Morning Brew Daily - Automakers Are Out on EVs & Kim K Bets on Menswear

Episode Date: October 30, 2023

Episode 180: Neal and Toby recap why the auto industry is becoming less bullish on the EVs and why driverless cars have hit a bump in the road. Then, the latest impacts from the Israel/Hamas war and UAW labor strikes that aren't done. Next, people are packing up and getting out of California and New York, and Boomers are living their best life. Finally, Kim Kardashian is looking to takeover menswear. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Listen to The Money with Katie Show Here: https://link.chtbl.com/mwk Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Brew Daily Show. I'm Neil Fryman. And I'm Toby Howell. On today's pod, can Kim Kardashian get men to buy shapeware? Then the vibes are off in the electric vehicle industry as demand has begun to slow, leaving automakers caught between a strike and a hard place. It's Monday, October 30th. Let's ride.

Neil, Halloween is tomorrow, and even though I'm sure many of you got your scary on this past weekend, we want to participate in the festivities. We're going to host a MBD Halloween costume contest on our Twitter. and Instagram today and tomorrow. To enter, post a picture of your costume and tag us at MB Daily Show on both Twitter and Instagram. We'll pick a winner on Wednesday of this week to send a Morning Brew Daily mug to. There is a catch, though.

If you dress up as Neil and I with a friend, a spouse, your kids, your dog, you automatically get a mug. So two days to win, either have the best Halloween costume we've ever seen or go dressed up as your humble podcast host, Neil Tovey. Is my costume just an old man? T-shirt? No, yours is a dark academia, very handsome, very smart, very wise. That's how you be Neil. Okay. That's what Toby says. Anyway, yeah, definitely hit us up at MB Daily Show. MB Daily Show. Thank you, Neil. Before we jump in the news, we've got a quick word from our sponsor,

Yahoo Finance. Neil, I was walking down the street this past weekend and someone called my name out. Famous. Thank you. But get this. One guy says, love the show, et cetera, et cetera. But then his friend says, Oh, is that the Yahoo Finance guy? No way. I'm serious. I swear, he heard it over the Alexa when his friend was listening to it, and the only thing that stood out was the Yahoo Finance ads. You got to love that.

But okay, Neil, I actually have to do this ad. Yahoo Finance is the number one platform for navigating the financial landscape where whatever your goals are. If you want access to an unparalleled suite of real-time news updates and actionable data, head to finance.com today or download the Yahoo Finance mobile app to get it directly on your phone. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill 3-burner gas grill.

Or get $50 off a select Weber Spirit grill and bring big flavor to your backyard. Then set the scene with Hampton Bay string lights that bring it all together. Shop spring backyard days for seven days at the Home Depot. Now through May 6th. Exclusion supplies to homedipo.com slash price match for details. Let's dive into the news. For a long time, EVs have been the crown jewel of the auto industry. They were touted as the futures on earnings calls, called the solution to the industry's carbon emissions problem,

and we're supposed to drive sales into the next decades. Yet cracks in that vision are beginning to show. GM and Honda said last week that they are abandoning an agreement forged just over a year and a half ago that was supposed to use GM's next-gen batteries to help produce an affordable line of lower-priced EVs. Also, GM quietly abandoned its self-imposed target to build 400,000 EVs by mid-20204, while Ford pushed back its target of building 600,000 EVs by 2024 as well. And surprisingly, Hertz is also backing off its big EV plans after agreeing to buy nearly 200,000 cars from Tesla and Polestar, because they are just way too costly to maintain.

Now they are saying that they are overfleated with EVs, which is not something you'd have expected to hear even a year ago. Neil, it feels like the auto industry is finally coming to terms with the fact that there's still a bit of a bumpy road ahead when it comes to an electric future. Right. Just like any new technology, you have the early adopters. And it looks like all the early adopters of EVs have adopted. And the rest of the mainstream consumers have just not fully bought in yet. It's totally one of those things where price points are still becoming the main issue. Evis are still a lot more expensive than normal gas cars. You know, who's looking pretty dang good? right now is actually Toyota, because Toyota was one of those companies that didn't go all in on EVs. They said hybrid is probably the way forward because people still want to have some gas in their cars, basically. And so they're saying that the market for hybrids is smoking hot.

And last month, Toyota had a little more than a week's worth of Prius hybrids in stock compared to more than two months supplies of its electric SUVs. So it just goes to show you where the demand is in terms of the hybrid electric vehicles. I don't remember the last time I saw Prius on the road. They're everywhere, apparently. It speaks to concerns over the lack of charging network. Just to put some numbers on this, EVs are still growing at a pretty brisk pace, but it's not what it was.

Year-over-year sales growth in the third quarters of 2021 and 2022 were 75%. This year, the increase was 50%. So people are still buying EVs, but, yeah, that pace has slowed down pretty dramatically. Yeah, and if you look at some of the factory news that is coming in as well, GM said two weeks ago is delaying the opening of an electric pickup truck factory in Michigan, and then the Wall Street Journal also reported that Ford was considering cutting work shifts back out of its Ford F-150 lightning pickup truck plants, which was crazy to say. Yeah, just two years ago, they couldn't make enough lightnings. And then even Elon Musk was on his earnings call for Tesla, was worried that

maybe they would slow down work on the new gigafactory in Mexico. So it is, it all kind of hit at once where all this EV news where people just started leveling off demand a little bit. So there's, as I said, there's some crack showing in this vision. One interesting angle to why people may not be buying EVs is politics, of course. There's a huge political divide in terms of who's buying EVs with Democrats shelling out for EVs. Republicans maybe not as much. In the U.S., for every five Democrats owning an EV, there are two Republicans, and there was this new working paper from UC Berkeley that showed from 2012 to 2022. About half of all EVs went to the 10% most Democratic counties, and about one-third went to the top 5%. So just like anything in our days,

these days, EVs have become extremely politicized with Republicans considering it maybe a little bit woke. And I think that's because the Biden administration has pushed so hard for EVs with subsidies and other ways to increase EV production. And so it's becoming this political football. Even you have CEOs of Ford and other automakers saying, like lamenting the fact that it has become so politicized and they're having a they're having a lot of trouble selling to red states that 10% stat stat. That's that's amazing right there. Thank you for that stat, Neil. Okay, well, thank you for thanking me about that stat. Okay, let's run through some major news headlines from the weekend. Starting out with the Israel-Hamas war, Israel expanded its ground operation deeper into the Gaza Strip

in an attempt to dismantle Hamas. But so far, it hasn't been the massive large-scale ground effort that many were expecting. This could be due to U.S. pressure on Israel to use a more targeted cautious approach to a ground war to lower the risk of a wider regional conflict, minimize casualties, and secure the release of the 230 hostages that were taken back to Gaza. In heavily bombarded Gaza, the humanitarian crisis is getting so dire that thousands of people broke into UN warehouses to grab flour and basic survival items like hygiene products, which aid group said showed the despair and desperation of people living in the territory during the war. Two things I want to touch on from an economic perspective here. One goes

back to concerns over a wider regional conflict that involves Iran proxies in the Middle East. So far, that hasn't spooked global investors. And you can see that plainly in oil prices, which sit at about $85 a barrel currently down from their peak of $90 during the war. Any perceived threat to crude shipments in the oil-heavy Middle East would send prices skyrocketing. But as of now, there have been no oil shipment disruptions. Meanwhile, U.S. stocks are rising before the bell this morning and another sign that investors appear relieved by Israel's more cautious ground approach. The second item is that Elon Musk has once again entered the geopolitical fray.

After Israel's airstrikes knocked out nearly all communications to Gaza Friday night, essentially cutting off the people there from the outside world, Elon said he'd allow his Starlink satellite network to support communications in Gaza for internationally recognized aid organizations. However, his statements ticked off Israel, which said it would fight Starling from being deployed in Gaza, claiming that Hamas would use it for terrorist purposes, Musk said he'd take extraordinary measures to confirm it's only used for humanitarian reasons. But Toby, once again, this guy is finding himself in the middle of a global war.

Yeah, it's pretty wild just how much Elon Musk has become a focal point in some of these global conflicts. Remember, he also provided Starlink connectivity to Ukraine, but then made the controversial decision to shut it off during a Ukrainian attack on a Russian naval fleet last year. So, yeah, just shows how much this one man has become a central geopolitical figure with outside influence. Satellite communications. Yeah, it's a big deal. Let's move on to our next headline, which is a sad one for sure. Former Friends star Matthew Perry passed away on Saturday at 54 years old. The official cause of death is pending a coroner's investigation, but he was found unresponsive in a hot tub at his home. No drugs were found at the scene and police responded

to a report of a cardiac arrest TMZ reported. Perry is obviously most known for his time spent playing Chandler Bing on Friends, which ran for a decade starting back in 1990. Friends needs no introduction and became so large that by the end of the run, the cast negotiated a deal that paid each main actor more than $1 million an episode to continue in its final seasons. But success on Friends came with a price, and Perry also publicly struggled with a drug and alcohol addiction. According to his 2022 memoir,

he spent at least $7 million on treatment and had 65 stints in detox beginning at the age of 26. Neil, I know a lot of our listeners have no doubt been touched by Friends. in some way, shape, or form. So this news definitely hit hard over the weekend. Yeah, it's super sad. I was not, I don't, I haven't seen a single episode of Friends, but you just know how popular was, how his character was so witty and sarcastic and just a very beloved person at all of these celebrities and other French co-stars, you know, sharing their memories of him.

One thing that I didn't know about Matthew Perry that I learned about this weekend, that he was an obsessive collector of Batman memorabilia. So he once actually paid $20 million for apartment that he said he wound up hating because it seemed like the kind of place that Batman's alter ego, Bruce Wayne, would live in. And then he also, one time, he called one of his assistants, Alfred, in reference to it. And he just loved collecting all this Batman memorabilia. So yeah, just an interesting, and he definitely wanted to be remembered for something beyond just his friend's career and was also a public advocate for addiction.

So let's head to the auto strike where it is two down, one to go. Last week, we discussed how the United Auto Workers Union reached a tentative deal with Ford to end its six-week strike, and this weekend it agreed to a similar contract with Stalantis, the maker of Chrysler and Dodge. That leaves GM as the only Detroit automaker that's still suffering from the wrath of UAW President Sean Fane. Like the historic Ford deal, the Stalantis labor contract give workers a 25% hourly pay raise plus cost of living allowances. By 2028, the highest wage will top $42 an hour. another big win for unionized labor and one that was expected after Ford's deal put pressure on the other automakers to finally sign the dotted line. But GM is the last holdout and the situation is only escalating. Even as it wrapped up its strike against the other two companies, the UAW

expanded its walkouts to include even more GM plans as the two sides can't come to terms over GM's legions of temp workers. GM has a lot more temp workers than Ford, up to 10% at any given time, and they're proving to be the final sticking point before a deal can come to. together. Yeah, that's definitely the biggest difference that it would just be so costly to give them 150% raises in some cases. So it does seem like that outsized amount of temp workers is what is hanging this deal up. But light at the end of the tunnel. Yeah, we're seeing, these companies have had their earnings calls over recent weeks, and we've started to finally get a scope of how much the strike is costing them. Ford said the work stoppage cost it $1.3 billion. And then GM also

said the strike has cost to $800 million a tally that is only rising. Yeah, it's only going to get bigger. Okay, for our final headline, I want to circle back on the Panera Lemonade story we spoke about last week. Panera restaurants are now adding a label to its highly caffeinated lemonade following a lawsuit filed against the chain after a college student with an underlying heart condition passed away after drinking it. A large charged lemonade has 390 milligrams of caffeine, which is more than a monster in Red Bull combined, as well as the equivalent of almost 30 teaspoonfuls of sugar. So going forward, Panera restaurants,

will disclose that the lemonade is enhanced and should be consumed in moderation and is not recommended for children, people sensitive to caffeine or pregnant or nursing women. Neil, a small victory, but the family's legal team says it's only a baby step because it still does not provide context for the amount of caffeine in the drinks,

nor does it explain that it contains additional stimulants. Right. The lawyer for the family said it's misleading in the sense that it's not indicating that it is an energy drink. So they're saying it's a small victory, but they like to see Panera do a lot more. One angle of this case that I thought was interesting was that charged lemonade was part of Panera's unlimited sip club,

which means it was out for anyone to go get unlimited refills as well. So that's another thing the lawyer is pushing for is trying to get this very, very caffeinated drink behind the counters and not provide limited refills because it gets dangerous if you're drinking multiples of these. All right, Neil, before we jump into our next story, we're going to take a quick break. Own it all. Pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly, Big Board Bucks, machine by aristocrat gaming, Yamava Resort and Casino at San Manuel is giving one person a $1.6 million dream

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Get a quote or find an agent today at thehart.com slash small business. Let's head to our winners of the weekend, the segment where Toby and I pick two people or two things that had A.J. Brown level performances this weekend. Toby, you won the pre-show milk jugging contest, so you get to go first. My stomach hurts, but thank you, Neil. My winner of the weekend is Boomers. Bank of America issued a trade recommendation last Friday saying that boomers are flushed with cash and benefiting from high interest rates juicing their savings account while the youths are struggling under sky high rents and mortgage rates. So Bank of America's recommendation is literally to buy old people's stocks and get out of anything whose main customer knows what Be Real is.

The winning sectors, according to analysts, are things like health care, entertainment, and home improvement. All places that boomers with disposable income are more likely to spend. While the losers are likely to be clothing retailers popular with the use like Revolve, boomers are just much stronger consumers right now in Bank of America's eyes, since they're more insulated from rising interest rates, have generally saved more and are less exposed to the crazy mortgage rates right now because they likely already own a house. So boomers are my winners because, in the words of Bank of America's analysts,

go long boomer stocks and short millennial stocks. It just kind of flies in the face of business conventional wisdom, which is to go after the youngest consumers. and drag them along over the course of their life. And so it is just kind of funny to see that boomers have become such a powerful spending force as our population ages. Yeah. And the one industry that is by far the most exposed to boomers is cruise lines. They represent roughly 40% of their tripgoers boomers do.

And the S&P hotels, resorts, and cruise lines index is up nearly 28% this year. So it is pretty wild that, I mean, if you just logically think about like, all right, what are seniors doing in terms of travel? it's definitely cruise line, so that's why cruises have been doing so well. We're not investment advisors, but Bank of America suggests this. It's something that might be worth looking into it, because Americans age 65 and up accounted for 22% of all spending last year, which is the highest share on record, and now 17.7% of the population is 65 and older. In 2010, it was just 13.

So this is a dramatic increase in the older population. They have a lot of money to spend. My thinking, though, is that a wealth transfer has to happen. eventually, like, it's going to get passed down through generations. So maybe this is one of those things where... It's a day trade. Right. You're, like, chasing something, a trend that's moving in the opposite direction, but for the

time being go-long boomers. My winners are two U.S. states, Texas and your home state of Florida. That's because new U.S. census data shows that those two states had the largest influx of people moving to them last year. And, of course, for every winner, there's a loser. New York and California experienced the steepest out migration with 820,000 people moving out of California last year and 550,000 out of New York. You might have heard complaints from your Texas friends that Texas is being swamped by

Californians, and they may have a point. The top state-to-state migration was California to Texas. Of the 8.2 million Americans who moved states last year, 100,000 of them moved from California to Texas. And it's not exactly a mystery why California and New York are losing this tug of war. The cost of living has soared in coastal areas such as California, New York, and you can generally find cheaper housing. lower taxes down south. Yeah, I think I did it totally wrong, Neil, because I moved from

Florida to New York, so maybe I'm just doing this wrong. I also found a funny survey from March of this year, which surveyed a thousand Americans. It was from home by a real estate analysis company, and they said about 75% of people who moved had some sort of regrets over it, and 44% of people reported crying at least once during the process. So even though... Moving is traumatic. It is so traumatic. Especially when he's moving out of New York. Yeah, and then it was also equal amount of peoples, which they moved into a bigger place and a smaller place. So I guess there's just no thread in the needle here. But yeah, we're seeing these migrations and cost of living is just becoming more and more important.

So I think... I think at some point Florida is going to not be as attractive anymore because it's going to become so expensive. I mean, it's just recently passed New York as the second largest real estate market in the country at $3.85 trillion. So people are... You're already seeing, in this same census data, you're already seeing people move from Florida. Florida to Georgia, to Tennessee, to Knoxville, places like that, because Florida is getting a little ridiculous. Too ridiculous.

All right. Our next story is big for any of the guys out there listening to this while rocking underwear that has seen better days. Kim Kardashian's shapewear brand skims announced last week that is getting into the men's space, rolling out a line of briefs, boxers, and t-shirts made for men. In typical Kardashian fashion, there were plenty of big names attached to the project. And the announcement came with photo shoots from the NFL's Nick Bosa. the NBA's Shy Gilgis Alexander and soccer superstar Namar clad and new Skim's products and nothing else.

This is the first big expansion for Skims, which has quickly become an absolutely massive company. In just four years, Skims is likely valued at around $4 billion. And this year, it expects to do $750 million in sales up 50% compared to last year. Now, much to the chagrin of Bank of America analysts, 70% of its shoppers are millennials or Gen Z and 10% are men. Neil, that 10% is what makes this announcement so intriguing. Skim's co-founder, Jen's Greeds said that that means 50 million men visited this site over the past few months. So it's not a small number by any means. And yet, should you launch a new product catered to just 10% of your audience?

Either way... Well, it's hoping to grow the pie. Yeah, they certainly look comfortable. I thought about this a lot. It's all I thought about yesterday. I think I'm generally pretty bullish because this is a very powerful brand. They did a smart launch with all of these athletes. And then when you look at the underwear space, I mean, it's dominated by Haynes and Fruit of the Loom, which are just these very classic legacy brands.

I mean, I think Warren Buffett owns Fruit of the Loom. So if there any was an industry that could be disrupted with a little higher-end better quality fabric, then I think underwear could be. I think the bigger question is this shapeware thing, which is where skims gets most of its revenue and drives most of its business, is can you get men to wear shapeware? because that market does not exist right now. What do you think? I was seeing Bloomberg opinion pieces. I was seeing a GQ piece saying that it's going to be very hard, just given the state of masculinity in America to get men to adopt shapewear.

But I think that shapewear is not going to be the main thing they adopt here. I think you spoke to it perfectly. Men want really nice underwear. We are kind of scratching the bottom of barrel because fruit of Lumen Haynes, they're just not getting the job done. So people, it is one of the things where I have friends who just swear by the Lul of the world where if they get a high quality underwear, then it's just a fantastic thing for them. So I think skims knows fabric in that, I mean, I haven't tried them on yet, but they look quite

comfortable. So I am bullish as well, Neil. Lulu Lemon's a good company to talk about because in 2014, it didn't have any menswear it launched that that year. Now it's doing $1.5 billion in men's sales. So that was, if you go back to 2014, we did this podcast, we'd be like Lulu Lemon getting into men's. Like, you're crazy. And now, you know, it's definitely a big brand for a bunch of our friends. Yeah, just high-quality, good clothes, or it doesn't matter across gender. So if skims produce something that is high quality, I think they'll do all right. Okay, let's wrap up our show with a preview of the week ahead.

Toby, it is so packed. And if we are ever scrambling for stories this week, we should quit. Today, President Biden is expected to issue a sweeping executive order on AI in the U.S.'s most significant single effort to regulate the high-flying industry, while executive orders are criticized for not having teeth, it'll aim to leverage the government's role as a top technology customer by requiring advanced AI models to undergo assessments before they can be used by federal workers, and would also ease barriers to immigration for highly skilled workers in an attempt to boost the U.S.'s technological edge.

Yeah, obviously you have to see exactly what's in this, but the immigration piece is huge because it keeps the U.S. as a leader in the space while responsibly putting up safeguards without also overreaching too far. So definitely interested to see exactly what's in this, but I love the immigration piece of this. Something we'll definitely talk about tomorrow. Also today, Apple will host its final product release of the year. It's called Scary Fast, which is probably a reference to Halloween, but also its first M3-3-nometer processors that will come in a new MacBook Pro laptops

and IMac desktops. One twist of this event, it's being held in primetime 5 p.m. Pacific time compared to its typical morning events. Guess they want it to be ultra-spooky. Ultra-spooky. I also just love that. Apple's the biggest company in the world, and they named their event the day before Halloween, scary fast.

That is a level of dad joke that we aspire to on this podcast, so good job, Tim Cook. Speaking of Apple, it also highlights a busy earnings week. We've got reports from Pfizer, Airbnb, Eli Lilly, McDonald's, Starbucks, and a lot more. And he stand out to you. I mean, McDanks and Starbucks. I actually just went to a new Starbucks, and they had kind of their new machines out on the counter. And so I wonder if any of those efficiency gains that they've spoke about will come into play. Going back to AI for a sec, on Thursday, the Beatles were released their last new song called Now and Then, thanks to AI technology that allowed for John Lennon's voice to be pulled from a recording done in the 1970s. I'm very pumped for that. Toby, I know you're not a Big Beatles guy. This is a good time to go through their entire discography before Wednesday.

That's what's standing out to me is I wonder if this is going to set off like a Gen Z TikTok era Beatles craze because it's a new song being released. Obviously, there's also the AI ethical questions as well. But I'm serious to see what TikTok does. with this. Interesting. We've got a Fed meeting also, though the central bank is expected to hold interest rate steady. The entire focus will be on what's going to happen at its next meeting and what it signals for that. Halloween is on Tuesday, but more importantly, unsold candy will be available at deep discounts on Wednesday. Kind of feel like the weekend was the climax of Halloween, though, and Tuesday is just kind of this denouement. In sports, the World Series between the Diamondbacks and Rangers rolls on. It's currently tied one at one game apiece. No offense to our Phoenix and Dallas readers, but this might be the least watchworld series of all time.

So random. So random. Over in the NBA, the league is holding its first in-season tournament beginning on Friday. This is going to be a blast. That's something we're excited about. I'm very excited as well, and I hope this turns into an international Champions League tournament at one point. That's my dream. Finally, finally, we turn back the clocks on Saturday night.

So if you feel like it's getting dark early these days, just wait. So is that good for us or bad for us? Do we get more sleep or less? I never remember. Oh, like one. We get more sleep because I always have. equated with the opposite. Because when it gets light out later in the spring, that's when we get one hour less of sleep. But now we get, yeah, but it's just temporary. I know, but that one day,

oh, that's going to be great. But then it gets dark out of course. And that is where we have to end our show for today. Let's have a great week, y'all. If you're not a social media person, you can always email us with your Halloween costumes at morning brewdaily at morningbrew.com. Also, feel free to reach out if you just want to say hi. Let's roll the credits. Samantha The Vela's is our Capitán. Raymond Liu is our associate producer. Euchenawa Ogu is our technical director. Billy Minino is on audio.

Hair and makeup left New York for Florida. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Hey, honey, it's mom. Did you know if we switch to Verizon, we can get four phones for $0, plus four lines for $25 a line? Call me back.

Me again. That's just $100 a month for four lines on Unlimited Welcome. Plus four phones, no trade-in needed. Call me. It's mom. America's Best Network, Verizon. That's the one we're talking about. I'll send you text.

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