Tesla Inc.’s (NASDAQ:TSLA) second-quarter report didn’t sit well with longtime Tesla shareholder Ross Gerber, who pulled no punches in an interview following the release.
“Yeah, I mean, it’s garbage,” the CEO of Gerber Kawasaki Wealth and Investment Management, told Yahoo Finance, just after the report was released. “It’s sad and depressing to me that this is a business in decline when it should be… a growing business, and it’s not.”
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Revenue Down, Sentiment Lower
On July 23, Tesla reported $22.5 billion in revenue for the second quarter, down 12% from a year earlier, short of Wall Street’s $22.8 billion estimate. Automotive revenue fell even more sharply, dropping 16% year-over-year to $16.66 billion. Per-share earnings were 40 cents, missing the expected 42 cents. Operating income dropped 42% to $923 million, with operating margins falling to 4.1%.
Gerber criticized Tesla's shrinking cash flow, noting that the company is now essentially break-even without regulatory credits. “The regulatory credits are going down every quarter and they’re going to be gone soon,” he said. “And the prices are going up on the vehicles soon. So I’m just like, man, you know, this sucks.”
Deliveries also fell to 384,122 vehicles, down from 443,956 in the same period last year. Production held steady at just over 410,000 units.
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High-End Sales Collapse And Brand Troubles
Gerber pointed to a 54% drop in sales of Tesla’s high-end vehicles, including the Model S, Model X, and Cybertruck. While he said he likes the Cybertruck personally, he criticized Tesla for not doing enough to market it.
He also warned that no matter how many new models Tesla produces, it won't matter if customers aren’t interested. “It doesn’t matter how many products you come up with if people don’t want to buy them,” Gerber said. “They just don’t seem to want to address that issue.”
While Tesla touted early production of a more affordable model set for volume release late this year, Gerber was skeptical. He acknowledged the need for a lower-cost vehicle but doubted that a smaller Model Y would move the needle. “You’re going to lose—you’re going to cannibalize more of your business,” he warned.
Musk’s Influence And Image Problem
The Tesla bull didn't shy away from addressing what he sees as a core issue: CEO Elon Musk's behavior. “Even if they came out with a golden car that flew, people wouldn’t buy it because it’s Elon Musk’s car,” Gerber said.
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He argued that Musk’s political commentary and public actions have alienated potential buyers. “Elon’s political, not just opinions, but his actual behavior in public is just super inappropriate and turns off basically everybody now,” he said. “Until he wants to address that, I still think it’s going to be hard for Tesla to grow.”
Though Gerber supports Musk returning to a more active CEO role—”The CEO of the company should actually work at the company”—he said that won't fix the brand image alone. “Probably the best thing he could do is work at Tesla and never tweet again,” he added.
Gerber also isn’t convinced that robotaxis are a game-changer. “What is so exciting about a business that’s been around for a long time?” he said. “I get in a Waymo. It takes me from A to B. Costs me 20 bucks. Big deal.”
He also expects Tesla to eventually acquire xAI, Musk’s AI startup, which would give Musk more control of Tesla. “Sadly, I think Tesla’s shareholders are going to vastly overpay for xAI,” he said. “They need the cash out of Tesla’s balance sheet for xAI to grow.”
Despite all his concerns, Gerber said he’s still long Tesla and isn't betting against Musk. But he’s clear-eyed about what needs to change: “Maybe in a year things get better. But if he doesn’t change the way he’s acting, I don’t see how anything gets better.”
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Image: Imagn Images
