Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Joining
Speaker 1: us in New York. I'm really pleased to say is
Speaker 1: cal Windberg, High Frequency Economics, chief economist and managing director,
Speaker 1: and he joins us right now. Good morning to you, Carl.
Speaker 1: Pleasure to be here, Thanks for having me on. It's
Speaker 1: the trade war on hold and for how long will
Speaker 1: it be on hold? It is on hold, it will
Speaker 1: be on hold until it's not on hold. There's no
Speaker 1: reason to suspect that it's going to go either well
Speaker 1: or badly. The scorecard is this. I think China is
Speaker 1: having its way with the United States in this conversation,
Speaker 1: and this was a backdown by the United States. It
Speaker 1: avoids a conflict, the tariff war that would have been
Speaker 1: to everybody's disadvantage, and it gives people a time to
Speaker 1: cool off. So I'm all in favor of it, and
Speaker 1: I hope it less and I hope that China and
Speaker 1: the United States can learn to work together rather than
Speaker 1: knock each other's heads. Well, we can discuss how long
Speaker 1: last thing it might be. Finalists explore the vague commitments
Speaker 1: the Chinese pledging to to rebalance the disparity between Chinese
Speaker 1: and the United States trade surplus. Um, how firm is
Speaker 1: that commitment to rebalance that? And what are you expecting
Speaker 1: to see? Car We've send commitments to boost imports of energy, agriculture.
Speaker 1: Are they good things? Yeah, well, they'd be good things
Speaker 1: if they would happen. I don't know exactly how you
Speaker 1: make them happen. I remember John Maynard. I remember reading
Speaker 1: about John Maynard Keynes talking to bertel Lean about why
Speaker 1: Germany doesn't export more? You know, why doesn't Germany export
Speaker 1: were And his idea was that Germany had to impoverage
Speaker 1: its workers to make all of its stuff cheaper. Um.
Speaker 1: I think at the end of the day, you know,
Speaker 1: the United States has to produce more stuff that China wants.
Speaker 1: We have stuff that China wants on the technology side,
Speaker 1: and we're not selling it to them, and that would
Speaker 1: be one way to reduce all of this. And that's
Speaker 1: the Chinese point. And as I said, I think the
Speaker 1: Chinese are really having their way in this conversation. What
Speaker 1: I talk about to what extent the Chinese, the commitments
Speaker 1: of the weekend, how much of that is just an organic,
Speaker 1: natural consequence of more growth in China that they will
Speaker 1: need more foreign agricultural goods, they will need more foreign
Speaker 1: energy sources as well. Undoubtedly that's going to growth, is
Speaker 1: going to help move this conversation forward. They've agreed to
Speaker 1: buy things like energy. All right, we make energy, we
Speaker 1: export energy now in the United States, that's new. We
Speaker 1: have a comparative advantage and if you will over China,
Speaker 1: and so therefore we're going to sell some more of it.
Speaker 1: So I think that's kind of a natural evolution. I
Speaker 1: really do believe that a lot of the substance of
Speaker 1: what we've seen this weekend is really just a face
Speaker 1: saving way for both sides to down from the cliff
Speaker 1: any real commitment to do anything. It just gives everybody
Speaker 1: a way to say, okay, just kidding ha ha, to
Speaker 1: move on with the conversation. I strongly agree. And then
Speaker 1: within the face saving Dr Weinberg is the timeline and
Speaker 1: the Chinese have every advantage, don't they don't They just wait, well,
Speaker 1: they're growing at in a bad year at just under
Speaker 1: seven percent, and the United States and the good year
Speaker 1: is growing at two and a half percent. So you
Speaker 1: do the math on that, and you start off with
Speaker 1: China slightly larger than the U. S economy in terms
Speaker 1: of converting looking at its economy in terms of the
Speaker 1: purchasing power of the money rather than the exchange right
Speaker 1: the way the World Bank looks at it. So they're
Speaker 1: already the largest economy on Earth, and they're just going
Speaker 1: to pull farther and farther ahead with their silk root.
Speaker 1: Their exports are going to grow faster and faster than
Speaker 1: the United States. They have already become the largest economy
Speaker 1: on Earth, and they're on track to become the dominant economy.
Speaker 1: But it was going to pay the the trade hawks.
Speaker 1: What they really wanted was not just to rebounance the
Speaker 1: trade surplus. It was to go after made and shine,
Speaker 1: to go after the protected industries that they want to
Speaker 1: dominate on a worldwide basis. Have we seen a big
Speaker 1: loss for Navarro, Wilbur Ross, and Mr Your good question,
Speaker 1: Greg Villier posits in his Morning Note that Mr Leightheiser
Speaker 1: and Mr Navarro may resign. Yeah, I actually saw the
Speaker 1: same thing in his morning you did, and yeah, you
Speaker 1: were read in and that's very read in. Um, cow
Speaker 1: cow To what extent is it a loss for them
Speaker 1: over the weekend? And also I should add to what
Speaker 1: extent is this actually about a foreign policy goal that
Speaker 1: could come about next month when the United States sits
Speaker 1: down with North Korea? Yeah? So, um, there's a lot
Speaker 1: of questions in the question that you raised, right, I
Speaker 1: mean Navarro, Uh, In my view, all right, his point
Speaker 1: of view has always been wrong. So to have him
Speaker 1: excluded from the administration because what he's doing is not
Speaker 1: working on what he wants to do is not going
Speaker 1: to work, all right, that's a logical extension. It's an
Speaker 1: evolutionary sort of thing. It's not a revolutionary sort of thing.
Speaker 1: But I think that his Mercanti listen approach to U
Speaker 1: S trade is just is just off as far as
Speaker 1: North Korea is concerned. I think the Chinese have a
Speaker 1: very clear upper hand here. The Chinese are saying to
Speaker 1: the North Koreans, you know, we'll give you what you want,
Speaker 1: do what we want you to do, which is to
Speaker 1: make friends with South Korea, and then to annex yourself
Speaker 1: to what we're doing, and that moves South Korea out
Speaker 1: of the US fold. Carl, I want to rip up
Speaker 1: the script, and I know we can do this with
Speaker 1: you because you're prodigious in your your history and ability.
Speaker 1: We have a merger this morning which is pretty cut
Speaker 1: and dry, and it's all these alphabets ge to my
Speaker 1: web co for what is it, John eleven billion dollars
Speaker 1: something like that after tax benefits ten billion dollars. But
Speaker 1: this barely describes the G Transportation flat out. Its back
Speaker 1: is going to be taken out where g E owns
Speaker 1: fifte of the Westinghouse break Company of eighteen sixty nine
Speaker 1: in Pittsburgh, Pennsylvania. Outside of Pittsburgh as well. And the
Speaker 1: fact is these are multi national companies. There are perfect
Speaker 1: manufacturing example of a true multinational vision, which I would
Speaker 1: suggest the President looks at as a discreet, uh domestic
Speaker 1: company outside Pittsburgh. They're not just another break company outside Pittsburgh,
Speaker 1: are they. They're truly multinational. Yeah. I think what you're
Speaker 1: hitting on, Tom is the education that this administration is getting,
Speaker 1: which is that trade is not a domestic issue, all right,
Speaker 1: but most American business is multinational. I mean even my
Speaker 1: little business does two thirds of its revenues come from overseas.
Speaker 1: Production chains are linked. You know, you go after NAFTA,
Speaker 1: for example, as the current administration has, and suddenly they
Speaker 1: allotmobile manufacturers, a core industry in the United States, are saying, WHOA,
Speaker 1: this affects us. We have to to rope it back
Speaker 1: in so that our core businesses aren't affected and the
Speaker 1: whole economy isn't affected. So I think there's an educational
Speaker 1: process going on within the administration, which is why the
Speaker 1: Navarros maybe stepping to this being pushed to the side,
Speaker 1: and bigger, more adults are coming into the and John,
Speaker 1: what's so important about this is I'm going to assume
Speaker 1: within transportation and trains and breaks it's wildly competitive, there's
Speaker 1: got to be like five but from bidding on the
Speaker 1: next train, away from the specifics of one particular industry,
Speaker 1: this was always about whether you want to maintain the
Speaker 1: status quote, not maintain free trade because we don't have
Speaker 1: free trade. Was about whether you maintain the status quo.
Speaker 1: And multinationals in the United States quite clearly benefit from
Speaker 1: the status quot and the view in the C suite
Speaker 1: is don't take the risk with the status quote to
Speaker 1: open up Chinese markets aggressively. They will over time. We
Speaker 1: can wait. We make enough money as it is. This
Speaker 1: administration took a very different stance. This administration looked at
Speaker 1: the Chinese, a very protectionist regime that has leached on
Speaker 1: global trade for over a decade now and more, and said,
Speaker 1: we need to do something aggressively. Now, Carl, as you
Speaker 1: sit there is a business owner that benefits from the
Speaker 1: status quo. Are you basically saying that you're not happy
Speaker 1: with this administration taking the risk aggressively opening up Chinese
Speaker 1: markets when the downside is the status quot could become
Speaker 1: something much much worse. Yeah, well, I think that uh
Speaker 1: ripping up the script, as Tom likes to say, without
Speaker 1: having a new script in its place, is a risky
Speaker 1: business right, And Tom can get away with it because
Speaker 1: he's Tom. But the US economic policy can't get away
Speaker 1: with it because there are many more complicated moving parts.
Speaker 1: And to my mind, the fault in this area of
Speaker 1: the Trump administration has been that they've been willing to
Speaker 1: take things off the table and to break things up,
Speaker 1: to remove elements from pieces from the puzzle without having
Speaker 1: replacement pieces ready to go. And that's been true of
Speaker 1: the China policy. It's been true of NAFTA, where we're
Speaker 1: now seeing them reel that back in as well. All right,
Speaker 1: it was true of Transpacific Partnership where suddenly we want
Speaker 1: to get back in and again it's it's true of
Speaker 1: so many things, because you can't leave a vacuum, because
Speaker 1: if you leave a void, someone like China will step
Speaker 1: into it and fill it for you. Fantastic to have
Speaker 1: you with this this this morning, and really appreciate your time.
Speaker 1: High Frequency Economics Chief Economists and Managing Directory. The book
Speaker 1: is standoff How America became ungovernable, governable. But what matters
Speaker 1: is the author is Bill Schneider. He has definitively put
Speaker 1: history first in our review of America are politics and
Speaker 1: of course the chaos that we're in right now. I
Speaker 1: love the blurb at the beginning. In a little more
Speaker 1: than fifty years, America policies have gone from Camelot to
Speaker 1: Game of Thrones. I guess that really says it all,
Speaker 1: Bill Schneider. Game of Thrones, which character is President Trump playing?
Speaker 1: I haven't seen the game of you're the only one
Speaker 1: who has it, but the but the answer is the
Speaker 1: chaos that's out there. We've seen before. How do you
Speaker 1: get beyond whether someone's a Republican, Democrat, whatever, How do
Speaker 1: we get beyond where we are out to something bordering
Speaker 1: on civility and stability? Normally, the answer is a crisis.
Speaker 1: We're a system that's very difficult to govern. We were
Speaker 1: designed not to be easy to govern. When there's a crisis,
Speaker 1: everything comes into place. You know. For one year after
Speaker 1: nine eleven, Democrats supported President Bush and the country. It
Speaker 1: looked like a consensus was being built because there was
Speaker 1: a crisis in the world and in the United States.
Speaker 1: It didn't last very long because a year after nine eleven,
Speaker 1: President Bush started the rollout for the Iraq War and
Speaker 1: all the old division surfaced once again. I look at
Speaker 1: where we are and helped John Farrell here, the young
Speaker 1: man from the United Kingdom, and that there's this populism
Speaker 1: mood that's out there. We see it everywhere. What is
Speaker 1: the flavor of populism that is the standoff of American politics.
Speaker 1: The flavor of populism is resentment of elites, that's very deep,
Speaker 1: resentments of big word here is and resentment. Yeah, there's
Speaker 1: a lot of resentment. Uh. And in the United States.
Speaker 1: You know, the constituency that Trump mobilized are basically people
Speaker 1: who feel disrespected. They went into a rage over President Obama.
Speaker 1: They called it the Ray the reign of political correctness,
Speaker 1: because political correctness is the belief in diversity and inclusion,
Speaker 1: and a lot of these working class white men think
Speaker 1: inclusion does not include them. That's a really interesting point.
Speaker 1: And so your point, Bill. We've had full presidents two
Speaker 1: Democrats to Republicans that have promised to unite and to
Speaker 1: heal and totally not only failed. Why it's so different
Speaker 1: this time around. We have a president who is governing
Speaker 1: by dividing. Uh. President Trump is doing something no other
Speaker 1: president has done. He ran as a divider by mobilizing
Speaker 1: this angry constituency that feels disrespected. Remember Hillary Clinton called
Speaker 1: them a basket of deplorables. Well, they erupted then in
Speaker 1: that campaign. Uh. And they feel as if no one
Speaker 1: is paying attention to them. The economy that affects them
Speaker 1: is fail ing. Uh. And these people have no place
Speaker 1: in a world of political correctness. Can't he deliver for them?
Speaker 1: We don't know yet. Uh. He the economy is moving
Speaker 1: along nicely, and if that happens and it helps them
Speaker 1: get ahead. Uh, then they'll be very appreciative. But the
Speaker 1: fact is there's very little evidence that the economic growth
Speaker 1: that the country is now enjoying is helping people much
Speaker 1: at the bottom. Where were you were you on the
Speaker 1: CNN set in Yes, the Republican I sat there, remember
Speaker 1: sitting on the coach. The only major network that covered
Speaker 1: it was Dan Rather on CBLS. And there was this
Speaker 1: revolution in absolutely stunning. Is that what we're faced here
Speaker 1: in November? We could be that would be they're talking
Speaker 1: about a blue wave instead of a red wave. That
Speaker 1: was the first time in forty years in that the
Speaker 1: Republicans took over the House of Representatives over Congress. It
Speaker 1: was a revolution. Did anybody see it coming? My recollection
Speaker 1: is pretty much no, no, not really. And we know
Speaker 1: what happened that year. Historically what happened is gun owners
Speaker 1: and there were it just right came out in huge,
Speaker 1: unprecedented numbers, nine million new mid The Blue crew come
Speaker 1: out this time around. That's what we don't know. It
Speaker 1: would include Bill Snyder. You know what's going to happen here? Well,
Speaker 1: you know there's an old rule never make predictions, especially
Speaker 1: about the future. Well, the down right. That was Yogie Barrett.
Speaker 1: I megan right down in the wedding register. How long
Speaker 1: has that taken you? Twenty three minutes to bring up
Speaker 1: the roll away John a question from Bill Snyder. Police,
Speaker 1: they'll just to complete this conversation. The risk for many
Speaker 1: people listening in our audience, investments, business leaders, is that
Speaker 1: if the president can't address the problems that the minorities
Speaker 1: that you've brought up that believe they haven't been listened
Speaker 1: to over the last several decades, if he can't address
Speaker 1: those problems, that this country swings aggressively to the left.
Speaker 1: How big is that risk? Well, I think there is
Speaker 1: a risk that will happen. It very much depends on
Speaker 1: whom the Democrats. Who who catches fire among Democrats? Will
Speaker 1: it be a strong progressive candidate like Elizabeth Warren? They
Speaker 1: could be Joe Biden. He would be the logical next person.
Speaker 1: The problem is he's well into his seventies and he's
Speaker 1: part of the past. We don't know. That's what primaries
Speaker 1: are all about, and they're inherently unpredictable, but some of
Speaker 1: them will always catch fire. The old rule is Democrats
Speaker 1: fall in love and Republicans fall in line. That didn't
Speaker 1: happen in twenty Republicans fell in love with Donald Trump
Speaker 1: and Democrats fell in line behind Hillary Clinton. So even
Speaker 1: those rules aren't necessarily the case. Bill Snyder, thank you
Speaker 1: so much in congratulations. The book is standoff, How America
Speaker 1: became ungovernable, with a fabulous tapestry history to drive forward
Speaker 1: to the mid term elections and then to two thousand
Speaker 1: Tory of course, Bill Schneider at George Mason and for
Speaker 1: years associated and inventing our political coverage and CNN soaring prices,
Speaker 1: widespread hunger, rampant crime, failing health system, and a large
Speaker 1: scale exodus of its citizens. And yet President Nicolas Maduro
Speaker 1: has won a second term as the president of Venezuela.
Speaker 1: Here to tell us more about it is Patricia La
Speaker 1: our Venezuela Bureau chief, joining us now on the phone. Patricia,
Speaker 1: thank you very much for being with us. Uh Do
Speaker 1: people in Venezuela regard the results of the election as
Speaker 1: uh legal? Um? Well, be hard for me to speak
Speaker 1: on behalf of Venezuela, but we did visit a lot
Speaker 1: of voting centers yesterday, and many of them were in
Speaker 1: the western side of Calacas, which is the more popular areas,
Speaker 1: and they were practically empty, many of them. I was
Speaker 1: the only person even there apart from the people that
Speaker 1: were working at the voting center. So clearly you have
Speaker 1: a very disillusioned and uninterested electorate who UM already fighting
Speaker 1: a daily plight to do about just anything, finding food,
Speaker 1: being able to afford food once you can find it.
Speaker 1: Public services are completely collapsed, as running water has become
Speaker 1: a luxury. In Kalaas and most of Venezuela, you have
Speaker 1: power out of just happening for hours. Public transportation is
Speaker 1: becoming more and more difficult, a spare parts are hard
Speaker 1: to find, an important to the country. So of course
Speaker 1: a large large percentage of Venezuelans were completely uninterested in
Speaker 1: yesterday's event. So before we get into smooth the economic
Speaker 1: implications of the continued reign of Maduro, I'm wondering almost
Speaker 1: of the population did vote? Who are his supporters? So, um,
Speaker 1: those are the numbers according to the national like the
Speaker 1: UM authority, but well, you know, it's hard to know.
Speaker 1: Some people do cust out on them UM. But of
Speaker 1: course they do have UM a large government shame that
Speaker 1: encourages people to vote by offering um bonuses or certain prices.
Speaker 1: That there were hundreds of thousands of points outside of
Speaker 1: electoral UH centers yesterday that if you prove that you voted, UM,
Speaker 1: they'll give you, you know, a certain price. They don't
Speaker 1: tell you what it is outwardly, right, but you assume
Speaker 1: that it's just a deposit into your accounts. At some
Speaker 1: of the centers, I even saw people handing out bread
Speaker 1: and water to voters. Um. So yeah, there's this, there's
Speaker 1: a machine that's encouraging people to come out and vote. Okay,
Speaker 1: so let's talk about the implications because I am looking
Speaker 1: at PASA bands that is, the state owned oil company
Speaker 1: that are falling, and the ie that the International Energy
Speaker 1: Agency has been coming out and saying they expect Venezuela
Speaker 1: oil output to decline to an innex basically a negligible amount.
Speaker 1: What's the prospects? Why are you? Why are things so
Speaker 1: bleak and getting bleaker for Venezuela at this point? Yeah?
Speaker 1: So oil production is already at a thirty or forty
Speaker 1: year low. Um, you have many of the oil workers
Speaker 1: just walking out, not only because they're so poorly paid,
Speaker 1: but because they're too hungry and weak to operate heavy machinery. Um,
Speaker 1: you have conical philips uh on a global assault. I
Speaker 1: guess Thataday sat trying to take some of his two
Speaker 1: billion arbitration award that it was granted last month. And you,
Speaker 1: on top of all of that, you have the Venezuela
Speaker 1: under active review for oil sanctions on behalf of the US,
Speaker 1: which would be sort of the deadly blow to an
Speaker 1: economy that's already in crisis. So the outlook is for
Speaker 1: everything to just continue to words them from now on.
Speaker 1: Does the president recognize that your description, and indeed the
Speaker 1: description of most media outlets about what the majority of
Speaker 1: people in Venezuela deal with on a daily basis, does
Speaker 1: he recognize that that is true? No, he does not.
Speaker 1: I don't think he has ever even uttered the word
Speaker 1: hyper influ asan or anything of the stort um everything
Speaker 1: Um that he does sort of agree or admit he
Speaker 1: characterizes it as the war waged from the US against Venezuela. Um,
Speaker 1: he blames everything as a Venezuela being under economic attack
Speaker 1: from other nations across the globe. Okay, but if he
Speaker 1: just sort of move a little further on that, if
Speaker 1: you're under it, let's say, let's say that is, let's
Speaker 1: just take that as his version. Does he admit or
Speaker 1: recognize that there are people who are going hungry, that
Speaker 1: there is no running water, that electricity is intermittent, and
Speaker 1: that no one can afford to buy food? No, I
Speaker 1: mean he'll admitted to a certain extent, but nothing even closed.
Speaker 1: He he will mention some of these, um issues are
Speaker 1: in press conferences and things like that. And the funny
Speaker 1: thing is that he kept repeating that, you know, after
Speaker 1: he was elected, Um, he was going to solve you know,
Speaker 1: a majority these issues. What we're wondering is how have
Speaker 1: those options alluded him so far as to how we
Speaker 1: can continue? The economy is expected to contract nine percent. Uh,
Speaker 1: this dear inflation is said to hit percent. The currency
Speaker 1: has lost more than his value. Right, Um, there are
Speaker 1: a lot of things that he needs to get on
Speaker 1: the right path. Patricia Lah, thank you so much for
Speaker 1: being with us. Good luck to you, and UH it
Speaker 1: sounds pretty hopeless. I'm hoping that there is something else,
Speaker 1: uh that will perhaps help mitigate the situation and perhaps
Speaker 1: cause a change to the at least policies of the leadership.
Speaker 1: Patricia la Venezuela Bureau chief talking to us about those
Speaker 1: Venezuelan elections and chairs of Tesla. They are up right
Speaker 1: now a little bit more than three percent. This comes
Speaker 1: after Elon Muska, the founder and the chief executive of Tesla,
Speaker 1: announces details about two variants of the model of three. Indeed,
Speaker 1: one of those variants is estimated to cost about seventy
Speaker 1: eight thousand dollars. That's twice the price of a base
Speaker 1: Model three. And it reminds me of an old National
Speaker 1: Airlines commercial entitled is this any way to run an airline?
Speaker 1: Is this any way to run a car company? Here
Speaker 1: to help us answer that question, Kevin Tynan, Bloomberg Intelligence
Speaker 1: Senior analyst for Everything's Automotive Kevin always a pleasure. Um.
Speaker 1: I know I'm dating myself by talking about National Airlines,
Speaker 1: but we all know what happened to National Airlines, So
Speaker 1: I'm curious, is this any way to run an automobile company?
Speaker 1: By having the chief executive tweet out, I mean, I
Speaker 1: get you know, it gets you tons of free public listening.
Speaker 1: You never have to do an ad in your life,
Speaker 1: But is this the way to run a company that's
Speaker 1: trying to produce mass automobiles? Well? I look I guess
Speaker 1: that goes all the way up to the President communicates
Speaker 1: via tweet now too, So, um, I think Elon Musk
Speaker 1: is that sort of new generation of CEO tweeting out plans, uh,
Speaker 1: you know, calling analyst bone heads on the call, so
Speaker 1: you know, until until the shareholders react, he'll he'll continue
Speaker 1: to push the envelope in that way. I'm sure. So
Speaker 1: what is your thought about this announcement and the new
Speaker 1: loaded versions of the Tesla Model three. Aren't they just
Speaker 1: having challenges getting the regular model three out there? Well?
Speaker 1: I don't. I'm not sure they want to get the
Speaker 1: regular model three out there when you look at you know,
Speaker 1: the quarterly reports and and you know, running at at
Speaker 1: an operating loss, and you know, the idea is is
Speaker 1: to still be up market until you know they can
Speaker 1: get production. I'm not sure you're ever going to see
Speaker 1: the thirty five thousand dollar vehicle. Um. You know, so
Speaker 1: in that in that way, this makes sense to be selling,
Speaker 1: you know, the premium vehicles. I think two things happen though.
Speaker 1: One is at seventy eight thousand dollars before autopilot even
Speaker 1: um that that's not even included in that seventy eight
Speaker 1: thousand dollar price egg, but at seventy eight thousand dollars,
Speaker 1: you worry about cannibalization of the Model S, which is
Speaker 1: priced a little bit higher. But you know, if you
Speaker 1: look at revenue per unit over the past couple of quarters,
Speaker 1: it's in that eighty you know, eighty to ninety dollar range,
Speaker 1: So you're pushing up against models. The other thing is
Speaker 1: how many of those five hundred thousand deposits we hear
Speaker 1: about all the time. We're people expecting to be able
Speaker 1: to actually get a thirty five thousand dollar vehicle, which
Speaker 1: probably won't be at least until some point of if ever.
Speaker 1: And doesn't this also bring into question the competition models
Speaker 1: from bm W as well as lower price models from Toyota, Nissan, etcetera. Right, Yeah,
Speaker 1: And and I still believe that those manufacturers are only
Speaker 1: halfheartedly involved in the battery electric vehicle market. Um. You know,
Speaker 1: there's announcements and you see this long lead time till
Speaker 1: those get to market, and I think that's just simply
Speaker 1: because the business economics of the drive train uh drivetrain
Speaker 1: technology just don't make sense yet. And basically Tesla proves
Speaker 1: that with every quarterly report. Right, And I think you
Speaker 1: saw General Motors with Chevrolet Bolt, and we were constantly
Speaker 1: hearing how Tesla out sells Bold, and I keep arguing, well,
Speaker 1: they're not trying to sell Chevrolet Bolt. It was an
Speaker 1: experiment of finance experience to see what the economics of
Speaker 1: the technology look like. Knowing it's not profit is profitable
Speaker 1: is why you don't see Chevally Bolt be marketed or
Speaker 1: aggressively sold, because you're losing money on everyone. You you
Speaker 1: that that you do put in customers hands. So the
Speaker 1: idea is is that we can do this. We have
Speaker 1: the technology, it's up on the shelf. If this ever
Speaker 1: looks like it's profitable, we'll put it in a good
Speaker 1: looking vehicle or a compact crossover, which is the best
Speaker 1: selling segment in the US, and we'll sell them like
Speaker 1: we want to sell them. Well, I just also want
Speaker 1: to mention getting this a news item from Greg Jared
Speaker 1: and the Bloomberg news Room that at least one person
Speaker 1: is dead after a Tesla Model S was found in
Speaker 1: a pond on a property in Alameda County on Sunday night.
Speaker 1: This according to the California Highway Patrol. UH this in
Speaker 1: you know Castro, in your Castro Valley um our Tesla
Speaker 1: automobiles getting a pass in terms of what they can
Speaker 1: do versus other electrified or what you might call hybrid
Speaker 1: technology cars can do well. I think, Um, I I
Speaker 1: don't know that that's totally Testla's fault. I think autopilot
Speaker 1: and I don't know if this incident was the autopilot
Speaker 1: was involved. I'm just you know, going over some of
Speaker 1: the ens recently, UM, you know, I think there's certainly
Speaker 1: misinterpretation of what that system can do. And I think
Speaker 1: when you look at even the um most recent crash
Speaker 1: where or the one before the one you just mentioned,
Speaker 1: where it hits a parked fire truck and you're wondering,
Speaker 1: why why does it not see a stopped object and
Speaker 1: and you know stop driving towards it. UM, it just
Speaker 1: tells me that people don't understand autopilot in the way
Speaker 1: it's supposed to work. And you just don't see that
Speaker 1: from from Cadillac and super Cruise. I think for some reason,
Speaker 1: the consumer understands, UH that those are driver aids and
Speaker 1: not expected to be the full control of the vehicle
Speaker 1: given over to the to the driver or to the
Speaker 1: vehicle from the driver. UM. You know, and perhaps that's
Speaker 1: way back in the day when you had Elon Musk's
Speaker 1: wife of the time, you know, dancing in the driver's
Speaker 1: seat with no hands on the wheel. Why that misconception
Speaker 1: is out there, but it certainly seems to be real.
Speaker 1: Is there a misconception of what the consumer wants when
Speaker 1: you have Ford getting rid of pretty much their entire
Speaker 1: sedan lineup going to SUVs and pickups except for the Mustang,
Speaker 1: I believe, uh, where Tesla doesn't have an suv really
Speaker 1: or a pick up right and I and I think
Speaker 1: in in Ford's defense there and I think this is
Speaker 1: industry wide. What you're seeing is certainly the death of
Speaker 1: the coupe in the sedan UM, but also a sort
Speaker 1: of a change in the shape. So we're still going
Speaker 1: to have small vehicles, We're gonna have fuel efficient vehicles. Uh,
Speaker 1: they're just gonna be shaped differently. So rather than what
Speaker 1: we know in for tourists UM or Ford focus, that
Speaker 1: just gets lifted up a little bit, looks a little
Speaker 1: bit more like a like a compact crossover where you
Speaker 1: have the higher ride height that people like a little
Speaker 1: bit more utility and usable space. Um, you know, and
Speaker 1: maybe use a car name or maybe you don't, but
Speaker 1: it's essentially filling that gap of utility that people need.
Speaker 1: It's just not shaped with what we know conventionally to
Speaker 1: be a car. What's what else should we know about
Speaker 1: Tesla that we don't focus on? Is it battery technology?
Speaker 1: Is it the drive range? Is it you know, weather conditions,
Speaker 1: when it gets cold. We note that the range on
Speaker 1: an electric vehicle can change dramatically, you know. I think
Speaker 1: that the product itself, for the most part, other than
Speaker 1: you know, those issues with autopilot dry, I think the
Speaker 1: consumer is is educated and aware or at least comfortable
Speaker 1: with what the vehicles can do. Um. I think the
Speaker 1: biggest misconception is that you know and and in our space,
Speaker 1: it winds up being more about the financials when you
Speaker 1: when you dive into the numbers of the company, and
Speaker 1: that's everything from the volume numbers down to the gross
Speaker 1: margin numbers that everybody talks about, and then the profitability
Speaker 1: of the company going forward. I think this is a
Speaker 1: firm that's really valued like it's of of global volume automaker,
Speaker 1: and it's really not or it's not yet at least
Speaker 1: um you know, in terms of market capped comparing it
Speaker 1: to Ford and in terms of uh, you know, volume,
Speaker 1: comparing it to whoever BMW or General Motors, and it's
Speaker 1: just not in that ballpark yet, um, you know, and
Speaker 1: it's going to take some doing and get there. I
Speaker 1: was just looking at gross margins. Somebody up their target
Speaker 1: price because they are expecting better than what was forecast
Speaker 1: gross margins on Model three and and that's entirely possible.
Speaker 1: But at the end of the day, I keep saying,
Speaker 1: this is an automaker, and you know, gross margins are
Speaker 1: going to be somewhere in that twenty percent range. And
Speaker 1: and I don't see Tesla doing anything production wise, manufacturing
Speaker 1: wise that gets them to that when companies like Toyota, BMW,
Speaker 1: Volkswagen are a Thanks very much, Kevin Tynan, Bloomberg Intelligence
Speaker 1: Senior analysts for all Things Automotive. Thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm
Speaker 1: on Twitter at Tom Keene before the podcast. You can
Speaker 1: always catch us worldwide. I'm Bloomberg Radio