WEBVTT - Instant  Reaction: Tesla Q2 Earnings

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

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<v Speaker 2>Get to it because this is one of the other

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<v Speaker 2>big companies reporting here after the close and what was

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<v Speaker 2>a busy earnings aftermarket day. Bloomberg Intelligence Global autos analyst

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<v Speaker 2>Steve Man joining us FROMBI headquarters in Princeton, New Jersey.

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<v Speaker 2>All right, Steve, come on in on this. So Tesla

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<v Speaker 2>shares down about three point four percent as we speak.

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<v Speaker 2>Why is it that there's some disappointment here?

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<v Speaker 1>Well, if you look at their earnings, they did take

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<v Speaker 1>a restructuring charge of about six hundred and twenty two

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<v Speaker 1>million used to exclude that.

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<v Speaker 3>They did beat consensus.

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<v Speaker 1>But I think if you look into the numbers, the

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<v Speaker 1>automotive gross margin continues to fall, and I think the

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<v Speaker 1>street was expecting it to kind of stabilize given that

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<v Speaker 1>price cuts have slowed down and battery costs have come down.

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<v Speaker 1>So there's still some concern and it's you know, when

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<v Speaker 1>is this gross margin gonna stop dropping?

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<v Speaker 4>Yeah, fourteen point six percent in the second quarter compared

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<v Speaker 4>to sixteen point four percent in the first quarter. What

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<v Speaker 4>do analysts want to see in terms of gross margin, like,

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<v Speaker 4>what's a realistic percentage?

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<v Speaker 1>Well, they did have they did reach as high as

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<v Speaker 1>twenty percent about a couple of years ago. It's gonna

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<v Speaker 1>be really tough to get back to that range. They're

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<v Speaker 1>gonna have to do a lot, you know. One of

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<v Speaker 1>the things that you know that I think the streets

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<v Speaker 1>talking about is the optimist humanoid robot that they're gonna

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<v Speaker 1>bring online internally and hopefully to cut cut some of

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<v Speaker 1>the fixed costs.

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<v Speaker 3>But that's gonna be a while.

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<v Speaker 1>I think they're gonna Tesla's gonna have to contend with,

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<v Speaker 1>you know, the continued price war in in China, continue

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<v Speaker 1>price decline in the US. But one of the things

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<v Speaker 1>that they're doing that could help, that could help is

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<v Speaker 1>expanding into markets like self. They just shipped more vehicles

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<v Speaker 1>in the UK and the now into the Middle East.

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<v Speaker 1>Hopefully the increased scale, and I think that would be

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<v Speaker 1>some of the questions we're going to have at the

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<v Speaker 1>earnings call is are they going to be able to

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<v Speaker 1>increase scale to drop to improve the gross margins?

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<v Speaker 2>So, Steve, is this a report from a Tesla that

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<v Speaker 2>is just maturing in a more competitive market, or is

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<v Speaker 2>this a Tesla showing signs of some strains, some struggle

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<v Speaker 2>struggles if you will, And some questions about the output.

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<v Speaker 1>Well, it's definitely getting more competitive. I think the concern

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<v Speaker 1>is that they're maturing. Auto business is maturing. GM reported

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<v Speaker 1>earnings today and you know their automotive gross margin is

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<v Speaker 1>fourteen percent. Tesla is around sixteen percent, So it's getting

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<v Speaker 1>awfully close to what GM, the legacy automaker's gross margins are.

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<v Speaker 1>So the concerns are there. The outlook, I think there's

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<v Speaker 1>there's gonna be a lot of focus on you know,

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<v Speaker 1>like I said earlier, are they able to build scale

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<v Speaker 1>in new markets? And then secondly their AI endeavors. You know,

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<v Speaker 1>they've delayed the August eighth event on AI to a

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<v Speaker 1>couple of months. I think a lot of investors will

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<v Speaker 1>want to probe a little bit more to to get

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<v Speaker 1>a glimpse of what they want to what they plan

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<v Speaker 1>to talk about in October.

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<v Speaker 4>Well, let's talk a little bit about that. You're talking

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<v Speaker 4>about an AI event. Some people refer to it as

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<v Speaker 4>the Robotaxi event.

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<v Speaker 2>How do they refer to it?

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<v Speaker 4>I don't know how how do they refer to it

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<v Speaker 4>internally the way you said it, Steve? How do they

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<v Speaker 4>refer to it though? Because it's I mean, this is

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<v Speaker 4>something Elon Musk has talked about for the better part

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<v Speaker 4>of a decade.

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<v Speaker 1>Yeah, I think I think they are referring to an

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<v Speaker 1>AI event. I think they want they do want to pivot. Uh.

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<v Speaker 1>They know the auto industry. It's not new to to

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<v Speaker 1>to to US, auto industry is a commoditized business.

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<v Speaker 3>You get the Chinese.

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<v Speaker 1>Uh, you know, I'm able to build cars for much cheaper.

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<v Speaker 3>So they know he knows that there's a lot.

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<v Speaker 1>Of value to be had in AI and so he

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<v Speaker 1>does want to start pivoting the company to be an

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<v Speaker 1>AI company, uh, less so of an auto company.

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<v Speaker 4>So can can But are you confident from an analyst

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<v Speaker 4>perspective that he can realistically do that because the joke

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<v Speaker 4>with robotaxi self driving has been next year, next year,

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<v Speaker 4>next year, and it hasn't shown up yet.

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<v Speaker 3>Yeah.

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<v Speaker 1>Yeah, I think there's a lot lot of hurdles. One

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<v Speaker 1>of the biggest hurdles to getting robo taxi uh to

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<v Speaker 1>be on a across the board on the roads is

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<v Speaker 1>really the regulations. And I know, you know, not the

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<v Speaker 1>only Tesla, but every automaker is trying to trying to

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<v Speaker 1>convince the government that you know, these are safe much

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<v Speaker 1>more much safer vehicles than they are operated by humans.

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<v Speaker 1>So uh, I think I think if you look at AI,

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<v Speaker 1>I think what Elon must is trying to do is

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<v Speaker 1>uh you know, introduce AI even beyond robotaxi. Right, there's

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<v Speaker 1>you know, at the end of the day, the company

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<v Speaker 1>is trying to try to lower energy consumption and increase

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<v Speaker 1>sustainable uh energy usage. Uh So if you can imagine,

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<v Speaker 1>for example, one thing is you know, all these vehicles

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<v Speaker 1>have large batteries in them, and if you know, if

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<v Speaker 1>we can get AI to actually maneuver these vehicles to

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<v Speaker 1>say where you know, there's a deficit of power and

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<v Speaker 1>these charge up batteries can actually uh offset some of

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<v Speaker 1>the peaks and and and fill some of the.

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<v Speaker 3>The deficit power deficit.

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<v Speaker 1>You know, that's that's one way of achieving sustainable energy

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<v Speaker 1>one of his goal. So you can't, I think, for us,

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<v Speaker 1>we can't just think of its robo taxi.

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<v Speaker 3>You got to think of.

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<v Speaker 1>It as you know, you have energy store ghorich in

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<v Speaker 1>a vehicle, in a moving vehicle. Plus the computers in

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<v Speaker 1>these vehicles are probably more powerful than some of our PCs,

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<v Speaker 1>So there's there's other ways of you you know, he

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<v Speaker 1>talked about using you know, putting, you know, putting a

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<v Speaker 1>number of these vehicles together. Yeah, to for example mind bitcoin.

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<v Speaker 3>Yeah.

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<v Speaker 2>Well, I'm looking at our live blog here and our

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<v Speaker 2>Dana Hall, who obviously covers Tesla and Elon Musk notes

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<v Speaker 2>something from Gene Munster of deep water asset managements as

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<v Speaker 2>a whole story here is about what else is to

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<v Speaker 2>come again these This is from Gene. The stock is

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<v Speaker 2>drifting because of the run up, but there are a

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<v Speaker 2>lot of questions about the unboxed manufacturing strategy and what

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<v Speaker 2>that means for the Robotaxi, which means you probably won't

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<v Speaker 2>see a Robotaxi until twenty twenty six or twenty twenty seven.

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<v Speaker 2>Munster a Dana Ads is referring to this line in

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<v Speaker 2>the deck quote our purpose built Robotaxi product will continue

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<v Speaker 2>to pursue a revolutionary unboxed manufacturing strategy. It sounds very

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<v Speaker 2>Elon Musk, right, like we don't, I mean, like don't

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<v Speaker 2>really quite know exactly what that means.

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<v Speaker 1>Right, Yeah, I you know, I think you know, in

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<v Speaker 1>our assumptions, I don't think grobal Taxi is going to

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<v Speaker 1>be even profitable, not until the next decade. But the

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<v Speaker 1>one more thing I think the investor would want to

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<v Speaker 1>know is, you know, when are they going to introduce

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<v Speaker 1>a more affordable EV. I think that's one of the

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<v Speaker 1>things that's plaguing the industry right now. You know, we've

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<v Speaker 1>lowered prices a lot and and and hasn't and hasn't

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<v Speaker 1>really lifted sales. But I think there's still not enough

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<v Speaker 1>choices for the consumer at the sub thirty thousand dollars range.

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<v Speaker 4>So who makes you know, Steve, who makes the most

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<v Speaker 4>affordable EV out there?

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<v Speaker 3>Is it?

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<v Speaker 4>Is it Hyundai? Is it Kia?

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<v Speaker 1>Yeah, it's Hunda, and the Asians do Hunda in Kia,

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<v Speaker 1>And I think I think if you look at globally,

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<v Speaker 1>the Chinese actually makes the most.

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<v Speaker 4>They can't get that in the US.

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<v Speaker 1>Yeah, it's well, we'll have to see. I think the

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<v Speaker 1>election is going to have He's going to have a

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<v Speaker 1>play and that.

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<v Speaker 4>So it always goes back to the election.

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<v Speaker 2>Yeah, Ed Love though it's also noting that he says,

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<v Speaker 2>I guess when it comes to the more affordable models

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<v Speaker 2>remaining on track for the start of production in twenty

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<v Speaker 2>twenty five, says those products will be built on quote

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<v Speaker 2>the same manufacturing lines as current vehicles, but it's kind

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<v Speaker 2>of always a wait and see good stuff, Steve. We'll

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<v Speaker 2>look for some of your research certainly tomorrow. Thank you

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<v Speaker 2>for coming along and helping him make some sense of

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<v Speaker 2>this Bloomberg Intelligence Global autos and industrial analyst Steve Mann,