Is China's BYD the Un-Tesla?

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio, or watch us on YouTube. Search Bloomberg Clobal News, the new wish of Bloomberg Business Week. It's coming out on newsstands, The Bloomberg and online all its entirety tomorrow. It includes two cover stories this week, a domestic cover story and an international cover story, which talks about maybe the UN Tesla. It's a car company

that's trying to take on Tesla. It's called b y D, and the question is is China's b y D the UN Tesla. Jim Ellis is Assistant Managing editor of Bloomberg Business Week. He's with us right now in the Bloomberg Interactive Broke Studio. Jim, how do how do when you think about a story like this, how does it come together? And we should note that UM it's available in the upcoming issue of Bloomberg Business Week Matters. I mean this came together because there was a lot of interest in UM.

You know, there's obviously a lot of interest in e v S, a lot of interest in in Tesla and UM. You know, most people sort of think that the way Tesla has sort of developed itself is the is the model for UM, you know, auto companies of the future, and by D sort of stands in as an example of it doesn't have to be that way. I mean, b b D is not just a startup, and it's a very successful company. It's the largest EV maker in China. It's also the third most valuable by market cap auto

company in the world, after Tesla and Toyota. But a lot of people here probably don't know it much other than that it's a big investment by who else, Warren Buffett, who bought into this company back in the you know, early two thousands and put in with two million dollars. It's now a stake worth eight billion dollars and um, this is a company very that believes in vertical integration. They've come in and they've said, you know, everybody's talking

about chips shortages, and everybody's talking about battery deals. I mean, they make their own batteries. They're now the third largest maker of EV batteries in the world. They also make their own chips. They use them in their cars. They are probably going to be a battery supplier to Tesla. They're already a battery supplier to Toyota. I mean, this is a true, you know, vision of we should make this. They also, um, you know now have invested in lithium, minds,

all the things you need for batteries. They are just very different. The other thing that's really different is that they are making cars for the sort of middle class person and that's that's a big market. But it's a very different approach. With the Tesla tests that came in and Tesla said they were doing Model three at what thirty k, right, and the average price for that it's now about forty six. So what would it be y

D set you back? Right now? You can get one and you can't get one in the you can't get one in the US but it would probably be about a third less than comparable Tesla in China where they sell hit to hit UM. You know, it goes to the Their Auto three UM is about half the price of the Tesla model. Why which would be comparable? It should be sort of e V or it's um UM. You know. It's a different marketplace though, because when you're saying I'm going to make cars for Middle I don't

wanna call it Middle America. It's Middle China, Middle uh Asia. UM. You're not going to be able to charge as much, but you're also not going to be able to have the same sort of level of profitability. And right now, about two percent of every you know of revenues goes to profit at b y D, about ten percent of profit goes to UM. You know a revenue goes to

profit at Tesla. Is this a company I think about you know President g and he talked about, you know, wanting to get into higher tech or you know, high tech markets UM and sell to the world and not be the manufacturer of the world. And I do wonder is this ultimately will will be able to get these cars in the United States? And and I do think about what that means for some of the competition and specifically, yeah,

I mean that that is the goal there. I mean one of the big things about the ideas it's been expanding global. It means in Australia now they're they've got deals now for Germany. UM, I mean they view themselves as a global company. They just got then they're going to use this period now when everybody wants to have evs but everybody doesn't have the capacity to produce enough evs. They're using that as an opportunity to sort of build

into the market also. Um, they have UM, you know, they're they're doing something that China wants to do, which is to become more of a producer, global producer of autos and um. Just this morning, UM, the Chinese Premier Leko King went to be at b y d s headquarters and to say, you guys, hey at a boy you know, get out there and you know, sort of

do this for us for the future. I mean, they view that as one of the big potential consumer products of the future and China must have a much bigger piece of that, and a company like b y D gives them a beachhet in that. And I just want to point out. I mean, the ad rs do trade on the New York Stock Exchange. They're up for the

year just shy of ten percent. But I do think about, you know, the access for investors ultimately, especially when you're President ge it feels like, you know, really honing in, homing in on certain industries and either restricting what they can do or whether they can be listed on the

New York Stock you know, on US exchanges. And I do wonder what the futures are how investors ultimately will continue to be able to tap into this well, I mean, the the idea at least the Chinese would like, um, you know, the rest of the world to be able to help them fund the transition, but um, a lot of countries increasingly reviewing, you know, sort of the auto business as it's a potentially protected industry something because it's going to be one of the biggest consumer products forever.

I mean, it's it's trans Transit is just that, and so's it'll be interesting to see just how dependent do we want to become on foreign automakers who aren't German or Japanese, right exactly, Jim to me, it's also a story about how Tesla is increasingly not the only game in town when it comes to e vs. Not to mention you know the companies that you mentioned, but also the US rivals Ford and the US and Ford and GM.

I mean Tesla made what I consider to be a strategic mistake in not pushing ahead with the truck business. I mean they have left you know, they sort of left an open lane for both UM, you know, Ford and GM in here one fift lightning. They cannot make it fast enough in order to it. They just stopped taking orders because how can you not jump into that market. I mean, the the regular gasoline powered forward one is the most sold vehicle, single vehicle in the United States.

It is a hugely profitable piece. It is the reason there is still four and to allow that, you know, to happen where they say the cyberstruck will get around to it. No, this was a mistake and I had a filling in two or three years. People are going to be saying Tesla could have had this market to itself, didn't and it it gave a lifeline to Ford. It's gonna mean also that GM, with UM you know, its own evs you know trucks is going to also have a way to compete against Tesla long term, and that's

a very profitable part of the market. Jim really quickly, just about twenty five seconds, is b y D also potentially have an advantage in terms of um. China has been on such a mission to line up lithium, cobalt, nicols, some these key minerals for e V batteries. Is that going to give them maybe potentially an advantage going ahead,

just quickly at least short term. It it will mean simply because it's been so difficult to line up those resources, and so they'll have the ability to do it not only from resources in China but also in places in South America where China also has influence. Great story, and it is the international cover story. It'll be hitting the Bloomberg terminal at five pm Wall Street time, so be sure to check it out. Jim Ellis come back more often. Thank you, We love, We love. Jim Ellis Assistant managing

at a Bloomberg Business Week. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We want to get to one of the most read stories on the Bloomberg Today, it's about the recent CEO drama at the private equity from Carlisle Group. The drama, of course, you know Carli's CEO, Kusan Lee, abruptly pushed out the door by the company's board. Earlier

today on Bloomberg Surveillance. Carlisle Group co chairman and co founder and host a peer to peer conversations on Bloomberg, David Rubinstein address the situation on how you get ready for the next generation of leaders. There's no perfect model. Each of the firms have gone through it in different ways. I think a good thing to do is to have somebody who's been at a firm for a long time

part of the culture. They know the ethos of the organization, and gradually they come in and take over control and the founders step back. But it's more complicated than a typical situation. So let's suppose you're lou Gerstner. You're the CEO of IBM, and you retire. When you retire, you don't own twenty or thirty percent of the company still, and you're not still you know, a major investor in

the funds. It's a different situation. You're not a founder so all the founders of the large private equity firms are still involved, uh largely with some exceptions, still involved in as owners, investment committee members and as big shareholders. And it's a little different than the lou Gersner situation or Jack Well situation when they retire and they don't really control the company through the owner ownership, there's large

shares shares in the company. That was Carlisle Group founder and co executive chairman David Rubinstein, also the post of Bloomberg Wealth with David Rubinstein on Bloomberg TV. That was him earlier on Bloomberg Surveillance. I want to bring in Heather purl Burg. She's private equity reporter for Bloomberg near.

She joined us on the phone from Washington, d C. And she's the co author along Don Limb, of one of the most read stories on the Bloomberg terminal, all about the CEO drama at Carlisle Group and what we're learning about that transition as we speak. They're good to have you with us. So how did this all go down at Carlisle Group a few weeks ago? Well, let's say this hole debacle was not managed the way you'd

expect from a top tier firm like Carlyle. I mean, even comparing it to Glenn Younkin's exit the last CEO, which was telegraphed from a public relations perspective, really well managed. This was kind of a mess. Um. You know, we're talking about ten pm press release on a Sunday night. Took everyone on Wall Street by surprise, and people have been kind of trying to unpack it ever since. So yeah, so what as we've as you guys too, have been unpacking it and writing about it. What more have we

kind of learned about how this is playing out? Well? It sounds like what happened is a big conflict between q Sun Lee the CEO, and the founders was really at the heart of it. Uh, The board sort of leaned towards David Rubinstein on the side of the founders and essentially pushed Lee out. Um. You know, he has been the CEO for about six years. He started with Glenn Youngcan, who ironically he himself kind of pushed out

a few years ago. Young Can went on to be the Governor of Virginia, and Lee was making a lot of changes which people would say was necessary, um, going into new businesses, making Carlyle more competitive, but sort of icing out the founders and changing the culture in a way that was really controversial. So where does where does Carlisle go from here? And what do we know about how they're going to bring in somebody? You know, there's a search going on, is you right? What's the direction

that they need to move in? Well, Carlisle has kind of bigger underlying issues at this point, I mean this identity crisis as we called it. Where they really got their footing is a buyout shop, but they've had to push into new businesses to compete with Blackstone, KKR and the others. Now they have credit insurance, retail, and they've expanded in New York, but they're still based in DC.

They kind of made their name doing defense related investments, but now they've had to pivot to technology and healthcare. They really need someone who's gonna kind of keep pushing them in a new and competitive direction. But who knows that the founders really loom large. I mean Rubenstein said it himself. They have a huge percentage of ownership in

the company. I think it's collectively of the stock between the three founders, so a large portion of their own wealth is tied up in this company, and they generally control the boards. They have institutional relationships and knowledge, and they don't want to be completely iced out and pushed to the side. There. I would have thought the founders, who uh do wield a lot of influence, would have been swayed by just the share price of Carlisle alone,

which you include in your reporting. Carlisle shares have advanced more than fifty percent since Lee became Seal CEO, even including the recent sell off. That compares with a four percent gain from the time of the company's IPO back in twenty twelve to Januar, when the founders seeded control. Typically that would have been enough. And I do wonder if ultimately, longer term Carlyle is going to end up going back towards some of the things that Lee was

pressing for or moving towards. I think that that is true. The stock prices had done significantly better, but compared to a black Stone or KKR Apollo, it was still really lagging. I mean, some of these other firms were up a hundred percent two percent um, and it really Carlisle really just wasn't keeping up. There's also other issues as far

as fundraising gos. They just couldn't really get as much ground raising money for their new funds, their flagship private equity fund and they're seeing a lot of high profile exits, which is concerning to the founders and two investors of these you know, all of these private equity firms. They're looking at things like that when they make decisions on where to put their money. Hey, just got about fifteen seconds. But sometimes, you know, observers will say the old guard

has to let the new guard find their way. Are people saying that and just very quickly. I think there's a mixed feeling going on. Careed Rubenstein and the others. No, they need to make way for you know, new leaders, but they don't want the firm to go down and flame. Alright, Heather pearl Burk, thank you so much, great reporting. Private equity reporter AP Bloomberg News on the phone in d C. This is Bloomberg Business Week with Carol Masser and Bloomberg

Quick Takes. Tim Stinovic on Bloomberg Radio. All right, um, one thing we do all get a lot of his social media did have a batch of primaries around the country today. I'll make the connection with that in mind. A story in our top Tech menu in the Bloomberg checks into what TikTok is up to as it gets ready for the round of mid terms. Come to Vampire, the story by Alex brinca technology reporter for Bloomberg New She joins us this afternoon on the phone from our

Los Angeles bureau. So, Alex, what is TikTok doing to try to keep its platform quote unquote safe ahead of mid terms here in the US? And I think, actually, you know what, I'm sorry, I have to just you know, ask with the context of who owns TikTok and why this is so important and all level set there. So Bite Dance is a Chinese company UM that owns TikTok,

which operates here in the US. UM it's a that short form video app where UM where content can go viral in a matter of seconds, and a lot of US users are spending much of their time on these days, and so when it comes to where people are spending time, you're guaranteed to see political information, especially before US election. For this round, TikTok is doing what we've seen a lot of the UM social media companies do and basically trying to shore itself up against that kind of term.

We hear a lot misleading information. UM. There are a few things specifically that UM TikTok is doing. For one, they're really leaning into this ban on political advertisements that they put in place before the election that they're continuing through UM this cycle. And specifically UM, they are banning

influencers from posting paid political content. Now, in the past, influencers were UM kind of looped into this blanket ban UM, but they saw some challenges with some of that paid content UM, where organizations were paying content creators to make videos supporting political campaigns or political issues. UM. And now they are making sure that that ban is really enforced this year. They're also launching something called a kind of

elections center. They're saying, look, if we see misinformation on the platform, we can redirect people that direction. Now, the last thing I'll point out that is very TikTok ESK. If you've never been on the app, when you open it up, that main page is called the four you feed, Yeah, the f hashtag f yp UM. It's the place that you know, videos go viral. It's a place that a lot of people spend their time. UM. It's also the place that you know, garners the most views on videos.

For any post that anyone posts that is kind of flagged by their technology algorithms or by human moderators, if it has any misleading information, it will be pulled from the platform. But if it has also information that's not verified, it will be basically tagged to disallow it from getting on that f yp so bottom line is here no political advertisements, and they're basically trying to suppress anything that

is bad info on the platform. All right. We also heard this week um Alex from Meta, you know, putting out their playbook in advance of elections. So what you're telling me is that we're all set, We're all only going to get truth, no misinformation on social media or not. But this is this is where you know, by colleague Kurt Wagner and I had a chance to chat to um metas policy boss called Nick clegg Um. He basically came out and said, look, we think we have a playbook,

but that doesn't mean we're being complacent. Um, you know, there will always be folks who are posting misinformation on the platform. Carol, I will say, no, I'm sure I'm going to see some stuff that um it would not fly through the fact checkers that a lot of these companies work with. UM. That being said, you know, it's been what six years since Metta in particular has come under fire for how it hosts information and political ads

on its platform. So the company says like, look, we think we have a playbook that is working from the last general election. UM. That company does allow ads, and those ads will need to be vetted. Uh. They also will not allow any changes to adds in the week prior to UM the closing of voting to make sure that they can catch anything. But you know, if I were a betting woman, I would probably guess we're to see some things pop up. Okay, So that's that's the question, Alex,

And we'll have a minute left. But how is it a platform like TikTok going to verify if somebody's being paid for doing some sort of post versus just expressing their support for a certain candidate. Yeah, And their tactics here are basically to try to educate creators in advance and expect that they'll uh, you know, go along with the rules that are expected by the FTC in terms

of tagging things as an ad. If they see something that's been tagged as an ad that um, you know, does have political information in it, they will take it down. But that is a point there that you know, you have to hope that content creators will also be good actors and make sure that they're following the rules that TikTok is trying to share quite a bit in advance

to make sure that they can head off anything like that. Alright, great update on what's going on in the world of social media, especially when it comes to those upcoming elections here on this primary day. Alex Barenka sis Technology Report up Bloomberg News on the phone from her l A bureau. I mean politicians, right, candidates, they know how fluential and how persuasive social media can. But you're smiling. TikTok is so addictive, Carol. Just do yourself a favor. Just don't

download it. I'm roc journal. Yeah, but you let me drive? No, no, no, all right, please, I want to drive. It's good question. D This is the drive to the clothes well down on Bluebird Radio. All Right, we've got about ten minutes left in today's trading session. Stocks have been bouncing around here off our highs and loads of this session, Tech the biggest underperformer. And we did see some market reactions, sending stocks a bit higher and rates a bit lower

following those FED minutes. Some interpretation maybe that the FED was thinking about maybe slowing rate moves or making small are ones. But I'm reading a lot of analysis and they said, folks, the FETE is still going to continue raising rates, so just get just get used to it, all right, buckle up. Well, let's see what Rebecca Corbyn has to think about this. She's founder and CEO of Corbin Advisors. She joined us on the phone from Farmington, Connecticut. Rebecca,

it's good to have you back with us. How are you. I'm doing great, Thank you for having me and have the August. This August is a little bit busier than last year, which is an indication of nuts. What's happening on Walster. It doesn't seem like everyone's on vacation, right, No, it does not. Yeah, it's a lot going on here,

all right. So having said that, there does seem to be continued even though we've seen the markets trade down after several consecutive days it was a four day up dates or the it's the first down day in four that we've seen on the S and P five hundred. So I do wonder do you think some of the

enthusiasm that we're seeing, certainly on the equity trade makes sense. Listen, I think if you look at what's been happening in the second quarter UM and the gains that we've made after the first quarter and the concern you know, investors are starting to come to terms with, Hey, we're in this and this is not going to be necessarily short term, and we're going to continue to see fallout as this economic downturn wends its way through the different sectors. Well,

how long is it being most pronounced? Sorry? What was that last part? Consumer being the most pronounced? Well, let's talk a little bit about that, because we're getting a good read on the consumer, not just from you know, banks a few weeks ago, but this week from retailers like Target and Walmart and Home Depot t j X. Well, what's the takeaway that you have from not just seeing what they're reporting, but also the commerce department numbers that

we got this morning. Well, I think more importantly, what we're seeing across the consumer spectrum from earnings is that companies are continuing to implement higher prices. So this whole issue with inflation and FED rate increases across consumer, industrial, basic material, those inputs. The vast majority of companies have communicated that they are continuing to raise prices the second

quarter and they're still seeing higher costs. So we have yet to see the kind of wall that's going to say, you know what, no moss um, We're going to reverberate. So that's still happening. It's still was reported on the second quarter. How do you make sense of especially within the retail community this week where Walmart investors reacted pretty positively, and you know, it seemed more positive in terms of

the release we got from this company. Mind you they guided us lower just about three weeks ago, But then Target comes out another retailer, and it's a little bit more of a negative tone and certainly negative investor reaction. Those are both got big exposure right to consumers. So how does how do you make sense of that? Since it sounds like overall that you're saying anything with kind

of consumer exposure you maybe want to back off of. Well, actually you want to take advantage of weakness in the smart it right Walmart, Target these are tried and true companies and they will make it through whatever vicissitudes we're seeing. I think the bigger focus is that people are feeling a little bit of a reprieve in terms of consumer

and gas prices have come down. That's being reflected. Restaurants are still strong, but we are going into a choppy period and we'll continue to go into a choppy period. We're going to go back to school people. There will be reality check. We're looking at um back to school retail sales and to see how how that does. But this does have a long tail, and you asked me

earlier how long does it laugh. We're predicting that when companies come out in January and February of three, they will set the bar with their guidance and it will likely be conservative. Rebecca, you're a disconnect with yep. Well, I was gonna say, you do so much research about sentiment, and I want to understand how investors are feeling right now and how how you know we get it. You gave us a good idea about shumors and what we

learned in recent weeks, but what's investor sentiment? Because again I go back to this idea of this puzzling rally that we've seen in a hiking cycle, and you know, with the FED that is basically said, we're going to do whatever it takes to get inflation under control. So great question one is heading into the earning season for the second quarter, investors generalists that we surveyed were very barished.

We had actually had not seen the level of bearishness that we saw heading into the second quarter until when we saw it in December of which was actually a mini industrial recession. So the bearishness was at the same level as those two periods. It was better than expected in terms of earnings and revenue. Both were better than consensus for the vast majority of companies. So we're seeing a reaction from investors that says, you know what I was. I thought we were going in But we're still seeing

record performance, We're still seeing record backlog. There is rans in this economy. Industrials are doing actually quite well. Um, so they're feeling a little bit better, But make no mistake about it, we get into the third quarter. That's kind of the last stop on the bus before you have to lower guidance if you see things coming, and we're already seeing continued deterioration in materials, for instance in

July and August. So this is going to continue, but investors expectations were worse than what companies delivered, and they're starting to again get a tune to this process. We also, you know, heading into the second quarter, there was a lot more uncertainty with regard to the FED and the impact. We now see that impact, so it's not as big of an X factor as it was a few months ago where we didn't understand what was actually going to transpire.

And I think it's great that the FED is actually coming to terms with the fact that if you raise rates as quickly and as aggressively as you do, you know, you can get ahead of yourself because these things take time six and nine months to work their way through the system. Yeah, I think that was a key point certainly of what we got from the FMC minutes that the you know, talking about this is going to take some time. We certainly see a play out in housing

and mortgage. It feels like already the mortgage market, in the housing market, but it does sound like in terms of the impact of those FED rate hikes that more is to come. Hey, um, we're gonna leave it there, Rebecca. Thank you so much. Rebecca Corbyn, she's founder and CEO at the strategic consultancy and research firm Corbin Advisor, joining us on the phone from Farmington, Connecticut. Thanks for listening

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