00:00Tesla earnings missing here. They did have record third quarter deliveries. But when it comes to actually how the stock trades, it feels like it's in this transition period where, OK, the EV business, which is the bulk of Tesla's business at this point, starting to struggle. There's a lot of yellow flags there. And then you think about the long term promise of the stock, the visions that it has with humanoid robots and things along those lines, not actually a material factor when it comes to Tesla's bottom line.
00:28And it just leaves the stock in this intense period of volatility.
00:34Yeah, and I think it's not helped by the multiples. I mean, it trades for over 170 times next 12 month revenues and over 115 times next 12 months EBITDA.
00:46I should say 170 times next 12 months earnings. So it's it's it's in the stratosphere when you consider it against other mag seven that are trading at 15 to 30 times.
00:57It makes those stocks look like a bargain in comparison.
01:01So, I mean, when you think about some of the long term ambitions here and certainly the proposed pay package for Elon Musk hinges on him staying at the company and being able to live around those promises.
01:12But some of the visions and goals that they do have when it comes to robotics, when it comes to full self-driving, what do you think the timeline is there where it actually will materialize in a way that's meaningful?
01:23I think full self-driving, we're probably going to see material impact emerging over the next couple of years, robotics, maybe over the next five to 10.
01:34And so I think to be long at these multiples, you've really got to believe in that long, long term.
01:40But even then, it's it's a very pricey stock to own.
01:44I am curious, John, just when we talk about this push into autonomous driving and not just with what Tesla's ambitions are, but overall the industry.
01:51And it just seems like they're behind. I know they've talked a lot about it, but we've all been I mean, if you've been on the West Coast, you've probably been in a Waymo already.
01:59There was a headline earlier today about them doing more testing here on the East Coast, particularly when it comes to a Newark airport just in suburban New York and New Jersey.
02:08So, I mean, you have a company, at least with regards to Waymo, but a couple others that seem to be making pretty material progress in sort of realizing this future of autonomous driving on public streets.
02:19Is Tesla going to catch up?
02:21It's a great question. And I think it's a challenge on two fronts. It's a challenge on the software and the hardware.
02:26So on the hardware side, you know, Elon's pledge has been if a car can drive with human eyes, so can the computer.
02:34But as Sterling Anderson, a GM, points out, humans also have the ability to hear and smell and touch.
02:42And we fuse sensors as humans. So we don't just rely on our eyes and our eyes don't work very well in the dark and sun glare and in storms.
02:51So the rest of the industry, including Waymo, has made a hardware bet that you need LiDAR to make up for that.
02:57And you can certainly fuse the LiDAR sensors in.
03:00And so I think that's why you see other companies making more progress is because the hardware choice is just superior,
03:08not only for being able to drive autonomously, but for safety.
03:11On the software side, all the other players are taking a hybrid approach where they're using both large language models
03:19and they're using rules engines around those.
03:23And that's important because at some point, if you get in an accident, a regulator is going to ask you,
03:28why did this happen? Show me where in the code it was where the cause was and how you fixed it.
03:33Tesla's making a different bet, and that is to use only an LLM end to end,
03:38which means they really can't tell a regulator what went wrong and where it went wrong and if they could fix it.
03:43So I think that's why you see Tesla behind Waymo and behind, I think, some of the other manufacturers.
03:51You know, GM reported today that they've got 500,000 users on their system and they haven't had a single accident.
03:59And that cannot be said for Tesla.
04:01I am curious. Also, what about the business model itself?
04:04I mean, we were diving here at Bloomberg into kind of just the economics of autonomous driving,
04:10particularly when it comes to the Waymo vehicles.
04:12I mean, this is still pretty pricey, and I know we're in the early stages of this.
04:16But is this a business model that you see can actually be competitive with current ride sharing or cab hailing business models?
04:26Yeah, I think in Waymo's case, they've optimized for software and they have not really optimized their hardware costs yet.
04:32I think the advantage that car manufacturers have, take Tesla, take GM, is that they know how to manufacture and squeeze every penny possible out of a really great product
04:43and still come to market with something that's elegant and beautiful.
04:47And so I think they've got a cost advantage in manufacturing these things at scale, no doubt.
04:52And so that may point to Waymo getting closer and closer to a manufacturer or two to help them bring those costs down.
05:01And, John, I want to talk a little bit about maybe underappreciated part of Tesla's business, and that is the energy division.
05:08I'm taking a look at our top live blog on the Bloomberg terminal,
05:11and it points out that there was a massive 44 percent jump in energy and storage revenue for Tesla,
05:17of course, maybe coming off of smaller base than some would like.
05:21But still, you think about this coming at the same time that we're seeing the first surge in U.S. electric demand in decades.
05:27And I wonder, you know, how much opportunity there is for Tesla when it comes to this division specifically.
05:32That division has really been focused on residential and then grid power storage, and it's a rather small revenue source.
05:41So out of the $28 billion in quarterly revenue this quarter, it's around two.
05:45So it's less than 10 percent.
05:47And if you compare that with GE Vernova, who is in that power space to AI data centers,
05:53they're doing tens of billions of dollars of revenue.
05:55So it's a very different application that Tesla's had in the past.
05:59And certainly batteries can play a key role.
06:04But the generation is the problem at power plants.
06:07You've got to find the power source.
06:09And so you've got to have something feeding those batteries.
06:12And that's the real challenge right now.
06:15And Tesla is not in that generation space today.
06:18I mean, obviously, you have a great perspective being an investor in this, obviously, the former president.
06:23I am curious, though, too, about how you view some of the other car companies.
06:27We just heard from General Motors.
06:28We're going to hear from Ford, I believe, tomorrow after the bell as well.
06:33And I just was looking to, and I noticed I don't want to front run it, but I know you've got a book that's coming out next year
06:37that kind of talks about the evolution of Tesla and SpaceX.
06:40But also in that title, you also throw General Motors into that mix as well.
06:44Not a name that I would think would be directly associated with the two others.
06:49No, that's right.
06:50You can't imagine teaching a 100-year-old company that's a $200 billion revenue company how to get agile.
06:58But Mary Barrow has.
07:00And it started with the EV Hummer, which they brought out in record time.
07:05And then they've continued to flow with more than a dozen new models, the latest of which is the Bolt,
07:13which is a $28,000 and change vehicle that's got 255-mile range.
07:20And what they're proving is that they can bring out really fantastic products in record time.
07:26And they've gone from zero to number two behind Tesla just in a few years.
07:32They've built a company that's about four or five times the size of Rivian.
07:36So it's really exciting to watch them apply some of these principles of innovation that much younger companies have applied.
07:45And that's credit not only to Mary and Mark Royce, but the rest of that team.
07:49They've been very, very agile.
07:51And I think you're going to see them continue to be.
07:53And so they intend to be a force in this EV space.
07:57And they're proving it as now the number two share in the space.
Be the first to comment