I also agree with, and I don't think that will 0:05:27.560 --> 0:05:31.120 reverse any time soon. I don't, however, think necessarily that 0:05:31.160 --> 0:05:35.200 the BOJ is the real corporate of it, because I 0:05:35.240 --> 0:05:38.520 think that they are justified in thinking about inflation not 0:05:38.560 --> 0:05:41.000 only as a cyclical problem, but as a structural problem 0:05:41.040 --> 0:05:43.679 for Japan. Japan hasn't had inflation for twenty thirty years, 0:05:43.880 --> 0:05:46.600 so you know, if you think about an average inflation target, 0:05:46.640 --> 0:05:48.719 they have a long way to catch up. So I 0:05:48.720 --> 0:05:51.559 think they's justified for them to take a more longer 0:05:51.640 --> 0:05:54.919 term approach as they try to engineer just return to 0:05:55.040 --> 0:05:58.920 reflation story and overlook a little bit of the near 0:05:59.040 --> 0:06:03.040 term inflation squeeze, and because ultimately what matters is whether 0:06:03.080 --> 0:06:05.440 the economy can move to a new equilibrium in terms 0:06:05.480 --> 0:06:08.880 of productivity growth, and that takes time and some patients awards, 0:06:08.880 --> 0:06:10.120 some patients of the central bank. 0:06:10.279 --> 0:06:14.280 One quick call on inflation. In the US, UBS strategists 0:06:14.360 --> 0:06:16.919 are saying that the FED hiking rates to six and 0:06:16.920 --> 0:06:20.160 a half percent is a real risk. Can you see that. 0:06:22.279 --> 0:06:24.960 We don't see that happening. I think the main difference 0:06:24.960 --> 0:06:27.880 between now and twenty twenty two is that FED fount 0:06:27.920 --> 0:06:31.760 rate is a five point three You know, pcees running 0:06:31.760 --> 0:06:34.080 at two point eight percent, so the gap in terms 0:06:34.120 --> 0:06:36.440 of real rate is already two hundred and fifty basis point. 0:06:36.600 --> 0:06:39.680 So even if inflation becomes dicky at this level, even 0:06:39.720 --> 0:06:41.919 if there are some bumps in the road, there's a 0:06:41.920 --> 0:06:45.200 decent buffer for free in terms of real rate, the fact doesn't. 0:06:44.960 --> 0:06:47.520 Happen absolutely, Julia, thank you so much for joining us. 0:06:47.600 --> 0:06:58.000 Julia Wong, executive director at JP Morgan Private Bank. The 0:06:58.080 --> 0:07:01.839 closer look at Apple now, Apple iPhone shipment slid nearly 0:07:01.920 --> 0:07:05.120 ten percent last quarter. It was the steepest drop in 0:07:05.200 --> 0:07:08.720 sales for Apple since the pandemic. Joining us now is 0:07:08.800 --> 0:07:13.040 Vlad Savov, Bloomberg Tech editor. To discuss this further. A 0:07:13.040 --> 0:07:17.040 while back, Flad, we had Apple sales in China down 0:07:17.080 --> 0:07:20.560 about a third, but then all smartphones were down a third. 0:07:20.680 --> 0:07:24.160 But that's not the case here. Here you have overall 0:07:24.160 --> 0:07:27.560 global sales Apple shipments down nearly ten percent last quarter, 0:07:28.120 --> 0:07:31.200 and for the rest of the industry you had a 0:07:31.240 --> 0:07:34.040 gain of seven point eight percent. What has gone wrong 0:07:34.400 --> 0:07:35.280 at Apple. 0:07:35.640 --> 0:07:38.480 Well, it's an interesting question. One way to look at 0:07:38.480 --> 0:07:41.360 it is it may be a matter of a cyclical 0:07:41.400 --> 0:07:44.760 matter that just runs over many years. When you look 0:07:44.840 --> 0:07:47.720 back to the pandemic, the iPhone was actually the most 0:07:47.760 --> 0:07:52.960 resilient smartphone among any so when we had especially in China, 0:07:53.000 --> 0:07:54.880 the world's biggest smallphone market, is the one to keep 0:07:54.880 --> 0:07:59.000 the closest eye on Android. Rivusudi iPhone would down double 0:07:59.040 --> 0:08:02.240 digits every single month for over a year, whereas the 0:08:02.240 --> 0:08:05.840 iPhone was rather sustaining its momentum. Now the trend has reversed, 0:08:05.880 --> 0:08:07.560 and there are a number of reasons for this. I mean, 0:08:07.600 --> 0:08:10.760 one of them is when Huawei was hit with sanctions, 0:08:10.800 --> 0:08:14.400 everyone else in the Chinese market invested really heavily, brought 0:08:14.440 --> 0:08:17.680 a lot of inventory, seven conductors, et cetera. They wanted 0:08:17.720 --> 0:08:20.760 to grab that Huawei market share, and they did to 0:08:20.840 --> 0:08:24.560 a great extent, but they did overspend. They had a 0:08:24.560 --> 0:08:27.520 lot of inventory which took months to clear. So now 0:08:27.640 --> 0:08:30.880 those exact companies because of their aggressive pricing to shift 0:08:30.880 --> 0:08:35.040 that inventory and now coming back and ramping up their shipments. 0:08:35.120 --> 0:08:38.160 So just in relative terms, that's why they are on 0:08:38.240 --> 0:08:42.360 the up. Whereas Apple, because it has been sustaining things, maybe, 0:08:42.440 --> 0:08:43.920 as I say, it has a bit more of a 0:08:43.960 --> 0:08:46.760 down cycle at the moment. That's let's say the positive 0:08:46.840 --> 0:08:49.120 the upweight way to look at it from Apple's perspective. 0:08:49.200 --> 0:08:51.720 Yeah, we're citing data hear from the market tracker IDC 0:08:51.960 --> 0:08:54.520 in terms of first quarter growth. One of the things 0:08:54.520 --> 0:08:58.800 that I was just stupefied by Transhan. I hadn't even 0:08:58.920 --> 0:09:01.960 heard of this company, shipments were up eighty five percent, 0:09:02.000 --> 0:09:04.120 and when I did a little bit of research, I 0:09:04.160 --> 0:09:08.120 guess Trenson sells heavily into African markets. 0:09:08.200 --> 0:09:08.640 Is that right? 0:09:09.559 --> 0:09:12.960 That's right. It's very much a budget oriented company. It 0:09:13.000 --> 0:09:16.600 has several brands which even if I record him at 0:09:16.600 --> 0:09:20.000 the moment, I'll forget him in a minute. I mean, 0:09:20.720 --> 0:09:23.400 I'm being a bit dismissive. But the company does a 0:09:23.400 --> 0:09:25.560 good job. This is the other thing. Just because you're 0:09:25.559 --> 0:09:28.040 a budget oriented company, that doesn't mean that it doesn't 0:09:28.080 --> 0:09:32.840 take a lot of expertise and operational efficiency to make 0:09:32.880 --> 0:09:35.520 that work. Not everybody does it. Not everybody turns a profit, 0:09:35.559 --> 0:09:37.960 and that company is doing it. It's now number four 0:09:39.040 --> 0:09:41.800 in the world. Oppo, which is one of the big 0:09:42.400 --> 0:09:45.600 brands over here in China, it's kind of been slumping, 0:09:45.640 --> 0:09:50.040 whereas Shami, on the other hand, it has rebounded. Shami 0:09:50.120 --> 0:09:53.319 is a really interesting company because it's co founder Leijun 0:09:53.480 --> 0:09:56.480 has dedicated all his attention to the EV project, which 0:09:56.520 --> 0:10:00.240 is boosted the share price, whereas the smartphone companies sally 0:10:00.280 --> 0:10:01.400 rebounding just as well. 0:10:01.840 --> 0:10:06.400 Is really adding to the difficulties of other EV makers 0:10:06.720 --> 0:10:09.080 in China. I don't want to go that direction. I 0:10:09.120 --> 0:10:12.000 want to go back to Apple because that's the focus 0:10:12.040 --> 0:10:15.320 of this discussion flat and Apple, you know, has never 0:10:15.400 --> 0:10:17.960 really been first in a lot of things, but it 0:10:18.000 --> 0:10:22.880 eventually got there by extremely good quality in its output, 0:10:23.320 --> 0:10:27.080 and so it brings to mind AI. So you've had 0:10:27.360 --> 0:10:31.079 Google and Microsoft and other companies like Nvidia and broad 0:10:31.120 --> 0:10:36.199 Common others really take advantage of, you know, making announcements 0:10:36.240 --> 0:10:39.800 and getting started on artificial intelligence. Not so much Apple. 0:10:40.080 --> 0:10:43.880 But now you have the WWDC coming in June. Is 0:10:44.240 --> 0:10:46.000 that going to be the beginning of a new push 0:10:46.000 --> 0:10:47.160 for Apple to the upside? 0:10:48.280 --> 0:10:52.440 Well, it's the beginning of the AI story, shall we say, 0:10:53.280 --> 0:10:56.240 or let's say the reboots of it, because Apple Serrie 0:10:56.320 --> 0:10:58.560 Digital Assistant is supposed to be some version of AI. 0:10:58.720 --> 0:11:01.240 But again what we refer to his AI today is 0:11:01.280 --> 0:11:05.080 the generative AI, the chat GPT class. So Apple really 0:11:05.080 --> 0:11:08.920 hasn't given the world a narrative around that. It has 0:11:09.000 --> 0:11:12.319 had again a rally in a share price just because 0:11:12.920 --> 0:11:16.520 there was indication that it's indicated integrating more AI processing 0:11:16.520 --> 0:11:20.880 and its chip in. Tim Cook has spoken repeatedly saying 0:11:21.000 --> 0:11:22.320 AI is going to be a priority. 0:11:22.440 --> 0:11:23.760 But our own. 0:11:23.640 --> 0:11:26.360 Reporting at Bloomberg says that Apple is looking to contract 0:11:26.360 --> 0:11:29.480 Google for its Gemini AI model for the coming generation 0:11:29.559 --> 0:11:32.000 of iPhones. It is fair to say that Apple has 0:11:32.000 --> 0:11:35.839 been quite flat footed. It's playing catch up. Just as 0:11:35.840 --> 0:11:39.320 you said, Brian, there were smartphones many many years before 0:11:39.360 --> 0:11:41.320 the iPhone, and then the iPhone came in and it 0:11:41.480 --> 0:11:44.040 said the standard. It defined what a smartphone is for 0:11:44.160 --> 0:11:47.600 all of us today. So absolutely no reason to rule 0:11:47.640 --> 0:11:50.199 Apple out, but it is the case that the company's 0:11:50.200 --> 0:11:53.760 playing catch up and it needs to show some evidence 0:11:53.800 --> 0:11:54.960 that it's closing the gap. 0:11:55.000 --> 0:11:57.320 In June, well, they're doing some business in India. We 0:11:57.440 --> 0:11:59.480 know that, right The last figure that we had for 0:11:59.559 --> 0:12:02.080 Apple sales in India was pretty pretty strong. 0:12:03.640 --> 0:12:03.840 Yeah. 0:12:03.880 --> 0:12:06.800 Absolutely. And the other thing that Apple's doing is shifting 0:12:07.320 --> 0:12:11.840 it's iphl manufacturer into India. That doubled this past fiscal 0:12:11.960 --> 0:12:15.079 year ending in March, and it had tripled the previous one. 0:12:15.280 --> 0:12:17.400 So India in the space of a couple of years 0:12:17.440 --> 0:12:21.040 has gone from just a percentage of iFilm manufacturing to 0:12:21.200 --> 0:12:25.040 fourteen percent. And as I mentioned, because the iPhone had 0:12:25.040 --> 0:12:26.840 been so steady, one way to call it is steady, 0:12:26.880 --> 0:12:29.120 the other way to call it a stagnant it's very 0:12:29.120 --> 0:12:31.600 easy to say all this manufacturing has gone out of 0:12:31.679 --> 0:12:35.320 China to go into India. It isn't additional to manufacturing 0:12:35.320 --> 0:12:35.880 in China. 0:12:36.040 --> 0:12:38.000 So Tim Coulk spent a lot of time in China 0:12:38.040 --> 0:12:41.400 here just recently. I'm wondering whether or not that's a 0:12:41.480 --> 0:12:48.200 kind of push to reinforce among Chinese officials that Apple's 0:12:48.200 --> 0:12:50.040 here to stay in China. 0:12:50.720 --> 0:12:54.800 Literally, that's something that he literally put out there. He 0:12:54.880 --> 0:12:56.960 declared his love for China on his most recent trip. 0:12:57.080 --> 0:12:59.840 He has been on free public visits to the country 0:13:00.120 --> 0:13:04.520 in the past year. It's increasingly common for him to 0:13:04.559 --> 0:13:08.040 be in China. It's supposed to be reassuring. One way 0:13:08.080 --> 0:13:11.120 to read it is the other way, because if you're 0:13:11.120 --> 0:13:12.959 really sure in something, you don't need to go and 0:13:13.000 --> 0:13:14.760 attend to it on such a regular basis. 0:13:14.760 --> 0:13:16.679 I guess he was just in Hanoi as well, or 0:13:16.720 --> 0:13:20.280 maybe he's still in Vietnam, and so that's another manufacturing 0:13:20.360 --> 0:13:23.400 site for them that they want to be able to fortify. 0:13:23.480 --> 0:13:26.160 Yeah, I think he's just hang out in Asia and 0:13:26.240 --> 0:13:30.360 just back to the US. It's a busy time, and yes, 0:13:30.400 --> 0:13:34.120 he's hanging out with influences and YouTubers in Vietnam, and 0:13:35.520 --> 0:13:38.080 there is the prospect for him to announce fresh investments 0:13:38.160 --> 0:13:38.880 in there as well. 0:13:39.320 --> 0:13:41.800 All right, lad, out of time, unfortunately, but a great session. 0:13:41.840 --> 0:13:44.559 Thank you, Lad's have all Bloomberg chech editor. 0:13:50.720 --> 0:13:53.440 Let's go to Tesla next. The company is cutting more 0:13:53.480 --> 0:13:58.280 than ten percent of its workforce. That's roughly fourteen thousand jobs. 0:13:58.679 --> 0:14:02.000 Let's take a look under the hood. I know I 0:14:02.000 --> 0:14:05.240 couldn't resist with our own Ed Ludlow, co host of 0:14:05.400 --> 0:14:09.800 lumber Technology, Ed's joining us from San Francisco. Is this 0:14:09.960 --> 0:14:13.480 something more than a company that is struggling with softer demand? 0:14:15.440 --> 0:14:17.959 I think it is something more than that. It's been 0:14:17.960 --> 0:14:20.200 a long day, long night. It's been a long twenty 0:14:20.240 --> 0:14:22.960 four hours. But you know something you said there more 0:14:23.000 --> 0:14:25.840 than ten percent. You know, it kind of got lost 0:14:25.880 --> 0:14:29.000 in the kind of cadence of headlines that we broke. 0:14:29.560 --> 0:14:31.960 But what I'm hearing now is that the cuts in 0:14:32.120 --> 0:14:35.320 certain teams is a lot deeper than ten percent. In 0:14:35.360 --> 0:14:38.360 many cases, it's near it to twenty percent. And as 0:14:38.400 --> 0:14:43.000 we reported, it seems to be largely coincidental timing. But 0:14:43.080 --> 0:14:46.440 there were two very prominent executives at Tesla that handed 0:14:46.440 --> 0:14:49.480 in their resignation last night, and they would have known 0:14:49.520 --> 0:14:53.160 full well these cuts were coming. So and I think 0:14:53.200 --> 0:14:55.880 the stock cloak down more than five percent, So there's 0:14:55.920 --> 0:14:56.800 a lot there there. 0:14:57.800 --> 0:15:00.560 We're journalists, so we like to have a certain sobriety, 0:15:00.560 --> 0:15:02.440 but then we're radio hosts and so we like to 0:15:02.480 --> 0:15:03.640 stir things up a little bit. 0:15:03.800 --> 0:15:05.080 So inputting to hit me with it. 0:15:05.240 --> 0:15:09.720 This is not necessarily throwing in the white tell. It's 0:15:09.800 --> 0:15:14.120 not really the tail between the legs. But it is 0:15:14.200 --> 0:15:17.200 the year of efficiency for Tesla. Is that right? 0:15:17.600 --> 0:15:19.640 Yeah, Yeah, that's a really good way of putting it. 0:15:19.680 --> 0:15:22.480 Like you know, oftentimes in the bottom technology when a 0:15:22.520 --> 0:15:26.000 company announces big layoffs. You know, it's never pleasant to 0:15:26.000 --> 0:15:28.240 talk about people losing their jobs, but you'll see the 0:15:28.280 --> 0:15:30.040 stock go up, and you'll see the stock go up 0:15:30.080 --> 0:15:33.720 because investors it is a sign of cost discipline, and 0:15:34.000 --> 0:15:38.080 obviously reducing your cost base has impact on the bottom line. 0:15:38.680 --> 0:15:42.200 This time, Tesla shares with down five percent and very much. 0:15:42.240 --> 0:15:45.160 This time. It's kind of a compounding effect of negative 0:15:45.160 --> 0:15:49.920 headlines that we've had. In the first quarter, Tesla missed 0:15:49.920 --> 0:15:53.440 deliveries by a very big margin. The data suggests that 0:15:53.480 --> 0:15:57.760 Tesla is facing increasing competition from domestic players in China. 0:15:58.600 --> 0:16:03.560 So cutting this with the added negative headline that Drew Baglino, 0:16:03.600 --> 0:16:07.000 who has been at that company for eighteen years and 0:16:07.120 --> 0:16:10.640 was one of only four named executive officers on Tesla's 0:16:10.640 --> 0:16:15.120 management team, that he resigned and there's deep layoffs. I 0:16:15.160 --> 0:16:19.280 think it just added to a downward trend that this 0:16:19.360 --> 0:16:22.840 company and literally its soccers seen so far in twenty 0:16:22.880 --> 0:16:23.320 twenty four. 0:16:23.480 --> 0:16:26.000 So, ed, how is this going to impact a product 0:16:26.040 --> 0:16:27.200 line right now? Do we know that? 0:16:28.520 --> 0:16:28.760 Yeah? 0:16:29.760 --> 0:16:32.840 Reading the memo that Elon Musk sent to employees around 0:16:32.840 --> 0:16:36.160 the world last night, you know he's attributing the need 0:16:36.240 --> 0:16:40.880 to cut BA to a their people in duplicate roles 0:16:40.880 --> 0:16:44.680 because they grew too fast, but also productivity and cost discipline. 0:16:45.160 --> 0:16:47.600 And as you guys know, Tesla's narrative right now is 0:16:47.640 --> 0:16:50.880 it's between two waves of growth. Wave one has been 0:16:51.040 --> 0:16:54.200 gone driven by Model three and Model Y and Wave 0:16:54.280 --> 0:16:57.080 two we're a little bit confused about. But it's either 0:16:57.120 --> 0:16:59.880 a twenty five thousand dollars ev or it's a ROBOTAXI, 0:17:00.280 --> 0:17:02.920 depending on whether Elon Musk is right or Reuter's that 0:17:03.000 --> 0:17:07.159 reported the twenty five thousand dollar v was dead last week. 0:17:07.600 --> 0:17:12.440 And you know amid losing some pretty important intellectual capital 0:17:12.920 --> 0:17:15.280 in those executive departures. I think Elon's just trying to 0:17:15.280 --> 0:17:18.119 rein it in. You know, what I'm hearing is that 0:17:18.160 --> 0:17:21.399 he's kind of clear in house and making sure that 0:17:21.440 --> 0:17:23.320 he has the people in place that he wants to 0:17:23.359 --> 0:17:25.440 get this next phase of growth going. 0:17:26.359 --> 0:17:29.800 And as I heard you say in an interview more 0:17:29.840 --> 0:17:32.240 than a year or two ago, that Elon Musk is 0:17:32.240 --> 0:17:35.320 the wild card man. Should we doubt him? I mean 0:17:35.680 --> 0:17:40.240 Mark Zuckerberg pulled it off, didn't he at Meta? Should 0:17:40.400 --> 0:17:42.680 Is this a big challenge now that Elon Musk will 0:17:42.720 --> 0:17:45.960 embrace and he will get this company more efficient and 0:17:46.040 --> 0:17:47.920 more profitable. Yeah? 0:17:48.359 --> 0:17:50.280 I mean I talked about this on air and I 0:17:50.320 --> 0:17:53.800 wrote about it in my column today as well on 0:17:53.920 --> 0:17:57.159 Tech Daily that there are times where Elon Musk is 0:17:57.240 --> 0:18:01.280 just consistent, and this in terms of layoffs is one 0:18:01.320 --> 0:18:04.159 area that Musk is consistent. He did it in twenty 0:18:04.200 --> 0:18:06.960 twenty two where they cut around ten percent of staff. 0:18:08.119 --> 0:18:11.480 He's talked about the impact of rates on demand presently, 0:18:12.320 --> 0:18:16.080 and he's always had this mantra that the leaders of 0:18:16.119 --> 0:18:21.400 each business unit should be aggressive in pursuing cost savings. Basically, 0:18:21.520 --> 0:18:24.520 he says to all of them, get me cents off 0:18:24.560 --> 0:18:28.639 the dollar on every component, shave cost out of every process. 0:18:29.040 --> 0:18:31.120 And he's always done that, and this is him doing 0:18:31.119 --> 0:18:34.120 it again. The difference is that, you know, he's got 0:18:34.119 --> 0:18:36.679 a lot else going on. He's the CEO leader of 0:18:36.720 --> 0:18:40.480 five other companies, and it's just disconcerting when two big 0:18:40.560 --> 0:18:44.520 name executives that are highly competent leave the company at 0:18:44.520 --> 0:18:47.800 the same time. So this time, I think investors and 0:18:47.840 --> 0:18:52.800 Tesla shareholders and Tesla owners as well basically trying to 0:18:52.920 --> 0:18:54.960 wade through it and go is the net result that 0:18:55.119 --> 0:18:56.119 Lance got this or not? 0:18:56.560 --> 0:18:58.639 Well, that goes to the next question. I mean, if 0:18:58.680 --> 0:19:01.400 he's spread himself to friendly, do we need to see 0:19:01.480 --> 0:19:05.240 him kind of remain more laser focused on the Tesla 0:19:05.320 --> 0:19:07.480 problem at the exclusion of some of the other things 0:19:07.480 --> 0:19:08.359 he's got his hands in. 0:19:09.160 --> 0:19:09.560 Yeah. 0:19:09.640 --> 0:19:12.640 Yeah, you know, to the root of your previous question, 0:19:12.720 --> 0:19:15.320 there is an element of key man risk. Tesla now 0:19:15.359 --> 0:19:18.680 literally puts it in its regulatory filings that if anything 0:19:18.720 --> 0:19:21.320 would happen to Elon Musk, you know, horrible to say. 0:19:21.359 --> 0:19:24.160 The easiest example for our globe audience, if Elon Musk 0:19:24.160 --> 0:19:26.800 were to be hit by a bus Tesla would have 0:19:26.880 --> 0:19:30.120 a problem. And that's me paraphrasing. And again it goes 0:19:30.160 --> 0:19:32.439 back to when Drew Baglino resigned or you know, he 0:19:32.440 --> 0:19:34.520 announced he'd left Tesla, but a source told me he 0:19:34.600 --> 0:19:37.720 resigned rather than he was fired. A lot of people 0:19:37.800 --> 0:19:41.400 thought Drew might be next in line potentially to be CEO. 0:19:41.800 --> 0:19:44.560 He'd done eighteen years at Tesla. He leads all energy 0:19:44.600 --> 0:19:47.160 and powertrain activities at the company, or he did until 0:19:47.200 --> 0:19:51.080 last night. So with him out the running, there's now 0:19:51.080 --> 0:19:54.520 only three named executive officers, including Musk. And you wonder 0:19:54.600 --> 0:19:57.280 like if he ever turned around and said, I'm done 0:19:57.280 --> 0:19:59.240 with Tesla for now, I'm moving on to something else. 0:19:59.640 --> 0:20:01.040 Who person might be. 0:20:02.560 --> 0:20:05.640 Ed just in twenty seconds or so? Does this mean 0:20:05.720 --> 0:20:09.240 lower prices across the board for evs and does this 0:20:10.040 --> 0:20:12.840 bring in viability? How viable are these companies? 0:20:13.760 --> 0:20:16.199 Well, the answer is no. I don't think if you 0:20:16.240 --> 0:20:18.359 see job cuts in other ways to save money, that 0:20:18.400 --> 0:20:20.800 you'll continue to see price drops. I think they've cut 0:20:20.840 --> 0:20:23.960 as deep as they can, but you never know. They've 0:20:24.000 --> 0:20:26.320 not been afraid to use price changes as a lever. 0:20:26.600 --> 0:20:28.760 Yeah, so far this year the stock is down thirty 0:20:28.880 --> 0:20:31.679 five percent. Talk about price cuts, and it's always a pleasure. 0:20:31.760 --> 0:20:34.239 Thank very much for making time to chat with us. 0:20:34.320 --> 0:20:37.840 Bloomberg's Ed Ludlow, co host of Bloomberg Technology on the 0:20:37.840 --> 0:20:41.119 Tesla story shares today in the regular session down to 0:20:41.160 --> 0:20:42.240 five point six percent. 0:20:43.160 --> 0:20:46.600 This is the Bloomberg Daybreak Asia podcast, bringing you the 0:20:46.680 --> 0:20:50.120 stories making news and moving markets in the Asia Pacific. 0:20:50.359 --> 0:20:53.520 Visit the Bloomberg Podcast channel on YouTube to get more 0:20:53.560 --> 0:20:57.359 episodes of this and other shows from Bloomberg. Subscribe to 0:20:57.400 --> 0:21:01.200 the podcast on Apple, Spotify, or anywhere else you listen 0:21:01.480 --> 0:21:04.680 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:21:04.680 --> 0:21:06.000 Bloomberg Business app.