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Automakers are 'going to get wiped out by Tesla if they don’t go all-in on EVs’: Expert

Ross Gerber, Gerber Kawasaki CEO, joins Yahoo Finance’s Zack Guzman to break down Tesla's stellar third-quarter earnings report.

Video Transcript

ZACK GUZMAN: Things were good already at Tesla, but now it seems they are getting better. The stock up 400%-- more than 400%-- on the year. And it just reported earnings yesterday, and it was a blowout quarter, ladies and gents. It reported a fifth consecutive quarter of profits, beating analysts' estimates handedly. Also said it remains on track to deliver that 500,000 vehicle number in 2020.

I also want to highlight, too, third quarter profits, $0.76 a share on an adjusted basis. Also handily topped, again, the estimate there, $0.55 a share. So a lot of positives here for Tesla. I want to bring on our next guest to dig through the results of the quarter. That would be Ross Gerber, Gerber Kawasaki CEO.

And Ross, it's good to have you back, my friend. I mean, when we look at the quarter, it's really hard. And I know this is our job to present the other side here and look at maybe some weaknesses, some things to point out. Really hard to find those here, but what did you say about the quarter [INAUDIBLE].

ROSS GERBER: You know, I think your point is valid. I mean, a year ago, Tesla had, you know, the issue of maybe running out of money. They had less than $2 billion in the bank. And we went up and talked to Elon about, you know, doing a secondary or a convertible offering, which he did the next day. So he had already thinking about that. And now I'm looking on the books, and they've got over $14 billion in cash, which is greater than their debt level.

You know, it's, like, the best financial position. They can totally fund now with the capital they have all of the investments they're making without having to go back to the markets. And the future has never looked so bright for Tesla. So I'm excited because we finally got through that struggle for survival stage. And now we're in the, this gets really good, stage.

ZACK GUZMAN: Yeah, and in regards to that question, I mean, there are a lot of catalysts here. We've been talking about potential inclusion in the S&P 500 for a while here. It seems like one of those questions, since you can't point to the profitability thing-- that's been answered. Again, five consecutive quarters of profits.

But when you think about some of those question marks, it could be tied to the emission credits. Of course Tesla has benefited from that. Revenues or sales from those credits fell to about $400 million, down from $428 million before here. So maybe that's a question mark when you think about inclusion in the S&P 500. Talk to me about what that might say about that idea as it remains maybe one of the shaky elements here.

ROSS GERBER: Well, I think that's sort of an unfair way to look at a company. OK, so here's a company that makes an EV that knows that it gets a credit for taking this enormous risk and making a much harder vehicle that's better for the environment, where making a gas car is easy and it's horrible for the environment. So there's a reason why these credits exist.

So to infer that that's not part of the business is, I think, disingenuous. I mean, the bottom line is that that's real cash that Tesla gets paid because other companies have failed at creating any sort of EV solution when they know they can and they just don't want to invest the money. So it's real money. They're getting paid this money, and they're going to get paid this money forever into the future, while these companies continue to dither with their ice vehicles, you know?

ZACK GUZMAN: Yeah, well, I mean, we know the number is going down. It went down this quarter. And we know that other companies out there are increasing their own EV efforts. We saw that with GM earlier announcing more than $2 billion going into their own manufacturing. They have--

ROSS GERBER: Just to have that effort, Zack, though. Like, even still, these companies, it's such a half-assed effort. I just-- they don't understand. They're going to get wiped out by Tesla if they don't go all in on EVs. Now other companies are doing it. Rivian, Lucid-- they're making nice vehicles. They're all in on EVs. And they'll be successful. But the GMs and the Fords, if they-- they are out of time.

ZACK GUZMAN: Yeah, I wanted to ask you about that, too, though, because we did get the update-- of course, GM didn't reveal how much in terms of vehicle production or the actual numbers here. But when we talk about the GM, the EV Hummer, it's catching a lot of eyes here. I mean, the price tag's going to be north of $100,000 in the first run here.

But saying that they sold out in reservations within an hour. So maybe there's some strength. There's some truth to the idea that, you know, there's some sort of demand there on that front. But you say it's too late, what?

ROSS GERBER: Well, listen. The demand for EV cars is off the charts. If these companies understood, like, just build EVs. People want them. Look at the Taycan, not even a great car-- the number-one selling Porsche. But they're not even all in. I'm like Porsche, dude, make a Cayenne. Like, what are you doing, right? Like, it's just-- like, it's crazy to me, right?

So, like, the same thing with the Hummer. So how many Hummers can they make in 2022? My guess is less than 10,000. So this is a non-event. To say you've sold out a few trucks is a non-event. And nobody's going to buy a $120,000 truck when they can buy the same ice truck for 50 grand.

And so, what GM is doing is trying to sell more ice cars by making the EV so expensive that nobody is going to buy it. So it sells more ice cars with higher margins. This is exactly what Volkswagen has done. It's exactly what Audi has done. They make crappy EVs so people buy the ice cars instead. And they say, oh, you know, well, we have an EV. Tesla's winning. They're just going to win big as long as [AUDIO OUT].

ZACK GUZMAN: The numbers they reported so far do continue to show that momentum growing here. We'll see what GM is able to do.

ROSS GERBER: Everybody wants an EV. They're better cars, and they're cheaper to operate. And that's irrelevant to full self-driving. And when the trucks come out in two years, boy, that's going to be a whole another industry to watch out for that Tesla's going to just blow up.