Instant Reaction: Tesla Earnings Surpass Expectations

Bloomberg Audio Studios, Podcasts, radio news. 0:00:07.040 --> 0:00:09.840 Our own Dan Hole, noting that Tesla is giving some 0:00:09.920 --> 0:00:13.400 quasi bullish guidance. The company delivered one point eight million 0:00:13.560 --> 0:00:18.239 cars in twenty twenty three. Average selling prices fell in 0:00:18.239 --> 0:00:21.599 the quarter. There was some FX impact. There was a 0:00:21.600 --> 0:00:24.079 slight top line missus. Ed Ludlow points out on the 0:00:24.120 --> 0:00:27.680 live blog. The company's third quarter automotive automotive gross margin 0:00:27.800 --> 0:00:31.040 excluding credits came in way above estimates at seventeen point 0:00:31.040 --> 0:00:35.640 one percent. Estimates were for fourteen point nine percent. We 0:00:35.680 --> 0:00:38.320 got with us the perfect guest when it comes to 0:00:39.000 --> 0:00:42.199 what's going on with Tesla. Ross Gerber is joining us. 0:00:42.280 --> 0:00:45.480 He's president and CEO of Gerber Kawasaki Wealth Managed, Wealth 0:00:45.479 --> 0:00:48.920 and Investment Management. He joins us from Santa Monica, California. Ross, 0:00:48.920 --> 0:00:50.680 we got a lot to talk about with you. We 0:00:50.760 --> 0:00:53.680 got a good bit of time. First, your reaction to earnings. 0:00:53.680 --> 0:00:55.160 Investors are certainly happy to see this. 0:00:55.960 --> 0:00:59.320 Yeah, I am too. It seems as if, and granted 0:00:59.360 --> 0:01:02.080 they didn't really release a lot of data yet that'll 0:01:02.120 --> 0:01:05.720 come soon, I hope, where they were able to increase 0:01:06.360 --> 0:01:11.200 margins on the vehicle and therefore beat on earnings. So 0:01:11.440 --> 0:01:13.399 I'm not sure where that's coming from, but they seem 0:01:13.440 --> 0:01:16.000 to suggest that their cost of good sold is dropping 0:01:16.080 --> 0:01:20.600 quite rapidly and that's added margin to their vehicles, which 0:01:20.840 --> 0:01:24.360 is good news for Tesla. So it's very possible that 0:01:25.000 --> 0:01:28.240 because you know, like battery demand is down so much 0:01:28.280 --> 0:01:30.840 and lithium prices are down so much, that this is 0:01:30.840 --> 0:01:34.400 finally starting to get into the supply chain for Tesla. 0:01:34.440 --> 0:01:37.000 But you know, once again, I haven't seen all the 0:01:37.080 --> 0:01:39.520 numbers and been able to really parse where the margin 0:01:39.520 --> 0:01:40.360 gain has come from. 0:01:40.800 --> 0:01:43.760 And it's interesting too when it comes to the outlook. 0:01:43.840 --> 0:01:47.640 Tesla continues to state that plans for new vehicles, including 0:01:47.720 --> 0:01:50.800 more affordable models, remain on track for the start of 0:01:50.840 --> 0:01:53.600 production in the first half of twenty twenty five. More 0:01:53.720 --> 0:01:58.240 affordable models ross. Obviously that has been a major focal 0:01:58.280 --> 0:02:00.440 point for this company. 0:02:00.600 --> 0:02:03.440 Yeah, I mean, there's a more affordable model, why on 0:02:03.760 --> 0:02:07.400 sale use the three year old for an incredibly good 0:02:07.400 --> 0:02:12.240 price under abound twenty five thousand or so. So, you know, 0:02:12.360 --> 0:02:16.600 really Tesla runs into the problem of cannibalizing its other cars, 0:02:16.720 --> 0:02:19.839 and that I think is what's causing them to pause. Now, 0:02:20.040 --> 0:02:22.000 what I've been saying is if they would have put 0:02:22.040 --> 0:02:24.440 a steering wheel on that robocab. It would have been 0:02:24.440 --> 0:02:28.959 a much more exciting launch for me and I think 0:02:29.000 --> 0:02:32.720 for customers knowing that this two seater, cheaper car could 0:02:32.720 --> 0:02:35.000 be something we could actually just buy and drive. The 0:02:35.080 --> 0:02:37.800 robotaxi business is not a business that I'm excited about. 0:02:38.120 --> 0:02:40.120 It's not really what I think Tesla should be doing. 0:02:40.360 --> 0:02:44.359 There already are robotaxes that exist called Weimo, and Uber 0:02:44.440 --> 0:02:48.320 is already the master of transportation. So to me, Tesla 0:02:48.400 --> 0:02:51.080 should be selling evs, focusing on making great evs with 0:02:51.160 --> 0:02:55.600 grade software, and not trying to pivot into being some 0:02:55.639 --> 0:02:58.600 sort of robotaxi company. But you know, once again, I 0:02:58.600 --> 0:03:00.440 think people want to buy the cars and they worried 0:03:00.440 --> 0:03:02.160 about selling the cars will do just fine. 0:03:03.160 --> 0:03:06.320 Russ. I have a question for you that I've wanted 0:03:06.320 --> 0:03:07.480 to ask you for a few days now. 0:03:07.480 --> 0:03:09.919 Somebody did pause, so I'm excited. 0:03:10.040 --> 0:03:12.079 Yeah, Well, I'm interested to hear what Ross has to 0:03:12.120 --> 0:03:18.720 say about this. Okay, Elon Musk. In politics, he's donated, 0:03:19.040 --> 0:03:22.520 he's one of the largest donors to the Trump candidacy, 0:03:22.600 --> 0:03:26.120 to the Trump campaign, He's got his America Political Action 0:03:26.320 --> 0:03:31.200 Committee a super pack. He's become incredibly active. I'm wondering, 0:03:31.240 --> 0:03:34.240 from the perspective of business, if, in a time when 0:03:35.040 --> 0:03:38.040 we're so divided as a nation, if taking such a 0:03:38.160 --> 0:03:40.720 clear stance and doing so much to elect one candidate 0:03:41.120 --> 0:03:44.320 is a risk to the company. 0:03:45.120 --> 0:03:50.000 Yes, of course, you know why are you laughing? Strategic? Well, 0:03:50.040 --> 0:03:53.200 because I think it's an absurd risk to put your 0:03:53.240 --> 0:03:57.360 company in that you could avoid, right, So, you know, 0:03:57.600 --> 0:03:59.640 I I've personally tried to stay out of this election. 0:03:59.680 --> 0:04:02.560 I don't get any positive from my clients expressing my 0:04:02.640 --> 0:04:05.440 liberal opinions, which are liberal, and you know, I think 0:04:05.480 --> 0:04:08.400 people who work at my firm know that. And but 0:04:08.800 --> 0:04:11.480 you know, as a business person, it doesn't really serve 0:04:11.520 --> 0:04:15.880 my purposes to spouse my liberal beliefs on everybody. And 0:04:15.960 --> 0:04:20.560 that said, Elon's extremely right wing beliefs turn off a 0:04:20.600 --> 0:04:22.240 lot of his core demo. Now a lot of people 0:04:22.279 --> 0:04:24.960 don't believe that's happening. But I mean, look at what 0:04:25.040 --> 0:04:26.600 the effort they have to do to sell a car 0:04:26.720 --> 0:04:30.440 today and they still refuse to advertise. So taking this 0:04:30.680 --> 0:04:33.960 stance for Elon is kind of a lose lose for 0:04:34.080 --> 0:04:36.919 Tesla because if Trump wins, you know, doesn't give a 0:04:36.920 --> 0:04:40.200 crap about evs, he supports oil, and Elon's gonna learn 0:04:40.200 --> 0:04:42.680 about Trump, which is that he's a liar. And so 0:04:43.279 --> 0:04:45.760 all this money Elon's putting into Trump to hopefully have 0:04:45.839 --> 0:04:50.600 some power, he's gonna learn the hard way about Trump, 0:04:51.080 --> 0:04:56.240 just asked Juliani. So that's a lose, And if Trump loses, 0:04:57.600 --> 0:05:01.320 it's a disaster for Elon, just per and for his 0:05:01.440 --> 0:05:04.240 personal brand and for everything that he's been working on. 0:05:04.640 --> 0:05:07.960 And it really puts Tesla in a tough position because 0:05:07.960 --> 0:05:10.120 the administration isn't going to do anything to help them, 0:05:10.240 --> 0:05:14.800 that's for sure. So I don't get it other than 0:05:15.360 --> 0:05:18.400 I guess he thinks the America is in this horrible place, 0:05:18.440 --> 0:05:21.080 but the stock market's hitting all time highs every day, 0:05:21.120 --> 0:05:23.280 and I think America is in a wonderful place. But 0:05:23.320 --> 0:05:26.640 it's all a matter of perception, you know, And so 0:05:27.320 --> 0:05:30.720 I think this is the most political I've ever seen 0:05:30.720 --> 0:05:32.760 a CEO. And that's one of the reasons we've lowered 0:05:32.800 --> 0:05:35.160 our position in Tesla is we do think it affects 0:05:35.200 --> 0:05:39.240 sales and affects the brand and ultimately margins, And we're 0:05:39.279 --> 0:05:42.240 excited about margins going up instead of going down for 0:05:42.279 --> 0:05:45.360 a quarter which is great news, you know, but this 0:05:45.400 --> 0:05:47.919 is coming from the fact that the car market is 0:05:47.960 --> 0:05:50.599 so difficult that the cost of goods has gone down, 0:05:50.920 --> 0:05:53.680 not because Tesla is making more margin because people are 0:05:53.680 --> 0:05:55.240 willing to pay more for a Tesla. 0:05:55.320 --> 0:05:57.279 I want to talk a little bit more about Elon Musk. 0:05:57.480 --> 0:06:01.920 Matt Levine calls it the attention auction, you know, the 0:06:01.920 --> 0:06:04.960 there's just a lot of things competing for Elon Musk's attention. 0:06:05.200 --> 0:06:08.359 And you know, he's been involved with multiple companies for 0:06:08.480 --> 0:06:12.840 many years, of course, but now politics feels like a 0:06:12.880 --> 0:06:15.640 new wrinkle there, of course, and he is heavily involved 0:06:15.680 --> 0:06:18.480 when it comes to the Trump campaign. This has been 0:06:18.520 --> 0:06:21.000 discussed before, but I am curious to hear your opinion 0:06:21.120 --> 0:06:24.560 on whether or not the fact that Elon is so 0:06:24.800 --> 0:06:29.080 spread thin across these different efforts, how you're thinking about 0:06:29.080 --> 0:06:31.080 that when you're taking to look at your Tesla position. 0:06:32.200 --> 0:06:34.080 Well, this is probably one of the biggest issues is 0:06:34.080 --> 0:06:37.120 he doesn't actually work at Tesla, you know, like you 0:06:37.160 --> 0:06:39.200 go to work at your company every day like you're 0:06:39.240 --> 0:06:42.039 the CEO. I don't think that's what he does. And 0:06:42.080 --> 0:06:44.440 I don't think that Elon gets more hours in a 0:06:44.520 --> 0:06:48.360 day than you or I do so, so he might 0:06:48.440 --> 0:06:51.279 sleep four hours a day instead of eight. Well, you 0:06:51.279 --> 0:06:52.800 know where that's going to cost him is at the 0:06:52.880 --> 0:06:55.040 end of his life, because it's super unhealthy to live 0:06:55.120 --> 0:06:57.520 this way. You know. There's this sort of opinion that, 0:06:57.720 --> 0:07:01.760 you know, like he has some super human ability. He doesn't. 0:07:01.960 --> 0:07:05.039 So he's spending his time working for Trump right now 0:07:05.279 --> 0:07:07.839 and doing politics, and he's not spending his time getting 0:07:07.839 --> 0:07:10.720 his full self driving to work, which it still doesn't. 0:07:10.960 --> 0:07:15.160 And so this is really the issue for me as 0:07:15.200 --> 0:07:19.480 an investor, is shouldn't the CEO of your company be 0:07:19.640 --> 0:07:23.240 there every day or at least pretend, you know. And 0:07:23.280 --> 0:07:25.480 then the second thing is and I was just talking 0:07:25.480 --> 0:07:27.520 to a guy about this who's been following Tesla for 0:07:27.560 --> 0:07:30.400 a long time, and we were having a nice discussion 0:07:30.440 --> 0:07:32.600 about Tesla, and I said, the biggest difference between Tesla 0:07:32.640 --> 0:07:35.200 now and the Tesla of twenty nineteen, twenty twenty that 0:07:35.680 --> 0:07:38.800 made us all really wealthy was that Elon worked at 0:07:38.800 --> 0:07:41.840 Tesla every day. It was the fundamental thing he focused 0:07:41.840 --> 0:07:44.400 on one hundred percent of his energies and efforts. And 0:07:44.440 --> 0:07:48.560 that's why Tesla became successful because they were about to fail. Okay, 0:07:48.920 --> 0:07:52.240 so this lack of attention to what needs to be done, 0:07:52.320 --> 0:07:56.320 especially around full self driving, is really troubling to me 0:07:56.400 --> 0:07:59.280 because I see the competitors all over the place. I'm 0:07:59.280 --> 0:08:03.000 here in the heart of EVS right, and Rogue taxis 0:08:03.120 --> 0:08:05.400 away moo just drove by me just a second ago, 0:08:05.560 --> 0:08:09.360 you know, like they're everywhere. They're working in extremely difficult 0:08:09.440 --> 0:08:12.280 driving conditions that my cyber truck can't even come close 0:08:12.360 --> 0:08:16.520 to tackling. So I just am like, get back to work, 0:08:16.600 --> 0:08:18.920 focus on the job, or maybe it's time to just 0:08:18.960 --> 0:08:21.600 get a real CEO like when shot Well, you know 0:08:21.680 --> 0:08:25.760 she hasn't Yeah, yeah, I mean I think she deserves 0:08:25.760 --> 0:08:27.080 a metal Russ. 0:08:27.480 --> 0:08:29.320 Gotta we gotta go. We gotta let you get back 0:08:29.360 --> 0:08:31.640 to work. We do appreciate you joining us. It's always 0:08:31.680 --> 0:08:34.080 a treat when you are on our air, especially post 0:08:34.080 --> 0:08:36.760 Tesla learnings. Ross Gerber, president and CEO over at Gerber 0:08:36.800 --> 0:08:39.400 Kawasaki Wealth and Investment Management. I want to go now 0:08:39.440 --> 0:08:42.559 to Ed Ludlow, who's standing by in San Francisco, because 0:08:42.600 --> 0:08:44.480 he has had his eye on the live blog. He's 0:08:44.480 --> 0:08:47.960 had his eye on the numbers. ED shares surging in 0:08:48.000 --> 0:08:50.720 the after hours. Now, good report for Tesla what sticks 0:08:50.760 --> 0:08:51.120 out to you. 0:08:51.920 --> 0:08:53.720 Yeah, I think we still need to do the math 0:08:53.840 --> 0:08:56.079 on like all of it. So where would you got 0:08:56.080 --> 0:08:56.679 me to stop? 0:08:56.720 --> 0:08:59.120 I mean, Mark, let's do it. Where are those gross margins? 0:08:59.160 --> 0:08:59.880 Where did that beat come? 0:09:00.120 --> 0:09:00.360 Yeah? 0:09:00.800 --> 0:09:02.720 Actually, I think at the end of the day, remember 0:09:02.760 --> 0:09:04.920 that Tester is a public company and it prepares a 0:09:05.000 --> 0:09:08.400 very thorough earnings deck for investors. In that deck, there 0:09:08.480 --> 0:09:12.280 is a section about revenue and profit, the headwinds and 0:09:12.280 --> 0:09:14.800 tailwinds for the top and bottom line. And what they're 0:09:14.840 --> 0:09:18.679 telling us about the bottom line is that while there 0:09:18.679 --> 0:09:22.240 were lower average selling prices for their consumer cars, the 0:09:22.280 --> 0:09:25.680 cost of producing them is also coming down, both from 0:09:25.720 --> 0:09:28.680 sort of the technology they use to manufacture in the process, 0:09:28.880 --> 0:09:31.719 but also raw materials. The thing that really jumps out 0:09:31.720 --> 0:09:34.400 at me is they're now listing the sale of full 0:09:34.440 --> 0:09:38.320 self driving software as a direct contributor to profit, which 0:09:38.360 --> 0:09:41.920 I find really interesting because of two recent catalysts. FSD 0:09:42.120 --> 0:09:45.800 is available to cybertruck owners very recently, and they also 0:09:45.880 --> 0:09:48.079 have this actual smart sum and I won't give you 0:09:48.160 --> 0:09:53.120 the acronym feature that is also contributing to the bottom line. 0:09:53.120 --> 0:09:55.120 And I think that Ross was talking about that right, 0:09:55.360 --> 0:09:58.599 He was trying to understand where this margin boost was 0:09:58.640 --> 0:10:01.400 coming from if you strip out the impact of regulatory credits. 0:10:01.559 --> 0:10:03.760 Okay, Yeah, So that's where we're trying to figure out, 0:10:03.760 --> 0:10:05.200 and certainly there's going to be a lot of number 0:10:05.240 --> 0:10:07.440 crunching that happens, and I imagine a lot of questions 0:10:07.520 --> 0:10:09.600 from analysts too. I did want to get your thoughts 0:10:09.640 --> 0:10:12.840 on my line of questioning to Ross about political risk here, 0:10:13.120 --> 0:10:15.960 because I cannot name a CEO. In fact, you have 0:10:16.040 --> 0:10:19.480 CEOs right now coming out and avoiding talking about the election, 0:10:19.760 --> 0:10:22.000 whereas Elon Musk is going all in on this. In 0:10:22.040 --> 0:10:25.439 a different time, maybe that would make sense. But incredibly 0:10:25.440 --> 0:10:29.439 polarized country right now. Are analysts talking apart from Ross 0:10:29.440 --> 0:10:31.440 talking about the risk here? Yeah? 0:10:31.440 --> 0:10:33.240 I think that you know, whether they are sell side 0:10:33.240 --> 0:10:36.439 analysts or retail investors and institution investors, that there is 0:10:36.480 --> 0:10:40.079 a likely chance that Musk is asked a question about 0:10:40.080 --> 0:10:43.120 this on the call within the next hour. There's no 0:10:43.320 --> 0:10:47.640 mention of the election or either candidate. Sorry my mobile 0:10:47.679 --> 0:10:48.920 phone is ringing. Who knows who that is? 0:10:49.320 --> 0:10:49.400 You? 0:10:49.480 --> 0:10:54.480 Either candidate could be doubt it, either candidate in the deck. 0:10:54.760 --> 0:10:57.880 I think what's interesting that the important point to note 0:10:57.960 --> 0:11:01.840 here is that throughout the period of the administration, and 0:11:01.920 --> 0:11:04.760 the impact already to consumers are the benefit of the 0:11:04.760 --> 0:11:08.320 Inflation Reduction Act. There has not been a lot of 0:11:08.320 --> 0:11:11.280 sort of vocal support of the Biden administration for Musk. 0:11:12.280 --> 0:11:14.640 That's gone very quiet. The Harris camp has not talked 0:11:14.720 --> 0:11:17.320 much about Musk, where the Musk practically talks about them 0:11:17.360 --> 0:11:19.800 in the context of earning school, I would say, on balance, 0:11:19.840 --> 0:11:21.480 he probably will, but we'll have to find out. 0:11:21.679 --> 0:11:24.320 I mean, given given Elon's comments over the last few 0:11:24.320 --> 0:11:26.760 months about Kamala Harris, I don't imagine if she wins 0:11:26.760 --> 0:11:29.719 that they're going to have a very friendly relationship. Ed 0:11:29.800 --> 0:11:32.680 before we let you go, there's still a lot of 0:11:33.600 --> 0:11:35.040 you know, we're still wedding on the call. There's still 0:11:35.040 --> 0:11:36.840 a lot to get to when it comes to understanding 0:11:36.840 --> 0:11:41.080 more about these numbers. But is Tesla on its way 0:11:41.520 --> 0:11:42.440 out of the woods yet? 0:11:43.559 --> 0:11:46.000 Well, it's really interesting. So the stock's down year to date, 0:11:46.040 --> 0:11:48.280 but look at prior years of performance on the stock. 0:11:48.600 --> 0:11:51.000 They're telling us that they're going to grow modestly on 0:11:51.040 --> 0:11:53.720 the ev side, And if you do the math, as 0:11:53.720 --> 0:11:56.480 our bn F colleague Corey Cantor has done, they're going 0:11:56.520 --> 0:11:58.840 to have to have a record breaking fourth quarter to 0:11:58.880 --> 0:12:01.680 achieve that growth or beat the one point eight million 0:12:01.720 --> 0:12:04.520 units they did last year. No one ever really talks 0:12:04.520 --> 0:12:07.040 about the energy storage print that seems to be doing 0:12:07.080 --> 0:12:10.440 really well record energy storage and energy generation, and I 0:12:10.480 --> 0:12:12.760 go back to my earlier comment. They're listing it as 0:12:12.800 --> 0:12:16.000 a contributing factor to profit in a positive way in 0:12:16.040 --> 0:12:18.760 the earnings deck. Maybe we'll hear a bit more about that. 0:12:19.200 --> 0:12:21.160 But at the end of the day, the frustration Ross 0:12:21.200 --> 0:12:24.040 gave you is shared by many types of investors, which is, 0:12:24.520 --> 0:12:26.520 you keep steering us to a future where you are 0:12:26.520 --> 0:12:28.559 not doing the thing you currently do, which is selling 0:12:28.600 --> 0:12:30.920 cars to consumers. In the future, you're going to be 0:12:30.960 --> 0:12:34.000 an AI and robotics company with a proprietary ride hailing app. 0:12:34.120 --> 0:12:35.840 There's not a lot of mention of that in the deck, 0:12:36.040 --> 0:12:37.560 and I think on the call that that will be 0:12:37.760 --> 0:12:40.080 at least where the questions are asked whether or not 0:12:40.120 --> 0:12:41.720 Musk wants to go there of his own volition. 0:12:42.240 --> 0:12:44.880 Hi Ludlow. He is the co host of Bloomberg Technology 0:12:44.880 --> 0:12:49.120 on a Bloomberg TV each and every day. Also check 0:12:49.200 --> 0:12:51.800 them out on Twitter, Instagram and the like. Tesla shares 0:12:51.880 --> 0:12:54.560 right now surging in the after hours,