Tesla Costs Undermine Record EV Sales

Summary

Bloomberg Tech: "Tesla Costs Undermine Record EV Sales"

Episode Date: October 23, 2025
Hosts: Caroline Hyde, Eric Schatzka, Ed Ludlow
Main Theme:
An incisive deep-dive into Tesla’s recent financial results, the impact of rising costs on its record EV sales, the ongoing debate around Elon Musk’s compensation and voting control, as well as broader tech sector issues like US-China software controls, macroeconomic trends, and new innovations from rivals.

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Episode Overview

This episode focuses on Tesla’s latest earnings report, examining the paradox of record EV sales but plunging profits due to increased costs and tariffs. The discussion expands to Elon Musk’s proposed $1 trillion pay package, trade tensions between the US and China over critical technology exports, and new product innovations in the EV and battery supply chain space. Candid expert commentary, real-time market analysis, and notable guest interviews create a nuanced look at the state of tech, business, and policy.

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Key Discussion Points and Insights

1. Tesla Earnings: Record Sales, Squeezed Profits

• Key Segment: [02:36]–[06:45], [27:12]–[29:27]
• Tesla posted record vehicle deliveries but saw profits drop sharply, largely due to higher costs, tariffs, and restructuring charges.
  • Stock was down 3% at open but partially recuperated.
  • Gross margin surprised to the upside at 18% (vs consensus 17.3%); free cash flow was strong with a robust $40B cash on balance sheet ([04:42]).
  • However, operating expenses and one-time items led to earnings missing expectations.
• Expert View:
  • Iti McKenney, TD Cowan Senior Analyst:
    • “The numbers themselves were fairly mixed, but overall in line on an operating basis… Free cash flow was actually very strong. So overall some puts and takes in the numbers, but fairly in line to maybe even a bit better operationally versus consensus.” ([03:39])
  • Tariffs created a $400M cost headwind just in the quarter, as Tesla sources battery cells from China ([28:22]).

2. Elon Musk's $1 Trillion Compensation Debate

• Key Segment: [03:04]–[08:16], [42:36]–[43:21]
• Shareholders and analysts scrutinize Musk’s proposed compensation, which also centers on securing voting control for Musk to pursue projects like AI and robotics.
  • Elon Musk (on earnings call):
    “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.” ([03:06])
  • The comp plan ties Musk’s rewards to ambitious targets: 20 million vehicles over 10 years, massive EBITDA growth, disruptive expansion into FSD/autonomy, and major new models.
  • New York State Comptroller (opposed plan):
    “How much more rich does one person have to be? But for Elon Musk, it wasn't about money… it was about voting control.” ([06:55])
• Analyst View:
  • Iti McKenney expressed that the goals embedded in the incentive package are bullish for Tesla’s strategic direction:
    • “Those goals seem very aligned with our thesis… It actually turned us more bullish on the stock kind of long term when we read those proposals.” ([05:50])
  • JB Straubel, Tesla Board Member, stressed the focus on shareholder value: “This proposal really does that and it provides, you know, potential incredible upside growth to the existing and future shareholders.” ([42:55])

3. Tesla’s Path to Lower Costs: Engineering and Production Choices

• Key Segment: [29:27]–[35:25]
• Sandy Munro, manufacturing expert, discusses Tesla’s efforts to cut costs in new Model 3 and Model Y vehicles.
  • Moved “sideways” from some giant single-piece castings to more cost-balanced methods. Many cost reductions are incremental but build foundation for future savings ([30:29]).
  • Steer-by-wire, ethernet controls, and innovations from Cybertruck could help address latency and crash control in vehicles.
  • Munro praises most of the engineering decisions, but wants faster rollout of new models, especially highly automated vehicles for aging populations:
    “Why have they [not] brought [out] the model to the cyber Taxi… I don't need a steering wheel. I've already been in that vehicle several times and I think it's the ideal opportunity to sell for people that are my age.” ([32:37])

4. AI, Robotics, and Future Strategy at Tesla

• Tesla continues substantial investment in AI, robotics, and autonomy ([04:42]).
• Assembly line for the humanoid robot (Optimus) under construction; Munro sees this as a massive opportunity:
  • “That robot should sell for somewhere around 100, 100 and a quarter each… this is the best return on investment ever… I'm more up on that than I am the cars.” ([34:35])

5. Policy & Geopolitics: Tech Exports, US-China Tensions

• Key Segment: [13:04]–[18:01]
• US administration is considering new export restrictions targeting critical software and tools for chip design amid negotiations with China.
• China announces its own goal of “greatly increasing self-reliance in science and technology.” ([14:15])
  • “It's clearly a challenge for the US… China is perhaps pushing away from the US tech stack and trying to go on its own.” – Mike Shepard, Bloomberg Senior Tech Editor ([14:25])
• US companies potentially affected: Cadence, Dassault Systems, Synopsys, Nvidia ([17:17]).
  • Natalie Gallia, Principal Economist at Board:
    “Our power is really in intellectual property. We've shown… leadership there. That's our key metric moving forward.” ([17:41])
• Despite tariffs and controls, tech sector and global economy have shown “amazing resiliency,” but inflationary impacts could accelerate into 2026 ([18:19]).

6. Battery Supply Chain and Energy Storage Innovation

• Key Segment: [38:10]–[44:02]
• Redwood Materials (JB Straubel, CEO & Tesla board member) raises $350M to expand grid energy storage solutions and continue battery recycling.
  • Focus moves beyond recycling to energy storage for data centers – a new growth area as AI and electrification scale up ([38:30], [40:57]).
  • “There are no federal incentives… So what we do and others do is purely driven by economics and being competitive today with mined materials.” – JB Straubel ([39:16])
  • Nvidia joins the cap table, strategic for energy needs of AI factories ([40:57]).

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Notable Quotes & Memorable Moments

• Elon Musk on voting control:
  “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.” – Elon Musk, [03:06]

• Sandy Munro on missed product opportunities:
  “Why have they brought that [fully autonomous vehicle] out? …I'm ready for that right now. I don't need a steering wheel. I've already been in that vehicle several times and I think it's the ideal opportunity to sell for people that are my age.” – Sandy Munro, [32:37]

• On the promise of robot labor:
  “That robot should sell for somewhere around 100, 100 and a quarter each… this is the best return on investment ever.” – Sandy Munro, [34:35]

• On US tech trade leverage:
  “Our power is really in intellectual property.” – Natalie Gallia, [17:41]

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Timestamps for Major Segments

| Timestamp | Topic/Segment | |------------|-----------------------------------------------------------| | 01:52 | Preview of Tesla, record sales & Musk’s pay package | | 02:36 | Deep dive into Tesla earnings: sales up, profits down | | 03:39 | Analyst Iti McKenney on Tesla earnings & comp plan | | 05:50 | Compensation package aligns with Tesla’s future & FSD | | 06:55 | NY State Comptroller’s objection to Musk’s package | | 13:04 | US export controls: China, critical software, semiconductors | | 14:25 | China pushes tech self-reliance | | 17:41 | IP is US tech’s strategic asset – Gallia | | 18:19 | Impact of tariffs, global tech sector resiliency | | 29:27 | Sandy Munro (teardown expert) on Tesla cost engineering | | 34:35 | Robotics is “the best return on investment ever” – Munro | | 38:10 | Redwood Materials raises $350M for grid storage | | 40:57 | Nvidia strategic investment in battery storage |

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Additional Topics Briefly Addressed

• T-Mobile Earnings & Competition ([21:12]–[25:46]):
  • Incoming CEO Srini Gopalan defends growth, competitive strategy, and ARPU amidst intense rivalry with AT&T/Verizon.
• Rivian Micro-Mobility Spinout ([46:45]):
  • Also, a Rivian spinout, debuts TMB e-bike.
• IBM & Quantum Computing/AI ([44:45]):
  • IBM’s Red Hat growth slows, but CEO is optimistic about R&D and AI pipeline.

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Conclusion

This episode delivers a comprehensive breakdown of how rising costs and tariffs are hamstringing Tesla’s profit engine despite record sales, brings listeners inside the high-stakes debate over Musk’s control and compensation, and explores the shifting dynamics of global tech and supply chains. Interviews with analysts, manufacturing experts, and industry insiders provide real-time insights and hot takes, while broader macroeconomic and policy angles position the day’s headlines in a larger context for tech, business, and innovation.

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For deeper dives or to listen to specific moments, refer to the timestamps above.

Transcript

[Eric Schatzka]

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[Eric Schatzka]

Podcasts Radio News Bloomberg Tech is live.

[Natalie Gallia]

From coast to coast with Caroline Hyde.

[Eric Schatzka]

In New York and Ed Ludlow in San Francisco.

[Caroline Hyde]

This is Bloomberg Tech. Coming up, Tesla's profits plunged despite record vehicle sales and a Musk hijack moment on his proposed trillion dollar pay package.

[Eric Schatzka]

Plus, the White House says it is weighing broad SOFTW restrictions against China as it pushes for tech self reliance.

[Caroline Hyde]

And we sit down with T Mobile's incoming CEO Srini Gopalan about the company's third quarter results.

[Eric Schatzka]

But first we check in on these markets which despite the geopolitical tensions, despite concern about some numbers not hitting the mark in the earnings underneath the benchmark, we're still up 6.10percent on the NASDAQ 100. That feels like there's a risk on sentiment more broadly and that's as we eye oil prices on the higher side, inflationary concerns. But we shake it off when it comes to the Nasdaq. We are looking underneath the hood.

[Caroline Hyde]

Yeah.

[Eric Schatzka]

Yep.

[Caroline Hyde]

Let's go to Tesla. Down 3% but not as down as much as it was when the stock opened. The story from earnings was really simple. Record vehicle sales and deliveries, but profits plunged, higher costs. Tesla talked about tariffs, talked about the impact of policy and how it had expanded its products to react to that. But then right at the end of the earnings call, the story became about Elon Musk and his proposed pay package. Listen to this.

[Natalie Gallia]

The point is, I just think that.

[Craig Trudell]

There needs to be enough voting control.

[Natalie Gallia]

To give a strong influence, but not.

[Caroline Hyde]

Not so much that I can't be.

[Craig Trudell]

Fired if I go insane.

[Eric Schatzka]

Elon Musk ending his final moments on the conference call, making the case to shareholders for his $1 trillion pay package. Let's get more on all of the Tesla numbers. Iti McKenney is with us, senior analyst of autos and auto parts at TD Cowan. And joining us, you've got a buy rating on the company $509 price target which is about 20% higher than where we currently trade. Going straight to the numbers. Persp, perhaps a pay package. Was there anything to shout about?

[Iti McKenney]

So the quarter overall, thank you again for having me. Was fairly in line with our preview thoughts that the setup was fairly balanced for, for the stock going in. As you know, the stock had kind of rallied into the quarter. Estimates have gone up a little bit since the record kind of deliveries and the upside there. And so we did think that the balance, that the setup was fairly balanced going in. The numbers themselves were fairly mixed, but overall in line on an operating basis, that the numbers were about percent above street expectations. When you exclude the restructuring item, that came out as a bit of a surprise. There were some below the line items such as a higher tax rate that caused EPS to miss. Free cash flow was actually very strong. So overall some puts and takes in the numbers, but fairly in line to maybe even a bit better operationally versus consensus, including on a better gross margin overall.

[Eric Schatzka]

Okay, so that gross margin and actually the cash that's still coming into the business, is that enough to really drive forward on basically the now focus of Elon Musk and Tesla more broadly, which is AI, which is robotics, which is autonomous.

[Iti McKenney]

Yes. To your point, the gross margin actually beat nicely in the quarter. 18% versus consensus at 17.3%. OpEx was actually higher, including for SG. And as you're seeing the company making still substantial investments in future growth, including of course AI. But the free cash flow, very strong. CapEx came in a bit below expectations and the balance sheet is very strong with our $40 billion of cash and you know, low 30s of net cash after debt. So the Balance sheet's in great shape. You are seeing the company continue to make an investment. Good to see the gross margin beat as well.

[Caroline Hyde]

We're trying to tie Musk's comments about the compensation package to the earnings that were posted. And the way that I look at it is that the board has set him over 10 years, both operational and financial goals, 20 million vehicles over 10 years. That means he needs to average 500,000 a quarter. They've set him EBITDA goals. And in the earnings statement and on the call they tried to explain with a broader portfolio of models and more affordable models, how they will achieve that. Did they answer those questions?

[Iti McKenney]

Yes, I think when we looked at the CEO compensation proposal when it came out, we were actually very encouraged. A lot of analysts have views over what Tesla should do, where they should be investing and what the future will hold. You know, we've been very bullish on Autonomy, not only for the Robotaxi vertical, but also for what we call the consumer AV vertical, the FSD vertical. And we thought the product goals, the four of them kind of laid out in the compensation proposal were very aligned with our kind of long term thesis of where Tesla should be investing in what they should do, particularly around the FSD part of it, given how disruptive that could be. The company's comments last night on the call were supportive of that, including kind of making the point that as they launch these incremental FSD features that could accrue very nicely to EV demand, it kind of addressed that issue as well. So those goals seem very aligned with our thesis. It actually turned us more bullish on the stock kind of long term when we read those proposals.

[Caroline Hyde]

It's this morning the New York State Comptroller joined us on Bloomberg Surveillance. Listen to his take on why they voted no on the comp package.

[Craig Trudell]

When you see the excessive compensation package, I mean, you know, credit to Mr. Musk.

[Caroline Hyde]

He's already one of the richest men in the world. How much more rich does one person have to be? But for Elon Musk, it wasn't about money or how rich, it was about voting control. The argument that he needs a certain level of control for Tesla to realize the vision of humanoid robotics and more broadly, AI. Where do you stand on that?

[Iti McKenney]

Sure, yeah, absolutely. Elon kind of made that point very clear. You know, ultimately the proposals, you know, are tied to market cap targets as well. They are, to your point, ambitious. They will require very, very strong execution. But once they're delivered, if they're delivered, there's a substantial amount of upside to EBITDA longer term as we see it. And you know would give Tesla a very significant competitive positioning as well. So given the amount of execution it needs to take there, I totally kind of understand management's point around this. And again those goals very well align with what we think Tesla should focus on over the next five plus years. And so you know we fel pretty good about, you know, the overall game plan for where to invest, where to focus on. And we felt those goals for us were positive in the scheme of we see the company going.

[Caroline Hyde]

It's time to have TD Cowan. Thank you very much. Now coming up, the White House says it's weighing more export limits against China, this time targeting critical software. We have more on that story next. This is Bloomberg Tech.

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[Caroline Hyde]

Let's get over to the evident AI symposium taking place right now in New York, York, and bringing together hundreds of banking executives and innovators to discuss AI adoption in financial services. Goldman Sachs CIO Marco Genti speaking with Bloomberg's Eric Schatzka. How do you take people through this journey? And so the human factor, the human element are more important than ever today.

[Mike Shepard]

I say that technology is even what.

[Caroline Hyde]

Technology or AI can do is ahead of what people accept that they can do with it. So there is a gap there. There is a cultural gap, friction. There is friction, but it's also like sometimes fear, right? And this period of transformation creates for the first time, creates almost like a competitor to the human species, which we never had before, which could be in.

[Natalie Gallia]

Some cases, smarter than us.

[Caroline Hyde]

And the way people face that threat is very different. And some people adopt it and embrace it and some people are just resisting it.

[Mike Shepard]

But back to the importance of the.

[Caroline Hyde]

First topic that I talked about.

[Srini Gopalan]

Why.

[Mike Shepard]

Is data so important?

[Caroline Hyde]

Sometimes when a lot of, you know, we talk with other people in the business and other CIOs, et cetera, or people asking me what's the best advice? And today the best advice is really make sure that you have a great data quality story in your firm, because that will be the single most important.

[Eric Schatzka]

Determinant of the Goldman Sachs CEO there. Marco Argenti, talking with our own Eric Schatzke. Catch the full conversation going on at the symposium on Live Go. But now we switch gears to what the White House is saying. Well, perhaps it's weighing new export limits on China, but this time targeting critical software that could send ripples through the tech sector. Bloomberg senior tech editor Mike Shepard joins us now with more. And it's trying to understand how far reaching such limitations would be. Mike?

[Mike Shepard]

Well, it's a great question, Karen. We still don't know the answer about how far the scope of this will go. But the treasury secretary said yesterday that everything is on the table. And really this is another instance of the US Or China trying to escalate ahead of a key round of negotiations. And we have one coming up this weekend where the two sides will try to hash out their Differences. What the US Is hoping to get from China this time around is a relaxation of some new export controls on rare earths that Beijing just imposed, much to the chagrin of the US and many of its allies. And Treasury Secretary Besson not only says that everything is on the table, but he is also saying that the US May act in concert with its allies and some of the areas that could be targeted are critical software, including chips, you know, the software used to design chips. But it also could be broader. Reuters reported yesterday that they may go as far as looking at anything made with US Origin software and trying to restrict that. And that is a measure that the US took against Russia back in 2022 following Russia's invasion of Ukraine.

[Caroline Hyde]

Mike, Overnight a communique from the Communist Party's Central Committee in China.

[Iti McKenney]

China.

[Caroline Hyde]

The country will aim to, quote, greatly increase the capacity for self reliance in the domains of science and technology. Timing. What do we need to know?

[Mike Shepard]

Well, this is clearly a challenge for the US because one thing we have heard from the Trump administration is an articulated desire to try to sell back into the Chinese market some of the American tech stack. And the idea, this is one that we have heard from White House adviser David Sachs and others, that if we can sell into China, we can compete with China in other markets globally. So this is something where we see China is perhaps pushing away from the US Tech stack and trying to go on its own. We also have some great reporting from our colleagues in Asia and Africa that is an example of how important this is. We see how deep Seek is making inroads in Africa in today's big take. It's worth reading on the terminal and elsewhere if you haven't seen it. But it shows just how China is building this model at home of lower cost AI, both the hardware and the software, and then offering it in markets where the US Is hoping to compete but perhaps being beaten to the punch by Chinese innovators.

[Caroline Hyde]

Bloomberg's Mike shepherd out of D.C. thank you very much. We have breaking news crossing the Bloomberg terminal. Reporting from the Wall Street Journal. President Trump pardoned Binance founder Changpeng Zhao on Wednesday. The markets are reacting. If you look at XPI USD Binance coin, it is spiked as those headlines cross the Bloomberg terminal. The team in New York getting it up on the screen. The Wall Street Journal citing sources on the pardon of Joe by the President. Bloomberg's not matched the reporting. We've shown you the market reaction. We'll look into it and when we have more, we'll bring it to you. Let's get back to Bloomberg Tech. Natalie Galler, principal economist and director at Board, an AI powered enterprise planning platform. Natalie, you provide macro, macroeconomic analysis and strategic guidance on business investment and economic policy to global companies. You just heard Shep going through the software component on trade back and forth. And then China realizing that it has to look at itself in some domains where it relies on the United States as you track trade. Right now I'd like you to answer, does software actually play any role in any of this negotiation?

[Natalie Gallia]

Yeah, you know, I think it plays a really significant role in this negotiation. Right. Because as we talk about AI and the importance of really being a leader in this space, we know that the US right now outspends China on a ratio about 5 to 1. But of course there's a lot of accusations around distillation. And when we, when we zone out from an economist's point of view, it becomes a lot less about what's the marginal cost to China to produce a model and more about are we doing what we can to protect US innovation. And it's really key that we get this right because this is an industry that's estimated to translate into trillions of dollars in global GDP over the next decade.

[Eric Schatzka]

So when we think about the actual US names that get caught up in this, analysts appoint to Cadence Design Systems, DESO Systems, Synopsis, opsis, as well as being companies that might be limited in their ability to export to China. But more broadly, what is the biggest element that US can bring to bear? It still seems to be semiconductor. It still seems to be the IP when it comes to GPU and compute.

[Natalie Gallia]

Yeah, I would absolutely agree with that. You know, our power is really an intellectual property. We've shown a lot of resiliency there, a lot of leadership there. That's our key metric for as we move forward, what we bring to the, the table. Absolutely. And we'll have to sort of continue to lean into that and really have these conversations around policy to continue to lead in that space.

[Caroline Hyde]

Right now, are you seeing any data, primary data or secondary data from any economy around the world that tariffs in the technology context or export controls are damaging any industries that we're talking about here?

[Natalie Gallia]

It's actually been really incredible. Tech has shown an amazing resiliency. Our global economy has shown an amazing resiliency. When we talk about the effect of tariffs.

[Eric Schatzka]

Right.

[Natalie Gallia]

And where we would anticipate to see it, when we talk about especially these relations with China, we would anticipate it to see in consumer electronics now the story of 2025 so far, and I wouldn't just say this for the US but globally has really been this idea of delayed pass through effects. Now as we get into the later half of 2025, into 2026, very likely that it's going to not continue in that way. Expect inflation to be persistent, really moderately accelerate as we go into 2026. So there will be an impact.

[Caroline Hyde]

We're talking about the environment and some of it is about headwinds and risk. But actually when I, when I think about where your, your research is at, you're looking at M and A. Yeah. You're looking at investment flows, deals are getting done, at least the infrastructure wise in this country. That's all quite positive.

[Natalie Gallia]

Yes, absolutely. I mean in many ways the tech sector has acted as a macroeconomic stabilizer for greater economic growth and it's been fascinating to see.

[Eric Schatzka]

What's also been fascinating is how we discern where we protect talent or not. Look, there's been a lot of focus on H1B visas, there's been a lot of focus on trying to make the US more self sufficient with its own people. But should we be looking more broadly at who the talent is in some of these big tech companies and where they're coming from from a national security and indeed an economic perspective? Natalie?

[Natalie Gallia]

Yeah, I mean it is such a fair question. Right. When we take a step back, we see that overall the labor market has softened meaningfully. But when we talk about, about the specific talent around AI and machine learning, we see a lot of labor market tightness, meaning there is so much demand. So as we talk about H1B visas and the overall impact, it is very likely that the demand is absolutely there for investment to necessitate global talent in this space.

[Eric Schatzka]

Natalie, it's been great having some time with you. Natalie Gallia Principal Economist at Board Appreciate it mobile it added 1 million postpaid mobile customers. It raised its outlook for the year and the boost is coming at a time when we're seeing the deal that was done with US Cellular, the launch of the new iPhone 17. But interestingly the market's kind of digesting this with perhaps looking a little bit at the revenue expectations potentially missing there a little bit. And it's locked in a fist battle, of course, competition at&T Verizon. Who better to speak about all of this as T Mobile's chief operating officer, but he's the incoming CEO Srini Gopalan and I know this is a special day with really being there for the first set of earnings as the Incoming CEO. But the market is kind of trying to find the flies in the ointment here. Why? Why do you think that million subscriber to postpaid wasn't enough?

[Srini Gopalan]

Look, I don't spend my time trying to predict market trading on a day to day basis. My focus is on building a solid, robust business, which is what we got. And a business where we're constantly expanding and widening our differentiation. That's the core of what we're focusing on. Because when you look at this quarter's results, you know, T Mobile has been the growth leader for 13 years and yet this quarter we added our highest number of new customers ever. And it's not just volume growth that translated into value growth. I'm not sure where you got the missing revenue expectations from because we exceeded consensus on service revenue and we delivered 9% service revenue growth along with 6% EBITDA growth. And all of that translates into that all important metric, cash, 26% cash conversion, which is the highest in the industry. So we're feeling really, really good about where the business is.

[Eric Schatzka]

Just to go into the nuances. For example, service revenue 18.24 billion, it was up 9% but the estimate according to Bloomberg consensus was for a little bit less than that, 18.16. But the revenue of 21.96 was perhaps slightly shy of the 21.98. But as I'm saying, this is flies in the ointment perspective here, but I think the average revenue per user perhaps is one to look at how it's being pulled down a little bit because you are in this fierce competition and I'm interested as to how much to get over all these new subscribers. You are having to go toe to toe with some of the more incentives out there.

[Srini Gopalan]

So let me pass that, that question into three bits, right? Getting new customers. Now if you look at our cost of acquisition of new customers and all of that flows through to the bottom line, we added a million postpaid phone customers and still delivered 6% earnings growth. That's because a lot of the new customers are coming to us. Because there's only one place where you can get best network, best value and best experience, and that's T Mobile. So while we talk about cost of new customers and the rest, when you have differentiation, you can drive earnings growth as well as bringing in new customers from a competition perspective. Look, this industry has always been competitive and let's just pull back out of the detail of promotions and the rest. You look at it on an industry level. The industry has seen a 50% growth in free cash flow in the last three years. Right. @ the same point. Point as delivering more value to customers. And your last piece of average revenue per user, our ARPU actually went up by 1.8% this year. In our guide, we have an inbuilt 2% guidance increase on ARPU, which was higher than our earlier guide. And so from our perspective, you know, some other players have a different problem, which is some of the incumbents have their existing customers paying a high price. So when they try and attract, attract new customers, what lands up happening is dilution of arpu. We don't have that problem. We've historically been the value leader in this.

[Caroline Hyde]

Renee, iPhone cycles, yes, are great for attracting switches. You and I have talked about that a lot at Apple park, but the companies, those incumbents, and you don't make any money on those handsets. Is it fair to say you're sacrificing. Sacrificing revenues for higher customer numbers in the event of a new product cycle like we're having in the iPhone?

[Srini Gopalan]

So two parts to that. One I agree with and one I debate. I just reject the starting point that we don't make money when we do new iPhones. Our customer lifetime value, which is the way we think about the profitability of a customer over the lifetime, are really, really strong. Look, if we didn't make money when we attracted customers, we couldn't deliver a million new postpaid customers and still grow our EBITDA at 6% and still deliver 26% cash conversion. So the premise of that question in my mind is just false. On the other hand, I think you have an excellent point on the switches piece. Look, every time there's a new device, customers reassess the tradeoffs they've made historically and they look for what's the best place for the new iPhone. And T mobile is conclusively the best place for the new iPhone. Just to give you some stats which give you a sense of that. Right, on the new iPhone, on the T Mobile network, you get 90% higher speeds than one of our competitors and 40% than the other.

[Iti McKenney]

Right?

[Srini Gopalan]

So this is a great switching moment. It's a switching moment when our differentiation has widened and that's, that's why you've seen this outsized and profitable growth.

[Caroline Hyde]

Trinity Gopalan T Mobile currently the CEO, soon to be the CEO. Thank you very much.

[Eric Schatzka]

Welcome back to Bloomberg Tech. Let's take a look at these markets because on the NASDAQ 100, we're shrugging off Some of the anxiety that you see in the bond market and indeed in the oil market, worries about inflationary pressure, pressure coming from oil. Instead we look at what's perhaps happening underneath the hood in terms of earnings and some semiconductors on a roll today we're up 6, 10 of a percent. But I shine a light on some areas that are not doing so well. There's a surprise pre announcement coming from Super Micro. Now this has been a company well loved in the AI trade as they designed some of the servers that are going into a lot of these data centers. But actually they're saying that the upgrades aren't going to be happening really until the fiscal second quarter. 5 billion billion is what they're directing us to in terms of sales and it's well below expectations of six and a half billion. We'll get more detail later in November when they come out with their true earnings date. We're looking at Tesla also by 1.7% bouncing off of its lows. But we see also earnings per share. The sacrifice there, we're seeing profitability down some 30% even though we saw record volumes of deliveries in that quarter. We see operating, operating expenses just shooting higher. And we want to get into to all of that with our auto czar, Craig Trudell. He's joining us now. And really this was an earnings where the fundamentals were almost ignored on the conference call by the executives. It was much more about, once again, robotics in the future.

[Craig Trudell]

Yeah, that's right. And you know, I think we've sort of grown accustomed to that. Right, where it doesn't necessarily matter what the numbers are. Oftentimes what Musk has to say matters more. But I think it's in this case, you know, absolutely there was some expectation that, you know, after, you know, vehicle sales were so much better than a lot of people anticipated. You know, I think that that maybe contributed to, to some recovery in, you know, consensus for, for these earnings results that we got last night. And yet a lot of the, you know, a lot of this sort of pass through from that strong top line was, was maybe a bit on the disappointing side. And there, there didn't seem to be enough oomph to what Musk had to say to sort of, you know, do much for the stock here.

[Caroline Hyde]

You know, Musk talks largely about AI and the promise of AI in the future, but the CFO and in the earnings deck gave us more about tariff impact to costs, the environment with policy Capex plans in the 10Q which you caught this morning, I think as well what were the other, other things that the market could go on?

[Craig Trudell]

Yeah, you know, I think the 400 million tariff impact just in the quarter was noteworthy. It was hard to tell from the call last night, you know, to what extent they were alluding just to that, you know, being the number four and the impact for the energy business or if it was energy and autos, because there was some possibility there that they were referring to, to multiple sort of parts of the energy business. But in any case, we've known that, that that was going to be a problem for Tesla because they do procure battery cells from China for that side of the business. I think another thing that was very interesting to me was just, you know, we expected to be a drop, there to be a drop off in regulatory credit revenue, but already we're seeing, you know, a pretty substantial, substantial drop from a year ago in that business. And, you know, you would think that there's more to come in that regard now that we have not only tax credits going away, but also, you know, fuel economy and emissions regulations having been gutted by the Trump administration.

[Caroline Hyde]

Bloomberg's crazy Dell, thank you very much. Tesla argued it's expanded its product offering and it emphasized its most affordable model vehicles yet. But many investors just aren't buying it. Let's get the engineers take. He was called the teardown titan. Decades of experience tearing cars apart and telling automakers how well or how badly that built. Now retired. Sandy Munro was once a big Tesla skeptic criticizing early Model threes. But he changed his tune as the company improved its cars and offered more models at times. James, a Tesla shareholder and part of the Tesla and Elon Musk fan community online. He has been watching closely. Delighted to say Sandy Munro joins us now. Sandy, we wanted you to come on the program because we thought there'd be more emphasis on this new generation of standard Model y and Model 3. And the question I get most for you is what did they actually engineer out in terms of the cost?

[Mike Shepard]

Well, at the end of the day, they, they did quite a few things that, that dropped the price or, let me rephrase that, the cost of getting the job done. Number one, they, they moved back away in some cases from the giant castings. The, the Giga castings are a great way to get rid of componentry in one eye, but occasionally what you do is you wind up in a situation where your peace costs are a little exorbitant. So they've moved a little bit sideways on that. They still have some of their product there, but some of it has moved away. As far as the, what I saw, as far as the reduction in the amount of cost associated with the product, those are all kind of things that you do after you've launched a program. So the, the amount of things, if you'd like that, that will reduce the amount of costs, are kind of right now insignificant. But they lay a plan for the future. So if you start looking at some of the things that they've experimented on with, the cybertruck and whatnot, where they've gone to steer by wire, Ethernet controls, I mean, that's the stuff you need to drop. The problems associated with latency, latency being the amount of time you need to.

[Craig Trudell]

Right.

[Mike Shepard]

Control the car in a crash.

[Eric Schatzka]

So. Yeah. So are they the right sacrifices? Sadly. Are you feeling that they're making the right decisions to get to the right price point at the moment?

[Mike Shepard]

Yeah, absolutely. Everything I've seen I like. I'm. Well, not everything, but most everything I've seen I like.

[Eric Schatzka]

What do you like?

[Mike Shepard]

What do I like?

[Eric Schatzka]

Don't you, Sandy? What don't you like?

[Mike Shepard]

What don't I like? The things I don't like are.

[Natalie Gallia]

Kind.

[Mike Shepard]

Of like, I don't understand why they haven't brought the, I'm calling it the model to the cyber Taxi. Why have they brought that out? I'm, I'm ready for that right now. I don't need a steering wheel. I've already been in that vehicle several times and I think it's the ideal opportunity to sell for people that are my age now. I'm kind of agile. I, I'm not a cripple and I, my, my, my reflexes are pretty quick. Actually. Two days ago, I caught a fly at the restaurant and I shocked the daylight. The waiter, at the end of the day, that, that product should have been, should have been out in the marketplace. Like right now we need it for the baby boomers. Boomers. So that's the thing I don't like.

[Caroline Hyde]

Sandy, I don't know if you remain a Tesla shareholder or not, but right now, you know, the company. Thank you for clarifying. Has a lot on its plate. One of the pieces of news was that they're building out the assembly line for the humanoid robot. You have a deep analysis of the things that Tesla does itself as a vertically integrated company. Can you just give me your assessment? Assessment of how you think they'll be able to establish their own supply chains and build such a product in line with also delivering 20 million EVs over the next decade?

[Mike Shepard]

I. Let me Attack that in a couple of different ways. Number one, I believe when Elon said that this is going to be the, maybe the biggest product ever or something, I can't remember he's exact words. He is absolutely correct Again. I go back to this aging population, it costs that that robot should sell for somewhere around 100, 100 quarter each.

[Natalie Gallia]

Okay.

[Mike Shepard]

If I take a look at nurse nursing care, you're looking at each, each nurse and you'll need three of them because for 24 hour kind of stuff each nurse is going to be getting about 100 and a quarter, say maybe 100 a year with benefits maybe a little higher. Man, this is the best return on investment ever. Not only that, grandma won't have to worry about taking her pills. Somebody won't have to try and pick grandpa up and take him to wherever he needs to go. I mean this is a huge opportunity and I've been working on robot since it was 16.

[Craig Trudell]

Yeah.

[Mike Shepard]

So that's a long, long time. That's like 60 years ago. This is, this is a huge thing. I'm more, I'm more up on that than I am the cars.

[Eric Schatzka]

Sonny Monroe, the Tesla towed on Titan. Maybe you'll be a robotics teardown titan too. We appreciate your time. Thank you very much indeed.

[Srini Gopalan]

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[Natalie Gallia]

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[Craig Trudell]

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[Craig Trudell]

Join Bloomberg in Houston or via livestream on November 4th for the future. Finding the opportunities this 2025 event series will examine how companies are investing in their businesses to create efficiencies, innovating their products and services, and improving the customer experience. This series is Presented by Invesco. Q. Q. Q. [e-mail] FutureInvestorHouston that's Bloomberglive.com FutureInvestorHouston Battery recycling.

[Eric Schatzka]

Startup Redwood Materials has just raised $350 million in a series E funding round, pushing its valuation past $6 billion according to, according to sources. I'm pleased to say. Welcome him to the show. J.B. straw, Redwood Materials CEO, Tesla board member and JB why raise? What's the money going to be used for?

[Craig Trudell]

Well, thanks for having me. And the primary purpose for this particular series raise is actually to accelerate our grid energy storage business. So many people think of us as a battery recycler only, but on top of that platform, platform, you know, we've built a growing energy storage business that is really quite exciting.

[Caroline Hyde]

JB I'm recognizing that there's a, there's a, there's a pivot here for redwood. Right. And the question that we get a lot for you is what is the viability of that legacy recycling business under the Trump administration and the policy environment we're in? Could you explain that based on the emphasis you're putting on this next gen energy demand from data centers?

[Craig Trudell]

Yeah, well, I guess the first thing I highlight is, you know, there are no federal incentives, there's no sort of infrastructure for the federal government to support battery recycling. There never has been. So what we do and others do is purely driven by economics and being competitive today with, with mined materials. And in this current Trump administration, actually, you know, we've seen huge excitement around the critical materials nature of what we're working on because, you know, very directly we're a quite substantial source of cobalt, nickel and lithium and copper, you know, all of which is domestically sourced. It's already here, it's already secure. So from that point of view, I actually am perhaps even More excited about the core recycling business in this administration than I have been in the past.

[Caroline Hyde]

Well, JB, just real quick, I was of the understanding the IRA did provide for incentives for recycling. Am I, am I wrong about that?

[Craig Trudell]

No, the IRA provides incentives for, for some of the material manufacturing that sort of evolves further downstream from recycling. So we were to make. So that's the, the more the manufacturing side. But in terms of collection, refining and selling those materials back, there's no incentives, there's no particular premiums for that material.

[Eric Schatzka]

And boy, in this moment of electrification, in this moment of need for compute and data centers, do we need a lot of those mined materials that you talk about. And with rare earth metals being a concern too, I'm interested in just who then get strategically on the cap table to drive that for jb. Why Nvidia for example? Interesting that they're coming on.

[Craig Trudell]

Well, Nvidia's interest is clearly evolving from our energy storage business. And you know, what we're doing is taking old transportation battery packs, refurbishing them and then redeploying them, extending their life in a very low cost setting to, to provide these energy storage services for data centers, for AI factories and for the expansion of industrial grid electrification. And this is one of the cheapest ways to provide grid energy storage. It's far cheaper than deploying brand new batteries and it can be a complementary strategy alongside of our materials recycling. So this is really what's driven Nvidia's excitement. I think they see that energy access and electricity availability has become a key strategic point for AI factory expansion.

[Eric Schatzka]

Can we talk about the money therefore that you need coming in? You raise this equity, but you're also depending on money coming from a federal perspective. A $2 billion loan from the Department of Energy, how is that in status? How are you seeing that navigation when it looks as though the current administration wants equity for every time they're giving some sort of federal funding?

[Craig Trudell]

Well, everything we're doing is supported by private funding. You know, that's something we're pretty proud of. And this round continues that that focus. You know, the, the government obviously has, you know, taken a different approach in looking at the DOE loan program. And you know, there's a huge amount of interest in a lot of these projects. But you know, I'd say, you know, from our point of view, we're focused on critical materials and energy storage and looking at the applicability of that for those interests.

[Caroline Hyde]

JB me, you are on Tesla's board. You recused yourself from the Special Committee on Comp. I know that Elon's argument is he needs voting control of Tesla. Explain that to me as if I were a five year old, please. The basics of why the board's position is that Elon should have voting control.

[Craig Trudell]

Well, I can't say too much more about Tesla matters today, but you know, maybe I would just comment that, you know, the focus is really on, on, on, you know, providing shareholder value and that's really the sort of first and foremost direction that we look at these things from. So I think this proposal really does that and it provides, you know, potential incredible upside growth to the existing and future shareholders.

[Caroline Hyde]

And lastly, jb, you're aware of the Bloomberg reporting about the manual release mechanism in Tesla car doors from the board's perspective. Perspective. Are you aware of any action Tesla's taking to change the design of that mechanism or has it been discussed at the board level?

[Craig Trudell]

Well, again, I can't go too deep on these topics, especially, you know, if there's any ongoing legal proceedings. But, you know, we take any safety matters incredibly seriously. You know, this is, this is, you know, one of the most important issues and we're constantly watching that. We're constantly looking at, you know, new events and reports and you know, we'll stay closely aware of any actions going on there.

[Caroline Hyde]

Redwood Just raising $350 million. I'm told by sources the valuation more than 6 billion, a pivot from just recycling to a broader look at what's happening in data center in the energy supply chain. JB Strawberry, Redwood Materials, really appreciate your time. Thank you very much. IBM reported reporting disappointing revenue in two key software categories, including its closely watched Red Hat unit, sparking concern among investors who see those businesses as essential to growth. IBM CEO saying, quote, I'm going to be upfront on one area where it didn't look so good. Red Hat growth slowed from 14% last quarter to 12%. But I'm not worried about that if I'm looking to 26. Carrie, that was your interview. What else did you learn in that conversation?

[Eric Schatzka]

Yeah, I mean, Krishna was really trying to own the area that he knew would be of concern and the sequential slowdown, and that was from a constant currency basis. Said, but he was saying that this is legacy issues. This is from like 23, 24 era. We're now rectifying. I'm now seeing really strong upfront demand for Red Hat. So he's not worried about 2026. In fact, he's really trying to redirect everyone's focus that they are an R and D business. They are super heavy in terms of the software side of things. We've got those pivots, this inflection at what's wanting in terms of consulting. But he's very pleased about the revenue growth that he keeps seeing. And they're also really thinking about the AI book of business. Nine and a half billion dollars analysts really shouting and applauding that sort of level. But it's interesting also that this is a company that's thinking about Quantum and boy is there a lot of Quantum that's in the news. But I think the book of business is one to really be keeping an eye on nine and a half billion dollars in just about two years. So he was more optimistic than perhaps the share price would be weathering on the day would seem to show at the moment. But I think what's really interesting is all of this comes on the heels of all these earnings that we're seeing and we're going to be looking at Intel a little bit later. I know you in particular could be trying to analyze that rough by 2.6% on IBM. Let's look at where we are in terms of where Intel. Intel trades ahead of its numbers up 710 of a percent. Notable as we think about where its business is going to be for growth growth when they've also given a 10% equity stake to the US government. Who else is giving equity stakes to the US government? Maybe Quantum stocks, some reporting out there from the Wall Street Journal. Add that we got a whole raft of Quantum companies maybe talking about federal funding going forward and of course that shares are on the up. We see iron and Q up 8%. But look at that D wave up 15% now coming up let's talk about what else you've been to up to add Rivian's E bike spin off also debuting its first product. That's not the only news coming up from the EV maker. More on that next. This is Bloomberg Tech.

[Caroline Hyde]

This is the first product from also the micro mobility startup spun out from EV maker Rivian. It's called the TMB, an e bike that starts under $4,000. TM stands for transcendent Mobility. It has a unique pedal by wire system. No chains or gears, just sensors and software converting pedaling to electric power. Two and a half years ago I broke a story that Rivian, the EV maker was working on a bike. We just didn't know what kind of bike. Now we do. Rivian saw a chance to reach short trip riders and leverage its battery tech now also is independent, launching its first gen E bike after raising hundreds of millions of dollars. I'm riding the premium version of the tmb. There's a touchscreen interface for modes, maps and music. The detachable battery pack has USB C fast charging and uses the same cells as Rivian's EVs. The modular seat or top frame adjusts without tools. It can be shared adjustable pedal assist with speeds up to 28 miles an hour. There's also an accelerator that throttles up to 20 miles per hour where it's allowed. One more thing also is planning four wheeled variants for families and businesses. Reservations are open, but deliveries start next year. Can a Rivian spin out really redefine the E bike ahead of that ride? We spoke to Rivian CEO RJ Scaring about what the launch of Also E Bike means for his company. Listen to this.

[Iti McKenney]

Aside from the fact that Rivian's a.

[Natalie Gallia]

Shareholder, also allows us from a mission.

[Craig Trudell]

Point of view to see to see the market or to see customers with an exposure to something that's advanced technology in electrification that has a much lower.

[Iti McKenney]

Step in price than let's say a.

[Craig Trudell]

Car even in R2 with the starting price of $45,000.

[Iti McKenney]

A lot of folks maybe want to try electrification, but want to try it.

[Craig Trudell]

In more like a 7, $4,000 version.

[Eric Schatzka]

Now in other news on Rivian, we understand today it's cutting about 600 jobs as the company contends with an unsteady market for EVs in the US it's all according to a source and we should note that soundbite that we just heard from RJ Scarring was part of a conversation that took place before the news of the layoffs at Rivian. Right, Ed?

[Caroline Hyde]

Yeah, that's right. You know, commercial roles being cut, but revision on the board, big stakeholder and.

[Eric Schatzka]

Also what a busy show. Extraordinary package. I love seeing it on LinkedIn and across various the social networks. Go see more of it on a bike. But that does it for this edition of Bloomberg Tech.

[Caroline Hyde]

Yep, check out the pod. You know where to find it. Lots of you listen to it. Thank you very much. This is Bloomberg Tech.

[Craig Trudell]

This is Tom Keene inviting you to join me for the Bloomberg Surveillance Podcast. It's about making you smarter. Each and every business day. We bring you a recap of what happened overnight in Europe and Asia. The day's economic data and complete coverage of the US Market open. We cover stocks, bonds, commodities, currencies, even crypto. All the information you need to excel. Bloomberg Surveillance also brings you the analysis behind the headlines. We do that with lengthy conversations with our expert guests, the smartest names in economics, finance, investment and international relations. We do all this live each and every weekday, then bring you the best analysis in our daily podcast search for Bloomberg surveillance on YouTube, Apple, Spotify or anywhere else you listen. On the east coast, listen at lunch and on the west coast when you wake up. That's the Bloomberg Surveillance Podcast with me, Tom Keene, along with Paul Sweeney and Lisa Mateo. Subscribe today wherever you get your podcasts.