00:00Join us now to talk all things Tesla's highly anticipated quarterly earning to Seth Goldstein.
00:05He is a senior equity analyst at Morningstar.
00:08Seth, let's start with the top line takeaways.
00:10This was a miss on the top line, on the bottom line, second straight consecutive quarter here of sales decline.
00:17We also saw revenue fall 12%, the sharpest decline in at least a decade.
00:22Seth, what happened?
00:24We saw deliveries fall 13% year over year for the second straight quarter.
00:29And with the automotive business, it's a pretty high operating leverage business.
00:33So lower deliveries hits the bottom line harder and we see a sharper drop in profit.
00:39So we already expected lower revenue given that Tesla reported deliveries earlier in the month.
00:45And so it's really no surprise to see revenue decline and the profit decline as well.
00:50You get the sense the street is losing a little bit of patience here with regards to Elon Musk's vision
00:56versus the reality of the very difficult automotive space.
01:00Well, we see that Tesla stock is still well below the all-time high it hit in December when it was at 488.
01:08But Tesla stock has recovered in recent months as the market's enthusiasm has turned away from Tesla's auto deliveries and to the robot taxi business.
01:17And this quarter, we saw the robot taxi business move from product concept to actually testing real rides with real consumers.
01:25And so that was a big step forward towards the long-term vision of Tesla to transition the company away from just being an automaker to an AI and robotics company.
01:35And that starts with the robot taxi as the first new product.
01:38Yeah, we're taking a look and seeing how the stock is moving here after hours.
01:43The drop in average selling price.
01:46The company makes headlines from time to time saying, hey, we know we priced a certain vehicle.
01:49At this price point, we're now going to bring it down.
01:52Do you view that as a price strategy or a bit of a red flag for the company?
01:56Well, we're seeing EB prices get cut all across the board as we're seeing more new affordable long-range models enter the market.
02:05So Tesla has to cut their prices to remain competitive.
02:08And I think they're going to see another step change towards a lower-priced vehicle that's set to begin production in the second half of this year.
02:16This will likely be on the Model 3, Model Y platform, likely will be a more scaled-down version of the Model Y in an SUV format.
02:24But that should allow Tesla to offer a vehicle in likely the mid $30,000 price point, which at that point, you're in line with a Toyota RAV4, a Honda CR-V in that category versus currently the Model Y is in the mid $40,000.
02:39So it's a little bit above the affordable SUV entry point.
02:44Yeah, we're still waiting for details, but we did hear from the company today that it has begun production on, to your point, what it calls a more affordable vehicle.
02:52We don't know the name.
02:53We don't know the features.
02:54We don't know the starting price.
02:56But right now, the starting price of a Model 3, which I believe is the company's cheapest vehicle, is a little above $42,000.
03:03Is that a big deal?
03:04And what other questions would you most have about an announcement like that?
03:08Well, I would want to see what the vehicle is.
03:12Is it a sedan or is it an SUV?
03:14And then what's it going to be priced at?
03:15And what's the range going to be?
03:17Many consumers in the U.S. will not consider an EV if it doesn't have at least a 300-mile range.
03:23In fact, we've seen Tesla's competitor, General Motors, release the Chevrolet Equinox EV with a range above 300 miles and at a price point in the mid to high $30,000 at the entry-level version of that vehicle.
03:37So that's competitive with the truck combustion engines, with the Hondas, with the Toyotas that have been best sellers in that category for years.
03:46And so if Tesla wants to compete, they're going to have to release a similar price point that also still has a longer range in order to make sure that they can win as many consumers in that affordable SUV market as possible.
03:58I wonder to what degree there's a bit of an emerging narrative that the automotive numbers are almost secondary because the company is in a position now where Elon Musk talks increasingly about potential future deals, XAI, co-investments across all of his other company.
04:14I mean, can you easily envision a world where it's almost less about the automotive parts of Tesla as a core business and more about how it can expand to include other parts of Elon Musk's empire?
04:27Well, I think Elon Musk's goal is to transition Tesla from just being an automaker to focusing more on the autonomous driving software.
04:36And that could happen by Tesla licensing out the software if they're able to successfully develop a level three software where the car can basically tell the driver you can focus on something else.
04:47The car can take control of most of the driving functions that also goes along with the RoboTaxi products.
04:53And then as Tesla developing the Optimus humanoid robot products, those will start in the Tesla factory.
05:00But the goal longer term is to sell those to other businesses, likely in manufacturing or places like warehouses where they can do simple, repetitive tasks and then eventually maybe sell them to consumers to become an assistant around your house.
05:15And so that's the long term vision for Tesla currently today.
05:19However, selling autos is still the primary business, but we've seen Elon Musk's investments have skewed more heavily towards AI and the chips need to support that business.
05:30And that's the goal over time is to transition away from just selling cars to AI and robots.
05:35What are the biggest questions that you have about CyberCab RoboTaxi production and the long awaited, long delayed as well, Tesla Semi for 2026?
05:47Well, my biggest question about the CyberCab production is, is the software ready for the CyberCab to enter production?
05:54Tesla can easily manufacture, you know, thousands of new vehicles.
05:58I have no doubt about their ability to make the CyberCab.
06:01My bigger question is, is the software going to be ready?
06:04When we've seen the RoboTaxi testing, you have a remote operator watching the vehicle.
06:10You have a safety employee in the front driver or passenger seat of the vehicle monitoring the vehicle for safety.
06:18And then you can have consumers in the back.
06:20It's also in a geo-fenced area.
06:22And so that's very different from the long-term vision of Tesla's camera only can go anywhere vision that they want to have for the RoboTaxi product, which would contrast with Waymo, which operates in geo-fenced areas in the five cities where Waymo operates today.
06:40So that's Tesla's long-term vision.
06:42But I want to hear how we're going to get there and how we're going to get there between now and next year if CyberCab wants to enter production.
06:50Ostensibly, the CyberCab, based on what we saw last year's RoboTaxi event, it's only a two-seat vehicle.
06:57So if you have a Tesla employee needing to be in one of the seats, that only leaves one seat open for a passenger, and that's not the alone RoboTaxi driving experience that Tesla has promised and Tesla's outlined for their vision.
07:12So I want to hear the steps on how they're going to transition from the early stages of testing to full commercialization, which would be a non-geo-fenced, no humans in the vehicle, car able to go anywhere within the service area, which I would take to mean the entire Austin and suburban area around Austin.
07:33I got to get your take on the elephant in the room.
07:35And by elephant, I mean Republican Party element, elephant, the actual GOP itself.
07:40Elon Musk's political activities undoubtedly has impacted the stock so far here in 2025 and maybe to a degree at the end of last year as well.
07:51He's gone back and forth with his degree to how much he wants to be involved with future politics, a third party that he wants to start up, what candidates he wants to fund.
08:00He really seemed to get very bothered by the passing of the so-called one big beautiful bill, budget reconciliation.
08:06You have the sense that investors just want to hear Elon Musk come out and say, I'm putting all that on the back burner.
08:13I'm back to sleeping on the factory floor at Tesla.
08:16And this company will be my main focus.
08:18I think that's what investors have been wanting to hear for months, especially when Elon Musk was spending a lot of time at the White House and heavily advising President Trump.
08:28I also think that's what investors want to hear when it comes to Elon Musk's recent spat with President Trump, where he has disagreed with the bill, the budget bill, and he was hoping for a bill that was going to cut the deficit, reduce spending.
08:45That's, I think, when he was brought on to advise the president, that's what his goal was in order to help reduce the U.S. deficit.
08:52But the bill turned out to go in a different direction.
08:55Elon's opinions were really not followed in the final version of the bill.
09:00And so I think we saw the reaction from Musk.
09:02But, you know, I think the market is hoping that Musk moves on, sort of puts politics aside and focuses more on developing Tesla, focuses more on the robotaxi business and getting deliveries back on track in the second half of 2025.
09:18Well, as if the man did not have enough on his plate, he's also in the restaurant business.
09:22Can I get your take on the Tesla diner that opened up?
09:26He's been tweeting a lot about it.
09:28Yeah, you know, it seems like a cool place.
09:31You know, it's been a long-awaited vision for Tesla to have a diner where people could have a bite to eat while they charge the vehicle, a cool place to hang out.
09:40And so, you know, Tesla finally did it.
09:42But longer term, I think Tesla wants to focus on faster charging, reduced charging time so that it wouldn't be necessary to plan a meal every time you need to stop to charge on a road trip.
09:54All right, Seth Goldstein, Senior Equity Analyst at Morningstar.
09:56Thanks for joining us on the day of the big earnings.
10:00I appreciate the context and conversation.
10:02Thanks a lot, Seth.
10:03Thanks for having me.
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