WEBVTT - Instant Reaction: Tesla's Earnings Miss Wall Street Expectations

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

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<v Speaker 2>This is a breaking news outdated from Bloomberg instant.

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<v Speaker 1>Reaction and analysis from our three thousand journalists and analysts

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<v Speaker 1>around the world. Tesla said it's moving forward with its

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<v Speaker 1>Robotaxi and affordable vehicle plans while reporting second quarter earnings

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<v Speaker 1>that fell short of Wall Street's estimates. Adjustin earnings forty

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<v Speaker 1>cents per share that was just below the average analyst estimate.

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<v Speaker 1>Revenue fell twelve percent to twenty two and a half

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<v Speaker 1>billion dollars that was also lower than expectations and the

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<v Speaker 1>sharpest decline in at least a decade. Gross margin, which

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<v Speaker 1>is a measure of profitability, was higher than anticipated. Right now,

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<v Speaker 1>shares down about six tenths of one percent. Tesla did

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<v Speaker 1>say many of its key isshives remain on track quote

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<v Speaker 1>despite a sustained uncertain macroeconomic environment resulting from shifting tariffs,

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<v Speaker 1>unclear impacts, and changes to fiscal policy and political sentiment.

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<v Speaker 1>Let's bring in a Bloomberg Intelligence Global Autos and Industrials

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<v Speaker 1>research manager, Steve Mann, joining us once again from New Jersey.

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<v Speaker 1>You gave us a great preview earlier in the afternoon.

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<v Speaker 1>Now we have the numbers anything surprise.

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<v Speaker 3>You, Yeah, I think if you look at the stocks

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<v Speaker 3>down after hours a bit, I think I think the

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<v Speaker 3>most important thing there is they haven't given us enough

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<v Speaker 3>visibility into the future what their outlook is going to be.

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<v Speaker 3>I mean, the numbers they miss consensus. But if you

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<v Speaker 3>kind of dig into a little bit more and look

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<v Speaker 3>under the cover, it's actually not bad. If you look

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<v Speaker 3>at automotive gross margin excluding credits, it's actually fifteen percent

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<v Speaker 3>better than the last quarter of twelve and a half

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<v Speaker 3>and better than consensus estimates.

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<v Speaker 4>And then if you.

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<v Speaker 3>Look at free cash flow, the reason why it's down

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<v Speaker 3>versus the first quarter is because they spend an extra

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<v Speaker 3>nine hundred million on capex, which is not a bad

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<v Speaker 3>thing given that they're launching the cheaper model in the

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<v Speaker 3>cyber cap So if you exclude that nine hundred million

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<v Speaker 3>of additional cap backs, their free cash flow is actually

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<v Speaker 3>over a billion more than six hundred and sixty million

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<v Speaker 3>in the first quarter.

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<v Speaker 5>So that's good.

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<v Speaker 4>That's good.

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<v Speaker 3>I mean spending cap backs, given you know what their

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<v Speaker 3>product launches are, is not a bad thing. They're investing

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<v Speaker 3>into the future, right, and look, they're also expanding.

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<v Speaker 4>Internationally, right, They have.

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<v Speaker 3>You know, we've seen over the quarter improvement higher sales

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<v Speaker 3>in South Korea, they announced entry into into India and

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<v Speaker 3>then they're launching the extended version of the Model Y

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<v Speaker 3>in China.

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<v Speaker 4>So so it's a good thing.

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<v Speaker 3>But look, we do want to hear what Elon mus

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<v Speaker 3>has to say in terms of not just the robotaxi,

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<v Speaker 3>but you know, are how are they going to face

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<v Speaker 3>ahead when the challenges we were seeing the US market

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<v Speaker 3>which is critical, it's it's they're one of the largest

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<v Speaker 3>market uh in in their portfolio. So we'll we'll have

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<v Speaker 3>to hear more uh on the on the call.

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<v Speaker 1>How do you think Tesla's robotaxi stands up to the

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<v Speaker 1>other autonomous vehicle solutions that are out there right now,

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<v Speaker 1>namely Weimo.

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<v Speaker 3>Well, I think the market can be very big, especially

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<v Speaker 3>in the US. So if we're not talking internationally, uh, there's.

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<v Speaker 4>Definitely room for multiple players. Uh.

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<v Speaker 3>You know, my perspective is that you know, Tesla is

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<v Speaker 3>using an all camera system that actually is gives them

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<v Speaker 3>a greater flexibility and greater scalability with with that system, uh,

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<v Speaker 3>Weimo and others use a combination of radars, liedars, and

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<v Speaker 3>camera system cameras just are just cheaper right to to

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<v Speaker 3>to build.

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<v Speaker 4>And uh, you know, and and.

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<v Speaker 3>So it's a lot easier to scale, cheaper to scale,

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<v Speaker 3>uh for for so.

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<v Speaker 4>But then again, I think the market's big enough.

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<v Speaker 3>I think there's going to be users that want in

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<v Speaker 3>all camera system. I think there's going to be users

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<v Speaker 3>that don't feel comfortable with that and want the redundancy

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<v Speaker 3>redundancy of light oars. So you know, for example, Uber

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<v Speaker 3>is partnering with Weimo.

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<v Speaker 5>So I got to go back to wait, all right,

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<v Speaker 5>So I'm looking at the FA function on the Bloomberg

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<v Speaker 5>and we just talked about free cash flow, and so

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<v Speaker 5>it's one hundred and forty six million dollars versus six

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<v Speaker 5>hundred and sixty four million in the first quarter of

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<v Speaker 5>twenty twenty five, as our live blog says, dropping eighty

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<v Speaker 5>nine percent. And I know what you're saying about. It's

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<v Speaker 5>good that they're spending for the future, right, because you

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<v Speaker 5>said to us earlier that the best way to get

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<v Speaker 5>to that one point fifty six million unit delivery for

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<v Speaker 5>the year, right, that's the concessus estimate, is that they've

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<v Speaker 5>got to launch that cheaper vehicle, right, So they've got

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<v Speaker 5>to bring stuff out. Do we have to be worried

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<v Speaker 5>though about that low number or they're they're going to

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<v Speaker 5>be fine.

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<v Speaker 3>Well, it's u uh, I mean it's it's technical, right.

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<v Speaker 3>It said if free cash flows overbuild, and obviously the

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<v Speaker 3>more the better, it is down Yeah, it's you know,

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<v Speaker 3>compared to a year ago, two years ago. But look

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<v Speaker 3>like if you look at the model Y, if you

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<v Speaker 3>look at the gross margin, you know, excluding credits, it

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<v Speaker 3>is up right. That actually tells you that, uh, you know,

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<v Speaker 3>the new vehicle is likely the model new model why

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<v Speaker 3>is likely built? They're able to build at a lower cost.

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<v Speaker 3>The issue is, like I said in the preview, is

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<v Speaker 3>they just don't have enough volume.

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<v Speaker 5>Yeah.

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<v Speaker 3>So so if if they can expand volume with the

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<v Speaker 3>with the existing model Y, not just in the US,

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<v Speaker 3>but in the international markets, and as well as introduced

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<v Speaker 3>the cheaper model which is supposed to build to be

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<v Speaker 3>built within the existing capacity, you know, there could be

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<v Speaker 3>a lot upside right in terms of margin, in terms

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<v Speaker 3>of free cash flow. So uh, you know, it's really

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<v Speaker 3>execution at the moment, and that's what we want to

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<v Speaker 3>hear from Elon Musk. You know, how where is the

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<v Speaker 3>second where is the cheaper model. They said, it's actually

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<v Speaker 3>they said the production has started. Initial production has started

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<v Speaker 3>in June, but you know it could take some time

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<v Speaker 3>right before they launch. I have to get all the

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<v Speaker 3>kinks out. But you know, you want to hear about India.

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<v Speaker 3>India is a huge market, right and where are they

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<v Speaker 3>taking India? You know, definitely Robotaxi is an important and

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<v Speaker 3>then the cyber cap.

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<v Speaker 4>You know, we need a little bit more details, all right.

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<v Speaker 5>Details is certainly near.

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<v Speaker 3>Term details, near term details.

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<v Speaker 5>All right, great setup, Steve Man, thank you so much.

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<v Speaker 5>We're going to look forward to reading your research in

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<v Speaker 5>the after hours and certainly into tomorrow's trades. Demand Bloomberg

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<v Speaker 5>Intelligence Global Autos and Industrials Research manager joining us from

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<v Speaker 5>BI headquarters in Princeton, New Jersey.

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<v Speaker 1>I want to go right now and bring in Ross Gerber.

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<v Speaker 1>He's president's CEO of Gerber Kawasaki Wealth and Investment Management.

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<v Speaker 1>As the end of last year, had about three point

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<v Speaker 1>four billion dollars in assets under management. Long time outspoken

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<v Speaker 1>Tesla bull more recently expressing concerns about the company, as

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<v Speaker 1>he did three months ago after the last quarter report

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<v Speaker 1>earnings report. According to the Bloomberg Terminal, Gerber Kawasaki still

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<v Speaker 1>owns about seventy eight million dollars worth of Tesla stock. Ross.

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<v Speaker 1>Good to have you with us this afternoon. What have

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<v Speaker 1>you been doing to your Tesla position over the last quarter,

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<v Speaker 1>just before we get your take on the numbers.

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<v Speaker 2>You know, we've been selling for years and I continue

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<v Speaker 2>to sell. You know, we have so much stock, and

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<v Speaker 2>we have a lot of clients that really believe in

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<v Speaker 2>the Tesla story, and we've kept some stock obviously in

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<v Speaker 2>our portfolios, but in my ETF, I'm out of Tesla

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<v Speaker 2>completely out of my GK ETF. And it's mostly because

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<v Speaker 2>the business is declining, and these earnings results continue to

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<v Speaker 2>show that the business continues to decline and in some

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<v Speaker 2>kind of troubling ways. So as much as the previous

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<v Speaker 2>guests is bullish on many of these things that Elon

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<v Speaker 2>talks about, nobody wants to talk about the truth that

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<v Speaker 2>nobody wants to buy Elon's products, like until that gets addressed,

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<v Speaker 2>there's a huge elephant in the room that nobody seems

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<v Speaker 2>to want to point at because it's Elon. So he's

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<v Speaker 2>the innovator behind all of the things that are great

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<v Speaker 2>about Tesla, but he's also the sort of villain that's

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<v Speaker 2>created so much animosity around him that nobody wants to

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<v Speaker 2>buy his products.

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<v Speaker 5>We've had a great cover story by the team of

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<v Speaker 5>Max Chafkin and Ed Ludlow in Bloomberg BusinessWeek. The new

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<v Speaker 5>issue coming out, the August issue. It'll soon be on newstands,

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<v Speaker 5>it's already on the Bloomberg. But you know, the whole

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<v Speaker 5>idea ross as you know, since you understand this guy,

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<v Speaker 5>this company so well, you never kind of count Elon out.

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<v Speaker 5>And so I do wonder, you know, if he does

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<v Speaker 5>get it right, if he maybe, I don't know, We'll

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<v Speaker 5>see what happens in terms of his involvement in politics,

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<v Speaker 5>because it does seem like he still wants to stay

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<v Speaker 5>according to the SpaceX filing. But I mean there is

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<v Speaker 5>always that caveat when it comes to Elon right that

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<v Speaker 5>he sometimes pulls it out, or he often pulls it out.

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<v Speaker 2>Yeah, And I think that's been true in the past.

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<v Speaker 2>And I'm very grateful that he pulled it out five

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<v Speaker 2>years ago when it really mattered and Tesla was almost

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<v Speaker 2>on the verge of bankruptcy and it has become a

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<v Speaker 2>very successful company. But it doesn't mean he's going to

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<v Speaker 2>do it again. And this idea that you know, these

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<v Speaker 2>kind of entrepreneur rock star people don't fall is actually

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<v Speaker 2>is not true. In fact, it's very common to what

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<v Speaker 2>we call the rise in fall story. That's all the

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<v Speaker 2>stories you see on Netflix and the documentaries. So you know,

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<v Speaker 2>this might be a rise in fall story, and things

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<v Speaker 2>don't rise forever per se. And I always remind people.

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<v Speaker 2>I don't think most people even know who invented the television,

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<v Speaker 2>but the television was invented in the United States by

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<v Speaker 2>a company called RCA, which was like the hottest stock

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<v Speaker 2>of the fifties. Well, how many TVs are made in

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<v Speaker 2>the United States today? Answer is zero, So the very

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<v Speaker 2>same thing could happen in the ev business. But that said,

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<v Speaker 2>Elon can fix the company. It's solely broken because of him.

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<v Speaker 2>He can certainly fix the company if he wants to

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<v Speaker 2>do what's necessary to improve his image, and in a

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<v Speaker 2>year people forget and Tesla might be back. But he

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<v Speaker 2>just doesn't seem to care about fixing his image, and

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<v Speaker 2>he doesn't seem to be an understanding. The responsibility goes

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<v Speaker 2>to him on why sales are down so much?

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<v Speaker 1>So why even have any Tesla's stock?

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<v Speaker 4>Right?

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<v Speaker 2>Now, I think the reason I hold personally still some

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<v Speaker 2>Tesla stock is for the same hope that we all

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<v Speaker 2>have that they are definitely focused on a future, and

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<v Speaker 2>especially for me a climate activist, you know, it's a

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<v Speaker 2>green future that I'm pushing and Tasla still is the

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<v Speaker 2>leader in green transportation and energy, and I think it's

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<v Speaker 2>an incredibly important company to succeed. Hence why I'm out

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<v Speaker 2>here banging on elon all the time. It's not, you know,

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<v Speaker 2>for any other reason than wanting to see Tesla succeed

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<v Speaker 2>because it's crucially important to climate change. But this robo

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<v Speaker 2>taxi business is not crucially important to anybody. So you know,

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<v Speaker 2>I think Tesla's main business is selling evs that and

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<v Speaker 2>energy storage, and they should be focused on repairing that

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<v Speaker 2>main business. And I think there are other future end

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<v Speaker 2>of ours are interesting, and that's why it's a reason

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<v Speaker 2>to hold the stock. But it also trades at one

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<v Speaker 2>hundred and fifty times earnings that are going down, okay,

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<v Speaker 2>and so you know you have to weigh that too.

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<v Speaker 1>In the past, you've talked about how nice it is

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<v Speaker 1>to drive a Rivian for example. Are you willing to

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<v Speaker 1>now invest in any other EV company that you've turned

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<v Speaker 1>on Tesla.

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<v Speaker 2>No, you know, I've lost a lot of money and

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<v Speaker 2>EV businesses over the last five years that I've hoped

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<v Speaker 2>would succeed in, including Rivian and many others, And unfortunately

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<v Speaker 2>many of the EV operators are now having all the

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<v Speaker 2>incentives taken away from them as well as traditional car

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<v Speaker 2>companies along with tariffs and every everything else. It's just

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<v Speaker 2>really a horrible setup to be a car company. The

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<v Speaker 2>car company we own is Ferrari actually, which has no

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<v Speaker 2>problem selling their cars at forty percent margins that make

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<v Speaker 2>Tesla look like chump change. So you know, truthfully, it's

0:12:14.640 --> 0:12:16.880
<v Speaker 2>just a tough to be in a global auto business

0:12:16.880 --> 0:12:20.000
<v Speaker 2>on a great day, let alone with Trump as president.

0:12:20.080 --> 0:12:21.880
<v Speaker 2>So it's a very tough time for the businesses, and

0:12:22.320 --> 0:12:25.280
<v Speaker 2>I'm just not recommending that right now. Versus a stock

0:12:25.360 --> 0:12:29.960
<v Speaker 2>like train technology that makes you know, clean energy air

0:12:30.000 --> 0:12:33.480
<v Speaker 2>conditioning units where the demand for air conditioning is off

0:12:33.520 --> 0:12:36.280
<v Speaker 2>the charts, and that's been a wonderful green energy investment,

0:12:36.280 --> 0:12:40.000
<v Speaker 2>along with ge Vernova, from which we also own, that's

0:12:40.040 --> 0:12:41.760
<v Speaker 2>been a wonderful green energy investment.

0:12:41.800 --> 0:12:43.960
<v Speaker 5>But it's not evis Hey, listen, I do want to

0:12:43.960 --> 0:12:46.720
<v Speaker 5>go back to We've got the Tesla live blog going

0:12:46.760 --> 0:12:49.840
<v Speaker 5>on and just tracking everything that's coming out of the earnings.

0:12:49.960 --> 0:12:53.360
<v Speaker 5>Are down a hole who covers Tesla and Alon, says

0:12:53.400 --> 0:12:57.439
<v Speaker 5>Page twelve of the shareholder deck shows the Tesla ecosystem,

0:12:57.520 --> 0:13:01.160
<v Speaker 5>which includes optimists. We know, the robot wishing a baby stroller,

0:13:01.640 --> 0:13:04.280
<v Speaker 5>you know, you know ross When it comes to Tesla

0:13:04.400 --> 0:13:06.880
<v Speaker 5>and the world of Elon, there are so many different

0:13:06.920 --> 0:13:10.720
<v Speaker 5>moving parts. There's you know, the shining beacon of a

0:13:10.760 --> 0:13:13.760
<v Speaker 5>SpaceX right that that's a really great business. There's all

0:13:13.800 --> 0:13:16.720
<v Speaker 5>the AI stuff that's going on. There's so many different

0:13:16.760 --> 0:13:20.120
<v Speaker 5>moving pieces. What else do you want to know, you know,

0:13:20.200 --> 0:13:21.480
<v Speaker 5>from the Elon universe.

0:13:22.080 --> 0:13:24.240
<v Speaker 2>Well, I think the most important thing in my mind

0:13:24.280 --> 0:13:27.400
<v Speaker 2>that has the biggest opportunity to help Tesla is this

0:13:27.480 --> 0:13:30.920
<v Speaker 2>low cost vehicle they keep talking about. They have so

0:13:31.080 --> 0:13:34.880
<v Speaker 2>much excess capacity in their factories now because they're not

0:13:35.000 --> 0:13:38.240
<v Speaker 2>selling more cars that they need a new vehicle. And

0:13:38.800 --> 0:13:42.400
<v Speaker 2>also for addressing other markets, whether it be India, China

0:13:42.440 --> 0:13:46.560
<v Speaker 2>and Europe, you need a small vehicle that's inexpensive to

0:13:46.600 --> 0:13:50.880
<v Speaker 2>compete against the other EV players and regular traditional car companies.

0:13:51.080 --> 0:13:53.600
<v Speaker 2>And they need to do this now and the sooner

0:13:53.640 --> 0:13:56.240
<v Speaker 2>they do this the better, and that's the most important

0:13:56.280 --> 0:13:58.320
<v Speaker 2>thing I know. We like to talk about the day

0:13:58.320 --> 0:14:01.080
<v Speaker 2>a robot is pushing my care around in a stroller.

0:14:01.400 --> 0:14:04.000
<v Speaker 2>That day is long in the tooth from coming. Nor

0:14:04.040 --> 0:14:07.280
<v Speaker 2>does anybody in the world would trust some big robot

0:14:07.360 --> 0:14:08.440
<v Speaker 2>made by Elon Musk.

0:14:09.080 --> 0:14:12.200
<v Speaker 5>Russ Gerber always appreciate you finding time for us.