00:00 Speaker A
Tom, it is great to see you. Um, big profit miss here for Tesla. Um, even though they sold more cars than anticipated in the quarter, there were some other areas that were also, um, disappointing. What do you think is the biggest thing here that Tesla needs to fix in the coming quarters?
00:27 Tom
Well, I don’t think it’s the issue is like something they need to fix necessarily. Um, I think it’s just something that surprised investors in the quarter. Um, you know, part of the reason why the deliveries were so strong is they they did cut some pricing notably, um in other markets like emerging markets and and I think in Europe as well. Um, there were also some one-timers that happened, some warranty dynamics, energy storage. I think all of us were just too bullish on the margins. It’s getting to be a little bit more competitive. Um, but I think the real thing why what’s pressuring the stock now is this R&D.
01:13 Tom
And that definitely ratcheted up a lot and they said on the conference call, this is going to be meaningfully higher for the for the future. But what folks should realize that this R&D isn’t related to the auto auto business, right? It’s to AI, it’s to humanoids, it’s to robo taxi. So to me, the way I look at this is, if you think this is an auto stock and you’re not happy with this big AI R&D spend, then why are you in this to begin with? And uh if you do believe it’s an AI stock and you do believe in humanoids and robo taxi in that future, then I don’t know why you would be worried about higher R&D spend to AI. You would want them to move quickly, right? to to capture this this market.
01:58 Speaker A
But Tommy is the problem that they’re that they’re spending too much or that they’re not spending enough? I mean, you look at, yeah, they’re talking, you know, I think their their number for the full year is still 25. I mean, 25 is a lot lower than 205, which is what the Alphabet but I mean, I know they’re different situations, but you know, so which do you think that some investors think they should be spending even more?
02:30 Tom
Yeah, I know, I I I think you also have this is where this this SpaceX conversation comes in, right? And uh we uh we did a lot of we we are big believers that ultimately there’ll be a combination there. Um and I think um that’s where you’ll see this kind of combined capex spend and synergies across the two. Also R&D spend. So, we’re also at the beginning of this cycle. So that could ratchet up definitely higher, but like, you know, when you combine these two companies, there’s so much collaboration between the two, you will see, you know, CAPEX spend and R&D spend for sure. But I think what’s going to be important to highlight is the synergies across the two.
03:22 Speaker A
Um, I I want to come back to the deal in a minute, but to go back to something you said, like, if you own this stock because you’re optimistic about Optimus and robo taxi, great. But like, when is that happening, right? Because even on the call like they they’re not giving us a lot of a lot of information about the product that is out there, the robo taxi. Optimus, who knows when the heck that thing’s coming or when they’re going to make money from it. Robo taxi’s out there and we’re still not learning very much about it, are we?
04:02 Tom
That actually, I think that that is where we did learn something. Um the Robo taxi conversation, they were asked a question of like, why the slow roll out? Wow, why such small volumes? And their answer is, you know, we want to get into as many cities as possible, then it’s scaled quicker because imagine if you were going to do one city at time, get a bunch of cars out there, after you get regulatory approval, then you’re going to start all over again in the next city, and then the next city. Their approach is, let’s get the approvals and some cars out there, um, you know, in all these cities and then it’s scale the scale explodes um eventually and and they they’ve talked about this akin to like the Apple Maps problem. When Apple Maps came out, it was kind of rushed too quickly and there were like consumer problems.
04:59 Tom
Today Apple Maps is great, but then Google Maps already has the customer secured. So they want to prevent that from happening, you know, um problems at intersections, uh you know, like dropping people off at the wrong place. That’s why this is being done slowly. Um so I I actually think people were comfortable with that. And in terms of Optimus, I don’t think that was ever going to be something that was right around the corner. They actually gave some uh timelines on production starting, construction starting, for example at Fremont, um and some targets. That’s always been kind of farther out. So I actually think their commentary on those items uh on on the earnings call was not holding the the the the company back. It was more about the kind of R&D and CAPEX and why they missed.
05:46 Speaker A
Gotcha. Um, and then to come back to the potential combination of SpaceX and Tesla. Um, when do you think this might happen? And does Musk have to wait until SpaceX shares recover and he has some more currency to to make this kind of combination happen?
06:21 Tom
Yeah, this is this is this is a good question. I don’t know the I don’t really know the answer. Um I you’re you’re absolutely right. There’s definitely some dynamics there on on like both of their, you know, share price performances. I imagine that impact things. Um, but you know, there there’s also maybe no rush, you know, we do have the S&P inclusion, right for for SpaceX in the future. Um, you know, and uh, yeah, at the end of the day, I do think Tesla benefits from the potential of an acquisition, right? So, um, you know, despite today’s uh stock price move. Um, I don’t know if there’s necessarily a rush, you know, immediately. And even if it does get announced, it’s going to take a while before this gets approved. Right, there’s so many global anti-trust things and this and that. So, I don’t know if I would expect this, you know, anytime soon. Um, but I do think that it’s it’s kind of it’s it’s kind of inevitable.
07:37 Speaker A
Yeah, it feels that way, doesn’t it? Tom, it’s great to see you. Thanks so much for joining us.
