Tesla Results Are a 'Tale of Two Cities,' Steve Westly Says

Watch Tesla Results Are a 'Tale of Two Cities,' Steve Westly Says - Bloomberg on Dailymotion

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00:00Steve, great to have you here. Let's start off on the quarter that just was. I mean,

00:04no surprise here. We kind of know how many vehicles they're producing, how many vehicles

00:08they're selling. But we're now on this precipice where here in the U.S., that $7,500 tax credit

00:14that you got is no more. And I do wonder how that changes the value proposition for Tesla

00:21and whether that means that their goals, their short-term targets can actually be met.

00:25Well, that's the big question. I think the results are kind of a tale of two cities. What

00:30you're seeing here is record Q3 results. But what that really is, is an indicator that a lot of

00:37people are racing to get that tax credit that President Trump has taken away. So China growth

00:44looked pretty strong. U.S. growth, we saw the bubble, but we expected that. The worrying part was

00:49European growth. That was down 20 percent. But it's down 20 percent at precisely the same time

00:55EV sales in Europe were up 30 percent. So there appears to be some brand damage there,

01:00competition coming. Tesla's going to have to manage this. They've got to find a way

01:05to get growth back, profitability back up, operating margins down 40 percent. That's never a good sign.

01:11I think Q4 could be tough for them. They've got to find ways to get that revenue back up.

01:16I am curious about sort of the methods that they would have. And maybe you can just kind of put

01:20on your hat from the old days. I know it was a long time ago when you were on the board.

01:24But there's this idea that you have a company that doesn't advertise in the traditional way

01:28and doesn't even necessarily market itself, I mean, outside of advertising, in a way that you would

01:33see other car companies or really other consumer product companies overall. Could that maybe be a

01:38switch they can flip? Or are they just so reticent to do that that it's just not going to happen?

01:43Well, it's going to be tough to flip that switch because you've got two things going on. There's

01:48Tesla, the auto company, and then there's Tesla, the technology company. And let's get down to the

01:53numbers. They did 28 billion in revenue this quarter. That's fantastic. But the last two quarters

01:58were 23 and 24 billion. They got to do 30 billion in Q4 to get back up to 100 billion. I think there's

02:05a good chance they end up at Q4 at a number closer to 25, 26 billion. That would mean this would be the

02:11first year in their history where they had declining margins. Now, when your PE ratio is 250

02:16compared to NVIDIA, which is not exactly top liver at 50, you've got to wonder, will they be able to

02:23keep that up? Now, what do they do to fix this? One, come out with a lower cost car, not a $37,000 car.

02:31I think they need to announce they're going to bring a $25,000 to $30,000 car to market. Two,

02:36saving grace in the numbers this quarter, their energy division is taking off. They're selling

02:42more giga packs in their new giga blocks than ever before. That grew 25% year over year. I think

02:50they're going to do $14 billion in energy products alone. So that's looking like the saving grace now.

02:55But I think within about a year, if they haven't really knocked it out of the park with their full

02:59self-driving or begun to bring humanoid optimist robots to market in scale, they're going to have

03:06some explaining to do. You might see some grumpy investors.