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All Right, the other big news company news of the day had to do with Tesla. So apparently Tesla's annual EV sales drop for the first time in over a decade, with about one point seventy nine million.
Vehicles sold in twenty twenty four.
Steve Man, Bloomberg Intelligence Global Autos and Industrials research analyst, joins us, So the comparison of hey, this is the first time it dropped in over a decade sounds bad. Can you just walk us through the intricacies behind this number.
Yeah, if you actually, if you look at the fourth quarter, it's actually up slightly by two percent. But you know they've done a lot throughout the quarter to drive that number, mainly on incentives, So we're likely to see that to continue. But if you look out at twenty twenty five, we expect the company that actually give you know, rosier guidance. They do have new vehicles coming out, the refresh of
the model why, the popular model why. And then there's a new affordable vehicle being launched in the first half that should drive sales in twenty twenty five.
So how important are incentives these days, Steve? For the average EV buyer.
It is very important. It's not just on EV.
We're seeing that throughout the auto industry, including gasoline cars. Affordability continue to be an issue. You know, if you look at delinquency rates on loans are they're rising, so the automakers have to come in and actually support demand.
So we'll probably see that in twenty twenty five. But you know, there's there's reports out there that we, you know, including ours, we think that battery costs will continue to come down and then we'll see probably a better an upturn, likely in twenty twenty six, not so much in this year.
When you mentioned that there'll be some product refreshes this year as well as an affordable Tesla, yeah, I've been hearing that for a while. What do we mean by affordable and do we trust this timeline?
Yeah?
So, you know, I think there's been a lot of questions out there in terms of how you know, if Elon must will actually meet his own projection. I think that he will launch the affordable EV and that's likely to be under a thirty thousand including the that then includes the seventy five hundred credit incentive by the federal government.
Oh, it includes it.
So if that goes away, it no longer becomes affordable.
It still is.
It's still one of the cheapest EV's out there. I think the new EV's that they're launching coming going forward will actually be much lower costs than the current model three Model Y, so there's still some room for them to cut prices and also, you know, help help maintain the automotive gross margin around the you know, eighteen to twenty percent.
Steve, twenty twenty four feels like a year where the evolution towards electric vehicleles hit kind of a speed bump at there A. Is that in fact the case? And b how do you think about the industries continued evolution to EV's over the twenty twenty five Yeah.
I think twenty twenty five EV sales will probably be grown at a single digit and you know, incentives still going to be a bigger part of the story. But I think long term, you know, beyond twenty twenty five. That means twenty twenty six and beyond, I think EV sales will recover, battery costs.
Will continue to come down.
More automakers, not just Tesla, GM and Stilentis are launching newer and cheaper evs. That's going to be that's going to resonate with a with a mass market. You know, a lot of the early adopters have bought evs, and I think the next leg up is really to get the general population to buy evs and make it more affordable for them.
I guess I just wonder, like without the tax credit, if that goes away, I appreciate that Tesla's still the cheapest one out there, but that's not going to be Like, there's no way Paul's buying a thirty eight thousand dollars Tesla, right, Like, that's not happening. So what has to happen for that price to get even lower? And I know that it's a chicken and an egg thing, right because you need the demand in order to trigger the production, which then
releases lower prices. But that's just not materializing, particularly without that tax credit, right.
You know, I think we talked about battery costs is being one of them. The other thing is really.
The charging infrastructure.
You know, I don't think the charging infrastructures has been expanded to a point where it's convenient for a lot of the for owners or potential owners of EV's, but there's a lot of money being poured into it. There's one company called ev Go. They just got a huge loan from the federal government to expand. We got a lot of automakers, major ones, GM.
Ford and.
Hyundai and the likes are actually joining forces together, pulling capital together to expand the infrastructure. So that's why, you know, I think, you know, beyond twenty twenty six to beyond twenty twenty five, we're going to see improved uptick on EV demand because of not only cheaper EV's, but an expanded charging infrastructure.
Steve above the auto companies you own, what's the best position here do you think for what's going to be a bumpy several years, arguably as as transition continues.
Yeah, I still you know, if I look at the company, I still prefer Tesla in terms of their fundamentals. There's still the lowest cost producers. The next one is GM and Shanday. You know, they have the best offering at the moment, and they continue to launch more affordable evs. On the other end of the spectrum, Ford is actually retrenching. They're more focused on commercial EV business rather than the
consumer EV business. So commercial evs there's demand, but obviously the market is not as big as the consumers.
All right, thanks so much, We appreciate that.
Steve Steve Man Bloomberg Intelligence, Global Autos and Industrials research analysts joining us on those Tesla delivery numbers.
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All right, we started your year green on the screen. The question is do you stick with what got you here? Kind of the mag set in some of the big tech themes that have worked for equity investors so well over the last couple of years, already trying to branch you out and find some value in other places. Let's check out with our next guests, on that issue, Kathy and Twistle Managing Director Morgan Stanley Private Wealth and Management, joining us via zoom. So, Katy, what are you telling
your clients this year? I mean, you know, from an equity respective, the market's really delivered outstanding returns over the last two years, but again a lot of that was skewed by a handful of names.
Here. What do you do this year?
Hey, thanks for having me on today. Happy New Year. There's a lot to talk about and a lot to do for clients first day of the year, and with the mag seven really outperforming, we are telling our clients to consider like reducing a lot of those positions with
tax harvesting and thinking thoughtfully. A lot of clients are starting the year off, obviously with the zero tax sum gain, and it's a good time to start reducing those positions looking at other areas because there will be other areas that will become more robust and better opportunities for clients going forward. So it's just about diversification in some ways.
Kathy, though this exact conversation could have taken place today at this exact same time one year ago, and it still wouldn't have necessarily worked out because you still had the big guys getting the big gains.
Absolutely, Alex. When I speak with my clients, I ask them, you know, what, how are you going to feel at the end of the year if these positions are much higher, and then how are you going to feel if they're much lower? And which one feels worse? And if you think that if they go down tremendously and that's going to feel worse for you, that probably means you're taking too much risk for your you know, for your for
your own risk tolerance and portfolio. And by reducing some of that risk and putting those assets in other areas of your portfolio, you're actually giving yourself a sleep at night formula and still having the opportunity to grow your portfolio.
Is sixty forty Is that still a reasonable fuller construction? Sixty percent equities, forty percent bonds or alternatives something.
It's it's it definitely has changed over the years, so sixty forty. And it used to also be like sixty percent of equities or equity percentage should be what your age is, and that has also changed tsentry over the years. So now we're looking at clients' portfolios, we're looking at a couple of different things. The first thing is do they have enough money today in order to you know, reach all of the goals like living comfortably, doing the things that they want to do, making an impact in
the world, whatever it may be. We want to make sure they have enough money. So the first thing is protecting you know, the wealth that the client is built and being sure that we can create the cash flow and the income for them, and then secondly being able to grow it enough to keep up with inflation and also take advantage of growth opportunities in the market. So if a client has enough money to do a fifty percent equity portfolio or fifty five percent equity portfolio, will
do that too. We are mixing in other areas of them markets though, other than just cash, equities and stocks, in order to achieve some of the target returns that we're looking for, and that includes alternative investments.
What does alternative investments mean.
To you guys, Well, to me, it means just like a non correlated asset class. Earlier in the program, I think I heard conversations about hedge funds and hedge funds performing, So we do want to have where it's appropriate some of those asset classes in our client's portfolio. So it could be hedge funds, it could be private equity credit.
You know, the whole banking system has this shadow banking system behind it now with private equity firms and coming in and providing credit to borrowers, and we are also
providing the opportunity for clients to invest there as well. Again, it depends on the client and their risk tolerance and their appropriateness for that type of investment, but it can make a big difference in terms of not doing exactly what the more mart does non correlated asset class and also providing some nice income returns, especially for those who are looking from you know, they're in the allocation phase
and now they're going into like the disbursement phase. They're getting ready to retire, and they want to make sure they have enough money to live on and not run out.
Kathy, how about in the fixed income space, how much credit risk are you suggesting clients take these days? I mean, if you consider it in a to your treasure and get four point two five percent, do you need to do much more than that?
Yeah? What you want to think about is the way the rates are changing right now as we're seeing is shorter rates are starting to come down and longer rates are staying higher. So we're trying to move some of our clients that have cash or short term cash like investments like to your treasuries into longer investments so that they can lock in those higher rates for longer. And I think that's a very simple and easy move to make right now for clients. So that's what we're trying to.
Do, all right, Kathy, Thanks Lott, really appreciate Katy and still Managing Director Morgan Stanley Private Wealth Management, appreciate that really very much.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecarcklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Let's talk about some fun stuff here, some digital media streaming, all that kind of stuff. Where's this business going to be taking us in twenty twenty five. The best person to chat with that is Mark Douglas, President and CEO of Mountain. Hey, Mark, I want to start with sports. We had a time as recently as I don't know a year, year and a half ago when Netflix says we're never getting into sports, Well, that's changing, and it's
changing in a big way. How do you think this last bastion of broadcasting, cable network television in terms of audience attraction live sports, how do you think that's going to migrate this year to streaming?
Well, I think you're seeing a few things happening at the same time what you just mentioned, which is Netflix getting into sports. Also ESPN is coming like fully to streaming. So I think the advertisers really like they still are addicted to kind of like big audiences watching at the same time so they can create big moments, and so these networks they want to commodate that. But they're going to start accommodating that on streaming in twenty and twenty five.
It's already happening.
But now you hear from Disney, you hear from Netflix, they're really going all in on it. I think ESPN on streaming, really going full in on streaming is a big deal.
Will the ad revenue for that live streaming of sports follow I.
Think it will.
I think the.
Netflix in particular is a big advantage because so many people go to Netflix as a first source so they can turn something that might not have been that big into a big moment. They did that with the Tyson Jake Paul fight. I think they're going to do that with WWE on Monday, where people who normally wouldn't watch WWE are going to turn on the TV and that's what they see, and they're going to you know, click and watch, and so they able to kind of amplify
these sports events. But Disney with ABC and all the other and especially ESPN, also has an ability to deliver a big audience.
I think they'll do the same.
You were bullish, really you were really early on on the Netflix story, Mark. Are you still as bullish about them, because one could argue it's a whole new competitive landscape here these days.
Yeah, I think where you go first, you know, in some sense the modern day TV guy is.
A really really big deal.
And as long as Netflix owns that spot, I think there's data to show that, well more than fifty percent of people when they turn on the TV, the first app, because now you like start an app rather than change a.
Channel, the first app they go to is Netflix.
As long as you own that spot, you will own, you know, kind of be the leader in streaming, and but it requires a big investment in content. People go there first because that's the first place they think there's going to be new content. So Netflix is going to have to keep beating that machine. And they're doing it now,
and they're doing it profitably. So you know, all of that combined, I think keeps them in the lead until they they until they make a strategic error essentially, and maybe you know, get cheap about how much there willing to spend on content, people abandon them.
So you guys, I found the one movie that's not on streaming really, Yes, I tried to bring it up yesterday to show my daughter and it was nowhere. You couldn't even buy it on Apple TV. Okay, Well, Nuns on the Run nineteen ninety British comedy with Eric Idel and Robbie Coltrane could not find it. It was very upsetting interesting putting this up.
That's what that's what you were searching for.
Yes, well, we went on a whole eighties movie thing, which then brought us some of the nineties movies. So we did Clue and then Clue got into Back to the Future and then you know, Robbie Coltrane was Hagrid and Harry Potter. It's all derivative plays at the room anyway, apropos of absolutely nothing. I just thought it was amazing that I found the one movie that wasn't on streaming. Mark when it comes to the next step, then are we gonna see bundles?
Like you said, it's Netflix is like basically raced to lose at the end of the day. So do the other guys start bundles?
Yeah, I mean consolidate bundles in the form of acquisitions.
I think.
So there's some loose bundles now that don't involve acquisitions. But I mean what's happening in twenty twenty five is every network is all in on streaming.
I mean I.
Talked to executives at all these networks. This is pretty regularly all that I mean, linear doesn't even come out of their mouth anymore.
That's a legacy business.
You know, the viewers are still there, so they still have to migrate them, but they only want to talk about streaming and the you know, the big one. I've said this many times are the ones where I can name them and you can.
Tell me why you go there and watch them, and.
So those winners are going to started consolidating the buy content, and it's already under way, and that that that's kind of what's going to have that bundles in the form of let's just start buying content and buying these brands which are going to disappear like old you know, car companies that that you never hear about anymore.
Something you know, similar to that.
So are the economics Are they as good in streaming mark? Do we know that? I mean, it seems like they're pretty good for Netflix.
They're good for Netflix, and I think starting to get good for Disney and you know, it's when do you reach a critical mass of subscribers that is more than your cost of acquisition for the consumers and the costs of the content. And Netflix is clearly at that point. I think Disney is. If not, I think I think Disney Plus is now profitable. I hope they don't underinvest in content to maintain that profitability and so and a.
Few others are going to follow.
I think the business is going to become very, very profitable, and it's going to go back to being a growth business. That's been the story of linear is it grows at one percent a year, and streaming has obviously grown a lot faster, so hopefully the whole industry is going to grow a lot faster.
If everyone's talking about streaming, are the ad pricing that a streamer can get as good as linear?
And then if not, when does that ship turn?
Yeah, it is as good.
The ad load is not quite as high, and so consumers are probably happy about that. They see fewer ads, but the ad load will probably catch up, and so the pricing is about the same, meaning how much money can you make per consumer is about the same. One thing also just switching back gear, so you know, kind
of the previous topic. The interesting thing about Netflix is they're profitable while they're bringing one out of every two subscribers is paying the lowest possible price with ads supported, and they're not selling many ads right, They're still relatively small in the ad game, and so it bodes well
for how profitable this company is going to become. I think it's five pot ninety nine price point is the cheapest price point to join Netflix, and they remain profitable, not actually expanding profits at that price point, and the media dollars are going to show up and make this company incredibly profitable. So that's back to the question about you know, is the industry going to grow, Is the
profitability going to be there? Yeah, it's going to be there pretty big and particularly pretty large for Netflix.
Is there a sense mark how many streamers can be economically supported in this marketplace?
You mean, in terms, there's I wouldn't call it unlimited demand for TV advertising, but there's a lot of demand. The pricing has been coming down a bit because of the competition you had in twenty you know, like Netflix started to really come on board, Disney plus Amazon Prime.
Now every subscriber receives ads. There's not even a way to opt out, and so all of that news inventory is definitely bringing prices down, triggering a little bit of a price war, But I think that'll shake out when you combine that with the acquisition spree that's probably going to happen over the next few years. I think pricing
will temporarily dip then start to go back up. And the main thing is you have a lot of new advertisers coming in and market a lot smaller younger, mid sized companies, smaller companies and bringing new revenue that will drive up revenue for the whole industry, Mark, are.
We ever going to see the streamers get really into news talking about live I know that some of them have their own streaming news part, right, like CBS now, et cetera.
How do you think that part evolves?
I think probably not.
And the reason is is because you know, like no one really I think fully understood in the recent years that like social media is a big competitor in news, so they get the kind of news that people are getting literally right now listening to you the the I don't see, you know, I think that's going to remain relatively independent. I don't see like Netflix and Disney getting into that and and so. And I've never, honestly never
hear from any of these companies about news. They only want to talk about sports and entertainment.
Yeah.
Uh, Mark, So what happens to some of those linear networks that we all grew up with? The Did the media companies just let them die a slow, natural death?
Yeah?
You know, that's a really tough question to answer, the the because I wonder that myself, and I can't say I have a response. I just don't see like a brand like CNN just disappearing. It's just too strong a brand, but it's going and need to go through some evolution.
Clearly people aren't showing up for that.
The other thing that competing with that mentioned social media's podcasts. You know, there are numerous podcasts that have more viewers per day than like CNN and so and buy a lot, not a little, and through multiple outlets, you know, like podcasting and YouTube.
And things like that.
So I think that's still evolving, but I don't see the you know, brand like CNN just like disappearing.
It's but it's going to have to am.
All right, Hey, Mark, we really appreciate it. Thanks for hanging on with us. Mark Douglas joining US president and CEO of Mountain.
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