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Boeing Latest, Lennar Earnings · Bloomberg Intelligence

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Speaker 3: are not all traveling in the same direction or at
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Speaker 3: the same speed in twenty twenty four.
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Speaker 2: But first we dive into the airline industry and Boeing.
1:09
Speaker 2: A Boeing quality inspector recently alleged that the plane maker
1:12
Speaker 2: mishandled and lost track of hundreds of faulty parts, some
1:15
Speaker 2: of which he said may have been installed on new
1:17
Speaker 2: seven three seven maxplanes.
1:19
Speaker 3: The claims were detailed in a complaint by Boeing inspector
1:22
Speaker 3: Sam Mohawk with the Occupational Safety and Health Administration, and
1:25
Speaker 3: they deepen the pressure that Boeing already faces from Washington.
1:28
Speaker 3: The company's under investigation by multiple federal agencies, including the
1:32
Speaker 3: Justice Department.
1:33
Speaker 2: For more on to all Things Boeing, we were joined
1:35
Speaker 2: by George Ferguson Bloomberg Intelligence, senior Aerospace, Defense and Airlines analysts.
1:39
Speaker 3: We first asked George about some of the challenges that
1:41
Speaker 3: Boeing is now facing with its outsourcing strategies.
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Speaker 5: So in that same report, right, they talk about inspections
1:46
Speaker 5: at suppliers, they talk about monitoring quality suppliers better.
1:51
Speaker 4: Yeah, I just think.
1:51
Speaker 5: This is a it's a wholly different industry, right. I
1:54
Speaker 5: think there's a bunch of people that have come to
1:56
Speaker 5: the aerospace world from auto backgrounds and other mass production backgrounds, right,
2:03
Speaker 5: and in those worlds, safety isn't as important. Volume is
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Speaker 5: a lot higher. You can get multiple suppliers to provide
2:11
Speaker 5: products to your production line, you can work cost on
2:14
Speaker 5: those suppliers, and I think that whole game plan is
2:18
Speaker 5: really really difficult to do in aviation. And I think
2:22
Speaker 5: this is part of what we're seeing, right. I think
2:25
Speaker 5: you can outsource, but I think if you outsource, you know,
2:29
Speaker 5: you know, to your supplier base, I think it's still
2:32
Speaker 5: got to be you know, a pretty strong relationship with them,
2:36
Speaker 5: not a combative relationship where it's always about price, because
2:40
Speaker 5: it really matters the quality you get to your line, right,
2:43
Speaker 5: safety is dependent upon it. And so I think what
2:46
Speaker 5: we're finding out as this sort of you know, whole
2:49
Speaker 5: Boeing saga unravels, is outsourcing and banging up your suppliers
2:54
Speaker 5: for price just isn't a winning strategy in aviation.
2:57
Speaker 3: Have they course corrected enough or can?
3:00
Speaker 1: Look?
3:00
Speaker 5: I think they can. Everything can be fixed. I think
3:03
Speaker 5: if you look at their competitors across the pond, Airbus,
3:06
Speaker 5: they're not having these problems. I think Airbus has been
3:08
Speaker 5: less combative with some of their suppliers. They're in the
3:11
Speaker 5: middle of this correction. We know they want to buy
3:14
Speaker 5: Spirit Aerosystems. We're still waiting to hear news on that.
3:18
Speaker 5: There's still, you know, the challenge of getting some of
3:21
Speaker 5: the other companies that Spirit supplies, to name the Airbus
3:25
Speaker 5: probably out of the portfolio so they can recover. It's
3:29
Speaker 5: gonna take some time and it's gonna take a lot
3:32
Speaker 5: of work with their suppliers.
3:34
Speaker 2: So, George, if I think about, you know, rethinking my
3:38
Speaker 2: strategy with my suppliers and maybe focusing less on price
3:42
Speaker 2: competitives maybe a little bit more on quality, does that
3:44
Speaker 2: imply that Boeing's profit margins will be under pressure going forward?
3:49
Speaker 5: I think for sure, right, I think you're you're not
3:51
Speaker 5: going to receive a return to the Boeing margins you
3:55
Speaker 5: saw at the end of last decade. I'm not gonna
3:59
Speaker 5: say in time, perhaps they could get back to that.
4:03
Speaker 5: It's going to take a bunch of work here near
4:06
Speaker 5: term to improve the quality, and that's going to cost money.
4:10
Speaker 5: Plus we already know that some of the business they
4:12
Speaker 5: put in the books, right, they had some challenges delivering
4:15
Speaker 5: into China. That was kind of the one two whammy
4:17
Speaker 5: after they had the grounding of the Max and the crashes.
4:21
Speaker 5: We know they probably sold a bunch of airplanes for
4:24
Speaker 5: some pretty good prices to really core customers like United,
4:28
Speaker 5: like Southwest. So I think that I think both, you know,
4:31
Speaker 5: both on the cost side again, given this correction to
4:35
Speaker 5: improve the supply base, improve production, get capacity rolling again,
4:39
Speaker 5: as well as some of the pricing they gave away
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Speaker 5: on backfill for orders means you're not looking at a
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Speaker 5: Boeing that's going to get those margins fore you through
4:49
Speaker 5: this decade.
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Speaker 3: I think if I look at Boeing stock, then I
4:52
Speaker 3: mean it's down from December. Does that accurately reflect then
4:56
Speaker 3: this tighter profit margin world to sort of revamp and
4:59
Speaker 3: the course correct and that they have.
5:01
Speaker 5: To do so, you know, I think when you look
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Speaker 5: at their valuations, you know, their historical valuations, One, they're
5:08
Speaker 5: really high right now, right because earnings are so low,
5:12
Speaker 5: you know. So I think that there is a little
5:14
Speaker 5: bit of investor look through at this point, you know,
5:17
Speaker 5: on the current problems they have. But whether or not
5:21
Speaker 5: they're properly positioned for the out years right now, I
5:24
Speaker 5: think it's all a function of if they can quickly
5:28
Speaker 5: improve the build rate so they can improve economies of
5:31
Speaker 5: scale and start to get more profitability back into this
5:34
Speaker 5: business and that you know, really remains to be seen.
5:37
Speaker 2: George, you mentioned China. Where is Boeing in terms of
5:40
Speaker 2: getting the seven three seven macs in the air and
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Speaker 2: China kind of how's that business looking in terms of
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Speaker 2: sales and deliveries.
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Speaker 5: So their deliveries going into China, right and uh, it
5:51
Speaker 5: looks to us to largely be deliveries that were you know, built,
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Speaker 5: you know, when the seven three seven was grounded, and
5:59
Speaker 5: they're started to get some of those back into the country.
6:02
Speaker 2: But China's also has this problem now with.
6:04
Speaker 5: The flight recorder that's been authorized by other jurisdictions, including
6:09
Speaker 5: the US. So I mean it feels to me like
6:13
Speaker 5: China's allowing deliveries, but you know, they're still not maybe
6:17
Speaker 5: keen on taking a lot of deliveries from Boeing. I
6:20
Speaker 5: haven't seen a bunch of orders come in from China,
6:23
Speaker 5: you know, for Boeing, And so I would say that
6:25
Speaker 5: relationship still, while it's maybe thawing a bit, is nowhere
6:30
Speaker 5: near where it was in the last decade. And they
6:33
Speaker 5: have their problems too.
6:34
Speaker 4: Right now.
6:35
Speaker 5: I think they don't need as many airplanes, their economy
6:38
Speaker 5: isn't growing as fast. Air travel isn't growing as fast.
6:41
Speaker 5: But I still think that relationship is not in the
6:44
Speaker 5: right place where it should be, where you'd like it
6:47
Speaker 5: to be. I think for Boeing before I let.
6:48
Speaker 3: You go, any word yet on the replacement for Dave Calhoun. Like,
6:52
Speaker 3: how's that going?
6:53
Speaker 4: He laughed?
6:54
Speaker 3: Answer is laughing.
6:55
Speaker 5: Yes, what I hear from news reports is picking up still.
7:00
Speaker 5: But gee, I mean, I don't know, it's been a while.
7:04
Speaker 5: There's a lot of conjecture. It's a hard job. There's
7:07
Speaker 5: probably a lot of people that just aren't willing to
7:09
Speaker 5: take it. I don't know, you know, they got to
7:12
Speaker 5: the end of the year, and so maybe they're going
7:14
Speaker 5: to use it all. I don't know.
7:15
Speaker 3: I mean, and anyone but Larry Culp that you keep
7:18
Speaker 3: hearing about, that's for real.
7:20
Speaker 5: So I don't really track the people that's you know,
7:22
Speaker 5: that's kind of hard for me. I do know, like
7:25
Speaker 5: it said, it's got to be a rock star manufacturing,
7:29
Speaker 5: you know, sort of CEO. I don't know that there's
7:32
Speaker 5: a lot of them left in America. I think we
7:34
Speaker 5: do a lot of outsourcing now, so maybe that makes
7:37
Speaker 5: it a taller order too.
7:38
Speaker 6: I don't know.
7:39
Speaker 2: Our thanks to George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense
7:42
Speaker 2: and Airlines analyst.
7:43
Speaker 3: We move next to big tech and alphabet's Google. Google
7:46
Speaker 3: has faced immense pressure to keep pacing artificial intelligence with
7:50
Speaker 3: Open AI and other companies, and in April of twenty
7:52
Speaker 3: twenty three, the tech giant announced it would combine its
7:54
Speaker 3: two elite AI teams, Google Brain and deep Mind.
7:58
Speaker 2: Google would form what it described as an AI super
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Speaker 2: unit called Google deep Mind. This is the subject of
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Speaker 2: a Bloomberg BusinessWeek story this week entitled Google deep Mind
8:08
Speaker 2: shifts from research lab to AI product factory.
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Speaker 3: For more. We were joined this week by one of
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Speaker 3: the stories authors, Bloomberg Tech reporter Mark Bergan. We first
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Speaker 3: asked Mark about Google's AI strategy.
8:18
Speaker 4: I think, you know, the good way to put their
8:19
Speaker 4: their strategy in some ways is they're trying to longer
8:23
Speaker 4: be in their back foot. But I think that with
8:24
Speaker 4: the past two years and that our story looks at
8:26
Speaker 4: how Google and deep Mind really set the infrastructure and
8:30
Speaker 4: then the base layer for this sort of AI boom
8:32
Speaker 4: that we've had, and then Chatgebt kind of took all
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Speaker 4: the glory in some ways, and so in their playing
8:38
Speaker 4: ketchup in you'd say, not necessarily on the technical side,
8:42
Speaker 4: but there's certainly now you know, chat, scheebt and all
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Speaker 4: iterations from the different companies building language models like anthropic
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Speaker 4: and cohere, they're all sort of threatening Google Search in
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Speaker 4: a way that really hasn't happened in almost two decades,
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Speaker 4: and so their strategy is I would say defensive at
8:58
Speaker 4: this point.
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Speaker 3: How does does it get on the offense? What does
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Speaker 3: it need to do to sort of change that narrative?
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Speaker 4: Yeah, I think you know the story. We looked at
9:05
Speaker 4: a lot about this mergers that they that Google put
9:08
Speaker 4: in place a year ago so they've had out here
9:10
Speaker 4: in London is Deep Mind, which is widely consider like
9:13
Speaker 4: the world's leading AI lab and has for the past
9:15
Speaker 4: decade effectively been the best funded university running in the world.
9:20
Speaker 4: They basically been a research lab. They put out some
9:23
Speaker 4: great breakthroughs like alpha go alpha fold around protein folding,
9:28
Speaker 4: but they've not been deeply integrated and connected with kind
9:31
Speaker 4: of Google's commercial and profit center, Google Brain, which was
9:34
Speaker 4: the competing AI lab or that they also had in
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Speaker 4: California that was a little bit more tied to a
9:40
Speaker 4: lot of the popular Google services, and they've been all
9:42
Speaker 4: merged that for the past year under demosacibus here who
9:46
Speaker 4: runs all of Google AI. It's had kind of a
9:48
Speaker 4: bumby road so far, but I think their plan is
9:51
Speaker 4: to continue to ship things like Gemini their big foundational model,
9:55
Speaker 4: tweak that and start kind of integrating a lot of
9:58
Speaker 4: this research directly into commercial services.
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Speaker 2: Mark what does Google say about that chat GPT and
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Speaker 2: just as a fundamental threat to the core Google search business?
10:10
Speaker 2: How do they respond to that?
10:11
Speaker 4: Yeah, I mean, you know, Google publicly is great about
10:14
Speaker 4: never talking about their rivals by name. Anyways, they say nothing,
10:17
Speaker 4: And I think that something they've talked about for a
10:19
Speaker 4: long time is that sort of their their token phrase
10:21
Speaker 4: that soon they're but cha uses is that the search
10:23
Speaker 4: is the last kind of biggest moonshot for Google. I
10:27
Speaker 4: think they are thinking, and you know, they're thinking a
10:28
Speaker 4: lot about what that search interface looks like. You know,
10:32
Speaker 4: how they're going to adapt to if consumers move to
10:35
Speaker 4: things like Chat, schipt and Gemini. What does that mean
10:38
Speaker 4: for Google Search ads business, which is still the line's
10:42
Speaker 4: share of its revenue. They've had some some clear mishaps.
10:45
Speaker 4: I've looked pretty ugly snaffoos, and since the launch of
10:49
Speaker 4: Gemini or this year, right, like there was that kind
10:51
Speaker 4: of famous incidents where they were some of the responses
10:54
Speaker 4: were encouraging people to put glue on pizza, right, there
10:58
Speaker 4: were these They've described this as sort of like this
11:00
Speaker 4: is kind of early stage in this technology and some
11:03
Speaker 4: stumbles that they've had, but you know, they are the
11:06
Speaker 4: world's leaders in search and this is something where you
11:09
Speaker 4: know they have a lot of deep responsibility to get
11:11
Speaker 4: this right, not just for their business but for people's
11:14
Speaker 4: trust in using Google.
11:16
Speaker 3: Well that's what's so difficult, right, It's like all the
11:18
Speaker 3: technology is changing so fast, but you still need to
11:21
Speaker 3: like do it. So it's it's you're like we're watching
11:23
Speaker 3: it in real time. Paul and I were just talking
11:25
Speaker 3: about a Washington Post article and then talked about how
11:28
Speaker 3: all the AI models cannot answer who won the presidential
11:31
Speaker 3: election in the US in twenty twenty. And I'm just wondering,
11:34
Speaker 3: like how these advanced technologies solve for problems that they're
11:39
Speaker 3: using these large language models, which is basically like, you know,
11:41
Speaker 3: me and Paul talking are regular people talking, does that
11:44
Speaker 3: also mess them up?
11:46
Speaker 4: It reminds me a little bit of it's a slightly
11:48
Speaker 4: different technology obviously, but you know they're In twenty sixteen,
11:51
Speaker 4: Google had this big mess where if there was a
11:54
Speaker 4: popular or there's a blog or this kind of fringe
11:56
Speaker 4: blog that said that if I remember this correctly, it's
11:59
Speaker 4: been a long time, it was that Hiller Clinton won
12:01
Speaker 4: the election in twenty sixteen, right, and that was a
12:03
Speaker 4: top of for briefly and momentarily top of Google News results.
12:06
Speaker 4: And they've dealt with this sort of problem around misinformation,
12:09
Speaker 4: around totally not credible sources being at the top of
12:13
Speaker 4: Google Search. You're seeing problems that are now dealing with.
12:16
Speaker 4: I saw a story about Google images and like consensual porn.
12:20
Speaker 4: I mean, these problems I think are being multiplied because
12:22
Speaker 4: with these tools of that generative AI do, which Google
12:25
Speaker 4: talks a lot of as being revolutionary, it also just
12:27
Speaker 4: makes content production so much easier. And so there's this
12:31
Speaker 4: multitude of content now and Google has been this sort
12:35
Speaker 4: of their primary services to organize this, and that has
12:38
Speaker 4: a lot of messy problems, especially what OpenAI has kind
12:42
Speaker 4: of forced and Microsoft as forced Google is to move
12:44
Speaker 4: a lot faster than they have been in years past,
12:47
Speaker 4: and we've seen some clear stumbles from that.
12:49
Speaker 2: Our thanks to Mark Bergan, Bloomberg Technology Reporter.
12:51
Speaker 3: Coming up, We're going to break down my recent guidance
12:53
Speaker 3: from the home old Leonard disappointed investors.
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13:29
Speaker 3: We move next to the home builder Lenar. This week.
13:32
Speaker 3: The company reported better than expected orders in the second quarter,
13:35
Speaker 3: but it's forecast for deals in the current quarter missed
13:37
Speaker 3: analyst expectations, and Lenar shares fell.
13:39
Speaker 2: After the report, Lenar said that affordability continued to be
13:43
Speaker 2: tested by interest rate movements and simultaneously challenged consumer sentiment.
13:47
Speaker 2: For more on this and the latest in the home
13:49
Speaker 2: building space, we were joined by Drew reading Bloomberg Intelligence
13:52
Speaker 2: US Homebuilding analysts.
13:53
Speaker 3: We first asked Drew for his key takeaways and why
13:55
Speaker 3: investors were so unhappy after Lenar reported its results.
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Speaker 6: It's so much about what's happened with the volumes they
14:01
Speaker 6: deliver good orders. They're up nineteen percent. They maintain their
14:04
Speaker 6: full year guidance for eighty thousand home closings. It has
14:07
Speaker 6: to do with their outlook for gross margin. They guided
14:10
Speaker 6: to about one hundred basis points below what the street
14:12
Speaker 6: was looking for, and as you mentioned, that would require
14:15
Speaker 6: a ramp in the fourth quarter to about twenty five percent. So,
14:18
Speaker 6: like you said, there's definitely some skepticism in their ability
14:22
Speaker 6: to meet their full year outlook. The reason for that
14:25
Speaker 6: is because we saw rates move up as high as
14:27
Speaker 6: seven and a half percent during the quarter. You know,
14:29
Speaker 6: they've come back in a little bit, but we're seeing
14:32
Speaker 6: their need to incentivize buyers remain elevated, and that's what's
14:35
Speaker 6: impacting profitability.
14:37
Speaker 2: So where are we in that activity there? If I'm
14:39
Speaker 2: looking at of seven percent mortgage, what are they going to.
14:41
Speaker 1: Do for me?
14:42
Speaker 6: Yeah, So typically what we're seeing is that the builders
14:45
Speaker 6: will maintain a spread versus the headline rate. So if
14:47
Speaker 6: you're seeing seven and a half percent in the market.
14:50
Speaker 6: Typically you're going to get six percent from a builder.
14:53
Speaker 6: You know, there are some other builders, and depending on
14:55
Speaker 6: the market, depending on how strong the market is, what
14:57
Speaker 6: the man looks like, they could get you into the fives.
15:00
Speaker 6: But obviously that's going to cost them on the gross
15:02
Speaker 6: margin line. So the incentives they're using are certainly working.
15:06
Speaker 6: It's just what's the cost so.
15:08
Speaker 3: That one percent the hundred basis point missed, but then
15:11
Speaker 3: keeping their guidance for gross margin for the year, that
15:13
Speaker 3: must imply that they're looking for rake cuts.
15:16
Speaker 6: Yeah, I think a lot of it has to do
15:18
Speaker 6: with what they're doing on the cost side. One of
15:20
Speaker 6: you know, Lenar's emphasis for their business over the last
15:24
Speaker 6: several years has really been running a more efficient manufacturing
15:27
Speaker 6: based business where they're not necessarily just chasing volume, but
15:31
Speaker 6: they're doing it the right way. They're fine tuning their
15:34
Speaker 6: floor plans, they're pushing back on their suppliers. You have
15:37
Speaker 6: to remember they're one of the second largest builder in
15:39
Speaker 6: the country, but they're one of the only builders who
15:41
Speaker 6: has scale at the national level, so they're able to
15:45
Speaker 6: leverage that and kind of push back a little bit.
15:47
Speaker 6: So certainly some of the benefit that they expect in
15:49
Speaker 6: foro Q, I would assume is going to come from
15:51
Speaker 6: what they're doing on the costs side, as well as
15:53
Speaker 6: fixed leverage from higher deliveries. But nonetheless that's still going
15:57
Speaker 6: to be the focal point for investors is how do
15:59
Speaker 6: they get there?
16:00
Speaker 4: How much?
16:00
Speaker 2: I mean, I remember this back in the beginning of
16:02
Speaker 2: the pandemic, lumber went crazy, Where are we in lumber?
16:06
Speaker 2: And how is that a part of their gross margin?
16:09
Speaker 6: Sure so numbers about ten percent of the cogs for
16:11
Speaker 6: a builders, so it's certainly the most important input costs.
16:14
Speaker 6: As you would expect, you know, lumber prices have come
16:18
Speaker 6: back down a lot, so builders have been benefiting on
16:21
Speaker 6: the margin side. I think we've seen more stabilization of late,
16:24
Speaker 6: perhaps a little rise to the upside, but really lumbers
16:27
Speaker 6: not impacting the business in as significant a way as
16:30
Speaker 6: it was over the last couple of years.
16:32
Speaker 2: What the companies tell you about their expectations for interest rates,
16:36
Speaker 2: mortgage rates, what are they think is going to happen?
16:38
Speaker 6: So I think the expectation broadly is that mortgage rates
16:41
Speaker 6: will start to come in a little bit as we
16:42
Speaker 6: get through the end of the year. I don't think
16:44
Speaker 6: they're managing their business for any you know, significant and
16:48
Speaker 6: dropping rates back to you know, where we were previously.
16:50
Speaker 6: But I think as a builder from a demand perspective,
16:53
Speaker 6: if we get rates coming back to the six and
16:55
Speaker 6: a half percent range, you know, that's that's pretty much
16:58
Speaker 6: a sweet spot for them. You know, we've heard that
17:01
Speaker 6: as you get to five and a half percent, that's
17:03
Speaker 6: really when demand in the market starts to move. So
17:06
Speaker 6: the fact that if we could get to six and
17:08
Speaker 6: a half they're buying down rates one hundred basis points,
17:10
Speaker 6: I think they'll continue to do well. And you know
17:12
Speaker 6: what's interesting is the public builders are kind of at
17:16
Speaker 6: the top of the food chain as it comes to housing.
17:19
Speaker 6: You have to realize they're generating about fifty percent market
17:22
Speaker 6: share compared to call it thirty eight percent prior to
17:25
Speaker 6: the pandemic. Really, so they've really leveraged that lack of
17:29
Speaker 6: inventory in the resale market and the struggles among some
17:32
Speaker 6: of the smaller private piers, and they've capitalized on it.
17:35
Speaker 3: So when you say we have to the five and
17:37
Speaker 3: a half percent is kind of a nice sweet spot.
17:39
Speaker 3: So that implies the Fed funds rate a six and
17:41
Speaker 3: a half percent and the home builders still give that
17:43
Speaker 3: hundred basis point discount. When the Fed funds rate gets
17:46
Speaker 3: to five and a half percent, do the builders still
17:49
Speaker 3: offer that one hundred basis point discount.
17:52
Speaker 6: I think it's going to depend on what the broader
17:54
Speaker 6: macro economic situation looks like. If we get a pool
17:58
Speaker 6: back in rates, you know, a modest pullback, and we
18:02
Speaker 6: are still dealing with a pretty solid labor market, I
18:05
Speaker 6: think that you know, builders will be able to definitely
18:08
Speaker 6: pull back on their use of incentives. I don't know
18:11
Speaker 6: that they'll go away altogether, because at this point that's
18:13
Speaker 6: something that buyers are looking to and it certainly made
18:16
Speaker 6: their product more attractive. If we get a significant pullback
18:19
Speaker 6: in rates and it's because you know, the economic situation
18:22
Speaker 6: has deteriorated further, that's obviously more of a concern and
18:26
Speaker 6: we would see them probably pushing centives even harder.
18:29
Speaker 2: Our thanks to Drew Redding Bloomberg Intelligence at US home
18:31
Speaker 2: building analyst.
18:32
Speaker 3: Moving to Japan, we hear the country is now dealing
18:35
Speaker 3: with rising cases of a disease caused by a rare
18:38
Speaker 3: flesh eating bacteria that can kill people within forty eight hours.
18:42
Speaker 2: Health authorities have reported over one thousand cases of strip
18:45
Speaker 2: to cockle toxic shock syndrome in the first six months
18:49
Speaker 2: of twenty twenty four. At the current rate of infection,
18:51
Speaker 2: experts fear the number of cases in Japan could reach
18:53
Speaker 2: twenty five hundred this year.
18:55
Speaker 3: For more on all this, we turned to one of
18:57
Speaker 3: the experts, Amshidalgia, Senior Scholar at the Center for Health
19:00
Speaker 3: Security at John Hopkins Bloomberg School of Public Health. He's
19:03
Speaker 3: also an infectious disease physician.
19:05
Speaker 2: We first asked Amash to tell us more about the
19:08
Speaker 2: bacterial infection in Japan.
19:10
Speaker 7: Streptococcus is a bacteria that all of us have dealt with.
19:13
Speaker 7: It's the same bacteria that causes strep throat. What can
19:16
Speaker 7: happen though in certain individuals is it can be a
19:20
Speaker 7: much more severe infection where it can cause what we
19:23
Speaker 7: call necrotizing or flesh eating type of skin infections and
19:28
Speaker 7: then also spread systemically and caused multiple different organ systems
19:32
Speaker 7: to shut down. So that's when we use the kind
19:34
Speaker 7: of term toxic shocks, and there would say that bacteria
19:37
Speaker 7: basically disseminates toxins throughout your whole body and it's a
19:40
Speaker 7: very serious illness with high levels of morbidity, immortality.
19:44
Speaker 3: Doctor, is this new or has this always been the case.
19:48
Speaker 7: It's always been the case. What's new is that in
19:50
Speaker 7: Japan post pandemic, they've reported at least two years where
19:54
Speaker 7: they've had higher than normal cases and trying to unravel
19:57
Speaker 7: the mystery of why that change in epidemiology occurred is
20:00
Speaker 7: what's getting headlines right now. But streptococcle toxic shock syndrome
20:04
Speaker 7: has been around forever. It's just this increase in Japan
20:07
Speaker 7: that people are interested in.
20:09
Speaker 2: How do the medical professionals, how are they treating this?
20:13
Speaker 7: So the mainstay is going to be antibiotics, but because
20:16
Speaker 7: it's this systemic toxin disease, we often give other drugs
20:18
Speaker 7: to modulate the immune system, and if there are elements
20:23
Speaker 7: of flesh eating disease going on, they basically have to
20:26
Speaker 7: do extensive surgery to kind of cut ahead of the infection.
20:30
Speaker 3: Oh my god, this sounds terrible. How quickly does this happen?
20:34
Speaker 3: I mean, you know, strap can come on really quickly
20:38
Speaker 3: and it might take you a couple of days to
20:39
Speaker 3: realize that you have it. Like, what's the cycle for this?
20:42
Speaker 7: Well, when you get into that toxic shock syndrome, spiral
20:46
Speaker 7: it's very fast. They can be dramatic, you know, even
20:49
Speaker 7: in an hour can be a major difference in a patient.
20:52
Speaker 7: But it's important remember that not everybody that gets a
20:53
Speaker 7: strep infection is going to get it's still rare. Most
20:57
Speaker 7: people who have a strep infection of their throat or
20:59
Speaker 7: of their skin going to turn out to be kind
21:01
Speaker 7: of a garden variety infection. But it is important for
21:04
Speaker 7: clinicians to keep in mind that if people are getting worse,
21:07
Speaker 7: if they're not getting better, if they're more concerning systemic
21:11
Speaker 7: symptoms occurring, that they think about this. And it's also
21:14
Speaker 7: important for patients to know that as well, that if
21:15
Speaker 7: they're not getting better in the expected time, or they're
21:17
Speaker 7: taking a turn for the worst when they're already on antibiotics,
21:21
Speaker 7: that this is something where they need to seek care immediately.
21:23
Speaker 2: Is there any reason why it would be I guess
21:26
Speaker 2: localized in Japan here, anything that is unique to that part.
21:30
Speaker 7: Of the world, not particularly, I mean, we've seen increases
21:33
Speaker 7: in streptococal infections, not necessarily toxic shock causing ones all
21:37
Speaker 7: over the different countries. For example, the UK had a
21:39
Speaker 7: major issue with this a couple of years ago, and
21:42
Speaker 7: it may be having to do with kind of idiosyncrasies
21:45
Speaker 7: in the immunity in the population in Japan. Remember, we
21:47
Speaker 7: all came through a pandemic where there was a lot
21:49
Speaker 7: of social distancing and many of the ordinary infections that
21:52
Speaker 7: people get every year were kind of disrupted. And there
21:57
Speaker 7: may have been different disruptions in different parts of the
21:59
Speaker 7: world and different lens of these infections, and now they're
22:03
Speaker 7: kind of coming back to their prior levels and there's
22:07
Speaker 7: some catching up to do. There are people who might
22:09
Speaker 7: not have had as much immunity because they weren't exposed
22:11
Speaker 7: at a low level over the last couple of years,
22:13
Speaker 7: or they just might not have been infected. And there's
22:16
Speaker 7: a certain number that are going to be expected every
22:18
Speaker 7: year in Japan, and because you had a two year lull,
22:22
Speaker 7: now it's coming back to baseline levels and that's what
22:25
Speaker 7: they're noticing. So this is kind of one of the
22:27
Speaker 7: leading hypothesis. But we don't know quite everything for sure
22:29
Speaker 7: what's going on in Japan, but that's what I think
22:31
Speaker 7: is at play.
22:32
Speaker 3: What are the signs you mentioned that if you're on
22:34
Speaker 3: antibiotics for strap and you don't get better, but you
22:36
Speaker 3: get worse. What are some other signs that people should
22:38
Speaker 3: be looking out for.
22:40
Speaker 7: Well, so severe a spreading rash that's getting severe, severe pain,
22:43
Speaker 7: if there's a rash where the infection might have been,
22:46
Speaker 7: anything involving low blood pressure, extreme fatigue, not being clear mentally,
22:52
Speaker 7: difficulty breathing, all of those kind of signs that the
22:55
Speaker 7: infection is not localized.
22:58
Speaker 2: Nic doctor. I remember we should talk to you all
23:00
Speaker 2: the time during the pandemic. You're very kind to share
23:02
Speaker 2: your time and you know, kind of educate a lot
23:04
Speaker 2: of folks on what this virus was, how doctors and
23:09
Speaker 2: health professionals were treating it, and then ultimately the vaccine
23:12
Speaker 2: and the efficacy of the vaccine. So we again appreciate
23:15
Speaker 2: all that time you gave us. Now that we've got
23:17
Speaker 2: that in the rear view mirror here, I know one
23:20
Speaker 2: of the themes that came out of that was just
23:22
Speaker 2: the stress on the healthcare system and the people of
23:26
Speaker 2: the healthcare system that doctors and nurses and everybody of
23:28
Speaker 2: the work they had to be in the front lines
23:31
Speaker 2: during those early months and that year. How are the folks,
23:35
Speaker 2: the good folks at Johns Hopkins that you deal with
23:37
Speaker 2: in the facilities, how are they doing? Several years on now, well,
23:42
Speaker 2: I think.
23:43
Speaker 7: That most healthcare systems around the country have kind of
23:45
Speaker 7: come to a new normal where there's kind of chronic burnout,
23:49
Speaker 7: there are chronic staffing issues where people quite haven't recovered
23:54
Speaker 7: from the way that the pandemic altered hospital operations. And
23:59
Speaker 7: this is going to be one of the long tails
24:01
Speaker 7: of the pandemic. It's not something that you can just
24:03
Speaker 7: bounce back from. There wasn't a lot of resiliency built
24:06
Speaker 7: into the system, There wasn't a lot of kind of
24:08
Speaker 7: slack in it, and the pandemic ate up all that slack,
24:11
Speaker 7: and I just think that we're in a situation where
24:15
Speaker 7: a lot of people still are carrying those scars around
24:19
Speaker 7: of that time when they were overworked, where there were
24:21
Speaker 7: concerns about personal protective equipment, where hospitals were crashing, and
24:26
Speaker 7: even when you look at the economics of hospitals, we're
24:28
Speaker 7: seeing hospitals closed world hospitals really looking at their financial viability,
24:33
Speaker 7: hospital bankruptcies. So this was something that took a major
24:36
Speaker 7: toll on the healthcare system, just like we expected and
24:38
Speaker 7: predicted it would, And this is why it's so important
24:41
Speaker 7: to incorporate healthcare preparedness healthcare resiliency into planning for the
24:45
Speaker 7: next infectious disease emergency, whatever it might be. This can't
24:49
Speaker 7: just be something that we think about when there's a crisis,
24:51
Speaker 7: when it's in the headlines. This is something that needs
24:53
Speaker 7: to be done kind of with a long term eye
24:56
Speaker 7: to the future to make a sustainable way to operate
25:01
Speaker 7: hospitals and make emergency prepared and as part of their
25:04
Speaker 7: core function.
25:04
Speaker 3: How are we doing with COVID? I mean, COVID loves me.
25:08
Speaker 3: It doesn't love Paul, but it loves me. How are
25:11
Speaker 3: we doing with COVID? What are the cases like? Are
25:14
Speaker 3: we going to get vaccinations in the fall for flu
25:16
Speaker 3: en covid? What do you think?
25:18
Speaker 7: Well, COVID is something that's increased over time in the
25:20
Speaker 7: last several weeks or so. But we've seen is this
25:23
Speaker 7: virus is endemic, but it continues to mutate and spin
25:27
Speaker 7: off new variants that are able to infect us. So
25:30
Speaker 7: right now, all across the country, COVID cases are up,
25:32
Speaker 7: emergency department visits are up, but its ability to cause
25:35
Speaker 7: severe disease, its ability to crush the hospital severely constrained
25:39
Speaker 7: because of the immunity and the other tools that we have.
25:41
Speaker 7: We will have new vaccines in the fall that are
25:44
Speaker 7: better targeted to what's circulating, and that will likely be
25:47
Speaker 7: something that's recommended to high risk individuals that they get
25:50
Speaker 7: right alongside their flu vaccine.
25:52
Speaker 2: Thanks to Ama Schadalgia, senior scholar at the Center for
25:55
Speaker 2: Health Security at Johns Hopkins's Bloomberg School of Public Health.
25:58
Speaker 3: Coming up on the program versation with Weatherford International CEO
26:02
Speaker 3: about the company's turnaround post bankruptcy.
26:05
Speaker 2: We're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
26:08
Speaker 2: research and data on two thousand companies in one hundred
26:10
Speaker 2: and thirty industries. You can access Bloomberg Intelligence via Bigo
26:13
Speaker 2: on the terminal, I'll Paul Sweeney.
26:15
Speaker 3: And Amlex Steel and this is Bloomberg.
26:22
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
26:26
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26:32
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26:36
Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
26:40
Speaker 3: We take a look now at the company Weatherford International
26:42
Speaker 3: ticker WFRD. Weatherford is an oil services company that also
26:47
Speaker 3: has a leg into the energy transition.
26:49
Speaker 2: What makes them interesting is that the company went bankrupt
26:52
Speaker 2: in twenty nineteen, and in twenty twenty, Weatherford announced several
26:55
Speaker 2: changes to its executive leadership team, and its stock has
26:58
Speaker 2: since rebounded.
26:59
Speaker 3: Weather Firs stock part increase ninety two percent in the
27:02
Speaker 3: full year of twenty twenty three, outpacing its peers. So
27:04
Speaker 3: for more on the company, we were joined by its
27:06
Speaker 3: president and CEO, Garesh Salgram.
27:09
Speaker 2: We first asked Garesh where the company is in its turnaround.
27:12
Speaker 8: Look, it's been a terrific four years. The team's done
27:14
Speaker 8: an incredible job. I think very few people could have
27:17
Speaker 8: dreamt where it would be today and what was possible.
27:21
Speaker 8: You Know, the way I think about it is, the
27:23
Speaker 8: turnaround's mostly done. You know, we've gotten the company out
27:26
Speaker 8: of the ditch. We have stabilized everything, We've fixed the
27:29
Speaker 8: balance sheet. So the journey so far has been from
27:32
Speaker 8: broken to good. The next phase of the journey is
27:35
Speaker 8: really the good to great journey. And that's what I'm
27:37
Speaker 8: actually very excited about, because if we've been able to
27:39
Speaker 8: do all of the things that we've done over the
27:41
Speaker 8: past four years with a lot of constraints, a lot
27:43
Speaker 8: of shackles. You know, the exciting part is what we
27:47
Speaker 8: can do without that.
27:48
Speaker 3: So when you go from good to great, does that
27:51
Speaker 3: mean like a lot of buybacks and dividends?
27:53
Speaker 4: Does that mean? Yeah?
27:54
Speaker 9: What is that?
27:55
Speaker 8: Look, it's a lot of different things, but ultimately it
27:58
Speaker 8: is creation of value, and it's creation of value for
28:00
Speaker 8: our customers, for our employees, and most of all for
28:04
Speaker 8: our shareholders. But it's doing that with continued focus on
28:07
Speaker 8: greater cash generation, which comes from better margins, better improvement
28:11
Speaker 8: in the way we manage our networking capital, but also
28:14
Speaker 8: ultimately better investments. So our real goal is to make
28:18
Speaker 8: sure that we've got world classes that are done on
28:20
Speaker 8: invested capital.
28:21
Speaker 2: Now that you've I see as an outsider to the
28:24
Speaker 2: energy industry, I see a lot of m and a
28:26
Speaker 2: activity there, and being a former banker myself, that's what
28:29
Speaker 2: hits my radar screen. How do you guys think about
28:31
Speaker 2: MNA for your business now that you are on maybe
28:34
Speaker 2: firmer footing correct?
28:35
Speaker 8: You know, for the first three years, MNA was a
28:38
Speaker 8: bad word. You know, Weatherford actually built up on a
28:40
Speaker 8: series of acquisitions and a lot of issues with that,
28:42
Speaker 8: especially around the lack of integration. So the first three
28:45
Speaker 8: years that I've been in the role, we really focused
28:47
Speaker 8: on the organic capabilities of the company, building out the portfolio,
28:51
Speaker 8: making sure we fix the operating intensity and the rigor
28:53
Speaker 8: around the company. But we have now gotten to a
28:55
Speaker 8: point where MNA has become a very important salient topic.
28:59
Speaker 8: We actually just exercise that muscle for the first time.
29:02
Speaker 8: We announced three small acquisitions back in February, so two
29:07
Speaker 8: in the wireline technology space, one in a very exciting space,
29:10
Speaker 8: and Intervention, which really gives us capability in slaught recovery
29:13
Speaker 8: and plug an abandonment, which is a very key part
29:16
Speaker 8: of that energy transition. So we've started to do that,
29:19
Speaker 8: and I think there will be more to come because
29:21
Speaker 8: we've now got a balance sheet that allows us to
29:23
Speaker 8: do that, and more importantly, a team that understands the
29:26
Speaker 8: importance of integration and is learning how to build that
29:28
Speaker 8: into the opening cadence of the company.
29:30
Speaker 3: How do your services differ than say one of your competitors,
29:33
Speaker 3: and how do you sort of invest for the life
29:35
Speaker 3: cycle of a welfare customer.
29:37
Speaker 8: Sure so in oilfield services, there's a lot of companies
29:41
Speaker 8: that do a lot of things similarly. So we've got
29:44
Speaker 8: what differentiates us. We've got a portfolio that provides core
29:47
Speaker 8: ofs services, so everything from brilling services to wireline, etc.
29:52
Speaker 8: But we're also able to complement that with what we
29:55
Speaker 8: call specialty services, things like managed pressure drilling, tubular running services,
30:00
Speaker 8: intervention services, etc. That very few, if anyone, has, So
30:03
Speaker 8: that combination of broad based services that allow us to
30:07
Speaker 8: go toe to toe with the larger peers in the
30:09
Speaker 8: sector as well as then these specialty products and specialty
30:12
Speaker 8: services give us that differentiation and also allow us to
30:15
Speaker 8: have higher margins.
30:16
Speaker 2: You know, I keep jogging to alex with oil at
30:19
Speaker 2: eighty dollars a barrel. I'm going to drive down to
30:21
Speaker 2: Texas and start drilling some holes. I mean, isn't the
30:23
Speaker 2: cost like forty bucks in eighty dollars? I can make
30:26
Speaker 2: some money there, but I don't see a whole lot
30:28
Speaker 2: of drilling activity. What's going to take it for the
30:30
Speaker 2: industry to take advantage of these prices here?
30:32
Speaker 8: Look, I think the industry has really really embraced this
30:36
Speaker 8: concept of delivering returns for shareholders, and so I think
30:40
Speaker 8: there's a lot of discipline, especially around managing capital within
30:43
Speaker 8: the industry that's further exacerbated by the wave of M
30:46
Speaker 8: and A that's happening, which again goes back to driving
30:48
Speaker 8: higher returns. So I don't think in the US there's
30:51
Speaker 8: going to be necessarily a sea change. You know, at
30:54
Speaker 8: the range of oil prices that we are seeing right now,
30:56
Speaker 8: which I think in the long term is actually good
30:59
Speaker 8: for our especially it creates a balance versus the seesaw
31:03
Speaker 8: effect that you see in the cyclicality that we've seen
31:05
Speaker 8: in the past. We also have a very robust international market.
31:09
Speaker 8: So for Weatherford, less than twenty percent of our revenues
31:12
Speaker 8: come from North America. The bulk of it is really
31:14
Speaker 8: an international orientation, international leverage, so we see a very
31:18
Speaker 8: healthy market. Now the US is still the largest market
31:20
Speaker 8: in the world. We see a lot of activity, but
31:23
Speaker 8: it is something that is driven by capital discipline by
31:26
Speaker 8: our customers, which is a good thing.
31:27
Speaker 3: And we have M and A too. Does that eventually
31:29
Speaker 3: lead into less business for oral services companies because in theory,
31:32
Speaker 3: maybe an Exxon pioneer going to drill ten wells rather
31:35
Speaker 3: than twenty.
31:36
Speaker 8: Yeah, I think, Look, we are seeing a lot of
31:37
Speaker 8: drilling efficiencies, we are seeing the recount go down, But
31:40
Speaker 8: I think it all comes down to differentiation. As long
31:43
Speaker 8: as companies can differentiate and deliver value to allow our
31:46
Speaker 8: customers to make greater headway on their efficiencies to generate
31:50
Speaker 8: higher returns. I think they'll always be business again. It
31:52
Speaker 8: is the largest market still.
31:54
Speaker 2: I mean I'm looking at your income savent, I mean
31:56
Speaker 2: roughly half your revenue Eastern Hemisphere, half Western HEMISAE fear
32:00
Speaker 2: it gives the economics of both of those, your domestic
32:03
Speaker 2: markets versus your international.
32:04
Speaker 8: Yeah, you know, Historically North America was a very profitably
32:07
Speaker 8: challenged market for us on a profitability basis. Yeah, right,
32:12
Speaker 8: So our team's done a fabulous job over the past
32:15
Speaker 8: few years really changing the way we run the North
32:18
Speaker 8: America business. So today the profitability across all of our geographies,
32:22
Speaker 8: all of our regions is pretty much imbalance. So and
32:25
Speaker 8: I think, you know, I've always said the litmus test
32:27
Speaker 8: of our turnaround has been what's happened in the North
32:29
Speaker 8: America market over the past year. We've seen revenues decline
32:33
Speaker 8: in North America, but the profitability has actually gone up.
32:35
Speaker 8: So that's a real testament to what we've been able
32:39
Speaker 8: to do at Weatherford and the opening rigor the opening
32:41
Speaker 8: intensity that the team has put in.
32:44
Speaker 2: Our thanks to Gresh Saligram, President and CEO at Weatherford International.
32:48
Speaker 3: We have something here at Bloomberg called Bloomberg New Energy Finance.
32:51
Speaker 3: The idea behind it is to provide data on commodities, power, transport, industries,
32:55
Speaker 3: buildings and agriculture plus new technology.
32:58
Speaker 2: This week we look at BNF's globe long term forecast
33:01
Speaker 2: for electric vehicles for more. We were joined by Corey
33:03
Speaker 2: Cantor Bloomberg bn EF lead US electric vehicle analysts.
33:07
Speaker 3: We first asked Corey for his key takeaways from bnef's
33:10
Speaker 3: recent EV research.
33:11
Speaker 9: I think the big takeaway is that EV sales growth
33:15
Speaker 9: is happening on evenly across different regions in the world.
33:18
Speaker 9: Maybe not a surprising finding if you're following EV's on
33:20
Speaker 9: a day to day basis, but moving forward, we expect
33:23
Speaker 9: that to be a bit of the same. To give
33:25
Speaker 9: you a sense of where we see things going, we
33:27
Speaker 9: basically have both the near termout look and a long
33:29
Speaker 9: term out look. The near turnout look ends in twenty
33:32
Speaker 9: twenty seven, and so what we expect is by twenty
33:35
Speaker 9: twenty seven, global passenger EV sales will be about thirty
33:38
Speaker 9: million in our base case called the economic transition scenario,
33:42
Speaker 9: and a probably a better metric of that is thinking
33:44
Speaker 9: about EV share of passenger vehicle sale. So we'll move
33:47
Speaker 9: from a world where one in five cars sold is
33:50
Speaker 9: electric to a world where one in three is about
33:52
Speaker 9: thirty three percent, up from eighteen percent last year. By
33:56
Speaker 9: twenty forty, we expect that about seventy three percent of
33:59
Speaker 9: all new car sales will be electric, but there's a
34:01
Speaker 9: long way to go. And then on the US question,
34:04
Speaker 9: always good to compare it, I think to China and Europe.
34:06
Speaker 9: US passenger EV's shareff sale last year was around ten percent.
34:10
Speaker 9: We expect the next two years to see a bit
34:12
Speaker 9: of a slower growth. So only about twelve percent of
34:15
Speaker 9: new car sales should be electric this year, rising to
34:17
Speaker 9: about twenty nine percent by twenty twenty seven. Seems pretty good,
34:21
Speaker 9: but if you look at Europe in China, it's going
34:23
Speaker 9: to be much higher there. So by twenty twenty seven
34:25
Speaker 9: we expect about sixty percent of new car sales to
34:28
Speaker 9: be electric in China and forty one percent in Europe.
34:31
Speaker 9: And when we talk about passenger evs at B and
34:34
Speaker 9: EF that's both battery electric and plug and hybrid electric vehicles.
34:37
Speaker 2: Talked us about this plug in hybrid it feels like
34:39
Speaker 2: a lot of folks are suggesting that might be a
34:42
Speaker 2: very vible interim step for at least in the US
34:45
Speaker 2: in terms of the transition. Ev Is that how you
34:47
Speaker 2: think about it, Paul?
34:48
Speaker 9: Really good question. I also co wrote the plug and
34:51
Speaker 9: hybrid section of the report. We do a kind of
34:53
Speaker 9: deep dive which we do with a few different deep
34:55
Speaker 9: dives every year, and what we call thematic highlights. I
34:58
Speaker 9: think around p Has the question really is.
35:01
Speaker 2: Pheaps, yeah, pheat. Pluggin hybrids okay, plug in hybrids okay?
35:05
Speaker 9: Is how good are they going to be? If you
35:07
Speaker 9: look at the plug and hybrids in China, they're all
35:10
Speaker 9: electric mode, meaning they're kind of electric. Mileage they get
35:13
Speaker 9: before they have to turn on that gas engine is
35:16
Speaker 9: about twice as high in China currently as it is
35:19
Speaker 9: in the US. So quite simply, China is making not
35:21
Speaker 9: only better fully electric vehicles, but better plug and hybrids.
35:25
Speaker 9: We still think that there is some role for pehabs
35:28
Speaker 9: to play this decade in markets like the US in Japan.
35:32
Speaker 9: But what I've been big on pushing on is the
35:34
Speaker 9: product that we're getting today is not necessarily as good
35:37
Speaker 9: as it should be. So when you hear automakers say oh, well,
35:39
Speaker 9: maybe we'll do more hybrids or do more plug and
35:41
Speaker 9: hybrids instead of fully electric vehicles. I think a fair
35:44
Speaker 9: response would be to say, well, in Europe and China
35:47
Speaker 9: they're getting far more all electric mileage than here, so
35:49
Speaker 9: can you deliver some of that more high quality product. Ultimately,
35:53
Speaker 9: we do a bunch of different scenario analysis in the
35:55
Speaker 9: full report, and one downside of plug in hybrids is
35:58
Speaker 9: that if you go down that route and people are
36:00
Speaker 9: aren't charging them enough, which is harder to do because
36:02
Speaker 9: of the lower all electric range, you could end up
36:05
Speaker 9: in a scenario where you're having a lot higher oil
36:08
Speaker 9: demand use than if you just switch to fully electric vehicles,
36:11
Speaker 9: and that would not be good for your climate targets.
36:13
Speaker 3: When do you think the tipping point is when EV's
36:16
Speaker 3: become more of mass adoption here in the US.
36:19
Speaker 9: So what we've pointed that historically is this idea of
36:21
Speaker 9: upfront price parody. We're seeing total cost of ownership parody,
36:25
Speaker 9: including fueling already being hit in many different regions in
36:29
Speaker 9: terms of upfront costs. It really depends if you're comparing
36:31
Speaker 9: apples to apples, right, you see a lot more evs
36:34
Speaker 9: in that kind of low forty thousand dollars price range
36:36
Speaker 9: now high thirties. I think once you get to the
36:38
Speaker 9: low thirty thousand dollars price point. Really, according to our analysis,
36:42
Speaker 9: when we're looking at kind of a generic BEV versus
36:44
Speaker 9: a generic ice vehicle, we see it happening in the
36:47
Speaker 9: US over let's say the next three to four years,
36:49
Speaker 9: really twenty twenty six to twenty twenty eight. But really,
36:52
Speaker 9: if you're comparing a Tesla Model Y towards a lot
36:56
Speaker 9: of its competitor vehicles or Model three, you're getting pretty close.
37:00
Speaker 9: But that's where you start to see I think higher
37:01
Speaker 9: adoption where you won't have to necessarily have a premium
37:04
Speaker 9: and price. You also get a lot of good leasing
37:06
Speaker 9: deals today on EV's but it's a bit messier to
37:08
Speaker 9: kind of figure that out because you've got dealer markups,
37:10
Speaker 9: you've got different rates. But big picture, that upfront price parity.
37:14
Speaker 2: How about the charging infrastructure in the United States? To
37:17
Speaker 2: what extent is that been holding back the adoption of
37:20
Speaker 2: evs here and kind of how do we expect that
37:22
Speaker 2: to evolve?
37:22
Speaker 9: Yeah, I think that's the biggest difference between Europe and China.
37:26
Speaker 9: Our EVY outlook for folks who aren't familiar, has whole
37:29
Speaker 9: sections on charging infrastructure, how much investment is going to
37:32
Speaker 9: be needed moving forward, but really just taking a base
37:35
Speaker 9: level stat TESLA remains the number one provider of charging
37:39
Speaker 9: infrastructure here in the US in terms of reliability, in
37:42
Speaker 9: terms of number of fast charging stations, and then there
37:44
Speaker 9: isn't really a clear cut number two, three, four, five.
37:47
Speaker 9: My colleague Ryan Fisher does a bunch of great presentations
37:49
Speaker 9: on this, and one of actually the most impressive findings
37:52
Speaker 9: is US and Europe actually have a similar amount of
37:55
Speaker 9: chargers between the top six kind of charging infrastructure operators,
37:59
Speaker 9: but Europe has an addition five hundred operators after that
38:02
Speaker 9: that really supply the bulk of the market. So again,
38:04
Speaker 9: we want to see more of that infrastructure built out.
38:06
Speaker 9: There's been a lot of reporting around the federal funds
38:09
Speaker 9: rolling out really slowly because they've had to go through
38:12
Speaker 9: state RFPs. But yeah, that's the number one issue holding
38:15
Speaker 9: back probably the US market, maybe even moving past the
38:17
Speaker 9: upfront cost issue.
38:19
Speaker 3: At least with my IC car, right, I can trade
38:21
Speaker 3: it in and I can get value for it. Do
38:23
Speaker 3: we know how this market evolves for evs?
38:26
Speaker 1: Yeah?
38:27
Speaker 9: I mean I did a residual value note with the
38:29
Speaker 9: team at BADF maybe about two years ago, and the
38:32
Speaker 9: market looks so different than that's when Tesla prices were
38:35
Speaker 9: going ten to fifteen percent above their kind of selling price.
38:40
Speaker 9: And so now you've seen because Tesla brought its prices
38:42
Speaker 9: down that residuals for a lot of evs have crashed.
38:44
Speaker 9: I think it's going to be something that continues to develop.
38:46
Speaker 9: We need to find out how long batteries are going
38:48
Speaker 9: to last.
38:48
Speaker 3: I don't know that yet.
38:50
Speaker 1: It varies.
38:50
Speaker 9: I mean, we don't have I think any research here
38:52
Speaker 9: where we've said that this is what we find amongst
38:55
Speaker 9: all the kind of evs in the market. But right,
38:57
Speaker 9: if your battery holds up longer than people expect, you'd
38:59
Speaker 9: expect to see me even more residual value. If not,
39:02
Speaker 9: you know, you could see more of an issue. But yeah,
39:04
Speaker 9: it's an outstanding question, like so much of the space.
39:06
Speaker 9: But to your point, Alex, that's why you want to
39:08
Speaker 9: see more, you know, look into battery life over time.
39:12
Speaker 4: All right?
39:12
Speaker 3: Thanks to Corey Kanter Bloomberg, an EF lead US Electric
39:15
Speaker 3: Vehicle analyst.
39:16
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