Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is a breaking news outdated from Bloomberg instant.
Speaker 1: Reaction and analysis from our three thousand journalists and analysts
Speaker 1: around the world. Tesla said it's moving forward with its
Speaker 1: Robotaxi and affordable vehicle plans while reporting second quarter earnings
Speaker 1: that fell short of Wall Street's estimates. Adjustin earnings forty
Speaker 1: cents per share that was just below the average analyst estimate.
Speaker 1: Revenue fell twelve percent to twenty two and a half
Speaker 1: billion dollars that was also lower than expectations and the
Speaker 1: sharpest decline in at least a decade. Gross margin, which
Speaker 1: is a measure of profitability, was higher than anticipated. Right now,
Speaker 1: shares down about six tenths of one percent. Tesla did
Speaker 1: say many of its key isshives remain on track quote
Speaker 1: despite a sustained uncertain macroeconomic environment resulting from shifting tariffs,
Speaker 1: unclear impacts, and changes to fiscal policy and political sentiment.
Speaker 1: Let's bring in a Bloomberg Intelligence Global Autos and Industrials
Speaker 1: research manager, Steve Mann, joining us once again from New Jersey.
Speaker 1: You gave us a great preview earlier in the afternoon.
Speaker 1: Now we have the numbers anything surprise.
Speaker 3: You, Yeah, I think if you look at the stocks
Speaker 3: down after hours a bit, I think I think the
Speaker 3: most important thing there is they haven't given us enough
Speaker 3: visibility into the future what their outlook is going to be.
Speaker 3: I mean, the numbers they miss consensus. But if you
Speaker 3: kind of dig into a little bit more and look
Speaker 3: under the cover, it's actually not bad. If you look
Speaker 3: at automotive gross margin excluding credits, it's actually fifteen percent
Speaker 3: better than the last quarter of twelve and a half
Speaker 3: and better than consensus estimates.
Speaker 4: And then if you.
Speaker 3: Look at free cash flow, the reason why it's down
Speaker 3: versus the first quarter is because they spend an extra
Speaker 3: nine hundred million on capex, which is not a bad
Speaker 3: thing given that they're launching the cheaper model in the
Speaker 3: cyber cap So if you exclude that nine hundred million
Speaker 3: of additional cap backs, their free cash flow is actually
Speaker 3: over a billion more than six hundred and sixty million
Speaker 3: in the first quarter.
Speaker 5: So that's good.
Speaker 4: That's good.
Speaker 3: I mean spending cap backs, given you know what their
Speaker 3: product launches are, is not a bad thing. They're investing
Speaker 3: into the future, right, and look, they're also expanding.
Speaker 4: Internationally, right, They have.
Speaker 3: You know, we've seen over the quarter improvement higher sales
Speaker 3: in South Korea, they announced entry into into India and
Speaker 3: then they're launching the extended version of the Model Y
Speaker 3: in China.
Speaker 4: So so it's a good thing.
Speaker 3: But look, we do want to hear what Elon mus
Speaker 3: has to say in terms of not just the robotaxi,
Speaker 3: but you know, are how are they going to face
Speaker 3: ahead when the challenges we were seeing the US market
Speaker 3: which is critical, it's it's they're one of the largest
Speaker 3: market uh in in their portfolio. So we'll we'll have
Speaker 3: to hear more uh on the on the call.
Speaker 1: How do you think Tesla's robotaxi stands up to the
Speaker 1: other autonomous vehicle solutions that are out there right now,
Speaker 1: namely Weimo.
Speaker 3: Well, I think the market can be very big, especially
Speaker 3: in the US. So if we're not talking internationally, uh, there's.
Speaker 4: Definitely room for multiple players. Uh.
Speaker 3: You know, my perspective is that you know, Tesla is
Speaker 3: using an all camera system that actually is gives them
Speaker 3: a greater flexibility and greater scalability with with that system, uh,
Speaker 3: Weimo and others use a combination of radars, liedars, and
Speaker 3: camera system cameras just are just cheaper right to to
Speaker 3: to build.
Speaker 4: And uh, you know, and and.
Speaker 3: So it's a lot easier to scale, cheaper to scale,
Speaker 3: uh for for so.
Speaker 4: But then again, I think the market's big enough.
Speaker 3: I think there's going to be users that want in
Speaker 3: all camera system. I think there's going to be users
Speaker 3: that don't feel comfortable with that and want the redundancy
Speaker 3: redundancy of light oars. So you know, for example, Uber
Speaker 3: is partnering with Weimo.
Speaker 5: So I got to go back to wait, all right,
Speaker 5: So I'm looking at the FA function on the Bloomberg
Speaker 5: and we just talked about free cash flow, and so
Speaker 5: it's one hundred and forty six million dollars versus six
Speaker 5: hundred and sixty four million in the first quarter of
Speaker 5: twenty twenty five, as our live blog says, dropping eighty
Speaker 5: nine percent. And I know what you're saying about. It's
Speaker 5: good that they're spending for the future, right, because you
Speaker 5: said to us earlier that the best way to get
Speaker 5: to that one point fifty six million unit delivery for
Speaker 5: the year, right, that's the concessus estimate, is that they've
Speaker 5: got to launch that cheaper vehicle, right, So they've got
Speaker 5: to bring stuff out. Do we have to be worried
Speaker 5: though about that low number or they're they're going to
Speaker 5: be fine.
Speaker 3: Well, it's u uh, I mean it's it's technical, right.
Speaker 3: It said if free cash flows overbuild, and obviously the
Speaker 3: more the better, it is down Yeah, it's you know,
Speaker 3: compared to a year ago, two years ago. But look
Speaker 3: like if you look at the model Y, if you
Speaker 3: look at the gross margin, you know, excluding credits, it
Speaker 3: is up right. That actually tells you that, uh, you know,
Speaker 3: the new vehicle is likely the model new model why
Speaker 3: is likely built? They're able to build at a lower cost.
Speaker 3: The issue is, like I said in the preview, is
Speaker 3: they just don't have enough volume.
Speaker 5: Yeah.
Speaker 3: So so if if they can expand volume with the
Speaker 3: with the existing model Y, not just in the US,
Speaker 3: but in the international markets, and as well as introduced
Speaker 3: the cheaper model which is supposed to build to be
Speaker 3: built within the existing capacity, you know, there could be
Speaker 3: a lot upside right in terms of margin, in terms
Speaker 3: of free cash flow. So uh, you know, it's really
Speaker 3: execution at the moment, and that's what we want to
Speaker 3: hear from Elon Musk. You know, how where is the
Speaker 3: second where is the cheaper model. They said, it's actually
Speaker 3: they said the production has started. Initial production has started
Speaker 3: in June, but you know it could take some time
Speaker 3: right before they launch. I have to get all the
Speaker 3: kinks out. But you know, you want to hear about India.
Speaker 3: India is a huge market, right and where are they
Speaker 3: taking India? You know, definitely Robotaxi is an important and
Speaker 3: then the cyber cap.
Speaker 4: You know, we need a little bit more details, all right.
Speaker 5: Details is certainly near.
Speaker 3: Term details, near term details.
Speaker 5: All right, great setup, Steve Man, thank you so much.
Speaker 5: We're going to look forward to reading your research in
Speaker 5: the after hours and certainly into tomorrow's trades. Demand Bloomberg
Speaker 5: Intelligence Global Autos and Industrials Research manager joining us from
Speaker 5: BI headquarters in Princeton, New Jersey.
Speaker 1: I want to go right now and bring in Ross Gerber.
Speaker 1: He's president's CEO of Gerber Kawasaki Wealth and Investment Management.
Speaker 1: As the end of last year, had about three point
Speaker 1: four billion dollars in assets under management. Long time outspoken
Speaker 1: Tesla bull more recently expressing concerns about the company, as
Speaker 1: he did three months ago after the last quarter report
Speaker 1: earnings report. According to the Bloomberg Terminal, Gerber Kawasaki still
Speaker 1: owns about seventy eight million dollars worth of Tesla stock. Ross.
Speaker 1: Good to have you with us this afternoon. What have
Speaker 1: you been doing to your Tesla position over the last quarter,
Speaker 1: just before we get your take on the numbers.
Speaker 2: You know, we've been selling for years and I continue
Speaker 2: to sell. You know, we have so much stock, and
Speaker 2: we have a lot of clients that really believe in
Speaker 2: the Tesla story, and we've kept some stock obviously in
Speaker 2: our portfolios, but in my ETF, I'm out of Tesla
Speaker 2: completely out of my GK ETF. And it's mostly because
Speaker 2: the business is declining, and these earnings results continue to
Speaker 2: show that the business continues to decline and in some
Speaker 2: kind of troubling ways. So as much as the previous
Speaker 2: guests is bullish on many of these things that Elon
Speaker 2: talks about, nobody wants to talk about the truth that
Speaker 2: nobody wants to buy Elon's products, like until that gets addressed,
Speaker 2: there's a huge elephant in the room that nobody seems
Speaker 2: to want to point at because it's Elon. So he's
Speaker 2: the innovator behind all of the things that are great
Speaker 2: about Tesla, but he's also the sort of villain that's
Speaker 2: created so much animosity around him that nobody wants to
Speaker 2: buy his products.
Speaker 5: We've had a great cover story by the team of
Speaker 5: Max Chafkin and Ed Ludlow in Bloomberg BusinessWeek. The new
Speaker 5: issue coming out, the August issue. It'll soon be on newstands,
Speaker 5: it's already on the Bloomberg. But you know, the whole
Speaker 5: idea ross as you know, since you understand this guy,
Speaker 5: this company so well, you never kind of count Elon out.
Speaker 5: And so I do wonder, you know, if he does
Speaker 5: get it right, if he maybe, I don't know, We'll
Speaker 5: see what happens in terms of his involvement in politics,
Speaker 5: because it does seem like he still wants to stay
Speaker 5: according to the SpaceX filing. But I mean there is
Speaker 5: always that caveat when it comes to Elon right that
Speaker 5: he sometimes pulls it out, or he often pulls it out.
Speaker 2: Yeah, And I think that's been true in the past.
Speaker 2: And I'm very grateful that he pulled it out five
Speaker 2: years ago when it really mattered and Tesla was almost
Speaker 2: on the verge of bankruptcy and it has become a
Speaker 2: very successful company. But it doesn't mean he's going to
Speaker 2: do it again. And this idea that you know, these
Speaker 2: kind of entrepreneur rock star people don't fall is actually
Speaker 2: is not true. In fact, it's very common to what
Speaker 2: we call the rise in fall story. That's all the
Speaker 2: stories you see on Netflix and the documentaries. So you know,
Speaker 2: this might be a rise in fall story, and things
Speaker 2: don't rise forever per se. And I always remind people.
Speaker 2: I don't think most people even know who invented the television,
Speaker 2: but the television was invented in the United States by
Speaker 2: a company called RCA, which was like the hottest stock
Speaker 2: of the fifties. Well, how many TVs are made in
Speaker 2: the United States today? Answer is zero, So the very
Speaker 2: same thing could happen in the ev business. But that said,
Speaker 2: Elon can fix the company. It's solely broken because of him.
Speaker 2: He can certainly fix the company if he wants to
Speaker 2: do what's necessary to improve his image, and in a
Speaker 2: year people forget and Tesla might be back. But he
Speaker 2: just doesn't seem to care about fixing his image, and
Speaker 2: he doesn't seem to be an understanding. The responsibility goes
Speaker 2: to him on why sales are down so much?
Speaker 1: So why even have any Tesla's stock?
Speaker 4: Right?
Speaker 2: Now, I think the reason I hold personally still some
Speaker 2: Tesla stock is for the same hope that we all
Speaker 2: have that they are definitely focused on a future, and
Speaker 2: especially for me a climate activist, you know, it's a
Speaker 2: green future that I'm pushing and Tasla still is the
Speaker 2: leader in green transportation and energy, and I think it's
Speaker 2: an incredibly important company to succeed. Hence why I'm out
Speaker 2: here banging on elon all the time. It's not, you know,
Speaker 2: for any other reason than wanting to see Tesla succeed
Speaker 2: because it's crucially important to climate change. But this robo
Speaker 2: taxi business is not crucially important to anybody. So you know,
Speaker 2: I think Tesla's main business is selling evs that and
Speaker 2: energy storage, and they should be focused on repairing that
Speaker 2: main business. And I think there are other future end
Speaker 2: of ours are interesting, and that's why it's a reason
Speaker 2: to hold the stock. But it also trades at one
Speaker 2: hundred and fifty times earnings that are going down, okay,
Speaker 2: and so you know you have to weigh that too.
Speaker 1: In the past, you've talked about how nice it is
Speaker 1: to drive a Rivian for example. Are you willing to
Speaker 1: now invest in any other EV company that you've turned
Speaker 1: on Tesla.
Speaker 2: No, you know, I've lost a lot of money and
Speaker 2: EV businesses over the last five years that I've hoped
Speaker 2: would succeed in, including Rivian and many others, And unfortunately
Speaker 2: many of the EV operators are now having all the
Speaker 2: incentives taken away from them as well as traditional car
Speaker 2: companies along with tariffs and every everything else. It's just
Speaker 2: really a horrible setup to be a car company. The
Speaker 2: car company we own is Ferrari actually, which has no
Speaker 2: problem selling their cars at forty percent margins that make
Speaker 2: Tesla look like chump change. So you know, truthfully, it's
Speaker 2: just a tough to be in a global auto business
Speaker 2: on a great day, let alone with Trump as president.
Speaker 2: So it's a very tough time for the businesses, and
Speaker 2: I'm just not recommending that right now. Versus a stock
Speaker 2: like train technology that makes you know, clean energy air
Speaker 2: conditioning units where the demand for air conditioning is off
Speaker 2: the charts, and that's been a wonderful green energy investment,
Speaker 2: along with ge Vernova, from which we also own, that's
Speaker 2: been a wonderful green energy investment.
Speaker 5: But it's not evis Hey, listen, I do want to
Speaker 5: go back to We've got the Tesla live blog going
Speaker 5: on and just tracking everything that's coming out of the earnings.
Speaker 5: Are down a hole who covers Tesla and Alon, says
Speaker 5: Page twelve of the shareholder deck shows the Tesla ecosystem,
Speaker 5: which includes optimists. We know, the robot wishing a baby stroller,
Speaker 5: you know, you know ross When it comes to Tesla
Speaker 5: and the world of Elon, there are so many different
Speaker 5: moving parts. There's you know, the shining beacon of a
Speaker 5: SpaceX right that that's a really great business. There's all
Speaker 5: the AI stuff that's going on. There's so many different
Speaker 5: moving pieces. What else do you want to know, you know,
Speaker 5: from the Elon universe.
Speaker 2: Well, I think the most important thing in my mind
Speaker 2: that has the biggest opportunity to help Tesla is this
Speaker 2: low cost vehicle they keep talking about. They have so
Speaker 2: much excess capacity in their factories now because they're not
Speaker 2: selling more cars that they need a new vehicle. And
Speaker 2: also for addressing other markets, whether it be India, China
Speaker 2: and Europe, you need a small vehicle that's inexpensive to
Speaker 2: compete against the other EV players and regular traditional car companies.
Speaker 2: And they need to do this now and the sooner
Speaker 2: they do this the better, and that's the most important
Speaker 2: thing I know. We like to talk about the day
Speaker 2: a robot is pushing my care around in a stroller.
Speaker 2: That day is long in the tooth from coming. Nor
Speaker 2: does anybody in the world would trust some big robot
Speaker 2: made by Elon Musk.
Speaker 5: Russ Gerber always appreciate you finding time for us.