emily: tesla just out with a quarterly earnings report. what is the company hoping to do to wrap up by the end of the year? ♪ i'm emily chang. this is "bloomberg west." fitbit, looking like it's a just fit. also, downgrades, but not all investors are listening as apple shares break a five-day losing streak. china, what does big brother mean for the big three?

all of that, head on emily: -- ahead on "what'd you miss? -- on bloomberg west. julie hyman is with us, as well as steve levine. shares are lower right now. but what is standing out, julie? julie: the company is cutting its forecast. the company has singh has seen 55,000 deliveries of its yet to be introduced suv and now they say that it is a range of vehicles. the company says that they are still on track to introduce that at the end of the third quarter, but for the quarter that just reported -- the second quarter -- 11532 -- they said the third order should be 12,000. they are again cutting the

forecast. delivery is what people have been focusing on for tesla. both the question of how many cars they can produce and the actual demand out there. now i'm seeing that second-quarter production was 12,870 vehicles. that was the production. the delivery was just over 11000. company losses coming in smaller than estimated, but again it's about delivery that's important. the shares are down. they have been gyrating a bit. down in the after-hours after gyrating year to date. emily: model s production, they are saying that those challenges could slow down things for the model x. eric, what is the significance of this? eric: we have seen the utilities segment on fire right now. it is a growth industry. it is very important for them to nail this deliverable and it is already two years delayed.

they need to get this product out as soon as they can. emily: what do you make of this? given the diversification, from the cars to the batteries, which is still not out but they are taking orders. eric: emily: steve go ahead. steve: the point in reducing the sales forecast this year, i personally don't think it would have been very hard for the company to beat its original for forecast. 55,000. i think it is setting itself up to have a blowout quarter.

it can still do that. i think it is setting itself up to have a blowout order to go ahead and meet the original production target. but what elon musk is doing is he is stepping back and showing that he is far more flexible in terms of how he is going to meet his targets, meet his 2020 targets. remember, he is seeking to sell 500,000 cars per year by then. he is going into new chemistries, bringing new products. he is hiring good battery technologies. this year will be all right, but the year to look at is next year, when he will come out with a prototype for the model three during the summer. emily: julie, we are still getting new headlines here. tesla is testing the ability of various suppliers. they also said that they are increasing investments in china,

which is potentially a huge market for tesla if indeed the trend that they are seeing there continues. julie: what you were saying about the testing ability of suppliers seems to speak to the model x production challenges. another thing that caught my eye has to do with pricing. the third quarter model average sales price predicted drop of over 100 basis points. so interesting there, it is putting a little bit of pricing pressure down when it comes to the model s. emily: tesla has been pouring more and more money into china. what is your estimation? eric: we have seen more and more about the macroeconomic factors in china. this will be the first time we have seen flat sales in china for 17 years. it is something that automakers around the globe are paying attention to and it could have a big negative impact for brands

that are dependent on china. emily: they said they planned to reveal the design for the model 3 in the first quarter. what can you tell us about that? eric: the model 3 is expected in 2018, assuming no pickup in production. this is the everyman tesla that they are talking about, it is important that they transition the brand from being a niche performance luxury to the bigger market. estimated in the $40,000 to $50,000 pricing range, which is where we see competitors on the gas engine in the counterpart with the 3 series. emily: they are talking a lot about production and operational challenges in the fourth order. steve, i want to talk to you about the production of the battery. obviously tesla has been buying land around that factory.

what does this mean for the success of the battery? steve: using that as a pivot point for tesla to pivot from a niche status into a major carmaker relies on the giga factory, on the batteries. bringing down the price of the batteries significantly. tesla could wind up on the factory floor. remember the concorde? tesla could wind up as this very, very good car that everyone thought a lot of, but never reached its potential because it was unable to bring down the price. emily: you are comparing tesla to the concorde? seems extreme. steve: i'm saying it could end up as the concorde if it does not bring its prices down. tesla has to bring down the

price of the car. the model three has to come down in price and if it can do that it will break into the mass market and be a success. emily: i wonder if there were some safety issues with the concorde that tesla has at this point. we will be listening to the call in a few moments, listening to anything elon musk has to add. eric, what is the number one thing you will be listening for? eric: i'm curious to see when the model x will launch. in the immediate term it is critical to them closing out the year successfully. as i mentioned before, it is a growing segment. i have also heard a lot of

reports about model s owners who are really anticipating and waiting for their model x. we will see how long they can wait until they might keep the model s they have and cancel the model x purchase and move on to a different utility vehicle that could service their needs. emily: all right, eric, steve, julie, thank you all for joining us. we will keep you all updated on tesla as the headlines roll in. time for an update on apple shares. earlier today investors were sounding the alarm at bank of america merrill lynch, where they downgraded the price target to $130 from 142. the reason? there are six. the slowdown in iphone sales slipping market share gains, slipping growth and profit. they also said the magnitude of the earnings beats will be -- are decreasing.

there will be a lower likelihood of capital return. this is the second downgrade to earnings since the 21st. they said that apple had entered the transition period. shares did close up more than half of 1%, breaking a five-day streak of losses. perhaps investors seeing this doom and gloom as a buying opportunity. coming up, fit bit posting strong results as a public company. why are shares falling? we dig into the fit report,. ♪

emily: we are watching tesla shares lower in the extended trading. model x production challenges could slow output, but they do remain on track for late in the third quarter. tesla also said that model s orders have increased. we will be listening to the call at the top of the hour with elon musk. fitbit is also tumbling in extended trading. they beat expectations, but the company missed the gross margins. the stock is down.

joining me now from new york our resident watch and wearable expert, stephen, as well as sue, founding partner at mindful. gross margins are not looking good? >> i think the one thing we can glean from this is that sales are doing well. people thought that the apple watch would monopolize wearable sales and it looked -- looks like that might not be the case. emily: it's interesting. some people thought that the apple watch was good for fit bit. stewart: exactly. they can have wearable devices to track their health. emily: my question has always been -- yes, people are buying them, but are they wearing them and how much? what do you think the answer is?

stephen: i think the answer to that question changes day today. people are wearing those devices for a period of time and then putting it in a drawer, but then they can click the product trend for a new device when they do decide to put it back on by adding things like heart rate sensors or extra alarm functions they can get someone who may be thought bought one, wore it for a while, put it in the drawer to buy a new one instead of pulling out an old one. emily: fitbit certainly got in the market.

by the initial numbers that he saw, they blew everyone away. stuart: the numbers were better than anyone expected. everyone had pushed the price up so much if there was any hick up at all they had taken a beating for it. but in the short term they are the leader and i think he will continue to be. emily: anything jumping out to you as strong competitor? stephen: if they can open up their credit card provider products and give someone access to something like apple pay, i think that that is a strong competitor. those are the features that people want. as those devices, as they start to pick up heart rate sensors it will have to continue innovating and continue offering something the competitors aren't. otherwise all these devices look similar and are priced in a similar way. the software is relatively similar. they have to keep differentiating themselves.

emily: you pointed out a trend of rising coaching. what other trends are you seeing? stuart: it is an enormous trend in tracking your specific data where you are able to take out the noise and get the signal of what the data is. the brain is one of those key areas where there is enormous opportunity. emily: the brain? what do you mean by that? stuart: there is a company with a product called muse. which is a headband that you put on your head that tracks your brain, measuring your rain waves brain waves and showing you what is going on in every moment. it scores for you. it rewards you to train your brain to relax. emily: stephen, would you wear something like that on your

head? [laughter] stephen: i don't think i would quite wear a strap around your head yet. but i do think that people will wear a chest strap. these are catching on a little bit. emily: that is a market that we will certainly continue to watch. fit shares are down, thank you so much, stephen, stewart. an android app could be the key to helping countries spot inflation. premise relies on 16,000 users who get paid to take pictures. they analyze these data points to get economic data were quickly than governments can. our governments feeling about the start of collecting the data that could be more accurate than their own? i asked the ceo. >> i think they recognize that

the speed and volatility of what is happening as well beyond any technical mechanism they have for tracking it. brother than thinking about us as some heresy, we are now a potential infrastructure that can help them do their jobs so much better. we find ourselves now is a dialogue partner. emily: they are backed by several economic heavyweights, including larry summers, who joined the board last month. up next, more censorship for internet companies in china. which company will it impact the most? netflix is offering new parents up to one year of paid leave. as we had to break we leave you with footage of the new "star gameplay mode.

very cool. ♪

emily: we turn now to the daily byte. one number that tells a whole lot. 12, the percentage of u.s. private sector employees who have access to paid family leave through their jobs. now at netflix new parents will have up to one year of paid time off. compare that to facebook, which offers four months. google, parents get up to 12 weeks. microsoft increased its family leave for parents to 12 weeks

today. many companies are reevaluating policies for new parents as they aim to keep top talent, but some say that the cost is still prohibitive. i asked around about parental leave policies. take a listen. >> we know that. >> am not sure that you are right. >> what should those companies do? >> most companies, if you are flying for an airline, you check in or check out at a certain time and the plane does not fly. most of those office type of jobs around the world, they can offer it completely. emily: president has also taken a stand on this issue, demanding federal ought -- federal agencies offer six months of paid leave when people become new parents. china, long known for its

censorship laws, is increasing its strength. the minister of public security will send officers against critical online companies, to protect chinese consumers and defend against cyber. joining me now is the author of "the coming collapse of china." you know i worked in china for many years. i worked at cnn, where we got routine visits from the police. this is not surprising, but really? police officers inside companies? >> i think it is part of a drive for absolute security. this is a reflection of the president. he believes in this strong state, weak society model. that is what the chinese dream is really all about. it is important to look at what the chinese central government is doing. this is only going to get worse.

emily: what companies do you think will be hit most significantly by this? what does this mean for alibaba, baidu, 10 sent? gordon: they are at the top of the list, they are the social media king. it's allits offerings are newer. they have not had time for the ministry of public security and internet censors to spend as much time with them as they have, for in its, with wave all, which has been killed by censorship. chat is certainly a top of the list of things that will be affected. emily: we are still waiting for comments from baidu and tencent, but alibaba said that they would work with the government to protect content and customers. what do we make of this in the middle of a stock selloff in china and all of these concerns about the future of the chinese economy? gordon: i think that this is

really related to the economy. the chinese communist the party knows that they are not growing at the 7.0% that they claimed and the opinion in beijing is that they are privately talking about growth at 2.2%. if you look at some of the underlying numbers like rail freight electricity construction, a lot of these numbers are negative. which really means you are talking about an economy that is sort of at that 0%, 1%, 2% range up or down. emily: i remember when facebook was blocked, twitter was blocked, google left the country. the government only seems to be taking steps backwards not forward. thank you so much, gordon. that does it for this edition of "bloomberg west." zynga, looking forward signs that the turnaround plan is working. see you then. ♪

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