Bloomberg Intelligence Podcast

Episode: Tesla’s Profit Tumbles as Costs Undermine Record EV Sales
Date: October 23, 2025
Hosts: Scarlet Fu, Paul Sweeney
Key Guest: Steve Mann (Global Autos & Industrials Research Analyst, Bloomberg Intelligence)

Episode Overview

This episode dives into Tesla’s latest earnings, dissecting the contradiction between record vehicle sales and a dramatic tumble in profits. The conversation, guided by Scarlet Fu and Paul Sweeney, centers on what drove Tesla’s operating profit down 40% despite robust EV deliveries, with expert insights from Steve Mann. The panel explores the implications of Elon Musk’s proposed $1 trillion pay package, Tesla’s aggressive push into AI and robotics, the international landscape for EVs—especially China—and the ongoing tension between the company’s long-term believers and short-term skeptics.

Key Discussion Points & Insights

1. Tesla’s Earnings Recap: Record Sales, Plunging Profits

(Starts ~01:14)

• Despite a record quarter for vehicle sales, Tesla saw operating profit plunge by 40%—marking the fourth consecutive quarter of falling earnings.
• Steve Mann: “Given the volume of production, you would think that the fixed cost absorption would be higher… but it didn’t happen. Looks like depreciation costs increase for them. Looks like the tariff cost impact is greater than expected. And then even below the gross margin line, the R&D costs went up quite a bit.” (01:56)
• The uptick in R&D, while hurting profitability, signals a ramp in Tesla’s pivot toward “robo taxi,” Full Self-Driving (FSD), and the Optimus robot initiatives.

2. Elon Musk’s $1 Trillion Pay Package Controversy

(Starts ~02:35)

• Musk used the earnings call to advocate for his massive compensation package, stressing the need for control to achieve Tesla’s ambitious goals.
• Notable Musk quote (messaged by Steve Mann):
  “There needs to be enough voting control to give a strong influence, but not so much that I can't be fired if I go insane.” (02:35)
• Analysts discuss that for Musk, control may outweigh financial incentive, especially given his experience being ousted from OpenAI.
• Proxy advisers ISS and Glass Lewis have recommended shareholders reject the package, which amplifies tension, especially with a large block of index and retail investors.
  • Steve Mann: “It does matter because a lot of the funds out there are index funds. So it does matter what they say and that’s why he needed to address that in the call.” (07:11)

3. The Battle Between Bulls and Bears: Tesla’s Long-term Vision vs. Near-Term Struggles

(Starts ~03:00)

• Despite weak earnings, the Tesla stock’s resilience points to ongoing investor faith in Musk’s vision—especially around AI and robotics.
• Steve Mann: “There are a lot of people who believe that he can achieve… getting the Optimus robot up and running, getting physical AI going. So there's a lot of believers out there.” (04:00)
• Investors are divided: short-term focused skeptics vs. long-term believers investing in a “physical AI” future.

4. Current and Future Growth Drivers

(Starts ~04:09)

• Shift in Company Messaging: Musk primarily highlights Tesla’s robotics and autonomy projects instead of cars.
• However, vehicles still provide the necessary cash flow to sustain these speculative ventures.
• Steve Mann: “He needs to sell cars. He needs to continue to sell cars to actually generate the cash to support his endeavors.” (04:39)
• Discussion of potential for even cheaper models, increased international expansion (recent record sales in Japan, South Korea, push into India).

5. Should Tesla Scale Back Car Production?

(Starts ~05:36)

• Debate: With profitability under pressure, is it wise to keep producing so many cars?
• Steve Mann: “It’s almost like he’s resetting the company to make it look like a startup… but the big difference is he has a huge cash generator which is selling cars.” (05:52; 06:41)

6. Proxy Fights and Shareholder Control

(Starts ~06:41)

• The outcome for Musk’s pay package is unpredictable, hinging on a mix of institutional and large retail investors:
  • Steve Mann: “It’s going to be tight… There are a lot of individual investors as well, retail investors as well. Those people are focused on the hope three or five years from now he will be able to kind of meet those targets.” (07:11)
• Ongoing speculation about whether legal battles will determine the result if shareholders vote “no.”

7. Tesla in China: Opportunity and Challenge

(Starts ~07:53)

• China remains a pivotal market, both as a sales opportunity and a competitive battleground.
• Steve Mann: “China is a challenging market. I think a lot of the policy over there, I do favor the local automakers, but look, the Tesla brand is still highly regarded over there, not just by the consumer but their competitors.” (08:01)
• Tesla continues to adapt: introducing longer versions of its vehicles to match local tastes, awaiting regulatory approval for FSD.
• Chinese competitors watch Tesla closely, especially regarding autonomous technology.

Notable Quotes & Memorable Moments

• Steve Mann on R&D spending:
  “That could be viewed as a good thing because that’s a sign they’re pivoting to the robo taxi, the FSD and the Optimus robots.” (01:56)

• Elon Musk’s rationale for his compensation/control (via Steve Mann):
  “There needs to be enough voting control to give a strong influence, but not so much that I can’t be fired if I go insane.” (02:35)

• On why vehicle sales still matter:
  “He needs to continue to sell cars to actually generate the cash to support his endeavors… Cars is still going to be important. I think the other half an investor knows and that’s why the stock is down today.” (04:39)

• On the company’s evolving narrative:
  “It’s almost like he’s resetting the company to make it look like a startup… The big difference between now and 10 years ago is that he has a huge cash generator which is selling cars.” (05:52)

• On China:
  “Tesla brand is still highly regarded over there, not just by the consumer but the, you know, their competitors, the BYDs, the Xpeng.” (08:01)

Important Timestamps

• [01:14] Episode shifts to Tesla earnings and Steve Mann analysis begins
• [01:56] Profit plunges and cost breakdown
• [02:35] Musk’s $1 trillion pay package plea and control concerns
• [03:00] Investor sentiment: Bulls vs. Bears
• [04:00] Faith in Elon Musk and AI projects
• [04:39] Growth drivers: cars vs. robotics, cash flow needs
• [05:36] Discussion on scaling production; Tesla as “startup v2.0”
• [06:41] Proxy battles and the influence of big shareholders
• [07:53] China’s strategic importance and Tesla’s adaptation there
• [08:01] Tesla's brand status in China and competitive dynamics

Summary & Conclusions

The episode provides a nuanced look at Tesla’s current crossroads:

• Intense pressure on profitability even as vehicle sales hit new highs
• Escalating R&D for breakthrough projects in AI and robotics, requiring heavy near-term investment and ongoing car sales
• Elon Musk’s drive to secure ironclad company control through a record-breaking pay package, splitting opinion among key stakeholders
• China as a simultaneously promising and fraught market
• Ultimately, Tesla’s valuation and investor faith appear to hinge not on present-day EV metrics, but on the longer-term promise of physical AI, autonomous vehicles, and Musk’s ability to deliver on bold futuristic ambitions.

For listeners seeking an in-depth but accessible breakdown of Tesla’s financial pivot and strategic identity crisis, this episode is essential.