Good morning.
I'm Brian Curtis and I'm Doug Krisner. Here are the stories we're following today.
A lot of movement here around Boeing seven thirty seven Max nine today. Let's get to head bax to with that story and more from the nine to sixty news room in San Francisco.
And yeah, so let's go through it. Brian, Number one, FA is halting all Boeing Max production expansion, including the seven thirty seven nine. And this while Boeing CEO Dave Calhoun is on Capitol Hill today meeting with Senators answering questions about or trying to answer questions about safety of the Max. Calhoun is standing by his product, we don't put airplanes in the air that we don't have one hundred percent confidence in.
I'm here today in the spirit of transparencies.
Yeah, but this comes with the public knowledge of the panel blowout on Alaska plane mid flight, as well as Alaska's CEO saying it found multiple loose bolts on many planes. So Bloomberg's Abigail Doolittle says, consumers and investors are trying to make some kind of sense of all of it.
The idea that you're hearing the CEO of a major airline manufacturer saying we fly safeplans. That's just something that you take for granted. But after the two trategies in twenty eighteen, twenty nineteen, the rudder issue last year, the door plug blowing out. Last Saturday, a wheel fell off, I mean, they really have a situations.
And again the Alaska air says it'll bring back it's first seven thirty seven nine. On Friday, President Joe Biden is securing the endorsement of the United Autoworkers' Union Union president Sean Fain, saying, the issue of the president's age is bs and.
If we're going to grow our union and organize the unorganized and help the working class, we have to have the right people in power.
And he says the other guy, Donald Trump, is a scab and Biden wall Street didn't go to America. The moon class built America, and Union's built the moon class, and Biden would have a very tough fight without a twin. Fane says that he has earned that endorsement. Nikki Haley reinforcing today she's still in and she's still attracting some wealthy donors who are definitely keeping the campaign afloat.
My parents came here fifty years ago to an America that was strong and proud and full of opportunities.
I want them to know that country again.
And Reuters reporting that Donald Trump is furious, saying she needs to get out so he can focus on Biden, but former House Speaker Kevin McCarthy says he should do it anyway. He was on Bloomberg Surveillance today saying that he doesn't think Haley will risk losing her home state of South Carolina next month. He says Trump just needs to go ahead and focus now on Biden.
So if I was Trump, I would start pulling Biden out. I would make the issue. But remember, a re election is a report card. Your first election is aspirational. What are you going to do now? There's going to be a report card what you did now?
The latest a Real Clear Politics polling average puts Haley about thirty points at this point behind Donald Trump. And let's get a lightning bolt for Jim Harbaugh, should we. We're hearing that the Harbaugh's returning to the NFL. Washington Post reporting that he is finalizing a deal with the LA Chargers and that borrowing any last minut of hang ups that he will have a deal in San Francisco. I'm at Baxter and this is Bloomberg gar Brian all.
Right, ed, thanks very much. This is Bloomberg, Debreak, Asia, Brian Curtis and Dead Chrisner. And we've been talking about Boeing. Well, today we actually have another hurdle for Boeing in the wake of the ongoing quality control issues. Today, the US Federal Aviation Administration said it would not approve production expansions for Boeing seven thirty seven Max. The move Race's questions about Boeing's plan to open a fourth production line for
the seven thirty seven later this year. Bloomberg's Danny Lee breaks down what this means for Boeing's bottom line.
What's key here is that Boeing It's critical Semphy seven mex cash Cow plane. Ultimately it was producing thirty eight planes a month, and it was going to add a fourth production line in Seattle, which means could go up to fifty planes a month. And you think about the millions of billions of dollars it would ultimately generate once this comes to fruition over the next couple of years.
Bloom breaks Danny Lee. The FAA says it will not be back to business as usual for Boeing until quality control issues are resolved. At the same time, the FAA has approved inspection procedures that airlines must carry out in order to resume seven thirty seven MAX flights, so there is a path there. Alaska Airlines says that it will bring its first Max nine back into service on January twenty sixth.
Let's go to China next. The Central Bank saying that it will cut the reserve requirement ratio for banks by fifty basis points on February fifth. Story Now from Bloomberg's Joan Wong In Hong.
Kong, PBOC Governor Pangong Chan said the cut will provide one hundred and thirty nine billion dollars in the liquidity to the market. Pahn also hinted at old measures to come. After the announcement, regulators added more measures to bolster this slumping property and stock markets. Measures include roddening the use of commercial property loans and boost in China and Hong Kong equities. The changes seem to show mounting urgency in
China to shore up the economy. In Hong Kong joined Wong Bloomberg Radio.
Tesla's fourth quarter earnings fell short of expectations. Today, the automaker spent much of last year's slashing prices around its lineup Wloomberg. Red Brown says that that choice could have made an impact on the bottom line.
It does raise some questions about this strategy of continuing to lower prices. They lowered prices just last week again in Europe, so it seems like that is going to be the strategy going forward. But it doesn't seem to be kind of paying dividends in the company's view going forward. In terms of actually selling cars.
Still, Tesla told shareholders to expect weaker sales growth in twenty twenty four as it builds its next generation vehicle. The carmaker has yet to offer a specific delivery target for that vehicle. Let's get to our guests. Gene Munster joins just managing partner at Deepwater Asset Management to take a closer look at Tesla's earnings. You should mention first, Tesla traded down in after hours about five percent, so
investors were a little disappointed here, Gene. It leaves things up in the air about what's coming next with Tesla's next generation vehicle.
Indeed disappointment. I think that the disappointment will probably increase tomorrow. I expect this stock to actually drift lower because the guidance in the outlook was sobering and something that I haven't seen. And I believe that this company is in a great position longer term. I think they're making all of the right moves by investing into the future, where
other automakers are pulling back on that investment. But that doesn't change the reality of how investors are feeling tonight, which is this outlook where they talked about a notable acceleration in their growth rate, and I'm going to decode that that means that growth is going to go from nineteen percent in twenty twenty three to probably ten percent this year, and maybe step up to twenty percent next year and then really get going in twenty six and so kind of pushing back that what a lot of
investors had hoped for was kind of a reacceleration. And the reason for this slow down is that they made a move that I did not expect them to make. They announced that they are going to be coming out with a lower price vehicle. They did not give the price, but it's probably thirty k in line with like a Honda Cord. They're going to move to that lower vehicle.
And when you start talking about that, immediately people who are thinking about getting a Model three or a Model Y are going to say, let's just hold off and see what that compact car looks like. And so you get this pullback and demand in the near term, and that's what's really causing some anxiety here in the near term related to their guidance.
So Cheane, when you look at the demand side, is price the biggest function? Do you think right now? And that's what must cast to kind of deal with, which is why this next generation vehicle will be low cost.
Price is the biggest issue. I mean, there's still a lot of cars that are sold every year in the US called fifteen million cars. Tesla sells will sell about just over a million cars this year in the US, and so price is one of the biggest inhibitors. There's other reasons why people don't buy an EV, whether it's charging, rains, anxiety tend to be at the top of the list, but price is the biggest reason. Average EV is right
around fifty five thousand. The average price of a car on the US is forty eight thousand, and if they want to get to the sweet spot of the growth market, they got to push more towards the Honda Cord, the Honda Civic than some of these maybe Volvo XC ninety.
So lower prices pretty much across the board, that hurts your margins generally. And if you're talking about I think Musk once talked about a twenty five thousand dollars Tesla model. You mentioned thirty thousand ers, so that probably means lower margins as well. Does that have a big impact on Well, let's let's ask you, Gene, what has been happening with margins.
So margins surprisingly took a step up in the December quarter. They finished at seventeen point two percent. That was up from sixteen point two in the previous quarter. That's the first time in a year that they've shown some improvement.
But the commentary on the call from their CFO was that their current their current production lines don't really support much margin expansion here and so they've got to get this next line up and go in this next gen line and Elon talked a lot about how efficient that line is, and so this what it means is that margins are probably going to be going down in twenty
twenty four, and that's that. Traditionally is the typical caretical metric on Tesla earnings is the margin, and it's probably won't be until late twenty five before they start to improve. I do believe that they will improve. I think that Tessa does have a long term cost advantage. But that's what's going on with margins, is that they showed a little bit of improvement, but the commentary is to expect them to decline in the next year.
One of the most interesting things that I read about what happened on the call was Musk addressing the size of his stake in the company, which as I understand it is about thirteen percent. He's obviously the biggest and most influential shareholder, but he said that he doesn't want to control the company, but he has so little influence that he risk being voted out. Is that even a possibility to imagine an activist investor coming in and pushing Musk out of the C suite.
As long as it's mathematically possible, which it is right now.
Elon doesn't want that risk on the table, and what he's asking for is something that's unprecedent, and he's going to get because investors know, whether you're part of the religious investors around this or part of the more level headed, know that Elon is critical to the success of the company and that he has been successful at generating wealth in the past, and they should give him that leverage to have an outsized impact on the decisions and the
strategy of the company. And so I think that it's unprecedented. I think he's going to get it, and I think he probably should get it, just given what he's done for the company over the past decade.
And we know that Tesla has been somewhat challenged in China, particularly with the rapid ascent of BYD. Did you hear much today about how the future looks for Tesla in China?
They talked about the China market. There was a question that came up related to you, do they want to kind of double down in China, And the answer was not really. They want to build Giga Mexico, expand the production line in Austin, and do some more things in Europe. And so I think that Tesla sees China as an opportunity.
It's obviously the largest EV market in the world, but I think they see their growth prospects in the US and potentially building some of these cheaper vehicles in Mexico and even exporting them to China.
What's your take on the cyber truck. I think it debuted back in November. It's still in the process of rolling out. I think the pace has been described as measured. Are you impressed at all by this?
It's I mean just from a peer specs of a vehicle, it's it is impressive. I made a reservation when I first saw the car back whenever that was twenty nineteen. I'm not going to at the current price. So there's I'm not going to buy the car. I mean, it's close to one hundred thousand dollars. I want a fifty thousand ARCR on one hundred thousand our car, And so I think that I'm impressed by the car, I'm not impressed by the price. And he said to expect around
two hundred and fifty thousand units plus. I think that's probably in twenty twenty six. But when you kind of added up this, this is going to be a car that call it ten percent of their overall overall vehicle sales and is just still it's going to be more of a you know, that ten percent type of a car, not what model wire model three are at forty five percent of sales. It's not going to reach that kind of scale.
Geene, you said you're pretty confident about the company's prospects longer term. But if we look at the stock price over the past two years, it's down pretty significantly from more than four hundred dollars down to right now about two hundred dollars. And if what we heard from Elon Musk is true and also from the CFO about lower margins going forward and worse performance in the coming year, the stock price, I mean, what's your target for the stock at the moment.
So we don't do the kind of traditional sale side targets or investors. And in terms of where this plays out, is that I think that this year can be potentially be a difficult year. The first part of this year
a difficult year for Tesla shares. I think tomorrow is going to be difficul But my question, I think the question about is this going to be more a higher value company in the future or a lower value comes down to a basic question is do you believe that electrification is going to impact automotive in the sense that in twenty years we're going to have more than sixty percent share of cars are electric. If you think we will be there in twenty years, we're at about four percent, five six percent.
Now.
If you think we're going to be above that sixty percent market mark in twenty years, then Tesla's doing all the right things to put traditional auto in a tight spot. And if you believe gas is just going to kind of hold on longer than most people think, then it's not going higher. And my sense is that cars are still stuck in a paradigm that's one hundred years old, and I think there's a massive opportunity for them to not only electrify them, but automate them on a lot
of levels. I think that's important.
All right, Gene, thanks very much for joining us here on Bloomberg Daybreak Asia. Gene Munster, Managing partner, Deepwater Asset Management. This is Bloomberg Daybreak Asia, your morning brief on this story's making news from Hong Kong to Singapore and Wall Street.
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