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First Move with Julia Chatterley
UK Temperatures Expected to Rise Further; Acting President: Previous Government "Covered Up" Facts; Sri Lanka says IMF Bailout Talks Nearing Conclusion; Lawyers for Twitter and Elon Musk Square Off in Court; Southeast Asia's Carro Enjoys Online Car Sales Boom; Massive Wave Nearly Wipes out Wedding in Hawaii. Aired 9-10a ET
Aired July 19, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
JULIA CHATTERLEY, CNN HOST, FIRST MOVE: A special warm welcome to "First Move" today! Great to have you with us for another Heat is on edition of
the program. Extreme weather warnings remain in effect for much of Europe, as well as many parts of the United States. The U.K. declaring a national
emergency as it suffers through what is already its hottest day on record.
Heat advisories in effect across global financial markets to its investors navigate a perilous summer landscape H stands for Hindering Hiring port sip
Apple take on fewer new workers and slow spending amid ongoing recession fears Goldman Sachs announcing Monday that it will pair headcount to E for
European energy angst the EU officials are operating under the assumption that the Nord Stream one gas pipeline from Russia will not return to
service this week.
After days of quote, maintenance they're anticipating the worst clearly A is for Aggressive Inflation Reuters now saying that the European Central
Bank is pondering a 0.5 rate hike at Thursday's meeting to battle soaring prices. And T is for Troubling Tech, IBM reporting strong second quarter
revenue growth but shares set to fall sharply today on cash flow concerns and some live streaming giant Netflix reports its numbers later today too.
Now with market heat comes turbulence on Wall Street U.S. stocks had to open higher after a disheartening session let's call it that on Monday the
S&P finishing in the red after being up some 1 percent intraday after the bad Apple hiring news hit the tape.
Europe also turning tire to off trade mix handover. During the Asia session, the CEO of Goldman Sachs said yesterday that inflation is now
"Deeply Entrenched" in the global economy raising the heat on central bankers amid an already sweltering summer and that is where we begin
historic heat waves.
The U.K. is seeing its hottest day ever than Mercury is top to 40 degrees Celsius. In parts of the country for the first time temperatures could rise
even further through today. The extreme heat is also fueling wildfires in Western Europe.
In France, a third wildfire has now broken up 37,000 people have been forced to flee the area and in screen wildfire suspended train services
across parts of the country passengers could see flames from both sides of this train as you can see.
Now China also sweltering as more than 50 cities across the country have issued the second highest warning today. And here in the United States over
100 million people now under heat alerts. That's around a third of the U.S. population.
Nada Bashir joins us now from London. Nada, we can take it across the U.K. but across the united the European Union, but let's start in the U.K. We
can hear the sirens behind you and it is sirens because officially now the hottest day on record.
NADA BASHIR, CNN REPORTER: Yes, it really is a sweltering day you can really feel it now provisionally by them at the Met offers pegging the
temperatures at 40 degrees Celsius and around 102 degrees Fahrenheit that was recorded at London's Heathrow Airport. And we are still expecting the
temperature to continue rising as the day goes on.
So it really has been a pretty extreme to me hot day here in London. We saw of course last night, the warmest night on record. And of course we are now
seeing those records being broken. And we are at Kings Cross Station is typically one of the busiest stations in the Capitol today it was a lot
quieter they have since yesterday been urging people to only travel if absolutely necessary.
And now Kings Cross has been forced to cancel all of its trains for today due to the hot weather which has had a serious impact on its infrastructure
and train equipment on the overhead lines and of course the rails as well which have been overheating.
So there are concerns there a lot of questions around what the country can do to better prepare itself for this kind of heat in the future. We have of
course heard from the government they've been holding emergency Cobra meetings to discuss their contingency plans for this heat wave, focusing of
course on the health and safety risks.
They've been in touch on working closely with the National Health Service with ambulance services to ensure that they have the capacity to really
cope with the immense heat that we are seeing and the expected surge in calls for help from the National Health Service we are expecting of course.
According to the NHS a surge in people suffering heatstroke and heat exhaustion have been issuing guidance telling people to stay indoors if
possible not to go out although. We are still seeing many people breathing the heat enjoying the summer as we've seen behind me. They are asking
people to make sure they're drinking lots of fluids to check in on the elderly.
[09:05:00]
BASHIR: And especially young children as well to make sure that they are coping well. But of course we've heard from ministers saying that this is a
lesson for the United Kingdom we are only going to see these temperatures continuing to extreme to increase and become more extreme and more
frequently to see these extreme levels. So the U.K. really has to learn those lessons from this heat wave for the coming years, Julia.
CHATTERLEY: Yes, it's such a huge challenge, isn't it? What changes do you make in an environment where you don't have a system and infrastructure
built for these kinds of temperatures? But really, let's be clear, it's only ever, at least for now, a few days a year. So it's that balance of
where to invest and how to adapt based on a small proportion of the area.
Of course, to your point, we know it's going to we believe it's going to increase on our on a yearly basis. Nada, the good news is for the U.K.; the
hope is that it will break those thunderstorms due tomorrow. But other parts of Europe thinking week continues.
BASHIR: Yes, absolutely! We've seen their shocking images of wildfires spreading across parts of southern Europe and France and Spain and
Portugal. We are they have been issued red warning parts of Europe still today that isn't expected to pass as soon. Thousands of hectares of land
have been destroyed as according to the European Commission saying that in just the last 10 days, France and Portugal is 40,000 hectares of land have
been destroyed by these wildfires.
As you mentioned earlier, thousands of people have been forced to be evacuated to flee their homes as a result of these wildfires, it really has
had a disastrous impact in parts of Europe.
And that red warning continues. We're seeing countries like Belgium, for example, extending their red warnings to other parts of the country, as
well, as a result of these rising temperatures that we are seeing with her previous from the European Commission, it's researchers warning that we
could continue to see increases in drought like conditions across the European continent, or perhaps issues as well with access to water. And
that is a huge concern.
We've heard out those warnings from the European Commission from the United Nations as well. Of course, there is a lot of focus and emphasis now on
what needs to be done to tackle the crisis that we're seeing to tackle these rising temperatures. And as I said earlier, we are going to continue
according to researchers and climate scientists.
We are going to continue to see these extreme temperatures over the coming years and we're likely to see those more frequently too. So there clearly
needs to be a more long term solution as opposed to these immediate solutions we're seeing in parts of Europe.
We've heard from one U.K. minister who's been overseeing Britain's response to this current heat wave hit Maha spoke yesterday. He said that these this
heat wave that we're seeing is going to give British government some pretty key lessons for how to cope with this heat wave with this intense level of
temperatures that we're seeing and lessons that will need to be learned urgently,
Julia.
CHATTERLEY: As many lessons Nada, great to have you with us loud we have to take your particular advice and dig and find some shading and get some
water because what I've realized is to counter the sun you'll be being blasted with super-hot lights at the same time. So escape immediately
please, thank you Nada Bashir, there.
OK to China now the scorching heat comes as COVID surges. The nation reported the biggest uptick in cases since May the extreme heat to making
it even more difficult to implement zero COVID, Selina Wang reports.
SELINA WANG, CNN CORRESPONDENT: In China's scorching temperatures and rising COVID cases, it's a double whammy for the economy and people's daily
lives. This heat wave has been sweeping throughout China. Dozens of cities have been experiencing record high temperatures last week more than 80
cities issued red alerts which means temperatures were expected to reach more than 104 degrees Fahrenheit.
Some cities recorded temperatures of more than 110 degrees. This week, there hasn't been much relief, with more than 50 cities issuing the second
highest alert level. This unrelenting heat comes as China reports nearly 700 COVID cases on Tuesday, the highest number of daily new cases since
late May.
Many cities still require residents to line up for regular COVID tests over the weekend here in Beijing are stood in line for my COVID test in 99
degree heat. Many people brought umbrellas with them some squatted on the ground unable to bear the heat. There have been an increasing number of
reports of COVID workers collapsing of the heat.
They work outside for hours wearing head to toe hazmat suits, and the snap lock downs continue in China. Over the weekend thousands of tourists were
trapped in a resort town in the City of Beihai, it's a popular tourist destination.
The lockdown happened after a COVID flare up was reported. Authorities ordered mass testing and banned residents from leaving their homes. This
heat wave is also not helping an economy that's already struggling from the Pandemic. The high temperatures are hitting China's crop production
threatening to push up inflation. Official said the heat wave could impact the production of corn, soybean and wheat in many Northern provinces. Pork
prices in China have already increased significantly because of the rising cost of feed.
[09:10:00]
WANG: This heat is proving to be dangerous for people's lives but also to the economy Selina Wang, CNN, Beijing.
CHATTERLEY: And Russian President Vladimir Putin is on a rare foreign trip his first in fact outside the former Soviet Union since the Ukraine war
began. He's meeting the Iranian and Turkish Presidents in Tehran. Their main focus is on the future of Syria, but other topics will likely include
Ukrainian grain exports largely frozen due to Russia's naval blockade.
CNN's Jomana Karadsheh is following the trip from its stumbled. Jomana, great to have you with us! The Iranian nuclear deal grain exports the
future of Syria where they all have forces that competing or conflicting interests are not the easiest of subjects to be discussing what concrete
outcomes can we hope for?
JOMANA KARADSHEH, CNN CORRESPONDENT: Well, not the easiest of topics Julia indeed. And this is quite a complex relationship between those three
countries. But we have seen over the years, they have the ability to still work together to de-conflict in certain areas, like Syria, for example,
even though you know, even when they are on different sides of a conflict.
Two key issues as you mentioned there, the Ukrainian grain exports, this green corridor that Turkey has been working with Russia, Ukraine and the
United Nations to try and create to try and unblock Ukrainian grain exports, that is going to be part of the bilateral meeting in the next
couple of hours between President Erdogan and Putin. But a lot of progress has already been made.
As you know, Julia, last week, you had the Ukrainian and Russian delegations here in Istanbul meeting with the United Nations and Turkey.
And we've heard very optimistic and hopeful messages from the UN Secretary General and from Turkish officials saying that they have some sort of an
initial agreement.
And we are expecting a second round of talks to take place here in Istanbul this week, and potentially the signing of an agreement for that green
corridor through the Black Sea. And the other very complicated issue. Of course, Julia, and this is top of the agenda for Turkey right now.
That's the Military offensive that Turkey wants to launch a new Military offensive into Northern Syria. For weeks now, we've been hearing President
Erdogan threatening saying that they are ready their forces are in position to carry out this new military offensive to push back Syrian Kurdish
fighters that Turkey considers terrorists a national security threat to this country from the border region. But they really can't do this without
some sort of a green light from Russia and perhaps to a lesser extent from Iran as well. Those are the two main powers backing the Syrian regime and
the main military forces there in Syria.
So this is something that is going to be part of that trilateral summit that will be taking place into Iran today. I can tell you, a lot of people
in this region, especially in Syria, are waiting and watching this closely. We know that the Syrian Kurdish authorities have already declared a state
of emergency in that area in anticipation of a possible offensive so we'll have to wait and see whether they're going to reach some sort of an
agreement perhaps to avoid Military escalation or if Turkey is going to get that green light, Julia.
CHATTERLEY: We're watching closely too. Jomana, great to have you with us thank you. OK, straight ahead here on "First Move" political chaos and
economic collapse Sri Lanka's central bank governor on the biggest crisis in its history. That's up next.
(COMMERCIAL BREAK)
[09:15:00]
CHATTERLEY: Welcome back to "First Move" Sri Lanka's parliament has shortlisted three candidates to be the country's next President. Lawmakers
are expected to reconvene Wednesday for a secret ballot to select their new leader. Sri Lanka's ruling party is backing Ranil Wickremasinghe, who is
serving as acting President after the previous leader was forced to resign. He's been Prime Minister of the country six times and his nomination could
inflame a volatile situation there.
In an exclusive interview with CNN he accused the previous administration of "Covering up" facts about the country's financial crisis. He spoke to
Will Ripley on Monday, shortly after imposing a nationwide state of emergency to quell the unrest.
(BEGIN VIDEOTAPE)
WILL RIPLEY, CNN CORRESPONDENT (voice over): Simply more of the same from the previous administration.
RANIL WIKREMESINGHE, SRI LANKAN ACTING PRESIDENT: I'm not the same people know that. I'm not this administration, I came in to handle the economy
like I did in 2001 we collapse.
RIPLEY (on camera): Do you think that the previous administration was telling the truth to the people of Sri Lanka?
WIKREMESINGHE: No. They were not.
RIPLEY (on camera): They were not - they were lying to the people.
WIKREMESINGHE: They were covering up facts.
RIPLEY (on camera): What were they covering up?
WIKREMESINGHE: That we are bankrupt that we need to go to the IMF? Answer this.
RIPLEY (on camera): So what would you like to say to the people now truthfully, as somebody who could very likely be their next President?
WIKREMESINGHE: Tell the people I know what they're suffering? We have, we have gone back, and we have to pull ourselves up by the bootstraps. But we
can do it. We don't need five years, 10 years. By next year, let's start stabilizing. And by the end of by, certainly by 2024, let's have a
functioning economy, which will start growing, export oriented economy, a dynamic economy.
RIPLEY (on camera): What went wrong that got Sri Lanka to this point of crisis.
WIKREMESINGHE: Everyone has been in politics, not talking about the truth.
RIPLEY (on camera): We interviewed a man who pushes his son in a wheelchair to dialysis, six kilometers each way, five days a week, public
transportation costs went up by six times. What do you say to that to that father?
WIKREMESINGHE: I can understand what you're going through. And this is going to be the worst period, the protests that is taking place, occupation
of houses, burning of houses, that's only adding to it.
RIPLEY (on camera): Do you believe that other buildings can be occupied again by protesters?
WIKREMESINGHE: I will not take up any building to be occupied by protesters.
RIPLEY (on camera): How will you stop that from happening?
WIKREMESINGHE: I have asked the Police and the army to guard it.
RIPLEY (on camera): And they've been authorized to take any by any means necessary to prevent people from occupying.
WIKREMESINGHE: Just like the Congress, I've said protected.
RIPLEY (on camera): You had your own home burned down.
WIKREMESINGHE: Yes, the furniture was mainly from my grandparents, my parents, great grandparents, I had piano 125 years old from my great
grandmother all destroyed.
RIPLEY (on camera): Lot of people would have that experience and say, that's it. I'm out. I don't want to do this anymore. Why do you want to be
President and put make yourself potentially a target for this kind of thing?
WIKREMESINGHE: I don't want this happening in this country. What happened to me I don't want others to suffer. There has to be law and order in the
country.
(END VIDEOTAPE)
CHATTERLEY: What's clear is that Sri Lanka's next President was guided through its worst financial and humanitarian crisis since independence. And
acute fuel shortages brought the economy grinding to halt inflation is estimated to be running at over 50 percent year on year.
Growth shrank by 1.6 percent in the first quarter and their Central Bank estimates the second quarter was far worse. Interest rates are at a two
decade high of over 14 percent. Meanwhile, spiraling food costs mean millions are going hungry. The United Nations says 1/5 of the population
doesn't have enough to eat.
I'm pleased to say joining us now is Nandalal Weerasinghe. He's the Governor of the Central Bank of Sri Lanka. Governor fantastic to have you
on the show we thank you for your time.
[09:20:00]
CHATTERLEY: I know you're new to the job you only took over as governor back in April. But I just want to get your view on what my viewers were
listening to there. Do you agree with the acting President that the former government lied to the Sri Lankan people about how bad the financial and
economic crisis in the country was?
NANDALAL WEERASINGHE, GOVERNOR, CENTRAL BANK OF SRILANKA: As the dollar central bank or any country's central bank governor. I don't think it's
appropriate for me to comment on a political administration to use of current comments. But I can say one thing, that earlier administration of
the central bank and the government had a different kind of module that they were pursuing, but they call bombed on module that they basically were
insisting that Sri Lanka - make some support from the International Monetary Fund for a bailout.
And Sri Lanka needs only to reach that was a position the previous administration were taking. So now, since I took office, in the same
administration, before different position, if you're able to convince the administration that we had to turn it around, and we have good guy with and
seek below package. We had to restructure our sum debt.
So since then, the administration has been taking a different path than this continues, even after there was a new government formed, I think last
month, and there's another government to be formed from tomorrow. So but still, I think the successive governments recently or in short term are
basically pursuing different directions, compared to the earlier direction that the need to put some time to research, that is a difference from the
last year to this year, as far as I can see.
CHATTERLEY: Governor, I want to ask you about the situation today, because as you said, we need to focus on the future and where to go from here the
hope is that a new government or at least a new leader will be elected and very quickly a new government can be in place. We also know that the
country is burned through cash reserves incredibly quickly, how concerning is the situation today. Does the country have enough money beyond the end
of July to make fuel purchases, for example?
WEERASINGHE: Yes, in fact, available external reserves in the central bank liquid reserves is almost very low, almost nonexistent, because whatever
the renewable resources the central bank, we have utilized to import support people have some shipments of petroleum products and some of the
gas supplies that we have been able to secure supplier, some sequence of petrol and diesel for next couple of weeks.
And beyond that, it is in fact the responsibility of the new government to secure some short term green financing, to be able to find out essentially
impose a next wave of five months until we are able to get the bailout package from the IMF, probably somewhere in December. So this is a
challenging time. So from next month almost basically are negotiating some of the bidding financing facilities from our friendly countries like India,
China.
So that we need new administration should start the approaching those countries or some resources to secure some short term financing. So that we
will be able to supply essential items for the people to have that they present smoothly.
CHATTERLEY: You have currency swap arrangements in place with India and with China. Are they willing to help before an IMF bailout program is in
place or is that support contingent on other help?
WEERASINGHE: Yes, sadly, so far, India has been helping a lot in terms of short term bidding financing, they already provide a $1 billion credit line
to import some of the essential items from India. And also they provided part of the program facility that can be placed. And also, there was
additional correlation in liabilities that out of which we were able to plan almost $2 billion during last six to seven months to provide support
to input some of the items.
[09:25:00]
WEERASINGHE: So we hope that India will get continued support going forward that all depends on the new administration, negotiations, and discussion
with India. So we hope that India will continue to have been for the next couple of months. Also, we have also made some requests from China to relax
some of the conditions in one also facilities that is China. So, if those facilities are coming, if those two countries will actually to relax
continuously, I think, support that obviously, we can improve the situation until we can.
CHATTERLEY: Help is coming; the question is how long it takes. The acting President suggested that negotiations with the International Monetary Fund
are nearing a conclusion. Is that you understand too or is your belief that this still could take several weeks to negotiate.
WEERASINGHE: With the IMF negotiations, what they are trying to reach what they call soft agreements with the IMF saw, which means the program world
macro-economic program, we have - and then asked me to send it to the international technical level.
So, what we're trying to reach people suffering that go into it, that is a first step. If there was an endless civil administration, in my view, we
could average applicant within this month. But if there's a delay informing the administration of there has not been a stable administration, then
obviously, this day, I've made a commitment from the new administration of the policies that we have presented to the technical right.
So that process, the time that could check to complete or really started will depend on new administration approach or agreement with policies that
we are already presented, they act very quickly, and we can reach an agreement quickly suffer left, but that is not the end.
So that is one step. But beyond that, we need to reach an agreement with our creditors on debt restructuring. So that process also will have to
commence once at the select one that we take another couple of months, until we reach the creditors, then definitely I will can discuss constant
Sri Lanka to support--
CHATTERLEY: Governor, it all depends on those negotiations and your actions at the central bank also depend on how the next government behaves too.
When you came to lead the central bank, you immediately raised interest rates to try and control inflation. Is this as high as interest rates need
to go or might be having to go higher?
WEERASINGHE: This is the highest interest rates we have at in Sri Lanka so far in the history. Whether we need to rise further in the future,
depending on what will be the outcome on inflation and inflation expectations.
But we think right now, we are tightening enough for the time being the present interest expectation in present position for next 12 months. So if
we think inflation is going beyond what we think, but then we might tighten further that will wait for me to look at data and also from the point of a
monetary policy.
It doesn't matter what the administration at my central bank will be implementing multiples independently from outside, that is how to get to is
super impressive, but it is not enough so here the - prices overall macro imbalances. We need a combination of multiples and also supporting fiscal
policies supporting structural reform. Those will have come parallel to have an impact on overall macroeconomic stimulus package is why I always
say it is tougher on policy, that whatever we do will have some impact. But without fiscal policy without subtle reforms we won't be able to achieve
our macro stability goal for.
CHATTERLEY: Now the International Monetary Fund will demand it too in exchange for a program. Governor, I have about one minute left at a time of
deep political instability in your country and pain for the people.
[09:30:00]
CHATTERLEY: What can you say to Sri Lankans watching this interview to give them some comfort at this moment?
WEERASINGHE: I think in my view we have we have a clear program is a clear path that is to follow this path. But - I'm really concerned with the
papers. I'm sure I'm confident that we can come out with these prices, selling somebody in bulk for five months' time. But until then we will have
difficult time.
So we will have to explain to the public that we will have to go through this difficult process in economic crisis. If people are going to be
patient, people have expectations of some recovery with the new administration taking so much.
We have like an end of the tunnel. So that is what I'm confident. If we have civil administration from tomorrow onwards, then we can make some
decision by the administration.
And we also support from our multiple site on setback together we can come up with this crisis. But we are still - that time, I hope people will be
patient and hoping to see the better future by going through a difficult - process in next couple of months, three, four months or five months until
then.
CHATTERLEY: Governor, thank you for your time. And yes, a message of hope lights at the end of the tunnel, but several months more of a pain the
Governor of the Central Bank of Sri Lanka. Sir, thank.
WEERASINGHE: Thank you.
CHATTERLEY: We're back after this, stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to "First Move" Legal Eagles for Twitter and Elon Musk today face off in a high stakes court hearing in their bitter battle
over Musk's abortive takeover bid.
Twitter is looking for a trial in the fast lane, Elon Musk lawyers saying, take it easy. Paul La Monica joins us. Both sides - ready to take it to the
limit. I do feel like we missed a Hotel California reference here though too. You can check out anytime you like.
PAUL R. LA MONICA, CNN REPORTER: But you can never leave. To quote another Eagle - I think some Tesla Investors might be wondering if Elon Musk is
like the protagonist of Desperado, you know why you don't come to your senses.
[09:35:00]
LA MONICA: And just figure this out sooner rather than later because obviously, any distraction for Elon Musk is bad news, potentially for Tesla
for Spacex and all the other companies that he runs, I've lost count.
CHATTERLEY: So what are we expecting today?
LA MONICA: We are probably not going to get any major drama, if you will. But part of it is because this hearing is going to take place on Zoom
because the judge has COVID. We - tested positive for COVID.
We also know that Twitter wants this trial to happen sooner rather than later, they can possibly attempt to enforce the proposed acquisition
closing date of the end of October, but Musk and his lawyers want to try and push this into 2023.
So I think it's a battle of gamesmanship right now, whether or not Elon Musk is able to push this further out in order to maybe in try and have a
settlement or if Twitter really can keep him under pressure to try and do this deal at that 5420 per share price.
CHATTERLEY: Yes. And Twitter, of course, are saying that the battle of the bots is hanging over their share price, and they don't want it hanging over
them for months and months and months. They want to draw a line into this.
I guess either way. Speaking of clouds, Apple announcing yesterday, or at least the headline was taken to be incredibly negative, but they're not
eliminating jobs. They're reducing the rate of hiring.
But for Investors, it was seen as a significant warning sign from, hey, one of the biggest tech giants out there.
LA MONICA: Not just one of the biggest tech giants out there. But one of the biggest companies on the planet, of course, Julia. Yes. I mean, the
market really shifted in tone yesterday, we had a nice little rally because of earnings.
And then all of a sudden, those gains went poof when those Apple reports came out. As of right now, it still seems to be just reports that Apple is
going to be slowing the pace of hiring.
But if they are doing that it would be consistent with what we're seeing from other large companies, Goldman Sachs, which had really good earnings
yesterday. They said during their conference call the CFO that they are slowing the pace of hiring, which makes sense given the market volatility.
You've had layoffs, reportedly at TikTok, one of the biggest tech social media giants now on the planet, there were some reported layoffs at Oracle
recently. So tech and financial services two areas you know, key parts of the market and economy potentially looking to reduce the pace of hiring if
not outright cutting jobs because of all this market uncertainty and economic turmoil right now with everyone talking about a recession possibly
coming maybe next year.
CHATTERLEY: Yes. And if you want to prune some stuff and make some adjustments, now is the time to do it because you have the economic and
arguably political cover to do so too. Paul La Monica, thank you for that.
Now, while some investors have their fangs bed let's talk about Netflix the world's largest streaming service set to report perhaps the most
consequential earnings in its 25 year history after the bell today, Rahel Solomon is covering this story for us. I think expectations now on these
earnings are so muted, it wills probably well I say this very carefully, it will be tough for them not to beat these muted expectations. But when
you've got Morgan Stanley talking about a streaming recession, the warning is there, Rahel, what are we expecting from these guys today?
RAHEL SOLOMON, CNN CORRESPONDENT: The warning certainly is there. And Julia to your point about this is the most consequential quarter and earnings
report for the season for Netflix. I would also argue that the most consequential number in today's report is going to be subscribers.
Remember last quarter Netflix warned that we could see an eye popping loss of 2 million subscribers that came after it reported that it had lost
200,000 subscribers and that really sent Netflix shares tumbling.
Take a look at its year to date performance. You can see a part of the year was just sort of getting swept up in the larger tech trend that larger tech
sell off. But take a look at April the last time the company reported.
And it really tells the story I mean, shares fell off a cliff after that warning about subscriber. So what folks are going to be watching very
closely is if Netflix did in fact lose more subscribers how many the companies warned that we could see 2 million so that will be the big
question.
But to your point Julia, Netflix is still the streaming leader and there's not all pessimism or negativity on the street. Wedbush for example putting
out this statement saying that we think that Netflix is actually positioned to exceed its guidance for Q2 particularly because of the staggered release
date for stranger things for adding that.
However we think the sooner the company shows its commitment to reducing churn by releasing new content and other things it will restore investor
confidence in the Netflix business model.
But yes, all eyes Julia on how many subscribers Netflix managed to lose this quarter if in fact it did.
CHATTERLEY: Yes never mind subscription recession, it's some subscription saturation, it's just how many more of these things can you watch
particularly as people get back to life and try and do other things.
[09:40:00]
CHATTERLEY: And one of the first things that get caught in an economic slowdown is advertising spending costs. This is something that Netflix has
resisted all the way along.
Now they've said, look, OK, we're going to allow for a cheaper subscription service that has adverts. And we should get more details on that today.
SOLOMON: Yes, so it's a great point, Julia, because for years, Reed Hastings had sort of bristled at the idea of an ad supported model. And
yet, more recently, we learned that they are going to be partnering with Microsoft to add and to add an ad supported tier, which analysts had been
calling for, at least some analysts have been calling for years.
So the idea here from the company is that in doing so hopefully, it can churn some more growth in terms of new subscribers, or at the very least,
not lose some subscribers who are hoping to save a bit of money by not paying the $16 a month fee.
So it remains to be seen if it'll actually be effective. There is quite a bit of skepticism, I should say, within the analyst community about whether
it would actually add significant revenue.
CHATTERLEY: Yes, when it comes given Microsoft's lack of experience in this third party ad tech business. So we shall see.
SOLOMON: We shall.
CHATTERLEY: Rahel, thank you for that. Yes, after the Bell today on Netflix Rahel Solomon there. OK, coming up on "First Move", how three friends built
a billion dollar car business, but not content with it or not content with unicorn status, but now driving towards an eventual IPO Carro after the
break?
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to "First Move". Let's face it buying a used car can often rank alongside moving house or getting divorced when it comes to
uncertainty and stress.
While offering the antidote to online only experiences Carro which calls itself Southeast Asia's largest car marketplace, already riding high off
the back of soaring second hand values. This unicorn is gunning for growth thanks to funding from the likes of Softbank.
Now satisfied with that, the CEO says the billion dollar mark is just the start. He wanted to become the Amazon of cars with eyes on an eventual U.S.
IPO. Aaron Tan is the Chief Executive and he joins us now. That's no small ambition. Wow. Welcome to the show.
We'll talk about it. You're aiming to make car ownership easy whether it's the purchase the finance or the selling. Why is your platform the best to
the consumers in your view?
[09:45:00]
AARON TAN, CEO, CARRO: Well, I think no, to sum it up in the simplest way matter is effective, we give the best experience, right? It will be, if
you're trying to sell the car in the shortest period of time, literally in minutes, the car comes into comes into the platform and off, it goes money
into your bank account, right?
It doesn't even sell it. And for that matter, if you're buying a car, we make it super simple, super seamless for you to buy the car, and Tally
online. And you know, for that matter, we have been able to do this.
And to and from a customer's perspective, primarily because we play, you know, across lending, insurance, warranties, and after sales in the
company. So I mean, the - this is just simply because we make the experience of buying and selling entirely online, super seamless, and
simple for the end consumer.
CHATTERLEY: So let's say I'm buying, and I want insurance, I want to check that the car is good. I want to finance it, how quickly can I do that,
hypothetically speaking, using your platform?
TAN: Hypothetically, everything can be done in minutes, like literally; we're talking about five to 10 minutes end to end, right. So you come and
you select the car that you want, and then you know for that matter, the loans gets instantly approved online based on your credit score.
And after which you can you can then say that you know what, I need insurance I need comprehensive and third party, whatever. And then you
select the car. And literally if the cars beside you or for that matter, you know, if you do not need next day delivery, you can choose to pick up
the car using the QR code from one of our car parts. And you can just drive the car off the lot.
CHATTERLEY: Oh, we're going to come back to financing.
TAN: Right, everything can be done five to ten minutes.
CHATTERLEY: OK, we're going to come back to the financing, because got huge questions on that. But first, where's the inventory coming from? And can
Sellers list on rival platforms too because you're not the only one in the region? We've got Carson, we've got carousel that that instantly sprang to
mind.
TAN: Yep, so the loan shark, this is different from a traditional classified by itself. And so the cars actually belong to us, right? The
cars comes from various sorts of suppliers, including like, you know, Tesla awful end consumers and a whole bunch of other, you know, platforms or
other services, so to speak, right, but the cars are actually in our platform on our system.
And one thing, you know, - I think the biggest differentiation really at the end of the day is that we actually value app by making sure that the
cost value and quality goes up dramatically, right.
Every single console needs to go through more than like 160 point check by submitting payment goes through and tire refurbishment exercise, which
brings the contrast in a level of what we call certified pre owned like National United States.
And this will allow the customer to feel even better about buying the car from us because buying a car on car wasn't just buying another used car, it
is actually a certified pre owned car, and for that matter is as good as new.
CHATTERLEY: Oh, and this is where the anxiety for consumers in particular comes in is the uncertainty of buying a used car and potential problems. If
you've already done all the checks ahead of listing it, then, then that's the important point.
Then obviously, it speeds up the time table as well of achieving this. Is the real money making opportunity, though, to the point that you were
making earlier, less about getting these cars in and selling them on.
But the financing side, the insurance side of it, is that how you're making money because you make a big point about it's not just about selling cars,
it's also as a business being profitable. And that's something that separates you too from your competitors.
TAN: Correct. Yes, you know, we think of live very simplistically, especially in today's current market, everything's about the bottom line,
and it can do double bottom line, it's even better, right.
And for us, I think, you know, the biggest differentiation is that we have been a bit of positivity for the last three years, but as a tech company
itself is almost unheard of. But you know how do we do that?
How do we achieve it in such a short period of time, by the way, the company is only about five to six years old, and we have been EBITDA
positive for three years. So that is, that buys --.
And I would say that the secret sauce for that method is really simply because of the fact that we focus a lot of our time and attention on
financial services, right? Lending insurance, when only guys that has the license to land across all the various jurisdictions that we are, we are
present in.
Indonesia, Thailand, Malaysia, Singapore, for that matter, we also own our own insurance license in some of these markets. So net, net, this focus on
ourselves and financial services has really allowed us to monetize a lot better than any of the competitors or big comparable around the region or
globally.
CHATTERLEY: How are you doing this? You are writing insurance contracts and loan contracts as you've just been saying, when at a time during the
pandemic in particular, when traditional finance providers are more reticent.
And you said to used people's credit profile, but there were a lot of people that she actually doesn't have an established credit profile so,
they just not able to use the platform? How do you price that kind of credit risk? How are you doing this and making money? Explain.
TAN: Yes, we do this, we do this entirely based on risk based pricing and it is very good question by the way. And I didn't put it on record. Our
non-performing loan is our MPL internally when we call in our industry is basically like 0.1 percent a month, right.
It is practically non-existent. And we have been able to do this because we have been able to do risk based pricing extremely well. And what this means
effectively is that of course if you belong to a higher risk category and to your question if the customers will be caught tin fall or for that
matter you know, I'm bankable or whatever not, it's not that we cannot lend them money.
[09:50:00]
TAN: It's just that, you know, what's likely going to happen is that the risk of the customer goes up. And as a result, the resulting interest rate
goes up a little bit more, right.
And how we have been able to make this work is very simple, right, we have been able to make a good spread of margins, i.e. the cost of borrowing,
let's say, you know, one, or 2 percent or whatever.
And then, you know, lending it out at a corresponding interest rate that actually makes sense and more importantly, being able to control the risks
far better than even the banks themselves.
In fact, our NPL rates are the lowest amongst, you know, the comparables or for that matter in the industry by itself. And this has really allowed us
to really drive ahead of competition or for that matter, driving ahead of a lot of the comparables in the region, in FinTech or EBIT in a transaction
or marketplace services place.
CHATTERLEY: How many users on the platform so far? And how big is this market potentially Aaron? Because this is a question if you do try an IPO
that you're going to have to answer very quick.
TAN: Yes, very simple question. Today, we are only at about 2 percent of the overall market itself is in Southeast Asia, right? So we currently do
at you know somewhere north of about $2 billion in terms of top line revenue, and for that matter, GMV, right.
And if you look at it in a broader Southeast Asia context are about 40 to $50 billion annual market by itself. So we are only just at the tip of the
iceberg is up. And we believe this is a very sizeable opportunity.
Because at the end of the day, you know, buying vehicles itself big use or for that matter, you know, buying an automotive - and ICE itself is the
second largest, most expensive ticket item that you've ever purchased in life.
And for that matter is the next one is probably properties and we'd like to think that the used car space offered a method abroad, vehicle space itself
is effectively a trillion dollar category by itself.
And for that matter, again, in Southeast Asia, is it growing business, is it growing market and today at only just 2 percent of the market
penetration. We have a lot of room to grow.
CHATTERLEY: Aaron, you don't have loads more questions. I've seen you make comments about talent and culture and investing in all sorts. So you're
going to have to come back on soon, please.
And we'll continue the conversation. But for now, you also win the award for the most facts and this quickie speaker. I think that I've ever had,
that's something, Aaron, great to chat to you. Aaron Tan, CEO of Carro there, see you again soon.
TAN: Thank you.
CHATTERLEY: Thank you. OK, coming up after the break. What a mess, climate change or just a bad omen. See what caused this big wet wedding. But the
question is did they leave the cake out in the rain - stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to and finally where Mother Nature crashed a wedding in spectacular style in Hawaii. We just take a look at this,
sending tables on the water guess grumbling for cover luckily the cake and the dress survived. But several homes were damaged in the largest swell
scene those in more than 25 years.
[09:55:00]
CHATTERLEY: The bride and groom told CNN's New Day though everyone came together.
(BEGIN VIDEO CLIP)
DILON MURPHY, GIANT WAVE CRASHED HIS HAWAIIAN WEDDING: Honestly, it brought everybody together so fast because our families and friends sprung right
away and started picking up all the tables. The other thing that kind of went underwater was our dance floor and some of our reception tables and
all that.
So they took all that to the other side and fortunately we were able to have a party and still be able to dance and we're dancing in the grass.
RILEY MURPHY, GIANT WAVE CRASHED HIS HAWAIIAN WEDDING: And I think the one thing that we couldn't really salvage was our dance floor but nobody seemed
to mind we had a really fun night it didn't stop the party one bit. It was just a really good union of everyone coming together to kind of make things
work even though you know this they slept through and washed away, a good amount of - people, so it was pretty beautiful to watch.
(END VIDEO CLIP)
CHATTERLEY: An underwater dance floor lucky though as you could see, it was all smiles at the end. And we wish you all both and long happy marriage and
smooth sailing or surfing, whatever waves may come. That's it for the show. "Connect the World" Becky Anderson is up next. And I'll see you tomorrow.
(COMMERCIAL BREAK)
END
