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.

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.

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]).

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]

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 |

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.

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.

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