July 23, 2024 • 8 mins
Bloomberg Intelligence Global Autos and Industrial Analyst Steve Mann breaks down Tesla's Q2 earnings report
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Speaker 1 (00:02):
Bloomberg Audio, Studios, podcasts, radio news.
Speaker 2 (00:06):
Get to it because this is one of the other
big companies reporting here after the close and what was
a busy earnings aftermarket day. Bloomberg Intelligence Global autos analyst
Steve Man joining us FROMBI headquarters in Princeton, New Jersey.
All right, Steve, come on in on this. So Tesla
shares down about three point four percent as we speak.
Why is it that there's some disappointment here?
Speaker 1 (00:28):
Well, if you look at their earnings, they did take
a restructuring charge of about six hundred and twenty two
million used to exclude that.
Speaker 3 (00:36):
They did beat consensus.
Speaker 1 (00:39):
But I think if you look into the numbers, the
automotive gross margin continues to fall, and I think the
street was expecting it to kind of stabilize given that
price cuts have slowed down and battery costs have come down.
So there's still some concern and it's you know, when
(01:01):
is this gross margin gonna stop dropping?
Speaker 4 (01:04):
Yeah, fourteen point six percent in the second quarter compared
to sixteen point four percent in the first quarter. What
do analysts want to see in terms of gross margin, like,
what's a realistic percentage?
Speaker 1 (01:16):
Well, they did have they did reach as high as
twenty percent about a couple of years ago. It's gonna
be really tough to get back to that range. They're
gonna have to do a lot, you know. One of
the things that you know that I think the streets
talking about is the optimist humanoid robot that they're gonna
bring online internally and hopefully to cut cut some of
(01:39):
the fixed costs.
Speaker 3 (01:40):
But that's gonna be a while.
Speaker 1 (01:42):
I think they're gonna Tesla's gonna have to contend with,
you know, the continued price war in in China, continue
price decline in the US. But one of the things
that they're doing that could help, that could help is
expanding into markets like self. They just shipped more vehicles
(02:04):
in the UK and the now into the Middle East.
Hopefully the increased scale, and I think that would be
some of the questions we're going to have at the
earnings call is are they going to be able to
increase scale to drop to improve the gross margins?
Speaker 2 (02:20):
So, Steve, is this a report from a Tesla that
is just maturing in a more competitive market, or is
this a Tesla showing signs of some strains, some struggle
struggles if you will, And some questions about the output.
Speaker 1 (02:35):
Well, it's definitely getting more competitive. I think the concern
is that they're maturing. Auto business is maturing. GM reported
earnings today and you know their automotive gross margin is
fourteen percent. Tesla is around sixteen percent, So it's getting
awfully close to what GM, the legacy automaker's gross margins are.
(02:58):
So the concerns are there. The outlook, I think there's
there's gonna be a lot of focus on you know,
like I said earlier, are they able to build scale
in new markets? And then secondly their AI endeavors. You know,
they've delayed the August eighth event on AI to a
couple of months. I think a lot of investors will
(03:21):
want to probe a little bit more to to get
a glimpse of what they want to what they plan
to talk about in October.
Speaker 4 (03:28):
Well, let's talk a little bit about that. You're talking
about an AI event. Some people refer to it as
the Robotaxi event.
Speaker 2 (03:36):
How do they refer to it?
Speaker 4 (03:38):
I don't know how how do they refer to it
internally the way you said it, Steve? How do they
refer to it though? Because it's I mean, this is
something Elon Musk has talked about for the better part
of a decade.
Speaker 1 (03:48):
Yeah, I think I think they are referring to an
AI event. I think they want they do want to pivot. Uh.
They know the auto industry. It's not new to to
to to US, auto industry is a commoditized business.
Speaker 3 (04:02):
You get the Chinese.
Speaker 1 (04:04):
Uh, you know, I'm able to build cars for much cheaper.
Speaker 3 (04:08):
So they know he knows that there's a lot.
Speaker 1 (04:11):
Of value to be had in AI and so he
does want to start pivoting the company to be an
AI company, uh, less so of an auto company.
Speaker 4 (04:22):
So can can But are you confident from an analyst
perspective that he can realistically do that because the joke
with robotaxi self driving has been next year, next year,
next year, and it hasn't shown up yet.
Speaker 3 (04:34):
Yeah.
Speaker 1 (04:34):
Yeah, I think there's a lot lot of hurdles. One
of the biggest hurdles to getting robo taxi uh to
be on a across the board on the roads is
really the regulations. And I know, you know, not the
only Tesla, but every automaker is trying to trying to
convince the government that you know, these are safe much
more much safer vehicles than they are operated by humans.
(04:59):
So uh, I think I think if you look at AI,
I think what Elon must is trying to do is
uh you know, introduce AI even beyond robotaxi. Right, there's
you know, at the end of the day, the company
is trying to try to lower energy consumption and increase
sustainable uh energy usage. Uh So if you can imagine,
(05:23):
for example, one thing is you know, all these vehicles
have large batteries in them, and if you know, if
we can get AI to actually maneuver these vehicles to
say where you know, there's a deficit of power and
these charge up batteries can actually uh offset some of
the peaks and and and fill some of the.
Speaker 3 (05:45):
The deficit power deficit.
Speaker 1 (05:47):
You know, that's that's one way of achieving sustainable energy
one of his goal. So you can't, I think, for us,
we can't just think of its robo taxi.
Speaker 3 (05:57):
You got to think of.
Speaker 1 (05:58):
It as you know, you have energy store ghorich in
a vehicle, in a moving vehicle. Plus the computers in
these vehicles are probably more powerful than some of our PCs,
So there's there's other ways of you you know, he
talked about using you know, putting, you know, putting a
number of these vehicles together. Yeah, to for example mind bitcoin.
Speaker 3 (06:19):
Yeah.
Speaker 2 (06:20):
Well, I'm looking at our live blog here and our
Dana Hall, who obviously covers Tesla and Elon Musk notes
something from Gene Munster of deep water asset managements as
a whole story here is about what else is to
come again these This is from Gene. The stock is
drifting because of the run up, but there are a
lot of questions about the unboxed manufacturing strategy and what
that means for the Robotaxi, which means you probably won't
(06:40):
see a Robotaxi until twenty twenty six or twenty twenty seven.
Munster a Dana Ads is referring to this line in
the deck quote our purpose built Robotaxi product will continue
to pursue a revolutionary unboxed manufacturing strategy. It sounds very
Elon Musk, right, like we don't, I mean, like don't
really quite know exactly what that means.
Speaker 1 (07:00):
Right, Yeah, I you know, I think you know, in
our assumptions, I don't think grobal Taxi is going to
be even profitable, not until the next decade. But the
one more thing I think the investor would want to
know is, you know, when are they going to introduce
a more affordable EV. I think that's one of the
(07:20):
things that's plaguing the industry right now. You know, we've
lowered prices a lot and and and hasn't and hasn't
really lifted sales. But I think there's still not enough
choices for the consumer at the sub thirty thousand dollars range.
Speaker 4 (07:38):
So who makes you know, Steve, who makes the most
affordable EV out there?
Speaker 3 (07:43):
Is it?
Speaker 4 (07:43):
Is it Hyundai? Is it Kia?
Speaker 1 (07:46):
Yeah, it's Hunda, and the Asians do Hunda in Kia,
And I think I think if you look at globally,
the Chinese actually makes the most.
Speaker 4 (07:56):
They can't get that in the US.
Speaker 1 (07:58):
Yeah, it's well, we'll have to see. I think the
election is going to have He's going to have a
play and that.
Speaker 4 (08:06):
So it always goes back to the election.
Speaker 2 (08:07):
Yeah, Ed Love though it's also noting that he says,
I guess when it comes to the more affordable models
remaining on track for the start of production in twenty
twenty five, says those products will be built on quote
the same manufacturing lines as current vehicles, but it's kind
of always a wait and see good stuff, Steve. We'll
look for some of your research certainly tomorrow. Thank you
for coming along and helping him make some sense of
this Bloomberg Intelligence Global autos and industrial analyst Steve Mann,
Bloomberg Audio, Studios, podcasts, radio news.
Speaker 2 (00:06):
Get to it because this is one of the other
big companies reporting here after the close and what was
a busy earnings aftermarket day. Bloomberg Intelligence Global autos analyst
Steve Man joining us FROMBI headquarters in Princeton, New Jersey.
All right, Steve, come on in on this. So Tesla
shares down about three point four percent as we speak.
Why is it that there's some disappointment here?
Speaker 1 (00:28):
Well, if you look at their earnings, they did take
a restructuring charge of about six hundred and twenty two
million used to exclude that.
Speaker 3 (00:36):
They did beat consensus.
Speaker 1 (00:39):
But I think if you look into the numbers, the
automotive gross margin continues to fall, and I think the
street was expecting it to kind of stabilize given that
price cuts have slowed down and battery costs have come down.
So there's still some concern and it's you know, when
(01:01):
is this gross margin gonna stop dropping?
Speaker 4 (01:04):
Yeah, fourteen point six percent in the second quarter compared
to sixteen point four percent in the first quarter. What
do analysts want to see in terms of gross margin, like,
what's a realistic percentage?
Speaker 1 (01:16):
Well, they did have they did reach as high as
twenty percent about a couple of years ago. It's gonna
be really tough to get back to that range. They're
gonna have to do a lot, you know. One of
the things that you know that I think the streets
talking about is the optimist humanoid robot that they're gonna
bring online internally and hopefully to cut cut some of
(01:39):
the fixed costs.
Speaker 3 (01:40):
But that's gonna be a while.
Speaker 1 (01:42):
I think they're gonna Tesla's gonna have to contend with,
you know, the continued price war in in China, continue
price decline in the US. But one of the things
that they're doing that could help, that could help is
expanding into markets like self. They just shipped more vehicles
(02:04):
in the UK and the now into the Middle East.
Hopefully the increased scale, and I think that would be
some of the questions we're going to have at the
earnings call is are they going to be able to
increase scale to drop to improve the gross margins?
Speaker 2 (02:20):
So, Steve, is this a report from a Tesla that
is just maturing in a more competitive market, or is
this a Tesla showing signs of some strains, some struggle
struggles if you will, And some questions about the output.
Speaker 1 (02:35):
Well, it's definitely getting more competitive. I think the concern
is that they're maturing. Auto business is maturing. GM reported
earnings today and you know their automotive gross margin is
fourteen percent. Tesla is around sixteen percent, So it's getting
awfully close to what GM, the legacy automaker's gross margins are.
(02:58):
So the concerns are there. The outlook, I think there's
there's gonna be a lot of focus on you know,
like I said earlier, are they able to build scale
in new markets? And then secondly their AI endeavors. You know,
they've delayed the August eighth event on AI to a
couple of months. I think a lot of investors will
(03:21):
want to probe a little bit more to to get
a glimpse of what they want to what they plan
to talk about in October.
Speaker 4 (03:28):
Well, let's talk a little bit about that. You're talking
about an AI event. Some people refer to it as
the Robotaxi event.
Speaker 2 (03:36):
How do they refer to it?
Speaker 4 (03:38):
I don't know how how do they refer to it
internally the way you said it, Steve? How do they
refer to it though? Because it's I mean, this is
something Elon Musk has talked about for the better part
of a decade.
Speaker 1 (03:48):
Yeah, I think I think they are referring to an
AI event. I think they want they do want to pivot. Uh.
They know the auto industry. It's not new to to
to to US, auto industry is a commoditized business.
Speaker 3 (04:02):
You get the Chinese.
Speaker 1 (04:04):
Uh, you know, I'm able to build cars for much cheaper.
Speaker 3 (04:08):
So they know he knows that there's a lot.
Speaker 1 (04:11):
Of value to be had in AI and so he
does want to start pivoting the company to be an
AI company, uh, less so of an auto company.
Speaker 4 (04:22):
So can can But are you confident from an analyst
perspective that he can realistically do that because the joke
with robotaxi self driving has been next year, next year,
next year, and it hasn't shown up yet.
Speaker 3 (04:34):
Yeah.
Speaker 1 (04:34):
Yeah, I think there's a lot lot of hurdles. One
of the biggest hurdles to getting robo taxi uh to
be on a across the board on the roads is
really the regulations. And I know, you know, not the
only Tesla, but every automaker is trying to trying to
convince the government that you know, these are safe much
more much safer vehicles than they are operated by humans.
(04:59):
So uh, I think I think if you look at AI,
I think what Elon must is trying to do is
uh you know, introduce AI even beyond robotaxi. Right, there's
you know, at the end of the day, the company
is trying to try to lower energy consumption and increase
sustainable uh energy usage. Uh So if you can imagine,
(05:23):
for example, one thing is you know, all these vehicles
have large batteries in them, and if you know, if
we can get AI to actually maneuver these vehicles to
say where you know, there's a deficit of power and
these charge up batteries can actually uh offset some of
the peaks and and and fill some of the.
Speaker 3 (05:45):
The deficit power deficit.
Speaker 1 (05:47):
You know, that's that's one way of achieving sustainable energy
one of his goal. So you can't, I think, for us,
we can't just think of its robo taxi.
Speaker 3 (05:57):
You got to think of.
Speaker 1 (05:58):
It as you know, you have energy store ghorich in
a vehicle, in a moving vehicle. Plus the computers in
these vehicles are probably more powerful than some of our PCs,
So there's there's other ways of you you know, he
talked about using you know, putting, you know, putting a
number of these vehicles together. Yeah, to for example mind bitcoin.
Speaker 3 (06:19):
Yeah.
Speaker 2 (06:20):
Well, I'm looking at our live blog here and our
Dana Hall, who obviously covers Tesla and Elon Musk notes
something from Gene Munster of deep water asset managements as
a whole story here is about what else is to
come again these This is from Gene. The stock is
drifting because of the run up, but there are a
lot of questions about the unboxed manufacturing strategy and what
that means for the Robotaxi, which means you probably won't
(06:40):
see a Robotaxi until twenty twenty six or twenty twenty seven.
Munster a Dana Ads is referring to this line in
the deck quote our purpose built Robotaxi product will continue
to pursue a revolutionary unboxed manufacturing strategy. It sounds very
Elon Musk, right, like we don't, I mean, like don't
really quite know exactly what that means.
Speaker 1 (07:00):
Right, Yeah, I you know, I think you know, in
our assumptions, I don't think grobal Taxi is going to
be even profitable, not until the next decade. But the
one more thing I think the investor would want to
know is, you know, when are they going to introduce
a more affordable EV. I think that's one of the
(07:20):
things that's plaguing the industry right now. You know, we've
lowered prices a lot and and and hasn't and hasn't
really lifted sales. But I think there's still not enough
choices for the consumer at the sub thirty thousand dollars range.
Speaker 4 (07:38):
So who makes you know, Steve, who makes the most
affordable EV out there?
Speaker 3 (07:43):
Is it?
Speaker 4 (07:43):
Is it Hyundai? Is it Kia?
Speaker 1 (07:46):
Yeah, it's Hunda, and the Asians do Hunda in Kia,
And I think I think if you look at globally,
the Chinese actually makes the most.
Speaker 4 (07:56):
They can't get that in the US.
Speaker 1 (07:58):
Yeah, it's well, we'll have to see. I think the
election is going to have He's going to have a
play and that.
Speaker 4 (08:06):
So it always goes back to the election.
Speaker 2 (08:07):
Yeah, Ed Love though it's also noting that he says,
I guess when it comes to the more affordable models
remaining on track for the start of production in twenty
twenty five, says those products will be built on quote
the same manufacturing lines as current vehicles, but it's kind
of always a wait and see good stuff, Steve. We'll
look for some of your research certainly tomorrow. Thank you
for coming along and helping him make some sense of
this Bloomberg Intelligence Global autos and industrial analyst Steve Mann,
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Tim Stenovec
Carol Massar
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