Tesla’s Sales Fall but Investor Support Stays Strong

25:55Welcome back to Bloomberg Tech. Let's take a look at these markets as we see a rally in the Nasdaq 100. We are close to record highs once again, 5 tenths percent on the upside, even though we see a worldwide bond market sell-off. We see that data coming in from the United States in terms of jobs, maybe signaling tomorrow non-farm payrolls will show a slight weakening in the jobs data. And could that mean the Fed does indeed cut? We move on to see what's happening underneath the hood. What leaves the Nasdaq higher is big names such as NVIDIA, but also Apple up 1.7%, shaking off the anxiety that maybe Foxconn, its suppliers having to shift engineers back to China from India.

26:30What does that mean for its supply chain? Tesla up 4%. Have we seen the worst in terms of sales declines, Ed? We saw those Q2 numbers, deliveries down 13%, but the market embraced itself for worse. Okay, let's get back to our top story in Tesla. The EV maker is facing multiple headwinds, and its numbers tell us that story. Stephanie Valdez-Street is the director of industry insights at Cox Automotive. So 384 ,122 vehicles in the second quarter. The thing about the data is it doesn't distinguish by geography, right? There is some monthly data from different jurisdictions around the world, but like go under the hood of the data.

27:09What did you learn from the print, Stephanie? Yeah, you know, I was thinking about, we had our forecast call last week and we were forecasting that Tesla would have a 21 % year-over-year decline. So I think if you look at when the numbers start coming in, we'll probably see the numbers the next few days. I think the U.S. we're probably going to see a larger decline year-over-year. And once again, you know, with Tesla, it's all about having the product, right? They've had no product other than the Cybertruck. So they need a new product. And then just globally, just the competition from China, whether it's BYD, Zeker, Xiaomi, there's just lots of competition.

27:45And then, as we all know, with the recent Doge participation, Elon has had some polarization both in Europe and the U.S. markets. So I think it's going to be critical for Tesla to rebrand themselves and really bring some new product. If they can get that affordable product launched, that could be a game changer for them. Can they rebrand themselves with Elon taking over control of even more so the U.S., the European sales focus, too? Is that the sort of rebranding? Yes, I think it's going to take a lot of work, right, especially in the U.S., especially in certain parts of the country in the U.S.

28:24I think it's going to be done, but it's going to have to be very targeted, very strategic, and it has to be ongoing. It can't be a one-time thing. But also, I think it's all about product, right? with you think about consumers. If you look at the U.S. market, GM has been rolling out EVs the last couple of years, and they're right behind Tesla, eating up market share. So I think it goes back to having kind of that whole strategy as a car company, right? They're a car company trying to transition into an AI, but that car business is all about product and the right price and the right consumer experience.

28:58But that consumer experience, that product is technology at its very hard, Stephanie, if we think about how China looks as though it's stabilizing, many may be thinking that it's because of FSD, actually, that wins back some of the focus in China and competes against Xiaomi with the latest SU7 and competes against EBYD. How important is FSD? I think it's critical, especially you think about as Tesla is trying to become this AI. And with their recent RoboTaxi and Valene in Austin, it was small scale, but it was very important that they actually did launch when they said they were. And I think it's going to be important for them to continue to scale.

29:39And I know there's a lot of safety concerns and some regulatory, but I think it's going to be important for them to continue to innovate on their chips, on their dojo, to really kind of create that competitive mulch around AI. Stephanie, I use full self-driving supervised every single day. I do about 60 miles a day. Tesla's approach is get in the car and try it and then you'll see the future where Tesla operates as a ride-hailing company with robo taxis. Is that sales pitch resonating, the jump from a driver assistant tool to then becoming an Uber type player? I think it's challenging. And you think about just kind of when they're competition, you have Waymo, right, who has lots and lots of miles.

30:25And I think recently we just heard Jim Barley say that he thinks the Waymo approach is better. So I think Tesla has a lot more to prove. I think their approach can be effective if they're able to roll it out and get more miles and overcome some of the safety and regulatory concerns. The idea that Tesla is going to sell 10 million vehicles a year by the end of the decade seems to have changed now, right? But within the data, there are signs that outside of North America and Europe, they might be getting traction in new markets. Do you have any sense of what those new markets are? Yeah, I think they're looking at India.

31:00I think that's another market and some more of these other South American countries. So I think that's going to be an opportunity for them. But to your point, it's going to be critical for them to look at other options because, as we know, China is getting to get to that overcapacity. And so they need to find locations to export their EVs. And also, I think with some of the tariffs in place between U.S. and China, I think it's going to be important for them. And then also to continue to increase production in Berlin. I think that's a smart move as well. I will say the one thing, you know, we've talked about all the headwinds.

31:34Tesla does have, you know, the advantage of having the vertical integration. And that's what really gives them an up in some of the other U.S. manufacturers. So that's one thing I want to just point out. That's really something important to remember about Tesla. Stephanie Valdez-Streeti, Director of Industry Insights at Cox Automotive. Wonderful to have your insights. And look, let's return to the fact that amid the disappointing sales figures, the recent drop in share price too has been painful, but Tesla's market cap still dwarfs other automakers. Bloomberg Editor-in-Chief Emeritus and Bloomberg Opinion columnist Matt Winkler has been writing about this in his latest column.

32:13Basically, how difficult is it to remember what a juggernaut, what a success story Tesla is in the face of all the headwinds and news articles about Elon Musk right now, Matt? Pleasure to be with you. And you're quite right. Omitted from the prevailing narrative, including everything we just heard, is that Tesla still is the world's largest automaker. It's the ninth largest public company. It's worth more than the gross domestic product of Saudi Arabia. And the top 10 automakers are just, say, 75%, 78 % maybe, of Tesla's market value, which is more than a trillion dollars. So that's a really important point to make, which is amid all of this doom mongering, why is it that the people with the most at stake, who are the shareholders, somehow are missing from everybody's story, including this morning when the sales were first reported?

33:19People thought that was the lead. The sales are disappointing. And yet the share price is up the most since June. So what does the share price tell us? It tells us that Tesla is a lot more than its vehicle. It is the autonomous driving, but it's so many more things other than that. It's robotics. It's a visionary who wants to get to Mars, and he's taking everything he's got, which is artificial intelligence, and applying it to his products. And the shareholders see that because the shareholders are constantly looking at the future, not at the past. And one thing I would say about the vehicles, everybody thinks there's a demand problem.

33:57But the Model Y was actually refurbished, if you like, this year, which accounted for some of the production slippage. The sales are way up in Norway. They're way up in Spain. So the prevailing narrative really doesn't cut much there. and the Model Y, we forget, was the best-selling vehicle in 2023 in the world, the best-selling vehicle in 2024 in the world, looks like it's going to be the best-selling EV vehicle in 2025. So those are all things that are missing from the narrative that you've been sharing so far. Matt, you point out in your opinion piece that, by Tesla's own description, it's a full-stack technology company.

34:44I've written a lot about that as well. and the most bullish names on the street, on the sell side, their valuations are predicated on this vision of RoboTaxi and Optimus. But in the here and now, the sales are driven by the sale of cars to consumers. When does the inflection point come where revenues are derived largely from software? Well, I would just pay attention to the share price because what motivated my colleague Shinpei and I to produce this piece all through this year, headline after headline, story after story from everywhere was, as we said, bad to worse. And yet, through it all, everybody is omitting the great parenthetical clause, which is Tesla is still worth more than the 10 competitors, biggest competitors combined.

35:35Why is that? Why is it that Toyota's valuation is a fourth of what Tesla is? Why is it that General Motors, which you referenced earlier in this program, is just$50 billion and Tesla is a trillion dollars. And the answer is there's a lot more to Tesla that people are not looking at. And the best place to go is the share price because the share price tells you what the relative value of Tesla is every single day. Bloomberg Opinions and Bloomberg's editor-in-chief emeritus, Matt Winkler, great to have you back on the show. Thank you so much. This is Bloomberg Tech, and you're looking at a live shot of the principal room.

36:13check out the bloomberg tech podcast you can find it on the terminal as well as online on apple spotify and iheart this is bloomberg cloud-based design platform figma has filed to go public it could be one of the year's biggest initial public offerings i want to go right to bloomberg's kaylee roof you've been tracking this one let's get into all the details like what do we know about the ticker where it will be listed and just like me last night i'm sure you pulled through the entire regulatory filing what do we know sure yeah so their ticker is fig fig they're going to be on the new york stock exchange and sources tell me they're aiming to go to debut later this month uh you know this is a long time coming they almost got bought by adobe in 2022 and then and that didn't happen, so they went the IPO route instead.

37:12And there is the context that they were almost bought by Adobe, but they managed to keep eye on the price, keep growing the business independently. Where do we stand in terms of the growth of this company? Sure, and they recently turned a profit, so they have growing revenue and now profit. You know, I think they're trying to make themselves seem like they're AI-related. They recently launched an AI-related product. But, you know, they have a lot of designer clients, and then they have a lot of non-professional designers using their product, you know, a lot of them outside of the U.S., all around the world.

37:51And they're hoping, you know, that the IPO will continue to raise their profile with consumers. Good morning, Katie Roof. All things IPO for this summer. We appreciate it. Now from public markets to increasing investment on the private side. Venture firm Axel has led an unusually large Series A funding round for the startup Campfire. Now the AI native enterprise software firm recently closed a$35 million financing round. Axel partner Christine Esselman is here with us to talk it through. This is largely, I mean surprisingly large for a Series A, but I feel like our numbers have gone all out of whack the minute Generative AI came into the playbook, Christine.

38:30Why have you backed Campfire? Yeah, well, thanks for having me. I'm so excited to tell you more about Campfire, meetcampfire.com. Campfire is an AI-native ERP solution that replaces companies like NetSuite and QuickBooks. It's tackling the super large ERP market. It's one of the largest markets in software with over a trillion dollars of market cap. And Campfire is coming to market with a really fresh approach. to the uninitiated ERP enterprise resource planning, which when you say it in full is not as exciting. Why is it exciting? It's super exciting. I mean, think about the incumbents in this space.

39:11You have companies like Oracle and Intuit and SAP that have dominated this category for decades at this point. All of those companies were founded decades ago in the pre-AI world. And when you're actually a user of these solutions, they take months to implement. They require consultants. And post-implementation, they don't really deliver an enjoyable solution for any users who are using those solutions. And Campfire is taking just a really fresh approach, maybe to make it a little bit more tangible. Think of you as a finance leader, and you're trying to do something routine like forecast your cash in January.

39:52and that might require multiple people, manual data entry and all that. Using Campfire, you can flip this model on its head and Campfire enables a user to use natural language to just do this and automatically see the insights. Christine, the company itself and the people at the company are super interesting, right? Led by John Glasgow. And I was reading earlier in the week that it's one of these companies that from inception moved very fast. You know, within nine months or so, it had all of this business and there's evidence that business is being won from some sort of more established scale players.

40:26Can you just give us some of the data behind what gave you the conviction to back them? Definitely. I mean, in less than two years, this company has shipped a fully functioning ERP solution, which is just nothing short of remarkable. They have over a dozen companies that have moved from NetSuite completely, over 100 that have moved from QuickBooks, and that's just absolutely exceptional for the stage of company that they're at. They're also supporting some pretty large companies. I mean, Replit is one example. They just announced that they crossed 100 million of ARR publicly, and they're relying on Campfire as their ERP.

41:03Can I switch to large companies? And actually, Christine, of course, we know you for late-stage investment as well as these mighty Series A round that you've just delivered to Campfire. We just had perplexity on. We just had Dimitri from perplexity on. And I'm hearing we've all seen the reports that Accel's involved in a new funding round for the business. Can you talk about it as to whether you are looking at the business? Yeah, I won't comment on some of our unannounced investments, but I think as a firm we're incredibly bullish on AI. We were the first investors in scale AI. And obviously Alex Wang has had a lot of news recently, and we think super highly of that company.

41:41and we continue to think super highly of the future success of scale. We feel super fortunate to have invested in perplexity and companies like Superbase and Graphite and Cursor and other AI companies that are really defining the next wave of technology. Talk to us, though, about these rather interesting aqua hires, shall we call them, because we're seeing it time and time again in the generative AI space. Is that a win for you when you see Scale AI lose its key founder, continue as a different business, stripped of certain perhaps future business lines? Or is that given the sheer scale of the investment that a Meta makes or that others have made in certain acquires, is that nothing but a good thing from your perspective?

42:24Yeah, well, Meta made an investment in scale and the company will remain independent and will continue to go on. They have incredible privacy regulations in place and a number of really phenomenal customers that will continue using scale. And I'm just excited to see what the future has in store for scale. Christine Essman, Excel partner. It's great to have you here on Bloomberg Tech. Thank you very much. The people who seem to get more done than everyone else. They're not working longer hours or running on more caffeine. They've just stopped wasting time on the stuff that doesn't move work forward.

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45:02That's the Bloomberg Tech Minute brought to you by ChatGPT. For ChatGPT to work on your most ambitious ideas and projects, get started at ChatGPT.com today by selecting Work Mode, available on Plus and Pro Plans. This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream to do what you love and watch it grow. What you probably didn't dream about? Keeping up with cyber threats. That's where MasterCard can help, with access to tools that help identify cyber threats to better protect your business.

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45:54water music it is launching a 300 million dollar cost savings drive in order to free up funds for growth initiatives and the plan will result though in an unspecified number of job cuts according to a regulatory filing now the company says almost two-thirds of the savings will be achieved through job cuts with the rest coming from organizational changes and overhead savings Ed. Microsoft has initiated its second major wave of job cuts this year, laying off about 9 ,000 workers. This is the company that looks to reigning costs. According to a spokesperson, less than 4 % of the total workforce will be impacted.

46:29Bloomberg's Brodie Ford joins us with the details. So second wave, and the rationale is also pretty clear. Get rid of middle layers of management, streamline teams. Give us the size and scope. Size and scope is that, you know, you hear 4%, 3 % a couple months ago. It doesn't sound like that much. But with Microsoft, I mean, these are huge numbers of employees. We have 15 ,000 people impacted across two waves, and there's been other little cuts in addition to that. And, you know, folks might say Microsoft, the world's most valuable company a lot of days, $96 billion in profit. Why are they doing all this?

47:03A lot of it's that AI spending, right? One day you're spending$80 billion on AI data centers and you want to keep your margins flat. In this case, that's led to some cut heads. And Brody, the view has been actually the AI is getting so good that it means that they can start getting rid of engineers. AI is doing the job of them. But is that really where the cuts come from this time around? I haven't seen a ton of evidence that there's that kind of direct employee replacement. But I think companies certainly want to do it right. I mean a vendor like Microsoft, it is selling its software telling people, hey, you can do more with less.

47:40I think we'd be naive to think they aren't also attempting to do that internally. We saw the layoffs a couple months ago disproportionately hit software engineers. Right, and the Microsoft spokesperson told us that in this round it will be across teams and geographies, but we know from our reporting largely which divisions, I'm thinking like Xbox, sales and marketing. Correct. Sales and marketing are the really big ones right now, and that's because it's the end of the fiscal year, and you generally don't want to fire salespeople in the fourth quarter because you're not going to get the results you want.

48:12And so, yeah, we're seeing cuts today that I have reason to believe are focused on those sales employees, but really cuts across the company, and I think it underscores the kind of new reality of the tech market that even if you are in one of the most successful companies, jobs aren't safe the way they used to be. Brody Ford telling it straight we appreciate it thank you let's turn now to some of our other key top stories today Ed and we've been all over the moves when it comes to Apple potentially seeing those Chinese engineers that Foxconn had sent to India having to go back home what does that mean for the supply chain but Tesla front and center you're the man who helps break scoop after scoop we're up four percent because well the deliveries were bad but not as bad as we expected right Deliveries technically missed consensus estimates, but actually the sort of lowest range of the estimates exceeded.

49:01Expectations really reset. But I think as Gene Munster told us and Bloomberg Opinions' Matt Winkler, look past the deliveries and think about Tesla as a technology company. Meanwhile, that's what we do right here, the technology, and that does it for this edition of Bloomberg Tech. So much to recap. Don't forget the podcast. You know where to find it. It's on the Bloomberg Terminal. It's online on Apple, Spotify, and on iHeart. from San Francisco and Caroline's out in London. This is Bloomberg Tech.

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