Morning Brew Daily - Tesla Hurting from EV Tax Rollback & Amazon Dives Into AI Wearables

Episode Date: July 24, 2025

Episode 633: Neal and Kyle discuss the continuing slump Tesla is having amid the US ending its EV incentives. Then, the US and Japan reach a trade deal that sparks hope for US investors. Also, Amazon is joining the AI wearables race with a bracelet that will listen to your every word. Meanwhile, it’s Neal’s Numbers on Hershey’s chocolate prices, Venus Williams, and allergies among the Amish.  Gain the edge with Amazon Ads at advertising.amazon.com/startnow  Get more of Kyle on Per My Last Email here!: https://www.permylastemailshow.com/ Morning Brew Daily Puzzle: https://docs.google.com/forms/d/1Yzrl1BJY2FAFwXBYtb0CEp8XQB2Y6mLdHkbq9Kb2Sz8/viewform?edit_requested=true  Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here:⁠ ⁠⁠https://www.swap.fm/l/mbd-note⁠⁠⁠  Watch Morning Brew Daily Here:⁠ ⁠⁠https://www.youtube.com/@MorningBrewDailyShow⁠ 00:00 - Little League scandal 3:15 - Tesla woes continue 9:00 - US inks trade deal with Japan 13:30 - Amazon buzzin’ like a Bee 19:10 - Neal's Numbers 25:00 - Sprint Finish! Learn more about your ad choices. Visit megaphone.fm/adchoices

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pwc.com slash US slash brew AI. That's pwc.com slash us slash brewAI. Good morning brew daily show. I'm Neil Freyman. And I'm Kyle Hagey. Today Elon Musk says things at Tesla could go from bad to worse. And Amazon buys a company that listens to everything you're saying. Today is Thursday, July 24th.

Let's ride. Toby's out for the rest of the week at a bachelor party. Turns out he has friends besides me. Yeah, what the hell? All good because the fantastic Kyle is here. help take us into this summer weekend. Kyle, did you play Little League growing up? Yeah, look at me. Of course I played Little League growing up. Okay, so you know how intense it can get, but one controversy has caught national attention this week. A 12-year-old playing for a New Jersey

town was suspended from the state finals because he had bat flipped after hitting a home run in the previous game. He was ejected and suspended for violating Little League's rule for no horseplay and unsportsmanlike conduct. But the dad is, going down without a fight, filing an emergency temporary restraining order in court to overturn the suspension. He's saying that Little League promotes bat flipping all over the website and social media platforms. So it's hypocritical that they'd suspend someone for doing that. Kyle, if there's one kind of person you don't want to be on the wrong side of, it is a Little League dad. It's so true. And I played myself, but I was not good. So I never had the opportunity to flip a bat

after a home run. I would flip a bat after a strikeout. Maybe that is allowed. I'm not sure. sure, but I feel like if you hit a home run, you should flip the bat. That's my take. Okay. I mean, Little League's trying to promote sportsmanship here. I think most public opinion says this is quite egregious. We'll see what the courts as and if this kid can play in the state finals. I want to mention this is a very competitive league and town. They're trying to go to the Little League World Series and Williamsport. So I think that's another reason why it's sort of got national headlines. I stand with the kid. Okay. Now a word from our sponsor, Amazon ads. Kyle, do you have a favorite tool? I love a good screwdriver.

No, I'm more into hammers myself, but I ask because I just found out about a single easy-to-use tool Amazon ads. They make it easier for advertisers to plan, activate, and measure their streaming TV campaigns. It can be better than traditional media alone because you don't have to sacrifice reach for relevance. You don't even need to sell on Amazon to advertise and your ads show up alongside the content your customers love, like prime video, Twitch, and top third-party TV publishers and brought. Gain the edge with Amazon ads by heading to advertising. Amazon.com slash start now. That's advertising.com slash start now. Someone needs to get Tesla to a supercharger because the company is looking a little low energy during its latest earnings report.

The EV company reported a double digit drop in adjusted earnings for the second quarter and a record sales drop in the same period. it sales win from $25.5 billion in Q2 of 2024 to $22.5 billion in Q2 of this year. The company's adjusted net income, which is a key number Wall Street focuses on, fell $419 million from one year ago to $1.4 billion. That's a 23% drop. The aforementioned sales weakness has been attributed both to backlash from Milan Moss foray into politics, as well as increased competition in the global EV space,

especially from automakers in China like B-Y-D. In addition, the recently passed one big, beautiful bill was basically a giant yield sign on Tesla's road to continued growth. The bill forces a $7,500 tax credit for U.S. EV buyers to expire in October, and it eliminates the market for regulatory credit sales, which has fed $11 billion to the company's bottom line since 2019. This market allowed for some gas-powered carmakers to buy emissions credits for. from Tesla since his EVs came in below emission limits to avoid paying a fine, and Tesla would have lost money in the first three months of the year without its revenue from selling those credits. Now, it wouldn't be a Tesla's earning report without Elon Musk promising that some groundbreaking technology is right around the corner. He focused some of his remarks on autonomy,

both of the Tesla Robot Taxi Service and Optimus, their humanoid robot, must said, quote, autonomy is the story. It amplifies the value to stratospheric levels and said that these technologies will make Tesla the most valuable company in the world by far. Neil, Elon's prediction is quite ambitious, but it always has been. What stood out to you about the recent Tesla numbers? Well, we knew this was going to be a bad earnings report because Tesla already reported its delivery numbers for Q2. This is for its traditional EV business, which it doesn't really want to talk about anymore. That was a 13.5% drop year over year. Investors did not like what they heard on this earnings report. They're not sort of buying Elon's vision for the future 100%. The stock was down more than

6% in after hours trading amid all of the optimism about autonomy and humanoid robots. Musk also warned, he said on the call, we probably could have a few rough quarters. But once he get to autonomy at scale in the second half of next year. Certainly by the end of next year, I would be surprised if Tesla's economics are not very compelling. What I'm hearing from that is that Tesla's economics are not going to be compelling at all for at least the next year. And a large reason for that is what you mentioned. These regulatory credits are going away. That was basically pure profit for Tesla because they didn't have to make anything. They just sold, because they make EVs, they just sold these credits to other automakers. They made $1.8 billion.

last quarter, over the entire 2024 from these credits. And now that's going to go to zero. And then the $7,500 consumer credit is also going away. Those are more headwinds in addition to the many challenges that Tesla is facing in its traditional EV manufacturing business. Yeah. And there's, you know, it's been much covered, but a decent sense of irony for must supporting the Trump administration so much during the campaign. And then the one big, beautiful bill coming in and really hurting a pure profit play for Tesla. The stock has been on a hell of a run, though, on the company.

Over the last 18 months, it's kind of started to go a little downhill. But before that, there was only one quarterly year-over-year sales drop for the company before 2024. That quarter was at the height of the COVID-19 pandemic. So an incredible run for the company. And it's a bit of like a meme stock plus an actual valuable product. And I think Elon and maybe the cult of personality has built a really loyal, base of investors. And so it's tough to maybe disaggregate the stock price from how the company is

performing. The other thing I want to say is, you mentioned this earlier, the play might not be for EVs, but for other elements inside of Tesla. Tesla's core business auto revenue fell 16% from April to June, but overall revenue dropped less than that. It felt 12%. This company is now slowly maybe becoming a bet on AI, a bet on energy, a bet on autonomy. And if they can make that pivot, maybe they continue to see the growth this company's had in the past. Yeah, that's what Elon is promising. They did have a robotaxie rollout in Austin that investors were anxiously awaiting. That happened last month. That went okay. They didn't provide many details on it on the earnings report, which is probably one of the reasons the stock drop more than 6%. Elon says that they're going

talking with a bunch of other cities and states to roll out this robo taxi service from Austin to places like the Bay Area Phoenix, other hotspots, but there's also a lot of competition there. Waymo is in all of those places as well. The future of this company, as Elon says, as everyone says, is autonomy. The faster they can get there, the faster they can perhaps stop the bleeding. Global markets rejoice yesterday after President Trump announced Tuesday night that the US and Japan had secured a trade deal, the biggest fish reeled in yet on the administration's quest to seal agreements with major trading partners before higher tariffs kick in on August 1st. Japan's Niki index shot up 3.5 percent. Toyota climbed 14 percent and other Japanese automakers,

including Honda, Subaru, and Mazda posted double-digit gains. U.S. stocks closed higher on hopes that the U.S.-Japan understanding would grease the wheels for more agreements to come. So what's in this trade deal? Thankfully, not Shoha Tani. He gets to stay here. The headline is the U.S. will place a 15% tariff on Japanese exports, a lower rate than the 25% that Trump had threatened. And crucially, tariffs on Japanese cars and auto parts, which had been at 25%, will be lower to 15% in line with other goods, which is why you saw those auto stocks pop yesterday. Vehicles had been a major sticking point during negotiations because of how important they are to Japan's economy and its export base. Around 80% of Japan's trade surplus with the U.S.

is in cars and auto parts. In exchange, Japan pledged to invest $550 billion into the U.S. And while the details are scarce, it looks like this investment will take the form of a sovereign wealth fund type vehicle that will finance projects in America handpicked by Trump. Japan has also agreed to open more of its markets to U.S. vehicles and rice. All in all, Enos viewed this agreement as an optimistic sign that the U.S. would come to terms with other trading partners, particularly the EU, before those higher, reciprocal tariffs go into effect next week. At the same time, it also establishes a 15% tariff as the effective baseline for negotiations, which is much, much higher than tariffs on Japan before.

It was 1.6% previously. Yeah, this was really big news, obviously, and I see the sizzle. I want to see some of the stake when it comes to the details, particularly of this $550 billion investment in the U.S. During the negotiations, the administration had this big card that was outlining what they were going to get from it. originally it said $400 billion. Someone had crossed it out and wrote $500 billion, and then Trump on Truth Social put $550 billion. So I want to know what the actual number is. And then there's some, I think, disagreements around what makes up that investment pool.

Is it Japan just giving us $550 billion? Trump called it, quote, a signing bonus at an AI summit on Wednesday. Andy LaPérier, the head of U.S. policy research at Piper Sandler, said that Japanese officials are, quote, describing it differently when it comes to that investment plan. Japan's leaders, he said, see the $550 billion figure as a cap and inclusive of government loan guarantees. So I think good momentum for U.S. and Japan. I'm very curious about the details that will follow. I think the big story here, though, is the shifting of the quote-unquote Overton window on tariffs.

You mentioned that the rate used to be, you know, super, super small when it comes to a tariff rate on Japan. Now we're seeing 15% as almost a victory, even though if it was originally announced at 15% six months ago, markets would have been spooked. So Trump really has normalized these higher baseline tariff rates, and I think that is truly the big story. Right, because now the U.S. wants to take what it just secured with Japan, go out to other countries, other major trading partners, and say, look, this is what we, this is what we expect in a trade deal. Japan gave this to us. Their fifth largest trading partner, now let's go to our top largest trading partner, the European Union, and that is the biggest fish left in the pond. We heard yesterday that there

was progress on the U.S. and the EU moving to a deal. The U.S. would have 15% tariffs on the EU, and there would be certain exemptions going back and forth. It was interesting how this particular deal was received in the American auto manufacturing community. They were actually a little ticked off. Tariffs were supposed to help domestic manufacturing, but they said, and this is the lobby that oversees or that represents GM, Ford, and Stalantis, they said any deal that charges a lower tariff for Japanese imports with virtually no U.S. content than the tariff imposed on North American vehicles with high U.S. content is a bad deal for U.S. industry and U.S. auto workers.

What they're talking about is there's currently 25% auto tariffs from Canada and Mexico where they make so much of their cars and bringing them into the United States with certain exemptions. There's also 50% tariffs on steel that is remaining at 50%. And that's what they used to build cars. Meanwhile, when this deal, you know, Japanese cars have a tariff of 15%, which is lower than both of those rates. So they're a little ticked off. That said, all of their stocks gained yesterday on the hopes that more deals would be reached.

And overall tariffs would not come out to this worst case scenario. Right. And all you have to do is look at the market, too, about how this was received in terms of Japanese car companies. Toyota popped 14 percent. Honda rose over 11 percent. So good news for the Japanese automobiles. market. Amazon, the company whose logo boasts an arrow going from A to Z, has made the next most logical acquisition, purchasing B. No, not the letter the company B spelled B, E, which

makes a device for your wrist that looks similar to a Fitbit. But instead of telling you how many steps you took over the day, it transcribes every conversation you have to generate personalized summaries of your day, as well as reminders and suggestions. Now, you can engage with B through the wearable and its app, which also, with your permission, can get access to emails, contact, calendar, and other data sets to give it even more context about your life. You could also use what is basically fact Tinder, swiping right or left on facts B thinks about you to continue honing its context. Now, zooming out, Jeff Bezos in December of 2024 at the New York Times Deal Book Summit said that AI would be like electricity, quote, these kind of horizontal layers like electricity and compute and now artificial intelligence, they go everywhere.

There is not a single application that you can think of that is not going to be made better by AI. This statement should come as no surprise then when you look at Amazon's AI strategy. The company has introduced a series of AI products, including its own models, chips, a shopping chatbot, a marketplace for third-party models, an overhaul of Alexa, and implementing generative AI to its ring cameras. So while the big news is Amazon getting B, the letters it's clearly focusing on are A and I. Neil, the AI wearable space. There's too much wordplay, my God.

The AI wearable space is heating up. What do you make of it? It really is. I mean, Amazon's buying B, and it is very, it's not lost on anyone that Amazon is a company that said for many years that Alexa, which was his home assistant that it has, was not listening to any, all the things you were saying. Now it is buying a company whose explicit purpose is to just be in the background and listen to everything you are saying. So it's an interesting concept. I have thought about whether I would want something like this in my life to just be around, just be in the background,

listening to all of my conversations, going with me about my day, and taking notes essentially and telling me all the stuff that I said I would do, but I would forget about. And there are probably quite many things. So I think there might be, you know, demand or market for this type of thing that summarizes your day and helps you make efficient use of all the stuff that you forgot about. At the same time, there are a lot of privacy concerns. Even in certain states, it's not legal for you to, for me to record our conversation without me asking your consent.

And if I'm wearing a bee, I'm probably not going to tell you every single time I have a be on like we are being recorded right now. You can see how there are huge privacy implications. Joanna Stern, who is the Wall Street Journal tech columnist, tried B-out. She had a lot of good things to say. She said, within hours of wearing it, I was blown away at how quickly it turned ramblings and random chatter into useful, actionable information. But at the end of the day, she said the privacy risks don't outweigh those efficiency

gains or that usefulness that I found from it. She said the privacy risks were just too high. Yeah, there was a Victoria's song from The Verge had a funny experience with B where it has a hard time distinguishing between conversations with a person and radio or TV. And so she was watching Abbott Elementary and B generated a to-do list suggesting she keeps an eye on the SEPTA strike, as it would affect her students' ability to commute. So there's still some kinks to work out here. But I think it's a nice acquisition by Amazon and clearly Open AI is moving into some wearables with Joni Ivy. There's the Rayban Metas that are moving into this wearable space. The future of compute

seems to be maybe off the phone and onto these devices you actually wear on your body. All right, don't go anywhere because up next, it's Neal's Numbers. Welcome to Neal's Numbers, the segment where I share three stats from the week's news that will cause you to do a mental bat flip. My first number will motivate you to grab your Halloween Kickats and Reese's Cups, ASAP. Hershey's said the prices of its candy are going to go up by double digits, generally falling between the low teens and 20%. And psych, it's not because of tariffs.

It's because of soaring cocoa prices. Chocolate candy accounts for 67% of Hershey sales, but raw ingredient costs have gone parabolic. Last year, thanks to bad harvest in West Africa, Cocoa Futures rose 178% on top of a 61% gained the year before that. While cocoa prices have stabilized this year, they remain at more than double their levels two years ago and have proven too high for chocolate companies to absorb without passing it on to the consumer. humor. Hershey said that despite the price hikes, 75% of its product portfolio will remain under $4, so it's still economical to go to CVS before a movie and sneak in a chocolate bar. Elevated cocoa costs have forced other chocolatiers to raise prices. The Swiss giant lint jacked up prices by 16% in the first half of the year, and Oreo maker Mandeliz also

announced a price hike. Kyle, when Coco prices store, I always ask myself, WWWWD, what would Willie Wonka do? That is the question everyone should be asking right now. I mean, first you have GLP1 drugs. Now you have high cocoa prices. It's a tough day to be in the chocolate industry. And these changes normally take about 90 days to take effect. I did the math.

Yeah. That's 90 days is right before Halloween. I see what you're doing Hershey's. Okay. So get your Halloween candy now before this price increases, but I guess a smart business move by Hershey's to land this right before everyone buys or chocolate. All right, for my next number, Venus Williams just defied time. At age 45, the tennis legend defeated her opponent at the D.C. Open Tuesday night, becoming the second oldest woman to win

a tour-level singles match in pro tennis history, only behind Martina Navratilova at age 47 back in 2004. In front of 7,000 delirious fans, Williams took down Peyton Stern 6364, which is wildly impressive on a number of levels. Number one, Stearns is ranked 35th in the world, while Venus hasn't played a competitive match in 16 months. Number two, Stearns is 23 years old or 22 years younger than Venus. In fact, Venus won four Grand Slam trophies before Stearns was even born. After the match, Venus spoke about grinding day in and day out to rehab from injuries and

get back to the top level. Do you know how hard it is to play tennis? She said, you guys don't know how much work goes into this. like it's nine to five except you're running the whole time, lifting weights and just like dying and then you repeat it the next day. Seems like the literal blood, sweat, and tears paid off, but the road doesn't end here. Venus will take on the 24th ranked player in the next round tonight.

Yeah, I mean, she is a legend, and I think we're seeing a trend where athletes are able to extend their playing lifespan well into their 40s. You see the LeBron and the NBA, Venus here in tennis. I could probably podcast into my 70s. So the elite athletes are going long. It's funny in a viral clip, Venus was saying that she saw her Cobra bill and she was like, okay, I got to get back in to get these benefits on.

So lots of complaints about the U.S. healthcare system, but one thing about Cobra, it's very motivational. So good luck to Venus. For my final number, think about how great life would be if you didn't get allergies. Well, there is a way to avoid the seasonal sniffles or eat all kinds of food you want. You just need to be Amish. According to The Washington Post, the Amish are remarkably resistant to. allergies. Just 7% of Amish children had a positive response to one or more common allergens

compared to more than 50% for the entire U.S. population. And there's one Amish community in northern Indiana that scientists consider one of the least allergic populations ever measured in the developed world. So what's going on? Why do the Amish breathe easy while the rest of us sneeze, wheeze, and breakout in hives? Researchers led by Carol Obert, chair of human genetics at the University of Chicago suspect it has to do with the amount of exposure young Amish children get to farm animals or barns. The farm dust that these kids encounter contains protective agents, beneficial bacteria that isn't harmful enough to make you sick, but it trains your immune system to be less responsive to allergens down the road.

This finding builds on the famous hygiene hypothesis from 1989 that found hay fever and Exima were less common among children born into larger families, presumably because of more contact with older siblings. For the big takeaway, one of the authors said, I don't know that we can give every family a cow, but we are learning from these time-honored and very stable environments, what type of substances and exposures are needed. Yeah, super interesting. I had not heard of the quote, unquote, farm effect before I read this story. So really, really interesting. I feel like I have a billion-dollar business idea for the Amish. They already dominate the furniture market. They need to come out with an Amish farm dust supplement.

I feel like that would absolutely rock in today's landscape where people are super interested in supplements. So if any Amish people, or you know of any Amish people, send them that idea because it's a billion-dollar business. Well, that is the reason that they're doing these studies, these researchers at the University of Chicago, because they want to study resistant, allergen-resistant populations to see if they can get and create treatments from them

to help out the rest of us that are suffering through spring. so they're trying to maybe create essential oils or other type of concoctions that borrow this farm dust that makes kids so resistant and then eventually maybe bring it to the market and make some money off of it. Okay, let's sprint to the finish with some final headlines. Uber is trying to make its ride-sharing service a safer experience for women. Yesterday, the company rolled out new features that aimed to make it easier for women to ride with drivers who are also women. First, when a woman opens up the app, they'll see an option allowing them to request a woman driver. They'll also be able to adjust their settings to signal a preference for a woman driver

whenever they call an Uber. And then on the driver's side of things, women can also adjust their settings to request women passengers. The features are rolling out in the next few weeks beginning in LA, San Francisco, and Detroit. It's about giving women more choice, more control, and more comfort when they ride and drive an Uber VP said. In Uber's latest annual safety report, which covers 2021 and 2022, it said there were more than 2,700 incidents of serious sexual assault and misconduct, a 22% drop from the previous report. Yeah, it's important to note, too, that this women driver preference feature was actually unveiled in 2019 in different countries.

It's now up to 40 different countries. And the real challenge for Uber here will be making sure that there's enough supply and demand of women drivers and riders to make this feasible, because if not, then your wait times are going to go up. Your prices might go up. But I think the idea is really, really solid. You just mentioned some statistics that this feature is hoping to mitigate. Finally, when it comes to the worst traffic in America, the Beltway has toppled the 405.

An annual ranking from Consumer Affairs found that Washington, D.C. overtook Los Angeles as the U.S. city with the worst traffic, with the average daily commute clocking in at 33.4 minutes in the nation's capital compared to just over 30 minutes for Los Angeles. The survey authors said that Trump's return to office mandates contributed to D.C.'s traffic woes, while bus and train use is still far below 2019 levels. Rounding out the top five worst cities for traffic after DC and LA, Miami, San Francisco, and Atlanta. Neil, I have maybe a hot take here. What do people do on their drive to work? They listen to podcasts.

Congestion is good for business for us. So I want more traffic. I want it everywhere. And about a 30-minute commute is perfect because that's the length of the podcast. Well, if you don't want traffic, unlike Kyle, you can add to these cities because they had the least traffic congestion. of any in the United States. Rochester, New York, number one, then Salt Lake City, then Cleveland, then Hartford, then St. Louis. And I was in Cleveland recently.

And this is true. I believe this study wholeheartedly because in downtown Cleveland, I did not see a single car. I mean, it was just buses. It was crazy. I've never seen anything like it. There was no private cars in downtown Cleveland. It's kind of a ghost town, a little spooky, great city. Maybe much of the activities happening in the suburbs.

but downtown there were just no cars, and I'm not surprised that it is one of the least congested cities in the country. Okay, that is all the time we have. Thanks so much for starting your morning with us and have a wonderful Thursday. Kyle, appreciate you, as always, for joining us. You're clearly not shy around a microphone. It's true, Neil. I sometimes hop in for this show, but I do have a weekly show at Morning Brew called Per My Last Email.

It's all about career advice, work-life tactics and tips. We've been running that for about a year, and so we'll drop a link in the show to description if you want to get more of me in your in your earbuds and thanks for having me on awesome and if you have any other thoughts on today's episode send an email with questions comments or feedback to morning brew daily at morningbrewd.com it is time to reveal the next clue for password the game we're running this week asking you to find a secret word from a series of hints so open up your notes app with the clues from the past few days and write down this next one the password opens with the sound of a greeting the password opens with the sound of a greeting

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