WEBVTT - Instant Reaction: Tesla Beats Estimates, Hints at EV Demand Rebound

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news. This is a breaking

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<v Speaker 1>news update from Bloomberg. Instant reaction and analysis from our

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<v Speaker 1>three thousand journalists and analysts around the world.

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<v Speaker 2>Yeah, let's go right to Tesla. It just crossed the

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<v Speaker 2>Bloomberg terminal. First quarter adjusted EPs folks forty one cents

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<v Speaker 2>a share, seven cents better than what the street was expecting.

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<v Speaker 1>That was.

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<v Speaker 2>That's a justed EPs, first quarter gross margin coming in

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<v Speaker 2>stronger than forecasts, certainly a side of profitability twenty one

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<v Speaker 2>point one percent versus an estimate of seventeen point seven percent.

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<v Speaker 2>First quarter revenue coming in slightly higher than what the

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<v Speaker 2>street was forecasting tim twenty two point thirty nine billion.

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<v Speaker 2>The street estimate was for twenty two point nineteen billion.

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<v Speaker 1>Okay, So some other headlines crossing the Bloomberg turnel. You

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<v Speaker 1>mentioned free cash flow, but worth repeating because it is

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<v Speaker 1>a redhead. Carol first quarter free cash flow one point

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<v Speaker 1>four to four billion, the estimates for a negative one

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<v Speaker 1>point eight six billion. The Tesla communications around earnings are

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<v Speaker 1>a slide deck, so it's kind of tough to go through.

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<v Speaker 1>But Tesla says that the cybercab the Tesla semi, the

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<v Speaker 1>megacap production starting in twenty twenty six, so that's this year.

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<v Speaker 1>Tesla also saying the first gen production lines for Optimists,

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<v Speaker 1>that's the humanoid robot, are being installed. Tesla also saying

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<v Speaker 1>that Cybercab and the Tesla Semi are on schedule for

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<v Speaker 1>twenty twenty six. The company says seeing its rebounds and

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<v Speaker 1>demand for EMEA and North America. And we should note

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<v Speaker 1>that the company also says that tailwinds are persisting for

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<v Speaker 1>the US autos business, and it received approval for full

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<v Speaker 1>self driving in the Netherlands in April.

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<v Speaker 2>All Right, the stock, as you see though, investors liking

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<v Speaker 2>what it has to say about the first quarter in

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<v Speaker 2>terms of a lot of those metrics actually looking better

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<v Speaker 2>than forecast and again looking at some of the individual businesses.

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<v Speaker 2>The company also saying it launched unsupervised robotaxi in Dallas

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<v Speaker 2>and Houston. As you mentioned, tailwinds persisting for the autos business,

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<v Speaker 2>first gen production lines for optimists being installed. So much

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<v Speaker 2>of the Tesla story is about what it's going to

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<v Speaker 2>be done. It's classic vintage, if you will. At this point,

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<v Speaker 2>Elon Musk and we know we've talked a lot we're

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<v Speaker 2>anticipating the SpaceX ipo speculation. Does everything get rolled into

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<v Speaker 2>one company under the Tesla umbrella, whether it's the AI business,

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<v Speaker 2>and how does everything work together? And that is certainly

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<v Speaker 2>something we're watching and we'll be watching out for on

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<v Speaker 2>the call to Yeah.

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<v Speaker 1>On that, the question is about what the identity of

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<v Speaker 1>this company is. Investors are not, and have not for

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<v Speaker 1>years valued it as a car company. Many people who

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<v Speaker 1>are bullish on the company say it's about AI, it's

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<v Speaker 1>about autonomy, it's about creating that fleet of robotaxis. You

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<v Speaker 1>mentioned that it launched on supervised robotaxi rides in Dallas

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<v Speaker 1>and Houston. The company also saying that robotaximile is about

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<v Speaker 1>doubled sequentially. That's a measurement that Weimo uses as well

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<v Speaker 1>to kate the scale usage.

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<v Speaker 2>You're testing a little bit of both exactly.

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<v Speaker 1>Well, this is usage right, yeah, but not everywhere, and

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<v Speaker 1>it's the rollout is not as far and wide as

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<v Speaker 1>it is for Weimo.

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<v Speaker 2>Dana Hall on our live blog, senior reporter here at Bloomberg,

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<v Speaker 2>has been covering Tesla. She's saying Tesla saying high up

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<v Speaker 2>in the deck that demand has returned. Here's the quote.

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<v Speaker 2>We saw continued growth and demand for our vehicles in

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<v Speaker 2>markets in APAC and South America, while also seeing a

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<v Speaker 2>rebound of demand in both the emerging markets and also

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<v Speaker 2>in Africa and in North America.

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<v Speaker 1>Okay, look at that Tesla shares hire right now, as

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<v Speaker 1>we mentioned, just by about three point four percent. First

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<v Speaker 1>quarter adjusted gross margin excluding regulatory credits was nineteen point

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<v Speaker 1>two percent. That's up from twelve point five percent year

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<v Speaker 1>over year. The headlines, though, that are important for our audience.

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<v Speaker 1>Tesla first quarterd justin internings per share coming in above

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<v Speaker 1>estimates at forty one cents, the estimates for thirty four cents.

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<v Speaker 1>First quarter free cash flow one point four to four billion.

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<v Speaker 1>The estimate was for negative one point eight six billion dollars.

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<v Speaker 3>All right with us?

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<v Speaker 2>As Steve Man, Global autos and Industrial's Research manager at

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<v Speaker 2>Bloomberg Intelligence. He joins us from BI headquarters in Princeton,

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<v Speaker 2>New Jersey. Steve come on in lots of moving parts,

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<v Speaker 2>certainly when it comes to Tesla, but it was originally

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<v Speaker 2>all about the EV business. We can get into other

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<v Speaker 2>stuff later. How do you think they did in the quarter.

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<v Speaker 4>Uh, you know, earning, Like you said, earnings beat actually

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<v Speaker 4>not a big surprise given that production was pretty high

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<v Speaker 4>UH in the quarter. And I think, you know, positive

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<v Speaker 4>free cash flow is great versus the negative free cash

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<v Speaker 4>flow consensus was expecting. That's probably a function of the

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<v Speaker 4>higher profit UH for the for the gross profit for

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<v Speaker 4>the quarter. I think I think investor will like this

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<v Speaker 4>if I look clean into their investor deck shareholder deck.

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<v Speaker 4>They are ramping up the cyber rollo taxi business. They

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<v Speaker 4>have you know, unsupervised ramp up over in three different

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<v Speaker 4>cities UH and in San Francisco area they're actually have

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<v Speaker 4>it running with the safety driver. So I think that's

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<v Speaker 4>a good sign. I think that we're investors, investors pretty

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<v Speaker 4>antsy about that. You know, we're we're including myself, you know,

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<v Speaker 4>like we're waiting and thinking, like, you know, are they

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<v Speaker 4>are they? How are they doing on this? So you know,

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<v Speaker 4>I think I think they're ramping up a corneal plant.

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<v Speaker 4>What's also interesting, and we actually wrote about this, is

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<v Speaker 4>that the rest of the world markets for their auto

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<v Speaker 4>sales is improving. Rest of the world basically excludes their

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<v Speaker 4>three pillar markets, which is you know, US, Europe, and China.

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<v Speaker 4>So you know, we we saw, you know, they're actually

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<v Speaker 4>doubling their footprint in Japan, South Korea sales. They're starting

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<v Speaker 4>to get into the India market. Huge market potential. So

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<v Speaker 4>let's let's let's hear what they have to say about

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<v Speaker 4>the role buy. You know, I'm not as optimistic on

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<v Speaker 4>the robot.

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<v Speaker 1>Well Ed Ludlow is here with us. He's going to

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<v Speaker 1>help us make sense of all of these headlines. He

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<v Speaker 1>is the co host of Bloomberg Tech on Bloomberg TV,

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<v Speaker 1>follows this company and all EV companies closely. But it

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<v Speaker 1>is it even an EV company anymore?

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<v Speaker 3>This is the no Surprises, no drama shareholder deck. So interesting.

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<v Speaker 3>The return of the word demand about the core EV

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<v Speaker 3>business is almost a surprise. We spent all week saying

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<v Speaker 3>we look past the EV business. This is about being

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<v Speaker 3>an aftermist, yes, being an AI and robotics company. And

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<v Speaker 3>we talk about how Tesla trades at one hundred and

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<v Speaker 3>eighty three times forward earnings. The rest of the mag

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<v Speaker 3>seven those are the biggest technology companies by market cap

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<v Speaker 3>trade roughly thirty times forward earnings. In other words, this

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<v Speaker 3>is what we're saying. Investors value this as an AI

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<v Speaker 3>and robotics company, and yet the stock is up more

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<v Speaker 3>than four and a half percent in after hours. And

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<v Speaker 3>what they're talking about is the return of demand in

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<v Speaker 3>markets like APA and Latin or South America and demand

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<v Speaker 3>in other core markets like EMEA for their electric vehicle.

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<v Speaker 1>Is that surprising to you, given that China has been

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<v Speaker 1>able to create and build and develop evs that can

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<v Speaker 1>be bought in some of these markets at a fraction

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<v Speaker 1>of the price in Tesla's can be.

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<v Speaker 3>In the absence of any specific commentary about China, I mean,

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<v Speaker 3>what Tesla says, and I'm just going to read it,

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<v Speaker 3>is including the role out of the model y L

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<v Speaker 3>why long range or long length in markets outside of China,

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<v Speaker 3>and more affordable trims of both models. So that that's

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<v Speaker 3>the only real sort of specific way they've addressed China.

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<v Speaker 3>They're not saying they saw weakness, They're just saying they

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<v Speaker 3>saw strength outside of China. So I find that very interesting.

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<v Speaker 2>Shame on us for not like realizing this is still

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<v Speaker 2>a real business, this EV business.

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<v Speaker 1>They've been trying to communicate to us that that's not

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<v Speaker 1>the first.

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<v Speaker 2>Shame on them.

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<v Speaker 3>Well, I mean, there's so many ways we can go

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<v Speaker 3>about this. In the shareholder deck they talk about in

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<v Speaker 3>passing reference it's building the biggest ever chip fab. They

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<v Speaker 3>don't use the word terror fab, which I find interesting.

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<v Speaker 3>The absolutely critical cool thing for the audience to remember

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<v Speaker 3>is that any activity relating to Tesla building its own

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<v Speaker 3>chip factory is not factored into its full financial year

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<v Speaker 3>capital expenditures guide, which is twenty billion dollars. They haven't

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<v Speaker 3>changed that in this deck, and unless I missed it,

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<v Speaker 3>and I can check right now, but to build a

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<v Speaker 3>chip fab that they're talking about would take in the

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<v Speaker 3>trillions of dollars, and so one overhang that investors have

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<v Speaker 3>been worried about. Clearly they're not. The stocks up four

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<v Speaker 3>and a half percent, have been how much money is

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<v Speaker 3>Tesla going to spend to get all of this done?

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<v Speaker 3>Like at some point they're going to have to put

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<v Speaker 3>the money where the mouth is to get these projects underway.

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<v Speaker 2>Oh go ahead, Yeah, let's bring back Steve Man, Global

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<v Speaker 2>autos and Industrial's Research manager at Bloomberg Intelligence out there

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<v Speaker 2>in OURBA headquarters in Prince, New Jersey. You've been listening

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<v Speaker 2>to us talk with Ed and this kind of idea

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<v Speaker 2>that you know ev is actually still a big deal

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<v Speaker 2>at Tesla or and they're developing and growing in markets

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<v Speaker 2>outside the United States.

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<v Speaker 4>Yeah, I think I think you should think of cars

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<v Speaker 4>from a tesla's perspective as a robot on wheels, right, Uh,

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<v Speaker 4>you know, for them to proliferate AI in cars and

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<v Speaker 4>then later on with the humanoid robot, you know, they

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<v Speaker 4>do need to sell more cars, right, they need to

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<v Speaker 4>get these this FSD approved, and they had some good

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<v Speaker 4>news recently at the end of last year. South Korea

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<v Speaker 4>approved FSD and more importantly a few weeks ago, Netherland

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<v Speaker 4>approve FSD, and and that's critical because you know that

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<v Speaker 4>that can actually help them proliferate beyond Netherlands into the

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<v Speaker 4>rest of Europe. So it's a big deal for them.

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<v Speaker 4>Like you know, Ed was talking about the model. Why

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<v Speaker 4>the length and longer model. Why you know, it's important

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<v Speaker 4>to have that vehicle, especially in Asia because a lot

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<v Speaker 4>of the household over there are multi generational households, so

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<v Speaker 4>they do need a little bit more room, a little

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<v Speaker 4>bit more seating room for for the for the buyers

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<v Speaker 4>over there. So that's why you were seeing that. You know,

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<v Speaker 4>that car actually resonates. It has been resonating with the

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<v Speaker 4>Japanese and as well as South Korean consumers there and.

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<v Speaker 1>Is is this a real business for the company going forward?

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<v Speaker 1>Our investors betting the Optimist business.

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<v Speaker 3>There's a distinction between going forward and near term, median term,

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<v Speaker 3>long term.

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<v Speaker 1>I mean, well, that's the Tesla story.

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<v Speaker 3>The language is so specific. Preparations for our first large

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<v Speaker 3>scale Otomous factory will begin short put in the ground, yeah, exactly. Well,

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<v Speaker 3>we just don't know, and I'm sure that they'll get

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<v Speaker 3>questions on it in the in the cool You know,

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<v Speaker 3>Steve's absolutely right that they did discontinue production in the

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<v Speaker 3>Modeless and X, but they also for a very long

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<v Speaker 3>time Musk himself said they only made that vehicle for

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<v Speaker 3>sentimental reasons, right, it was so low volume. I find

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<v Speaker 3>it really interesting that the second part of that paragraph,

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<v Speaker 3>the first generation line for Optimus, designed for one million

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<v Speaker 3>robots a year, will replace the Modeless and Modern X

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<v Speaker 3>lines in Fremont. Fremont, California. We are also preparing Gigafactory,

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<v Speaker 3>Texas for the second generation line, which is being designed

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<v Speaker 3>for long term annual production of ten million. I think

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<v Speaker 3>that's a really significant piece of news for the Bay

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<v Speaker 3>Area and the state of California. That actually just in

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<v Speaker 3>writing confirmation that Optimist as a program starts at that

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<v Speaker 3>Fremont facility. You know, that's a big it's a big deal.

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<v Speaker 1>I mean, given what Elin has said about California, the

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<v Speaker 1>moving out of California.

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<v Speaker 2>Was Gavin Newsom, Yeah, Gavin.

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<v Speaker 1>Newson said that Elon called him, and this was in

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<v Speaker 1>Matt Winkler's opinion piece recently, that Elon called him and said,

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<v Speaker 1>we can't find the talent that we're looking for outside

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<v Speaker 1>of California.

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<v Speaker 3>And also, like, I'm not saying this is barnstorming breaking news.

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<v Speaker 3>I'm just making an observation that they've set the plan

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<v Speaker 3>out in writing for something that's hard for many people

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<v Speaker 3>to believe. Steve makes a very critical point again, Tesla

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<v Speaker 3>talks about this. The first use case of Optimus is

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<v Speaker 3>within Tesla's own facilities in the manufacturing context, and he's

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<v Speaker 3>talked about selling it to the general population as a

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<v Speaker 3>babysitter or is a care for the elderly, or as

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<v Speaker 3>part of the labor to address the deficit in labor

0:12:17.679 --> 0:12:21.480
<v Speaker 3>in various sectors. But I'm just saying, like they outlined

0:12:21.480 --> 0:12:23.199
<v Speaker 3>a plant and if you think about the history of

0:12:23.240 --> 0:12:26.240
<v Speaker 3>this company, the big tent at Fremont that they put together, Yeah,

0:12:26.240 --> 0:12:29.240
<v Speaker 3>you know, the Frankenstein's monster of a factory that it

0:12:29.320 --> 0:12:31.240
<v Speaker 3>once was. It's interesting how they do things.

0:12:31.360 --> 0:12:33.480
<v Speaker 1>I also want to bring in Ross Gerber. He's president

0:12:33.480 --> 0:12:36.439
<v Speaker 1>and CEO of Gerber Kawasaki Wealth and Investment.

0:12:36.440 --> 0:12:38.640
<v Speaker 2>We'll get a round table. Can you guys talk to

0:12:38.679 --> 0:12:39.880
<v Speaker 2>each other and we're going to talk to you.

0:12:39.960 --> 0:12:43.559
<v Speaker 1>The firm has about four billion dollars in assets under management,

0:12:43.800 --> 0:12:46.360
<v Speaker 1>So talk to us a little bit about your first

0:12:46.520 --> 0:12:49.280
<v Speaker 1>impressions when it comes to these results. This idea of

0:12:49.960 --> 0:12:52.480
<v Speaker 1>seeing demand in certain parts of the world for the

0:12:52.520 --> 0:12:54.559
<v Speaker 1>auto's business, what's your take.

0:12:55.320 --> 0:12:58.280
<v Speaker 5>Grill couldn't be happier to see demand for the auto's business.

0:12:58.360 --> 0:13:01.760
<v Speaker 5>That's the business. I'm in EV business. I care about climate.

0:13:02.480 --> 0:13:04.480
<v Speaker 5>I want to see them sell as many EV's as

0:13:04.480 --> 0:13:06.440
<v Speaker 5>possible in the world. And they still make the best

0:13:06.480 --> 0:13:09.520
<v Speaker 5>evs And so I was like, the fact we're talking

0:13:09.559 --> 0:13:13.120
<v Speaker 5>about cars, I'm so happy because like that's how they

0:13:13.200 --> 0:13:17.000
<v Speaker 5>actually make money and that actually matters. Nobody needs another

0:13:17.080 --> 0:13:19.839
<v Speaker 5>cab service. Okay, there's plenty of cab services. If you're

0:13:19.840 --> 0:13:22.120
<v Speaker 5>in Santa Monica, you can take a ROBOTAXI. Right now,

0:13:22.360 --> 0:13:25.240
<v Speaker 5>we got Amazon up next. I haven't seen a Tesla. Yet,

0:13:25.360 --> 0:13:27.400
<v Speaker 5>I'd love Tesla to come here where it's really hard

0:13:27.440 --> 0:13:30.640
<v Speaker 5>to drive and test it out. But that said, you know,

0:13:31.040 --> 0:13:33.880
<v Speaker 5>I'm excited about I'm an EV guy, I'm a climate guy.

0:13:33.920 --> 0:13:36.880
<v Speaker 5>It's Earth Day. I hope they sell as many EV's

0:13:36.880 --> 0:13:37.480
<v Speaker 5>as possible.

0:13:37.679 --> 0:13:39.760
<v Speaker 3>Guys, I'm just gonna jump in here, Ross, thank you

0:13:39.760 --> 0:13:41.320
<v Speaker 3>for joining the show. It's not my show. I'm going

0:13:41.360 --> 0:13:44.439
<v Speaker 3>to ask you to please hold and stand by, and

0:13:44.800 --> 0:13:47.040
<v Speaker 3>you guys, forgive me for that one. Something just dawned

0:13:47.080 --> 0:13:51.280
<v Speaker 3>on me. So last quarter they didn't either. But typically

0:13:51.600 --> 0:13:54.520
<v Speaker 3>in the third page of the deck they'll give you

0:13:54.760 --> 0:13:57.760
<v Speaker 3>a financial summary where they put the headwinds and tailwinds

0:13:57.760 --> 0:14:00.840
<v Speaker 3>to the top and bottom line. And I didn't even

0:14:00.920 --> 0:14:02.880
<v Speaker 3>realize last course. So they didn't do it in Q

0:14:02.920 --> 0:14:05.959
<v Speaker 3>four and they've not done it this time. So, for example,

0:14:06.000 --> 0:14:10.400
<v Speaker 3>we don't know what the impact of volume changes is

0:14:10.640 --> 0:14:15.400
<v Speaker 3>or FX as an example, or any other specifics, what

0:14:15.440 --> 0:14:19.440
<v Speaker 3>the impact of operating expenses is on profitability. They haven't

0:14:19.480 --> 0:14:22.320
<v Speaker 3>spelled it out, and I'm just making that observation.

0:14:22.680 --> 0:14:25.280
<v Speaker 5>Well, all right, so let me I agree with that observation.

0:14:25.440 --> 0:14:26.760
<v Speaker 2>So what do you make of that?

0:14:27.360 --> 0:14:30.880
<v Speaker 5>Ross, Well, you've got to wait for the SEC documents

0:14:30.880 --> 0:14:34.120
<v Speaker 5>to drop, you know, but I kind of was surprised

0:14:34.160 --> 0:14:36.480
<v Speaker 5>by the number, so I was trying to parse through

0:14:36.480 --> 0:14:39.040
<v Speaker 5>why it was better than expected, because with all the

0:14:39.080 --> 0:14:42.680
<v Speaker 5>extra access excess inventory that they added should have hit

0:14:42.760 --> 0:14:45.680
<v Speaker 5>cash flow harder. So I'm just you know, I want

0:14:45.680 --> 0:14:49.320
<v Speaker 5>to see their numbers didn't add up with my numbers,

0:14:49.440 --> 0:14:52.600
<v Speaker 5>basically because of the access inventory, which they now have

0:14:52.640 --> 0:14:55.280
<v Speaker 5>twenty seven days of inventory, which is actually a high

0:14:55.680 --> 0:14:58.400
<v Speaker 5>for them, but yet that didn't hit cash flow at all,

0:14:58.480 --> 0:15:00.800
<v Speaker 5>so or maybe it did. Bec there was one point

0:15:00.880 --> 0:15:02.800
<v Speaker 5>four billion they say a free cash flow, but the

0:15:02.840 --> 0:15:06.520
<v Speaker 5>actual cash that hit the books was seven hundred million.

0:15:07.000 --> 0:15:09.040
<v Speaker 5>But I just want to see how these numbers are

0:15:09.120 --> 0:15:10.000
<v Speaker 5>pars doaling