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Instant Reaction: Tesla Beats Estimates, Hints at EV Demand Rebound · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is a breaking
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  Speaker 1: news update from Bloomberg. Instant reaction and analysis from our
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  Speaker 1: three thousand journalists and analysts around the world.
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  Speaker 2: Yeah, let's go right to Tesla. It just crossed the
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  Speaker 2: Bloomberg terminal. First quarter adjusted EPs folks forty one cents
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  Speaker 2: a share, seven cents better than what the street was expecting.
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  Speaker 1: That was.
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  Speaker 2: That's a justed EPs, first quarter gross margin coming in
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  Speaker 2: stronger than forecasts, certainly a side of profitability twenty one
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  Speaker 2: point one percent versus an estimate of seventeen point seven percent.
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  Speaker 2: First quarter revenue coming in slightly higher than what the
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  Speaker 2: street was forecasting tim twenty two point thirty nine billion.
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  Speaker 2: The street estimate was for twenty two point nineteen billion.
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  Speaker 1: Okay, So some other headlines crossing the Bloomberg turnel. You
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  Speaker 1: mentioned free cash flow, but worth repeating because it is
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  Speaker 1: a redhead. Carol first quarter free cash flow one point
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  Speaker 1: four to four billion, the estimates for a negative one
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  Speaker 1: point eight six billion. The Tesla communications around earnings are
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  Speaker 1: a slide deck, so it's kind of tough to go through.
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  Speaker 1: But Tesla says that the cybercab the Tesla semi, the
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  Speaker 1: megacap production starting in twenty twenty six, so that's this year.
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  Speaker 1: Tesla also saying the first gen production lines for Optimists,
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  Speaker 1: that's the humanoid robot, are being installed. Tesla also saying
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  Speaker 1: that Cybercab and the Tesla Semi are on schedule for
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  Speaker 1: twenty twenty six. The company says seeing its rebounds and
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  Speaker 1: demand for EMEA and North America. And we should note
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  Speaker 1: that the company also says that tailwinds are persisting for
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  Speaker 1: the US autos business, and it received approval for full
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  Speaker 1: self driving in the Netherlands in April.
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  Speaker 2: All Right, the stock, as you see though, investors liking
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  Speaker 2: what it has to say about the first quarter in
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  Speaker 2: terms of a lot of those metrics actually looking better
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  Speaker 2: than forecast and again looking at some of the individual businesses.
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  Speaker 2: The company also saying it launched unsupervised robotaxi in Dallas
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  Speaker 2: and Houston. As you mentioned, tailwinds persisting for the autos business,
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  Speaker 2: first gen production lines for optimists being installed. So much
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  Speaker 2: of the Tesla story is about what it's going to
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  Speaker 2: be done. It's classic vintage, if you will. At this point,
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  Speaker 2: Elon Musk and we know we've talked a lot we're
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  Speaker 2: anticipating the SpaceX ipo speculation. Does everything get rolled into
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  Speaker 2: one company under the Tesla umbrella, whether it's the AI business,
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  Speaker 2: and how does everything work together? And that is certainly
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  Speaker 2: something we're watching and we'll be watching out for on
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  Speaker 2: the call to Yeah.
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  Speaker 1: On that, the question is about what the identity of
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  Speaker 1: this company is. Investors are not, and have not for
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  Speaker 1: years valued it as a car company. Many people who
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  Speaker 1: are bullish on the company say it's about AI, it's
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  Speaker 1: about autonomy, it's about creating that fleet of robotaxis. You
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  Speaker 1: mentioned that it launched on supervised robotaxi rides in Dallas
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  Speaker 1: and Houston. The company also saying that robotaximile is about
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  Speaker 1: doubled sequentially. That's a measurement that Weimo uses as well
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  Speaker 1: to kate the scale usage.
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  Speaker 2: You're testing a little bit of both exactly.
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  Speaker 1: Well, this is usage right, yeah, but not everywhere, and
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  Speaker 1: it's the rollout is not as far and wide as
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  Speaker 1: it is for Weimo.
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  Speaker 2: Dana Hall on our live blog, senior reporter here at Bloomberg,
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  Speaker 2: has been covering Tesla. She's saying Tesla saying high up
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  Speaker 2: in the deck that demand has returned. Here's the quote.
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  Speaker 2: We saw continued growth and demand for our vehicles in
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  Speaker 2: markets in APAC and South America, while also seeing a
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  Speaker 2: rebound of demand in both the emerging markets and also
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  Speaker 2: in Africa and in North America.
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  Speaker 1: Okay, look at that Tesla shares hire right now, as
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  Speaker 1: we mentioned, just by about three point four percent. First
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  Speaker 1: quarter adjusted gross margin excluding regulatory credits was nineteen point
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  Speaker 1: two percent. That's up from twelve point five percent year
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  Speaker 1: over year. The headlines, though, that are important for our audience.
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  Speaker 1: Tesla first quarterd justin internings per share coming in above
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  Speaker 1: estimates at forty one cents, the estimates for thirty four cents.
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  Speaker 1: First quarter free cash flow one point four to four billion.
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  Speaker 1: The estimate was for negative one point eight six billion dollars.
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  Speaker 3: All right with us?
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  Speaker 2: As Steve Man, Global autos and Industrial's Research manager at
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  Speaker 2: Bloomberg Intelligence. He joins us from BI headquarters in Princeton,
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  Speaker 2: New Jersey. Steve come on in lots of moving parts,
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  Speaker 2: certainly when it comes to Tesla, but it was originally
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  Speaker 2: all about the EV business. We can get into other
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  Speaker 2: stuff later. How do you think they did in the quarter.
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  Speaker 4: Uh, you know, earning, Like you said, earnings beat actually
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  Speaker 4: not a big surprise given that production was pretty high
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  Speaker 4: UH in the quarter. And I think, you know, positive
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  Speaker 4: free cash flow is great versus the negative free cash
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  Speaker 4: flow consensus was expecting. That's probably a function of the
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  Speaker 4: higher profit UH for the for the gross profit for
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  Speaker 4: the quarter. I think I think investor will like this
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  Speaker 4: if I look clean into their investor deck shareholder deck.
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  Speaker 4: They are ramping up the cyber rollo taxi business. They
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  Speaker 4: have you know, unsupervised ramp up over in three different
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  Speaker 4: cities UH and in San Francisco area they're actually have
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  Speaker 4: it running with the safety driver. So I think that's
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  Speaker 4: a good sign. I think that we're investors, investors pretty
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  Speaker 4: antsy about that. You know, we're we're including myself, you know,
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  Speaker 4: like we're waiting and thinking, like, you know, are they
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  Speaker 4: are they? How are they doing on this? So you know,
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  Speaker 4: I think I think they're ramping up a corneal plant.
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  Speaker 4: What's also interesting, and we actually wrote about this, is
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  Speaker 4: that the rest of the world markets for their auto
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  Speaker 4: sales is improving. Rest of the world basically excludes their
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  Speaker 4: three pillar markets, which is you know, US, Europe, and China.
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  Speaker 4: So you know, we we saw, you know, they're actually
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  Speaker 4: doubling their footprint in Japan, South Korea sales. They're starting
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  Speaker 4: to get into the India market. Huge market potential. So
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  Speaker 4: let's let's let's hear what they have to say about
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  Speaker 4: the role buy. You know, I'm not as optimistic on
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  Speaker 4: the robot.
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  Speaker 1: Well Ed Ludlow is here with us. He's going to
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  Speaker 1: help us make sense of all of these headlines. He
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  Speaker 1: is the co host of Bloomberg Tech on Bloomberg TV,
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  Speaker 1: follows this company and all EV companies closely. But it
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  Speaker 1: is it even an EV company anymore?
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  Speaker 3: This is the no Surprises, no drama shareholder deck. So interesting.
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  Speaker 3: The return of the word demand about the core EV
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  Speaker 3: business is almost a surprise. We spent all week saying
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  Speaker 3: we look past the EV business. This is about being
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  Speaker 3: an aftermist, yes, being an AI and robotics company. And
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  Speaker 3: we talk about how Tesla trades at one hundred and
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  Speaker 3: eighty three times forward earnings. The rest of the mag
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  Speaker 3: seven those are the biggest technology companies by market cap
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  Speaker 3: trade roughly thirty times forward earnings. In other words, this
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  Speaker 3: is what we're saying. Investors value this as an AI
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  Speaker 3: and robotics company, and yet the stock is up more
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  Speaker 3: than four and a half percent in after hours. And
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  Speaker 3: what they're talking about is the return of demand in
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  Speaker 3: markets like APA and Latin or South America and demand
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  Speaker 3: in other core markets like EMEA for their electric vehicle.
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  Speaker 1: Is that surprising to you, given that China has been
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  Speaker 1: able to create and build and develop evs that can
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  Speaker 1: be bought in some of these markets at a fraction
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  Speaker 1: of the price in Tesla's can be.
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  Speaker 3: In the absence of any specific commentary about China, I mean,
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  Speaker 3: what Tesla says, and I'm just going to read it,
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  Speaker 3: is including the role out of the model y L
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  Speaker 3: why long range or long length in markets outside of China,
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  Speaker 3: and more affordable trims of both models. So that that's
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  Speaker 3: the only real sort of specific way they've addressed China.
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  Speaker 3: They're not saying they saw weakness, They're just saying they
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  Speaker 3: saw strength outside of China. So I find that very interesting.
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  Speaker 2: Shame on us for not like realizing this is still
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  Speaker 2: a real business, this EV business.
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  Speaker 1: They've been trying to communicate to us that that's not
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  Speaker 1: the first.
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  Speaker 2: Shame on them.
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  Speaker 3: Well, I mean, there's so many ways we can go
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  Speaker 3: about this. In the shareholder deck they talk about in
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  Speaker 3: passing reference it's building the biggest ever chip fab. They
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  Speaker 3: don't use the word terror fab, which I find interesting.
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  Speaker 3: The absolutely critical cool thing for the audience to remember
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  Speaker 3: is that any activity relating to Tesla building its own
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  Speaker 3: chip factory is not factored into its full financial year
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  Speaker 3: capital expenditures guide, which is twenty billion dollars. They haven't
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  Speaker 3: changed that in this deck, and unless I missed it,
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  Speaker 3: and I can check right now, but to build a
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  Speaker 3: chip fab that they're talking about would take in the
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  Speaker 3: trillions of dollars, and so one overhang that investors have
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  Speaker 3: been worried about. Clearly they're not. The stocks up four
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  Speaker 3: and a half percent, have been how much money is
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  Speaker 3: Tesla going to spend to get all of this done?
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  Speaker 3: Like at some point they're going to have to put
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  Speaker 3: the money where the mouth is to get these projects underway.
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  Speaker 2: Oh go ahead, Yeah, let's bring back Steve Man, Global
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  Speaker 2: autos and Industrial's Research manager at Bloomberg Intelligence out there
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  Speaker 2: in OURBA headquarters in Prince, New Jersey. You've been listening
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  Speaker 2: to us talk with Ed and this kind of idea
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  Speaker 2: that you know ev is actually still a big deal
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  Speaker 2: at Tesla or and they're developing and growing in markets
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  Speaker 2: outside the United States.
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  Speaker 4: Yeah, I think I think you should think of cars
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  Speaker 4: from a tesla's perspective as a robot on wheels, right, Uh,
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  Speaker 4: you know, for them to proliferate AI in cars and
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  Speaker 4: then later on with the humanoid robot, you know, they
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  Speaker 4: do need to sell more cars, right, they need to
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  Speaker 4: get these this FSD approved, and they had some good
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  Speaker 4: news recently at the end of last year. South Korea
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  Speaker 4: approved FSD and more importantly a few weeks ago, Netherland
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  Speaker 4: approve FSD, and and that's critical because you know that
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  Speaker 4: that can actually help them proliferate beyond Netherlands into the
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  Speaker 4: rest of Europe. So it's a big deal for them.
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  Speaker 4: Like you know, Ed was talking about the model. Why
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  Speaker 4: the length and longer model. Why you know, it's important
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  Speaker 4: to have that vehicle, especially in Asia because a lot
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  Speaker 4: of the household over there are multi generational households, so
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  Speaker 4: they do need a little bit more room, a little
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  Speaker 4: bit more seating room for for the for the buyers
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  Speaker 4: over there. So that's why you were seeing that. You know,
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  Speaker 4: that car actually resonates. It has been resonating with the
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  Speaker 4: Japanese and as well as South Korean consumers there and.
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  Speaker 1: Is is this a real business for the company going forward?
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  Speaker 1: Our investors betting the Optimist business.
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  Speaker 3: There's a distinction between going forward and near term, median term,
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  Speaker 3: long term.
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  Speaker 1: I mean, well, that's the Tesla story.
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  Speaker 3: The language is so specific. Preparations for our first large
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  Speaker 3: scale Otomous factory will begin short put in the ground, yeah, exactly. Well,
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  Speaker 3: we just don't know, and I'm sure that they'll get
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  Speaker 3: questions on it in the in the cool You know,
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  Speaker 3: Steve's absolutely right that they did discontinue production in the
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  Speaker 3: Modeless and X, but they also for a very long
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  Speaker 3: time Musk himself said they only made that vehicle for
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  Speaker 3: sentimental reasons, right, it was so low volume. I find
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  Speaker 3: it really interesting that the second part of that paragraph,
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  Speaker 3: the first generation line for Optimus, designed for one million
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  Speaker 3: robots a year, will replace the Modeless and Modern X
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  Speaker 3: lines in Fremont. Fremont, California. We are also preparing Gigafactory,
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  Speaker 3: Texas for the second generation line, which is being designed
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  Speaker 3: for long term annual production of ten million. I think
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  Speaker 3: that's a really significant piece of news for the Bay
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  Speaker 3: Area and the state of California. That actually just in
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  Speaker 3: writing confirmation that Optimist as a program starts at that
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  Speaker 3: Fremont facility. You know, that's a big it's a big deal.
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  Speaker 1: I mean, given what Elin has said about California, the
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  Speaker 1: moving out of California.
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  Speaker 2: Was Gavin Newsom, Yeah, Gavin.
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  Speaker 1: Newson said that Elon called him, and this was in
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  Speaker 1: Matt Winkler's opinion piece recently, that Elon called him and said,
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  Speaker 1: we can't find the talent that we're looking for outside
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  Speaker 1: of California.
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  Speaker 3: And also, like, I'm not saying this is barnstorming breaking news.
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  Speaker 3: I'm just making an observation that they've set the plan
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  Speaker 3: out in writing for something that's hard for many people
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  Speaker 3: to believe. Steve makes a very critical point again, Tesla
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  Speaker 3: talks about this. The first use case of Optimus is
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  Speaker 3: within Tesla's own facilities in the manufacturing context, and he's
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  Speaker 3: talked about selling it to the general population as a
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  Speaker 3: babysitter or is a care for the elderly, or as
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  Speaker 3: part of the labor to address the deficit in labor
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  Speaker 3: in various sectors. But I'm just saying, like they outlined
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  Speaker 3: a plant and if you think about the history of
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  Speaker 3: this company, the big tent at Fremont that they put together, Yeah,
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  Speaker 3: you know, the Frankenstein's monster of a factory that it
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  Speaker 3: once was. It's interesting how they do things.
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  Speaker 1: I also want to bring in Ross Gerber. He's president
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  Speaker 1: and CEO of Gerber Kawasaki Wealth and Investment.
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  Speaker 2: We'll get a round table. Can you guys talk to
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  Speaker 2: each other and we're going to talk to you.
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  Speaker 1: The firm has about four billion dollars in assets under management,
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  Speaker 1: So talk to us a little bit about your first
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  Speaker 1: impressions when it comes to these results. This idea of
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  Speaker 1: seeing demand in certain parts of the world for the
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  Speaker 1: auto's business, what's your take.
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  Speaker 5: Grill couldn't be happier to see demand for the auto's business.
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  Speaker 5: That's the business. I'm in EV business. I care about climate.
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  Speaker 5: I want to see them sell as many EV's as
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  Speaker 5: possible in the world. And they still make the best
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  Speaker 5: evs And so I was like, the fact we're talking
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  Speaker 5: about cars, I'm so happy because like that's how they
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  Speaker 5: actually make money and that actually matters. Nobody needs another
• 13:17
  Speaker 5: cab service. Okay, there's plenty of cab services. If you're
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  Speaker 5: in Santa Monica, you can take a ROBOTAXI. Right now,
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  Speaker 5: we got Amazon up next. I haven't seen a Tesla. Yet,
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  Speaker 5: I'd love Tesla to come here where it's really hard
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  Speaker 5: to drive and test it out. But that said, you know,
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  Speaker 5: I'm excited about I'm an EV guy, I'm a climate guy.
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  Speaker 5: It's Earth Day. I hope they sell as many EV's
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  Speaker 5: as possible.
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  Speaker 3: Guys, I'm just gonna jump in here, Ross, thank you
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  Speaker 3: for joining the show. It's not my show. I'm going
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  Speaker 3: to ask you to please hold and stand by, and
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  Speaker 3: you guys, forgive me for that one. Something just dawned
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  Speaker 3: on me. So last quarter they didn't either. But typically
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  Speaker 3: in the third page of the deck they'll give you
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  Speaker 3: a financial summary where they put the headwinds and tailwinds
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  Speaker 3: to the top and bottom line. And I didn't even
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  Speaker 3: realize last course. So they didn't do it in Q
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  Speaker 3: four and they've not done it this time. So, for example,
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  Speaker 3: we don't know what the impact of volume changes is
• 14:10
  Speaker 3: or FX as an example, or any other specifics, what
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  Speaker 3: the impact of operating expenses is on profitability. They haven't
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  Speaker 3: spelled it out, and I'm just making that observation.
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  Speaker 5: Well, all right, so let me I agree with that observation.
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  Speaker 2: So what do you make of that?
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  Speaker 5: Ross, Well, you've got to wait for the SEC documents
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  Speaker 5: to drop, you know, but I kind of was surprised
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  Speaker 5: by the number, so I was trying to parse through
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  Speaker 5: why it was better than expected, because with all the
• 14:39
  Speaker 5: extra access excess inventory that they added should have hit
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  Speaker 5: cash flow harder. So I'm just you know, I want
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  Speaker 5: to see their numbers didn't add up with my numbers,
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  Speaker 5: basically because of the access inventory, which they now have
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  Speaker 5: twenty seven days of inventory, which is actually a high
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  Speaker 5: for them, but yet that didn't hit cash flow at all,
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  Speaker 5: so or maybe it did. Bec there was one point
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  Speaker 5: four billion they say a free cash flow, but the
• 15:02
  Speaker 5: actual cash that hit the books was seven hundred million.
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  Speaker 5: But I just want to see how these numbers are
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  Speaker 5: pars doaling