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Kevin O'Leary talks on Tesla, Cybertruck release, Elon Musk, work-from-home, commercial real estate

O’Leary Ventures Chairman Kevin O'Leary joins Yahoo Finance Live to discuss Elon Musk's comments from Tesla's shareholder meeting, Tesla's Cybertruck release, remote work, the banking crisis, and commercial real estate challenges.

Video transcript

[AUDIO LOGO]

BRAD SMITH: Tesla shares higher today after Musk seemed to impress investors at the annual shareholder meeting in Austin, Texas, on Tuesday. Musk providing updates on the EV business and the heavily anticipated Cybertruck. But he also gave a crowd of investors a tough outlook for the year ahead. Let's take a listen.

ELON MUSK: This is going to be a challenging-- I'd say, challenging 12 months. I want to be sort of realistic about it-- that Tesla is not immune to the global economic environment. I expect things to be, just at a macroeconomic level, difficult for at least the next 12 months. Like, Tesla will get through it. And we'll do well. And I think we'll see a lot of companies actually go bankrupt.

BRAD SMITH: For more on Tesla and a number of investment topics, we turn to Kevin O'Leary, O'Leary Ventures' chairman, joining us here in studio. Kevin, great to see you.

KEVIN O'LEARY: Great to be here. Thank you.

BRAD SMITH: So let's discuss. Start with Tesla here, first and foremost. I mean, you think about the comments that you just heard from Elon Musk, what he had to say yesterday in a wide range of topics that he discussed. At the end of the day, this is a company that is investing heavily at the same time that many other automotive companies are investing heavily in their next leg of growth into EVs. What makes Tesla perhaps in a better position to capitalize on where that trend, where that market share that they existingly have right now, or they currently have, could serve them, could benefit this, could benefit this company at a time where they're continuing to invest?

KEVIN O'LEARY: Well, each quarter, including this one, there's always the speculation by the market that competition is going to erode margins, competition is going to erode share, competition is going to slow growth. And yet that has not happened. There is no company yet that's transitioned to the effectiveness and the efficiency and the productivity that Tesla has around drivetrain, around engine, around chipsets, around batteries.

So there's a moat around Tesla because it was the first mover, but they've maintained their share through innovation. Everybody criticized this guy for a million different reasons. But at the end of the day, when you ask somebody if you want to buy an EV, what do they want? They want a Tesla. So GM hasn't come with anything anybody wants. Porsche hasn't done it yet. I'm not saying they won't. But it hasn't happened yet.

Meanwhile, they gained share. They reduced price. They're getting more aggressive. They're bringing the truck. I don't see a bad story here. And it's reflected in the stock, although it's a volatile stock. But if he's saying there's headwinds economically globally, that's the same environment for every company, whether they're in the EV market or not.

What they've got that no one else has is a 100% focus on EV. They're not dealing with legacy engines of any kind. And so you have a much more efficient use and a much more productive company.

BRAD SMITH: Do you think the Cybertruck is an additive, or if I put it simple terms, boom or a bust for Tesla long term?

KEVIN O'LEARY: It's going to be a boom because that crazy-looking vehicle has already shown its popularity on preorders two years.

BRAD SMITH: Why? Why?

KEVIN O'LEARY: I want one. I think they're nuts. And I think it'd be a lot of fun to drive a tank because that's what it is, but now a tank where you don't have to feel guilty about it. It's an EV. But it's got a lot of room. It's a very interesting vehicle. It's got a really ugly look. Ugly is interesting. And, you know, to be honest with you, I've got investments in providers that are providing technology for that truck. And we know the demand is huge. It's huge.

Now, this issue around four wheel versus two wheel, if it comes with a two wheel first, there will still be demand for it because the truth is most people don't drive these trucks off road. But if you wanted to drive that thing off road, you could. I like it. And I think-- you know, I'm on the list to get one.

BRAD SMITH: Do you think it will appeal to the parts of America or more broadly internationally where there has already been a strong pickup truck market share that has been maintained?

KEVIN O'LEARY: Well, I love my F-150.

BRAD SMITH: OK.

KEVIN O'LEARY: And so--

BRAD SMITH: You would trade in your F-150 for a Cybertruck?

KEVIN O'LEARY: I don't know yet. First, I'll try this. And this is a bit of a hybrid on the 150. I use the 150 all the time. It's like driving your living room around. The thing is so spacious and quiet and everything else. And that's the most advanced pickup truck and the most in demand.

The electric vehicle of that version has not yet enticed me to switch over yet because of battery concerns, about concerns in cold weather, all kinds of other things. The one thing I really like about the story that I learned yesterday on the whole Elon thing, the margins on this truck could be really high. I mean, this is going to be-- because they've had so much efficiency in manufacturing costs since they announced the truck. They're probably picking up, you know, 10% to 12% more margin on that thing.

BRAD SMITH: And so at a time where consumers also are being more judicious, more discretionary, even about vehicle spends, so how is Tesla and the broader automotive landscape-- how is that shaping up in terms of the demand that's actually pulling through, going into either a Tesla storefront or a dealership and saying, yeah, I'm still going to commit to buy? Or I'm still going to get favorable enough financing terms that make this purchase make sense.

KEVIN O'LEARY: On the mainstream vehicles, they have cut costs several times now. They're getting competitive. But it's not just because they feel the market is soft. And it's because they would like to get more share. Remember, this company, although they've talked about advertising, hasn't spent a cent on it yet. He owns his own global network called Twitter. He's constantly promoting Tesla and SpaceX on it all the time.

BRAD SMITH: Which he has said is a distraction-- Twitter.

KEVIN O'LEARY: Well he's got a new CEO. You know, so I mean-- you know, the thing-- the interesting thing about this guy is the productivity, what he's achieved with all the criticism he gets. Like, he's Batman. You know, that's the way I look at it. And he wants to do what he wants to do. And if you don't, you know what you're getting when you invest in Tesla shares. You know what you're getting when you deal with Elon Musk. It's not like he's hiding it from you.

Look, he gets himself in a lot of trouble. That must be a big time distraction. All the litigation and all the stuff that he has to deal with by just a nonstop barrage of communications that are sometimes off side. But on the other hand, he is who he is.

BRAD SMITH: Musk said in an interview with CNBC something about remote work that caught a lot of attention. I want to play this real-- actually, we've got a quick excerpt of it showing for our viewers on screen there too, saying, "the whole notion of work from home is a bit like the fake Marie Antoinette quote, 'Let them eat cake.' It's like really you're going to work from home, and you're going to make everyone else who made your car come work in the factory. The people that come fix your house, they can't work from home but you can? Does that seem morally right?"

So he goes on. But at the end of the day, it comes back to this broader discussion about who is still able to work from home. And he called some of them the laptop elites or the laptop class, if you will. We've continued to have this debate about where work from home still has a larger place in the workforce or employment situation society here. Do you agree with what Elon said? Do you believe that there's another way that this can have a balance in the employment future?

KEVIN O'LEARY: I don't. I do not agree with him, and I'll tell you why. He has every right to have an opinion, because his sectors are heavily populated with engineers. And you could argue that when you're designing new technology and new products and you're making things and you hire a lot of engineers, as in SpaceX, as in Tesla, you need collaboration at the engineering level, as you share ideas person to person. That's one sector of the economy. There's 11 sectors in the S&P. There are millions of companies.

And what we've learned-- and I invest in all 11 sectors. Here's what I've learned postpandemic. Let me give you financial services, for example. I have investments in many financial services companies. A 40% of the staff approximately are never coming back to the office. And if you think you can force them back, they'll just go work for somebody else.

And so people in compliance, in logistics, in accounting that used to live in cubicles, in the basement, don't want to do that anymore. They found different lifestyles, sometimes hundreds or thousands of miles away from HQ. And when you now know that 40% don't have to be there, because they've got lots of successful companies that have 40% of people working remotely, you can move your headquarters.

You can move it out of San Francisco, move it out of New York, move it out of Massachusetts. These are uninvestable states. They have terrible tax and regulatory environments. Move them to North Dakota. Move them to South Dakota, Montana, Oklahoma. Tax is way more competitive, regulatory environment better. And we have done that.

And I'll give you the challenge that Elon Musk has in his own universe. You can't apply forcing everybody back to work in San Francisco, where Twitter is headquartered. San Francisco is a war zone. It is perhaps the most mismanaged city in the United States in the most mismanaged state in the United States. You walk out at night, you risk your life there. You get executed. Why would you force somebody to work in a war zone when they could work, particularly on a product like Twitter, anywhere?

He will have a very hard time keeping the best and brightest in Twitter saying you've got to come and go through the war zone every day. If you get shot at, that's not my problem. Do you have a military vest on? Do you have a helmet? Do you have a tank? How are you going to get to work? You leave after sunset, you die. Who would want that?

San Francisco is uninvestable and unlivable now. And it's not just me saying that. Look at all the retailers pulling out. The shrinkage is like 10% downtown. People steal stuff. And they know there's nobody going to stop them from doing it. And if you do try and stop them, they shoot you. Well, they've got a lot of work to fix that up on. And that's why working for remote for cities where they're war zones, San Francisco is not the only one. Look at Los Angeles. It's a mess.

Poorly managed changes people's perception. There are thousands of people moving out of New York for tax reasons and safety. 3,000 license plates a month to Florida and Miami region alone.

BRAD SMITH: So thinking through the real estate portion of that equation too now, you're talking about major cities with huge commercial real estate footprints. Is commercial real estate, whether directly correlated with the banking stresses that we have seen or based on the favorability of certain cities that you're describing-- is commercial real estate one of the next shoes to drop?

KEVIN O'LEARY: It already has dropped. You just haven't seen the effect yet in the-- in the banking system, primarily regional banks, because right here in New York is the best Petri dish, best test for this theory. You have AAA office. You can lease it out at pretty good prices right now. If you have B-grade office, all over lower Manhattan or wherever, it's just a ghost town. Nobody wants that space anymore. When it used to be packed, that's 40%, 50% empty.

And it's never going to get full again. They're going to have to recapitalize or reconstitute or repurpose those buildings. And that's going to require a lot of capital. The problem is, why put that capital in a city that is so uncompetitive in the business regulatory and tax environment? Move it out of New York. That's the whole idea.

And I think-- I'm not the only person saying this. I would never invest a dime in New York City. It's got the worst tax policy and regulatory environment. AOC wants to sue you if you try and create jobs here. Look, don't shoot the messenger. These are facts.

BRAD SMITH: Just a quick question, I only got 15 seconds here. From the relationships that you've got with companies that you've invested in and the engagements that they've seen with their own customers, whether that be business to business or business to consumer, what type of economic pullback, what type of recession even-- shallow, mild, severe-- are they foreseeing or anticipating?

KEVIN O'LEARY: This is the crazy thing. I have to spend money on inventory for Q3 and 4 now. I've got to buy that inventory. And I have to guesstimate the slowdown. I have no slowdown yet. And yet I don't want to overspend on inventory. So I'm being cautious and telling my CEOs, pull your horns in a little bit.

But what I'm more worried about is that there is no capital available for businesses from 5 to 500 employees anymore. People talk about slowdown on lending. Let me assure you there is no lending. And that's because of the Silicon Valley Bank collapse and the other two banks. The smaller banks have stopped lending money.

BRAD SMITH: Kevin, we got to leave things there on the day. Pleasure to have you here in studio with us. Thanks for taking the time, as always. Kevin O'Leary joining us here on Yahoo Finance Live.