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K id
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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☒ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☐ |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of April 17, 2023, there were
TESLA, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2023
INDEX
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Item 1. |
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4 |
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4 |
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5 |
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6 |
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Consolidated Statements of Redeemable Noncontrolling Interests and Equity |
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7 |
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8 |
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9 |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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23 |
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Item 3. |
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31 |
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Item 4. |
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31 |
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Item 1. |
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32 |
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Item 1A. |
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32 |
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Item 2. |
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32 |
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Item 3. |
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32 |
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Item 4. |
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32 |
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Item 5. |
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32 |
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Item 6. |
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32 |
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34 |
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Forward-Looking Statements
The discussions in this Quarterly Report on Form 10-Q contain forward-looking statements reflecting our current expectations that involve risks and uncertainties. These forward-looking statements include, but are not limited to, statements concerning any potential future impact of the coronavirus disease (“COVID-19”) pandemic on our business, supply chain constraints, our strategy, competition, future operations and production capacity, future financial position, future revenues, projected costs, profitability, expected cost reductions, capital adequacy, expectations regarding demand and acceptance for our technologies, growth opportunities and trends in the markets in which we operate, prospects and plans and objectives of management. The words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” of the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and that are otherwise described or updated from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). We do not assume any obligation to update any forward-looking statements.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Tesla, Inc.
Consolidated Balance Sheets
(in millions, except per share data)
(unaudited)
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March 31, |
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December 31, |
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2023 |
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2022 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Operating lease vehicles, net |
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Solar energy systems, net |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Digital assets, net |
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Intangible assets, net |
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Goodwill |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities and other |
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Deferred revenue |
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Customer deposits |
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Current portion of debt and finance leases |
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Total current liabilities |
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Debt and finance leases, net of current portion |
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Deferred revenue, net of current portion |
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Other long-term liabilities |
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Total liabilities |
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(Note 9) |
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Redeemable noncontrolling interests in subsidiaries |
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Equity |
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Stockholders’ equity |
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Preferred stock; $
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Common stock; $
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Additional paid-in capital |
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Accumulated other comprehensive (loss) |
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(
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(
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Retained earnings |
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Total stockholders’ equity |
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Noncontrolling interests in subsidiaries |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
4
Tesla, Inc.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Revenues |
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Automotive sales |
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$ |
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$ |
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Automotive regulatory credits |
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Automotive leasing |
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Total automotive revenues |
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Energy generation and storage |
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Services and other |
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Total revenues |
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Cost of revenues |
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Automotive sales |
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Automotive leasing |
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Total automotive cost of revenues |
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Energy generation and storage |
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Services and other |
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Total cost of revenues |
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Gross profit |
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Operating expenses |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Income from operations |
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Interest income |
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Interest expense |
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(
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) |
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(
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) |
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Other (expense) income, net |
|
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(
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) |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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Net income (loss) attributable to noncontrolling
|
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(
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) |
|
Net income attributable to common stockholders |
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$ |
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$ |
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Net income per share of common stock
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average shares used in computing net
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Basic |
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Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
5
Tesla, Inc.
Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)
|
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Three Months Ended March 31, |
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2023 |
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2022 |
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Net income |
|
$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation adjustment |
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(
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) |
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Unrealized net gain (loss) on investments |
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(
|
) |
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Comprehensive income |
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Less: Comprehensive income (loss) attributable to
|
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(
|
) |
|
Comprehensive income attributable to
|
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$ |
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|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
Tesla, Inc.
Consolidated Statements of Redeemable Noncontrolling Interests and Equity
(in millions, except per share data)
(unaudited)
|
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Accumulated |
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Redeemable |
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Additional |
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Other |
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Total |
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Noncontrolling |
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Noncontrolling |
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Common Stock |
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Paid-In |
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Comprehensive |
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Retained |
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Stockholders’ |
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Interests in |
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Total |
|
||||||||||||
|
Three Months Ended March 31, 2023 |
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Interests |
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Shares |
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Amount |
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Capital |
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(Loss) |
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Earnings |
|
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Equity |
|
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Subsidiaries |
|
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Equity |
|
|||||||||
|
Balance as of December 31, 2022 |
|
$ |
|
|
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$ |
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$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Exercises of conversion feature of
|
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— |
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|
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— |
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— |
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— |
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Issuance of common stock for equity
|
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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|
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— |
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— |
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|
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— |
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|
Distributions to noncontrolling interests |
|
|
(
|
) |
|
|
|
— |
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|
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— |
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— |
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— |
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— |
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— |
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(
|
) |
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(
|
) |
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Buy-outs of noncontrolling interests |
|
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— |
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— |
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— |
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— |
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— |
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(
|
) |
|
|
(
|
) |
|
Net income |
|
|
|
|
|
|
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— |
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— |
|
|
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— |
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— |
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Other comprehensive income |
|
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— |
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— |
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— |
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|
|
— |
|
|
|
|
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— |
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|
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— |
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|
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|
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|
Balance as of March 31, 2023 |
|
$ |
|
|
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$ |
|
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$ |
|
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$ |
(
|
) |
|
$ |
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$ |
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$ |
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$ |
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Accumulated |
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|||||||||
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Redeemable |
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Additional |
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Other |
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Total |
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Noncontrolling |
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|||||||||
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Noncontrolling |
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Common Stock |
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Paid-In |
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Comprehensive |
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Retained |
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Stockholders’ |
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Interests in |
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Total |
|
||||||||||||
|
Three Months Ended March 31, 2022 |
|
Interests |
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|
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Shares (1) |
|
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Amount (1) |
|
|
Capital |
|
|
Income (Loss) |
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Earnings (1) |
|
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Equity |
|
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Subsidiaries |
|
|
Equity |
|
|||||||||
|
Balance as of December 31, 2021 |
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Exercises of conversion feature of
|
|
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— |
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|
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|
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— |
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— |
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|
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— |
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Issuance of common stock for equity
|
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— |
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|
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— |
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— |
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|
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|
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— |
|
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|
|
|
|
Stock-based compensation |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Distributions to noncontrolling interests |
|
|
(
|
) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
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— |
|
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— |
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— |
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(
|
) |
|
|
(
|
) |
|
Buy-out of noncontrolling interests |
|
|
(
|
) |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
— |
|
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|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
Net (loss) income |
|
|
(
|
) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
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— |
|
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|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
|
— |
|
|
|
(
|
) |
|
Balance as of March 31, 2022 |
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
7
Tesla, Inc.
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
||
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
|
Depreciation, amortization and impairment |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
Inventory and purchase commitments write-downs |
|
|
|
|
|
|
|
|
|
Foreign currency transaction net unrealized gain |
|
|
(
|
) |
|
|
(
|
) |
|
Non-cash interest and other operating activities |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
|
Accounts receivable |
|
|
(
|
) |
|
|
(
|
) |
|
Inventory |
|
|
(
|
) |
|
|
(
|
) |
|
Operating lease vehicles |
|
|
(
|
) |
|
|
(
|
) |
|
Prepaid expenses and other current assets |
|
|
(
|
) |
|
|
(
|
) |
|
Other non-current assets |
|
|
(
|
) |
|
|
(
|
) |
|
Accounts payable and accrued liabilities |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
|
|
Customer deposits |
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
||
|
Purchases of property and equipment excluding finance leases, net of sales |
|
|
(
|
) |
|
|
(
|
) |
|
Purchases of solar energy systems, net of sales |
|
|
(
|
) |
|
|
(
|
) |
|
Purchase of intangible assets |
|
|
|
|
|
|
(
|
) |
|
Purchases of investments |
|
|
(
|
) |
|
|
(
|
) |
|
Proceeds from maturities of investments |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(
|
) |
|
|
(
|
) |
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
||
|
Repayments of convertible and other debt |
|
|
(
|
) |
|
|
(
|
) |
|
Proceeds from exercises of stock options and other stock issuances |
|
|
|
|
|
|
|
|
|
Principal payments on finance leases |
|
|
(
|
) |
|
|
(
|
) |
|
Debt issuance costs |
|
|
(
|
) |
|
|
|
|
|
Distributions paid to noncontrolling interests in subsidiaries |
|
|
(
|
) |
|
|
(
|
) |
|
Payments for buy-outs of noncontrolling interests in subsidiaries |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash used in financing activities |
|
|
(
|
) |
|
|
(
|
) |
|
Effect of exchange rate changes on cash and cash equivalents and restricted cash |
|
|
|
|
|
|
(
|
) |
|
Net decrease in cash and cash equivalents and restricted cash |
|
|
(
|
) |
|
|
(
|
) |
|
Cash and cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash, end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
||
|
Acquisitions of property and equipment included in liabilities |
|
$ |
|
|
|
$ |
|
|
|
Leased assets obtained in exchange for finance lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
Leased assets obtained in exchange for operating lease liabilities |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
8
Tesla, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 1 – Summary of Significant Accounting Policies
Unaudited Interim Financial Statements
The consolidated financial statements of Tesla, Inc. (“Tesla”, the “Company”, “we”, “us” or “our”), including the consolidated balance sheet as of March 31, 2023, the consolidated statements of operations, the consolidated statements of comprehensive income, the consolidated statements of redeemable noncontrolling interests and equity, and the consolidated statements of cash flows for the three months ended March 31, 2023 and 2022, as well as other information disclosed in the accompanying notes, are unaudited. The consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements as of that date. The interim consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022.
The interim consolidated financial statements and the accompanying notes have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future years or interim periods.
Reclassifications
Certain prior period balances have been reclassified to conform to the current period presentation in the accompanying notes.
Revenue Recognition
Revenue by source
The following table disaggregates our revenue by major source (in millions):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Automotive sales |
|
$ |
|
|
|
$ |
|
|
|
Automotive regulatory credits |
|
|
|
|
|
|
|
|
|
Energy generation and storage sales |
|
|
|
|
|
|
|
|
|
Services and other |
|
|
|
|
|
|
|
|
|
Total revenues from sales and services |
|
|
|
|
|
|
|
|
|
Automotive leasing |
|
|
|
|
|
|
|
|
|
Energy generation and storage leasing |
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
|
|
|
$ |
|
|
Automotive Segment
Automotive Sales Revenue
The total sales return reserve on vehicles sold with resale value guarantees was
$
Deferred revenue is related to the access to our Full Self Driving (“FSD”) features and ongoing maintenance, internet connectivity, free Supercharging programs and over-the-air software updates primarily on automotive sales, which amounted to $
Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the balance sheet date. Revenue recognized from the deferred revenue balance as of December 31, 2022 and 2021 was
$
9
We have been providing loans for financing our automotive deliveries in volume since fiscal year 2022. As of March 31, 2023 and December 31, 2022
, we have recorded net financing receivables on the consolidated balance sheets, of which $
Automotive Regulatory Credits
During the three months ended March 31, 2022
, we had also recognized $
Automotive Leasing Revenue
Direct Sales-Type Leasing Program
For the three months ended March 31, 2023, we recognized $
Lease receivables relating to sales-type leases are presented on the consolidated balance sheets as follows (in millions):
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
|
Gross lease receivables |
|
$ |
|
|
|
$ |
|
|
|
Unearned interest income |
|
|
(
|
) |
|
|
(
|
) |
|
Allowance for expected credit losses |
|
|
(
|
) |
|
|
(
|
) |
|
Net investment in sales-type leases |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
||
|
Reported as: |
|
|
|
|
|
|
||
|
Prepaid expenses and other current assets |
|
$ |
|
|
|
$ |
|
|
|
Other non-current assets |
|
|
|
|
|
|
|
|
|
Net investment in sales-type leases |
|
$ |
|
|
|
$ |
|
|
Energy Generation and Storage Segment
Energy Generation and Storage Sales
We record as deferred revenue any non-refundable amounts that are collected from customers related to fees charged for prepayments, which is recognized as revenue ratably over the respective customer contract term. As of March 31, 2023 and December 31, 2022, deferred revenue related to such customer payments amounted to
$
We have been providing loans for financing our energy generation products in volume since fiscal year 2022. As of March 31, 2023 and December 31, 2022
, we have recorded net financing receivables on the consolidated balance sheets, of which $
Income Taxes
There are transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. As of March 31, 2023 and December 31, 2022
, the aggregate balances of our gross unrecognized tax benefits were $
We file income tax returns in the U.S. and various state and foreign jurisdictions. We are currently under examination by the Internal Revenue Service (“IRS”) for the years
Given the uncertainty in timing and outcome of our tax examinations, an estimate of the range of the reasonably possible change in gross unrecognized tax benefits within twelve months cannot be made at this time.
10
Net Income per Share of Common Stock Attributable to Common Stockholders
The following table presents the reconciliation of net income attributable to common stockholders to net income used in computing basic and diluted net income per share of common stock (in millions):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Net income attributable to common stockholders |
|
$ |
|
|
|
$ |
|
|
|
Less: Buy-out of noncontrolling interest |
|
|
(
|
) |
|
|
|
|
|
Net income used in computing basic net income per share of common stock |
|
|
|
|
|
|
|
|
|
Less: Dilutive convertible debt |
|
|
|
|
|
|
|
|
|
Net income used in computing diluted net income per share of common stock |
|
$ |
|
|
|
$ |
|
|
The following table presents the reconciliation of basic to diluted weighted average shares used in computing net income per share of common stock attributable to common stockholders, as adjusted to give effect to the
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Weighted average shares used in computing net income per share of common stock, basic |
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
||
|
Stock-based awards |
|
|
|
|
|
|
|
|
|
Convertible senior notes |
|
|
|
|
|
|
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing net income per share of common stock, diluted |
|
|
|
|
|
|
|
|
The following table presents the potentially dilutive shares that were excluded from the computation of diluted net income per share of common stock attributable to common stockholders, because their effect was anti-dilutive, as adjusted to give effect to the 2022 Stock Split (in millions):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Stock-based awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Restricted Cash
Our total cash and cash equivalents and restricted cash, as presented in the consolidated statements of cash flows, was as follows (in millions):
|
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|
December 31, |
|
||||
|
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
||||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Restricted cash included in prepaid expenses and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash included in other non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total as presented in the consolidated statements of cash flows |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
11
Accounts Receivable and Allowance for Doubtful Accounts
Depending on the day of the week on which the end of a fiscal quarter falls, our accounts receivable balance may fluctuate as we are waiting for certain customer payments to clear through our banking institutions and receipts of payments from our financing partners, which can take up to approximately two weeks based on the contractual payment terms with such partners. Our accounts receivable balances associated with our sales of regulatory credits, which are typically transferred to other manufacturers during the last few days of the quarter, is dependent on contractual payment terms. Additionally, government rebates can take up to a year or more to be collected depending on the customary processing timelines of the specific jurisdictions issuing them. These various factors may have a significant impact on our accounts receivable balance from period to period. As of March 31, 2023 and December 31, 2022
, we had $
Financing Receivables
As of March 31, 2023 and December 31, 2022, the majority of our financing receivables were at current status with only immaterial balances being past due. As of March 31, 2023, the majority of our financing receivables, excluding MyPower notes receivable, were originated in 2023 and 2022, and as of December 31, 2022, the majority of our financing receivables, excluding MyPower notes receivable, were originated in 2022.
As of March 31, 2023 and December 31, 2022
, the total outstanding balance of MyPower customer notes receivable, net of allowance for expected credit losses, was $
Concentration of Risk
Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, investments, restricted cash, accounts receivable and other finance receivables. Our cash and investments balances are primarily comprised of deposits which are diversified among high credit quality financial institutions or invested in U.S. government securities. These deposits are typically in excess of insured limits. As of March 31, 2023 and December 31, 2022
,
Supply Risk
We are dependent on our suppliers, including single source suppliers, and the inability of these suppliers to deliver necessary components of our products in a timely manner at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components from these suppliers, could have a material adverse effect on our business, prospects, financial condition and operating results.
Operating Lease Vehicles
The gross cost of operating lease vehicles as of March 31, 2023 and December 31, 2022 was
$
Warranties
Accrued warranty activity consisted of the following (in millions):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Accrued warranty—beginning of period |
|
$ |
|
|
|
$ |
|
|
|
Warranty costs incurred |
|
|
(
|
) |
|
|
(
|
) |
|
Net changes in liability for pre-existing warranties,
|
|
|
|
|
|
|
|
|
|
Provision for warranty |
|
|
|
|
|
|
|
|
|
Accrued warranty—end of period |
|
$ |
|
|
|
$ |
|
|
12
Recent Accounting Pronouncements
Recently adopted accounting pronouncements
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We adopted this ASU prospectively on January 1, 2023. This ASU has not and is currently not expected to have a material impact on our consolidated financial statements.
In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which we adopted on January 1, 2020. This ASU also enhances the disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, the ASU amends the guidance on vintage disclosures to require entities to disclose current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We adopted the ASU prospectively on January 1, 2023. This ASU has not and is currently not expected to have a material impact on our consolidated financial statements.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law and is effective for taxable years beginning after December 31, 2022. The IRA includes multiple incentives to promote clean energy, electric vehicles, battery and energy storage manufacture or purchase, in addition to a new corporate alternative minimum tax of
Note 2 – Fair Value of Financial Instruments
ASC 820,
Fair Value Measurements
(“ASC 820”
) states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, is comprised of: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices in active markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair value hierarchy requires the use of observable market data when available in determining fair value.
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||||||||||
|
|
|
Fair Value |
|
|
Level I |
|
|
Level II |
|
|
Level III |
|
|
Fair Value |
|
|
Level I |
|
|
Level II |
|
|
Level III |
|
||||||||
|
Money market funds |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
U.S. government securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit and time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
All of our money market funds were classified within Level I of the fair value hierarchy because they were valued using quoted prices in active markets. Our U.S. government securities, certificates of deposit, time deposits and corporate debt securities are classified within Level II of the fair value hierarchy and the market approach was used to determine fair value of these investments.
13
Our cash, cash equivalents and investments classified by security type as of March 31, 2023 and December 31, 2022 consisted of the following (in millions):
|
|
|
March 31, 2023 |
|
|||||||||||||||||||||
|
|
|
Adjusted Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
|
Cash and Cash Equivalents |
|
|
Short-Term Investments |
|
||||||
|
Cash |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government securities |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit and time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and short-term investments |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
December 31, 2022 |
|
|||||||||||||||||||||
|
|
|
Adjusted Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
|
Cash and Cash Equivalents |
|
|
Short-Term Investments |
|
||||||
|
Cash |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Money market funds |
|
|
|
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|
|
|
|
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|
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|
U.S. government securities |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit and time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and short-term investments |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
We record gross realized gains, losses and credit losses as a component of Other (expense) income, net in the consolidated statements of operations. For the three months ended March 31, 2023 and 2022, we did not recognize any material gross realized gains, losses or credit losses. The ending allowance balances for credit losses were immaterial as of March 31, 2023 and December 31, 2022. We have determined that the gross unrealized losses on our investments as of March 31, 2023 and December 31, 2022 were temporary in nature.
The following table summarizes the fair value of our investments by stated contractual maturities as of March 31, 2023 (in millions):
|
Due in 1 year or less |
|
$ |
|
|
|
Due in 1 year through 5 years |
|
|
|
|
|
Due in 5 years through 10 years |
|
|
|
|
|
Total |
|
$ |
|
|
Disclosure of Fair Values
Our financial instruments that are not re-measured at fair value include accounts receivable, financing receivables, digital assets, accounts payable, accrued liabilities, customer deposits and debt. The carrying values of these financial instruments approximate their fair values, other than our
We estimate the fair value of the 2024 Notes using commonly accepted valuation methodologies and market-based risk measurements that are indirectly observable, such as credit risk (Level II). In addition, we estimate the fair values of our digital assets based on quoted prices in active markets (Level I).
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
|
2024 Notes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Digital assets, net |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
14
Note 3 – Inventory
Our inventory consisted of the following (in millions):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2023 |
|
|
2022 |
|
||
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Work in process |
|
|
|
|
|
|
|
|
|
Finished goods (1) |
|
|
|
|
|
|
|
|
|
Service parts |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
We write-down inventory for any excess or obsolete inventories or when we believe that the net realizable value of inventories is less than the carrying value. During the three months ended March 31, 2023 and 2022, we recorded write-downs of
$
Note 4 – Property, Plant and Equipment, Net
Our property, plant and equipment, net, consisted of the following (in millions):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2023 |
|
|
2022 |
|
||
|
Machinery, equipment, vehicles and office furniture |
|
$ |
|
|
|
$ |
|
|
|
Tooling |
|
|
|
|
|
|
|
|
|
Leasehold improvements |
|
|
|
|
|
|
|
|
|
Land and buildings |
|
|
|
|
|
|
|
|
|
Computer equipment, hardware and software |
|
|
|
|
|
|
|
|
|
Construction in progress |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation |
|
|
(
|
) |
|
|
(
|
) |
|
Total |
|
$ |
|
|
|
$ |
|
|
Construction in progress is primarily comprised of construction of Gigafactory Texas and Gigafactory Berlin-Brandenburg, and equipment and tooling related to the manufacturing of our products.
Depreciation expense during the three months ended March 31, 2023 and 2022 was
$
Note 5 – Accrued Liabilities and Other
Our accrued liabilities and other current liabilities consisted of the following (in millions):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2023 |
|
|
2022 |
|
||
|
Accrued purchases (1) |
|
$ |
|
|
|
$ |
|
|
|
Taxes payable (2) |
|
|
|
|
|
|
|
|
|
Payroll and related costs |
|
|
|
|
|
|
|
|
|
Accrued warranty reserve, current portion |
|
|
|
|
|
|
|
|
|
Sales return reserve, current portion |
|
|
|
|
|
|
|
|
|
Operating lease liabilities, current portion |
|
|
|
|
|
|
|
|
|
Other current liabilities |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
15
Note 6 – Other Long-Term Liabilities
Our other long-term liabilities consisted of the following (in millions):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2023 |
|
|
2022 |
|
||
|
Operating lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
Accrued warranty reserve |
|
|
|
|
|
|
|
|
|
Other non-current liabilities |
|
|
|
|
|
|
|
|
|
Total other long-term liabilities |
|
$ |
|
|
|
$ |
|
|
Note 7 – Debt
The following is a summary of our debt and finance leases as of March 31, 2023 (in millions):
|
|
|
|
|
|
|
|
Unpaid |
|
|
|
Unused |
|
|
|
|
|
|
|
|||||||||||
|
|
|
Net Carrying Value |
|
|
|
Principal |
|
|
|
Committed |
|
|
|
Contractual |
|
Contractual |
|||||||||||||
|
|
|
Current |
|
|
|
Long-Term |
|
|
|
Balance |
|
|
|
Amount (1) |
|
|
|
Interest Rates |
|
Maturity Date |
|||||||||
|
Recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
2024 Notes |
|
$ |
|
— |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
— |
|
|
|
|
% |
|
|
|
RCF Credit Agreement |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Not applicable |
|
|
|
|
Solar Bonds |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
% |
|
|
|
Total recourse debt |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Automotive Asset-backed Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
% |
|
|
|
Solar Asset-backed Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
% |
|
|
|
Cash Equity Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
% |
|
|
|
Automotive Lease-backed Credit Facilities |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Not applicable |
|
|
|
|
Total non-recourse debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Total debt and finance leases |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
The following is a summary of our debt and finance leases as of December 31, 2022 (in millions):
|
|
|
|
|
|
|
|
Unpaid |
|
|
|
Unused |
|
|
|
|
|
|
|
|||||||||||
|
|
|
Net Carrying Value |
|
|
|
Principal |
|
|
|
Committed |
|
|
|
Contractual |
|
Contractual |
|||||||||||||
|
|
|
Current |
|
|
|
Long-Term |
|
|
|
Balance |
|
|
|
Amount (2) |
|
|
|
Interest Rates |
|
Maturity Date |
|||||||||
|
Recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
2024 Notes |
|
$ |
|
— |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
— |
|
|
|
|
% |
|
|
|
Credit Agreement |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Not applicable |
|
|
|
|
Solar Bonds |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
% |
|
|
|
Total recourse debt |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Automotive Asset-backed Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
% |
|
|
|
Solar Asset-backed Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
% |
|
|
|
Cash Equity Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
% |
|
|
|
Automotive Lease-backed Credit Facilities |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Not applicable |
|
|
|
|
Total non-recourse debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Total debt and finance leases |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Recourse debt refers to debt that is recourse to our general assets of the respective guarantors. Non-recourse debt refers to debt that is recourse to only assets of our subsidiaries. The differences between the unpaid principal balances and the net carrying values are due to debt discounts or deferred financing costs. As of March 31, 2023, we were in material compliance with all financial debt covenants.
16
2024 Notes
During the first quarter of 2023, the closing price of our common stock continued to exceed
Note 8 – Equity Incentive Plans
Other Performance-Based Grants
2021 Performance-Based Stock Option & Restricted Stock Unit (“RSU”) Awards
During the fourth quarter of 2021, the Compensation Committee of our Board of Directors granted to certain employees performance-based RSUs and stock options to purchase an aggregate
Summary Stock-Based Compensation Information
The following table summarizes our stock-based compensation expense by line item in the consolidated statements of operations (in millions):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Cost of revenues |
|
$ |
|
|
|
$ |
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
Our income tax benefits recognized from stock-based compensation arrangements in each of the periods presented were immaterial due to cumulative losses and valuation allowances.
Note 9 – Commitments and Contingencies
Operating Lease Arrangements in Buffalo, New York and Shanghai, China
For a description of our operating lease arrangements in Buffalo, New York, and Shanghai, China, refer to Note 15, Commitments and Contingencies , in our Annual Report on Form 10-K for the year ended December 31, 2022. As of March 31, 2023, we expect to meet the requirements under these arrangements based on our current and anticipated level of operations.
Legal Proceedings
Litigation Relating to the SolarCity Acquisition
Between September 1, 2016 and October 5, 2016,
On April 27, 2022, the Court entered judgment in favor of Mr. Musk on all counts. On May 26, 2022, the plaintiff filed a notice of appeal. Oral argument was held before the Supreme Court of Delaware on March 29, 2023.
These plaintiffs and others filed parallel actions in the U.S. District Court for the District of Delaware on or about April 21, 2017. They include claims for violations of the federal securities laws and breach of fiduciary duties by Tesla’s board of directors. Those actions have been consolidated and stayed pending the above-referenced Chancery Court litigation.
17
Litigation Relating to 2018 CEO Performance Award
On June 4, 2018, a purported Tesla stockholder filed a putative class and derivative action in the Delaware Court of Chancery against Elon Musk and the members of Tesla’s board of directors as then constituted, alleging corporate waste, unjust enrichment and that such board members breached their fiduciary duties by approving the stock-based compensation plan awarded to Elon Musk in 2018. The complaint seeks, among other things, monetary damages and rescission or reformation of the stock-based compensation plan. On August 31, 2018, defendants filed a motion to dismiss the complaint; plaintiff filed its opposition brief on November 1, 2018; and defendants filed a reply brief on December 13, 2018. The hearing on the motion to dismiss was held on May 9, 2019. On September 20, 2019, the Court granted the motion to dismiss as to the corporate waste claim but denied the motion as to the breach of fiduciary duty and unjust enrichment claims. Defendants’ answer was filed on December 3, 2019.
On January 25, 2021, the Court conditionally certified certain claims and a class of Tesla stockholders as a class action. On September 30, 2021, plaintiff filed a motion for leave to file a verified amended derivative complaint. On October 1, 2021, defendants Kimbal Musk and Steve Jurvetson moved for summary judgment as to the claims against them. Following the motion, plaintiff agreed to voluntarily dismiss the claims against Kimbal Musk and Steve Jurvetson. Plaintiff also moved for summary judgment on October 1, 2021. On October 27, 2021, the Court approved the parties’ joint stipulation that, among other things, (a) all claims against Kimbal Musk and Steve Jurvetson in the Complaint are dismissed with prejudice; (b) the class is decertified and the action shall continue exclusively as a derivative action under Court of Chancery Rule 23.1; and (c) the direct claims against the remaining defendants are dismissed with prejudice. On November 18, 2021, the remaining defendants (a) moved for partial summary judgment, (b) opposed plaintiff’s summary judgment motion and (c) opposed the plaintiff’s motion to amend his complaint. In January 2022, the case was assigned to a different judge. On February 24, 2022, the court (i) granted plaintiff’s motion to amend his complaint, and (ii) canceled oral argument on the summary judgment motions, stating that the court is “skeptical that this litigation can be resolved based on the undisputed facts” and the “case is going to trial,” but that the “parties may reassert their arguments made in support of summary judgment in their pre-trial and post-trial briefs.” Trial was held November 14-18, 2022. Post-trial briefing and argument are now complete.
Litigation Related to Directors’ Compensation
On June 17, 2020, a purported Tesla stockholder filed a derivative action in the Delaware Court of Chancery, purportedly on behalf of Tesla, against certain of Tesla’s current and former directors regarding compensation awards granted to Tesla’s directors, other than Elon Musk, between 2017 and 2020. The suit asserts claims for breach of fiduciary duty and unjust enrichment and seeks declaratory and injunctive relief, unspecified damages and other relief. Defendants filed their answer on September 17, 2020. Trial is currently set for November 27, 2023, to December 1, 2023.
Litigation Relating to Potential Going Private Transaction
Between August 10, 2018 and September 6, 2018,
Between October 17, 2018 and March 8, 2021,
On October 21, 2022, a lawsuit was filed in the Delaware Court of Chancery by a purported shareholder of Tesla alleging, among other things, that board members breached their fiduciary duties in connection with their oversight of the Company’s 2018 settlement with the SEC, as amended. Among other things, the plaintiff seeks reforms to the Company’s corporate governance and internal procedures, unspecified damages, and attorneys’ fees. The parties reached an agreement to stay the case until June 5, 2023.
18
On November 15, 2021, JPMorgan Chase Bank (“JP Morgan”) filed a lawsuit against Tesla in the Southern District of New York alleging breach of a stock warrant agreement that was entered into as part of a convertible notes offering in 2014. In 2018, JP Morgan informed Tesla that it had adjusted the strike price based upon Mr. Musk’s August 7, 2018 Twitter post that he was considering taking Tesla private. Tesla disputed JP Morgan’s adjustment as a violation of the parties’ agreement. In 2021, Tesla delivered shares to JP Morgan per the agreement, which they duly accepted. JP Morgan now alleges that it is owed approximately $
Litigation and Investigations Relating to Alleged Discrimination and Harassment
On October 4, 2021, in a case captioned
Diaz v. Tesla
, a jury in the Northern District of California returned a verdict against Tesla on claims by a former contingent worker that he was subjected to race discrimination while assigned to work at Tesla’s Fremont Factory from 2015-2016. On November 16, 2021, Tesla filed a post-trial motion for relief that included a request for a new trial or reduction of the jury’s damages.
On April 13, 2022, the Court granted Tesla’s motion in part, reducing the total damages and conditionally denied the motion for a new trial subject to the plaintiff’s acceptance of the reduced award. On June 21, 2022, the plaintiff rejected the reduced award and, as a result, on June 27, 2022, the Court ordered a new trial on damages only, which commenced on March 27, 2023, after which a jury returned a verdict of $
On February 9, 2022, shortly after the first Diaz jury verdict, the California Civil Rights Department (”CRD,” formerly “DFEH”) filed a civil complaint against Tesla in Alameda County, California Superior Court, alleging systemic race discrimination, hostile work environment and pay equity claims, among others. CRD’s amended complaint seeks monetary damages and injunctive relief. On September 22, 2022, Tesla filed a cross complaint against CRD, alleging that it violated the Administrative Procedures Act by failing to follow statutory pre-requisites prior to filing suit and that cross complaint was subject to a sustained demurrer, which Tesla later amended and refiled. The case is now in discovery.
Additionally, on June 1, 2022 the Equal Employment Opportunity Commission (“EEOC”) issued a cause finding against Tesla that closely parallels the CRD’s allegations. Tesla will engage in a mandatory mediation with the EEOC in June 2023.
On June 16, 2022,
Other Litigation Related to Our Products and Services
We are also subject to various lawsuits, including proposed class actions, that seek monetary and other injunctive relief. For example, on September 14, 2022, a proposed class action was filed against Tesla, Inc. and related entities in the U.S. District Court for the Northern District of California, alleging various claims about the Company’s driver assistance technology systems under state and federal law. This case was later consolidated with several other proposed class actions, and a Consolidated Amended Complaint was filed on October 28, 2022, which seeks damages and other relief on behalf of all persons who purchased or leased from Tesla between January 1, 2016 to the present. On October 5, 2022 a proposed class action complaint was filed in the U.S. District Court for the Eastern District of New York asserting similar state and federal law claims against the same defendants. On March 22, 2023, the plaintiffs in the California consolidated action filed a motion for a preliminary injunction to order Tesla to (1) cease using the term “Full Self-Driving Capability” (FSDC), (2) cease the sale and activation of FSDC and deactivate FSDC on Tesla vehicles, and (3) provide certain notices to consumers about proposed court-findings about the accuracy of the use of the terms Autopilot and FSDC.
19
On February 27, 2023, a proposed class action was filed in the U.S. District Court for the Northern District of California against Tesla, Inc., Elon Musk and certain current and former Company executives. The complaint alleges that the defendants made material misrepresentations and omissions about the Company’s Autopilot and FSDC technologies and seeks money damages and other relief on behalf of persons who purchased Tesla stock between February 19, 2019 and February 17, 2023. On April 13, 2023, a putative Tesla shareholder filed a related shareholder derivative complaint against the members of Tesla’s board of directors and certain current and former executives, alleging contribution for violations of the federal securities law, breach of fiduciary duties, waste, and unjust enrichment. The complaint asserts derivative claims and seeks, among other relief, unspecified monetary damages, attorneys’ fees and costs.
On March 14, 2023 a proposed class action was filed in the U.S. District Court for the Northern District of California. Several similar complaints have also been filed in the same court. These complaints allege that Tesla violates federal antitrust and warranty laws through its repair, service, and maintenance practices and seeks, among other relief, damages for persons who paid Tesla for repairs services or Tesla compatible replacement parts from March 2019 to March 2023.
The Company intends to vigorously defend itself in these matters; however, we cannot predict the outcome or impact. We are unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, unless noted.
Certain Investigations and Other Matters
We receive requests for information from regulators and governmental authorities, such as the National Highway Traffic Safety Administration, the National Transportation Safety Board, the SEC, the Department of Justice (“DOJ”) and various state, federal, and international agencies. We routinely cooperate with such regulatory and governmental requests, including subpoenas, formal and informal requests and other investigations and inquiries.
For example, the SEC had issued subpoenas to Tesla in connection with Elon Musk’s prior statement that he was considering taking Tesla private. The take-private investigation was resolved and closed with a settlement entered into with the SEC in September 2018 and as further clarified in April 2019 in an amendment. The SEC also has periodically issued subpoenas to us seeking information on our governance processes around compliance with the SEC settlement, as amended.
Separately, the company has received requests from the DOJ for documents related to Tesla’s Autopilot and FSD features. To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred. We cannot predict the outcome or impact of any ongoing matters. Should the government decide to pursue an enforcement action, there exists the possibility of a material adverse impact on our business, results of operation, prospects, cash flows and financial position.
We are also subject to various other legal proceedings and claims that arise from the normal course of business activities. If an unfavorable ruling or development were to occur, there exists the possibility of a material adverse impact on our business, results of operations, prospects, cash flows, financial position and brand.
20
Note 10 – Variable Interest Entity Arrangements
The aggregate carrying values of the variable interest entities’ assets and liabilities, after elimination of any intercompany transactions and balances, in the consolidated balance sheets were as follows (in millions):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2023 |
|
|
2022 |
|
||
|
Assets |
|
|
|
|
|
|
||
|
Current assets |
|
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
|
|
|
|
|
Solar energy systems, net |
|
|
|
|
|
|
|
|
|
Other non-current assets |
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
Liabilities |
|
|
|
|
|
|
||
|
Current liabilities |
|
|
|
|
|
|
||
|
Accrued liabilities and other |
|
$ |
|
|
|
$ |
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
|
|
Current portion of debt and finance leases |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
|
|
|
Deferred revenue, net of current portion |
|
|
|
|
|
|
|
|
|
Debt and finance leases, net of current portion |
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
|
|
|
$ |
|
|
Note 11 – Segment Reporting and Information about Geographic Areas
We have
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Automotive segment |
|
|
|
|
|
|
||
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
Gross profit |
|
$ |
|
|
|
$ |
|
|
|
Energy generation and storage segment |
|
|
|
|
|
|
||
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
Gross profit |
|
$ |
|
|
|
$ |
(
|
) |
The following table presents revenues by geographic area based on the sales location of our products (in millions):
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
United States |
|
$ |
|
|
|
$ |
|
|
|
China |
|
|
|
|
|
|
|
|
|
Other international |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
The following table presents long-lived assets by geographic area (in millions):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2023 |
|
|
2022 |
|
||
|
United States |
|
$ |
|
|
|
$ |
|
|
|
Germany |
|
|
|
|
|
|
|
|
|
China |
|
|
|
|
|
|
|
|
|
Other international |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
21
The following table presents inventory by reportable segment (in millions):
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2023 |
|
|
2022 |
|
||
|
Automotive |
|
$ |
|
|
|
$ |
|
|
|
Energy generation and storage |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.
Overview
Our mission is to accelerate the world’s transition to sustainable energy. We design, develop, manufacture, lease and sell high-performance fully electric vehicles, solar energy generation systems and energy storage products. We also offer maintenance, installation, operation, financial and other services related to our products. Additionally, we are increasingly focused on products and services based on artificial intelligence, robotics and automation.
In 2023, we produced 440,808 consumer vehicles and delivered 422,875 consumer vehicles through the first quarter. We are currently focused on increasing vehicle production, capacity and delivery capabilities, reducing costs, improving and developing battery technologies, improving our FSD capabilities, increasing the affordability and efficiency of our vehicles, bringing new products to market and expanding our global infrastructure.
In 2023, we deployed 3.89 GWh of energy storage products and 67 megawatts of solar energy systems through the first quarter. We are currently focused on ramping production of energy storage products, improving our Solar Roof installation capability and efficiency, and increasing market share of retrofit solar energy systems.
During the three months ended March 31, 2023, we recognized total revenues of $23.33 billion, representing an increase of $4.57 billion, compared to the prior year. We continue to ramp production, build new manufacturing capacity and expand our operations to enable increased deliveries and deployments of our products and further revenue growth.
During the three months ended March 31, 2023, our net income attributable to common stockholders was $2.51 billion, representing an unfavorable change of $805 million, compared to the prior year. We continue to focus on improving our profitability through production and operational efficiencies.
We ended the first quarter of 2023 with $22.40 billion in cash and cash equivalents and investments, representing an increase of $217 million from the end of 2022. Our cash flows provided by operating activities during the three months ended March 2023 and 2022 were $2.51 billion and $4.00 billion, respectively, representing a decrease of $1.48 billion. Capital expenditures amounted to $2.07 billion during the three months ended March 31, 2023, compared to $1.77 billion during the same period ended March 31, 2022. Sustained growth has allowed our business to generally fund itself, and we will continue investing in a number of capital-intensive projects in upcoming periods.
Management Opportunities, Challenges and Uncertainties and 2023 Outlook
Automotive—Production
The following is a summary of the status of production of each of our announced vehicle models in production and under development, as of the date of this Quarterly Report on Form 10-Q:
|
Production Location |
|
Vehicle Model(s) |
|
Production Status |
|
Fremont Factory |
|
Model S / Model X |
|
Active |
|
|
|
Model 3 / Model Y |
|
Active |
|
Gigafactory Shanghai |
|
Model 3 / Model Y |
|
Active |
|
Gigafactory Berlin-Brandenburg |
|
Model Y |
|
Active |
|
Gigafactory Texas |
|
Model Y |
|
Active |
|
|
|
Cybertruck |
|
Tooling |
|
Gigafactory Nevada |
|
Tesla Semi |
|
Pilot production |
|
TBD |
|
Tesla Roadster |
|
In development |
|
TBD |
|
Robotaxi & Others |
|
In development |
We are focused on growing our manufacturing capacity, which includes ramping all of our production vehicles to their installed production capacities as well as increasing production rate, efficiency and capacity at our current factories. The next phase of production growth will depend on the ramp at Gigafactory Berlin-Brandenburg and Gigafactory Texas, as well as our ability to add to our available sources of battery cell supply by manufacturing our own cells that we are developing to have high-volume output, lower capital and production costs and longer range. Our goals are to improve vehicle performance, decrease production costs and increase affordability and customer awareness.
23
However, these plans are subject to uncertainties inherent in establishing and ramping manufacturing operations, which may be exacerbated by the new product and manufacturing technologies we are introducing, the number of concurrent international projects, any industry-wide component constraints, labor shortages and any future impact from events outside of our control such as the COVID-19 pandemic. Moreover, we have set ambitious technological targets with our plans for battery cells as well as for iterative manufacturing and design improvements for our vehicles with each new factory.
Automotive—Demand, Sales, Deliveries and Infrastructure
Our cost reduction efforts, cost innovation strategies, and additional localized procurement and manufacturing are key to our vehicles’ affordability, and for example, have allowed us to competitively price our vehicles. We will also continue to generate demand and brand awareness by improving our vehicles’ performance and functionality, including through products based on artificial intelligence such as Autopilot and FSD, and other software features, and delivering new vehicles, such as our upcoming Cybertruck. Moreover, we expect to continue to benefit from ongoing electrification of the automotive sector and increasing environmental awareness.
However, we operate in a cyclical industry that is sensitive to political and regulatory uncertainty, including with respect to trade and the environment, all of which can be compounded by inflationary pressures, rising energy prices, increases in interest rates and the liquidity of enterprise customers. For example, inflationary pressures have increased across the markets in which we operate. In an effort to curb this trend, central banks in developed countries raised interest rates rapidly and substantially, impacting the affordability of vehicle lease and finance arrangements. Further, sales of vehicles in the automotive industry also tend to be cyclical in many markets, which may expose us to increased volatility as we expand and adjust our operations. Moreover, as additional competitors enter the marketplace and help bring the world closer to sustainable transportation, we will have to adjust and continue to execute well to maintain our momentum. These macroeconomic and industry trends have had, and will likely continue to have, an impact on the pricing of, and order rate for our vehicles, and in turn our operating margin. We will continue to adjust accordingly to such developments, and we believe our ongoing cost reduction, including improved production innovation and efficiency at our newest factories and lower logistics costs, and focus on operating leverage will continue to benefit us in relation to our competitors.
As our production increases, we must work constantly to similarly increase vehicle delivery capability so that it does not become a bottleneck on our total deliveries. We are also committed to reducing the percentage of vehicles delivered in the third month of each quarter, which will help to reduce the cost per vehicle. As we expand our manufacturing operations globally, we will also have to continue to increase and staff our delivery, servicing and charging infrastructure accordingly, maintain our vehicle reliability and optimize our Supercharger locations to ensure cost effectiveness and customer satisfaction. In particular, we remain focused on increasing the capability and efficiency of our servicing operations.
Energy Generation and Storage Demand, Production and Deployment
The long-term success of this business is dependent upon increasing margins through greater volumes. We continue to increase the production of our energy storage products to meet high levels of demand, including the announcement of a new Megafactory in Shanghai. For Megapack, energy storage deployments can vary meaningfully quarter to quarter depending on the timing of specific project milestones. For Powerwall, better availability and growing grid stability concerns drive higher customer interest. We remain committed to growing our retrofit solar energy business by offering a low-cost and simplified online ordering experience. In addition, we continue to seek to improve our installation capabilities and price efficiencies for Solar Roof. As these product lines grow, we will have to maintain adequate battery cell supply for our energy storage products and hire additional personnel, particularly skilled electricians, to support the ramp of Solar Roof.
24
Cash Flow and Capital Expenditure Trends
Our capital expenditures are typically difficult to project beyond the short-term given the number and breadth of our core projects at any given time, and may further be impacted by uncertainties in future global market conditions. We are simultaneously ramping new products, ramping manufacturing facilities on three continents, piloting the development and manufacture of new battery cell technologies and investing in autonomy and other artificial intelligence enabled products, and the pace of our capital spend may vary depending on overall priority among projects, the pace at which we meet milestones, production adjustments to and among our various products, increased capital efficiencies and the addition of new projects. Owing and subject to the foregoing as well as the pipeline of announced projects under development, all other continuing infrastructure growth and varying levels of inflation, we currently expect our capital expenditures to be between $7.00 to $9.00 billion in 2023 and in each of the following two fiscal years.
Our business has recently been consistently generating cash flow from operations in excess of our level of capital spend, and with better working capital management resulting in shorter days sales outstanding than days payable outstanding, our sales growth is also facilitating positive cash generation. We have and will continue to utilize such cash flows, among other things, to do more vertical integration, expand our product roadmap and provide financing options to our customers. On the other hand, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects and rising material prices and increasing supply chain and labor expenses resulting from changes in global trade conditions and labor availability associated with the COVID-19 pandemic. Overall, we expect our ability to be self-funding to continue as long as macroeconomic factors support current trends in our sales.
Critical Accounting Policies and Estimates
For a description of our critical accounting policies and estimates, refer to Part II, Item 7, Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2022.
Recent Accounting Pronouncements
See Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Results of Operations
Revenues
|
|
|
Three Months Ended
|
|
|
Change |
|
||||||||||
|
(Dollars in millions) |
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
|
Automotive sales |
|
$ |
18,878 |
|
|
$ |
15,514 |
|
|
$ |
3,364 |
|
|
|
22 |
% |
|
Automotive regulatory credits |
|
|
521 |
|
|
|
679 |
|
|
|
(158 |
) |
|
|
(23 |
)% |
|
Automotive leasing |
|
|
564 |
|
|
|
668 |
|
|
|
(104 |
) |
|
|
(16 |
)% |
|
Total automotive revenues |
|
|
19,963 |
|
|
|
16,861 |
|
|
|
3,102 |
|
|
|
18 |
% |
|
Services and other |
|
|
1,837 |
|
|
|
1,279 |
|
|
|
558 |
|
|
|
44 |
% |
|
Total automotive & services and other
|
|
|
21,800 |
|
|
|
18,140 |
|
|
|
3,660 |
|
|
|
20 |
% |
|
Energy generation and storage segment revenue |
|
|
1,529 |
|
|
|
616 |
|
|
|
913 |
|
|
|
148 |
% |
|
Total revenues |
|
$ |
23,329 |
|
|
$ |
18,756 |
|
|
$ |
4,573 |
|
|
|
24 |
% |
25
Automotive & Services and Other Segment
Automotive sales revenue increased $3.36 billion, or 22%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to an increase of 108,378 combined Model 3 and Model Y deliveries year over year despite a negative impact from the United States dollar strengthening against other foreign currencies in the three months ended March 31, 2023 as compared to the prior period. This was achieved from production ramping of Model Y at Gigafactory Shanghai, Gigafactory Berlin-Brandenburg, Gigafactory Texas and the Fremont Factory. This increase was partially offset by lower average selling price on our vehicles driven by overall price reductions year over year. There was also a decrease of 2,630 Model S and Model X deliveries year over year.
Automotive regulatory credits revenue decreased $158 million, or 23%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. We recognized $288 million in revenue in the first quarter of 2022 primarily due to changes in regulation which entitled us to additional consideration for credits sold previously, in the absence of which we had an increase in automotive regulatory credits revenue year over year. This increase was primarily due to the increase in volume as well as the regional mix of the credits sold.
Automotive leasing revenue decreased $104 million, or 16%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The change is primarily due to a decrease in direct sales-type leasing revenue driven by lower deliveries year over year. This was partially offset by an increase from the growing portfolio of our direct operating lease program.
Services and other revenue increased $558 million, or 44%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The change is primarily due to an increase in used vehicle revenue driven by increases in volume offset by decreases in average selling price of used Tesla and non-Tesla vehicles, non-warranty maintenance services revenue as our fleet continues to grow, paid Supercharging revenue, insurance services revenue and retail merchandise revenue.
Energy Generation and Storage Segment
Energy generation and storage revenue increased $913 million, or 148%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to an increase in deployments of Megapack, higher solar cash and loan deployments at a higher average selling price, as well as increase in deployments of Powerwall at a higher average selling price, year over year.
Cost of Revenues and Gross Margin
|
|
|
Three Months Ended
|
|
|
Change |
|
||||||||||
|
(Dollars in millions) |
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
|
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Automotive sales |
|
$ |
15,422 |
|
|
$ |
10,914 |
|
|
$ |
4,508 |
|
|
|
41 |
% |
|
Automotive leasing |
|
|
333 |
|
|
|
408 |
|
|
|
(75 |
) |
|
|
(18 |
)% |
|
Total automotive cost of revenues |
|
|
15,755 |
|
|
|
11,322 |
|
|
|
4,433 |
|
|
|
39 |
% |
|
Services and other |
|
|
1,702 |
|
|
|
1,286 |
|
|
|
416 |
|
|
|
32 |
% |
|
Total automotive & services and other
|
|
|
17,457 |
|
|
|
12,608 |
|
|
|
4,849 |
|
|
|
38 |
% |
|
Energy generation and storage segment |
|
|
1,361 |
|
|
|
688 |
|
|
|
673 |
|
|
|
98 |
% |
|
Total cost of revenues |
|
$ |
18,818 |
|
|
$ |
13,296 |
|
|
$ |
5,522 |
|
|
|
42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Gross profit total automotive |
|
$ |
4,208 |
|
|
$ |
5,539 |
|
|
|
|
|
|
|
||
|
Gross margin total automotive |
|
|
21.1 |
% |
|
|
32.9 |
% |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Gross profit total automotive & services and other
|
|
$ |
4,343 |
|
|
$ |
5,532 |
|
|
|
|
|
|
|
||
|
Gross margin total automotive & services and other
|
|
|
19.9 |
% |
|
|
30.5 |
% |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Gross profit energy generation and storage segment |
|
$ |
168 |
|
|
$ |
(72 |
) |
|
|
|
|
|
|
||
|
Gross margin energy generation and storage segment |
|
|
11.0 |
% |
|
|
(11.7 |
)% |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total gross profit |
|
$ |
4,511 |
|
|
$ |
5,460 |
|
|
|
|
|
|
|
||
|
Total gross margin |
|
|
19.3 |
% |
|
|
29.1 |
% |
|
|
|
|
|
|
||
26
Automotive & Services and Other Segment
Cost of automotive sales revenue increased $4.51 billion, or 41%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, in line with the growth in deliveries year over year, as discussed above. Further, the average combined cost per unit of our vehicles increased year over year due to increasing prices of raw materials, manufacturing, logistics and warranty costs. These costs were partially offset by manufacturing credits earned as part of the IRA during the three months ended March 31, 2023. There were also idle capacity charges primarily related to the ramping up of production in Gigafactory Texas and our proprietary battery cells manufacturing during the three months ended March 31, 2023. We had also incurred costs related to the ramp up of production in Gigafactory Berlin-Brandenburg during the three months ended March 31, 2022. These increases in costs of revenue were positively impacted by the United States dollar strengthening against other foreign currencies in the three months ended March 31, 2023 as compared to the prior period.
Cost of automotive leasing revenue decreased $75 million, or 18%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to a decrease in direct sales-type leasing cost of revenue driven by lower deliveries year over year. This was partially offset by an increase in cost of revenue from the growing portfolio of our direct operating lease program.
Cost of services and other revenue increased $416 million, or 32%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The change is primarily due to an increase in used vehicle cost of revenue driven by increases in volume offset by a decrease in costs of used Tesla and non-Tesla vehicle sales, an increase in non-warranty maintenance service cost of revenue, and an increase in costs of paid Supercharging, insurance services and retail merchandise.
Gross margin for total automotive decreased from 32.9% to 21.1% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. This was driven by the changes in automotive sales revenue and cost of automotive sales revenue, as well as a decrease in regulatory credits revenue, as discussed earlier.
Gross margin for total automotive & services and other segment decreased from 30.5% to 19.9% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to the automotive gross margin decrease discussed above, partially offset by an improvement in our services and other gross margin. Additionally, services and other was a higher percentage of the segment gross margin during the first quarter of 2023 as compared to the prior year.
Energy Generation and Storage Segment
Cost of energy generation and storage revenue increased $673 million, or 98%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to increase in deployments of Megapack, increase in solar cash and loan deployments at a higher average cost due to increased component costs, as well as increase in deployments of Powerwall.
Gross margin for energy generation and storage improved from -11.7% to 11.0% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. This was driven by the growth in energy generation and storage revenue and cost of energy generation and storage revenue as discussed above. Additionally, there was a higher proportion of energy storage sales, which operated at a higher gross margin, within the segment.
27
Research and Development Expense
|
|
|
Three Months Ended
|
|
|
Change |
|
||||||||||
|
(Dollars in millions) |
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
|
Research and development |
|
$ |
771 |
|
|
$ |
865 |
|
|
$ |
(94 |
) |
|
|
(11 |
)% |
|
As a percentage of revenues |
|
|
3 |
% |
|
|
5 |
% |
|
|
|
|
|
|
||
Research and development (“R&D”) expenses decreased $94 million, or 11%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The overall decrease was primarily driven by additional costs in the three months ended March 31, 2022 as compared to the current period, as we were in the pre-production phase at Gigafactory Texas and started production at Gigafactory Berlin-Brandenburg only closer to the end of the first quarter of 2022.
R&D expenses as a percentage of revenue decreased from 5% to 3% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. Our R&D expenses have decreased as a proportion of total revenues despite expanding product roadmap and technologies.
Selling, General and Administrative Expense
|
|
|
Three Months Ended
|
|
|
Change |
|
||||||||||
|
(Dollars in millions) |
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
|
Selling, general and administrative |
|
$ |
1,076 |
|
|
$ |
992 |
|
|
$ |
84 |
|
|
|
8 |
% |
|
As a percentage of revenues |
|
|
5 |
% |
|
|
5 |
% |
|
|
|
|
|
|
||
Selling, general and administrative (“SG&A”) expenses increased $84 million, or 8%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. This was driven by a $84 million increase in facilities-related expenses and a $49 million increase in employee and labor costs primarily from increased headcount, including professional services. These increases were offset by a decrease of $52 million in stock-based compensation expense, most of which is attributable to the lower stock-based compensation expense of $48 million on the 2018 CEO Performance Award which was fully expensed as of December 31, 2022.
Interest Income
|
|
|
Three Months Ended
|
|
|
Change |
|
||||||||||
|
(Dollars in millions) |
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
|
Interest income |
|
$ |
213 |
|
|
$ |
28 |
|
|
$ |
185 |
|
|
|
661 |
% |
Interest income increased $185 million, or 661%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. This increase was primarily due to higher interest earned on our cash and cash equivalents and short-term investments during the three months ended March 31, 2023 as compared to the prior period. This was driven by an increase in our short-term investments balance and rising interest rates.
Other (Expense) Income, Net
|
|
|
Three Months Ended
|
|
|
Change |
|||||||||
|
(Dollars in millions) |
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|||
|
Other (expense) income, net |
|
$ |
(48 |
) |
|
$ |
56 |
|
|
$ |
(104 |
) |
|
Not meaningful |
Other (expense) income, net, changed unfavorably by $104 million in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The change is primarily due to fluctuations in foreign currency exchange rates.
28
Provision for Income Taxes
|
|
|
Three Months Ended
|
|
|
Change |
|
||||||||||
|
(Dollars in millions) |
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
|
Provision for income taxes |
|
$ |
261 |
|
|
$ |
346 |
|
|
$ |
(85 |
) |
|
|
(25 |
)% |
|
Effective tax rate |
|
|
9 |
% |
|
|
10 |
% |
|
|
|
|
|
|
||
Our provision for income taxes decreased by $85 million, or 25%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to the change in our pre-tax income year over year.
Our effective tax rate decreased from 10% to 9% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to changes in mix of jurisdictional earnings.
See Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.
Liquidity and Capital Resources
We expect to continue to generate net positive operating cash flow as we have done in the last four fiscal years. The cash we generate from our core operations enables us to fund ongoing operations and production, our research and development projects for new products and technologies including our proprietary battery cells, additional manufacturing ramps at existing manufacturing facilities such as the Fremont Factory, Gigafactory Nevada, Gigafactory Shanghai and Gigafactory New York, the ramp of Gigafactory Berlin-Brandenburg and Gigafactory Texas, the construction of future factories, and the continued expansion of our retail and service locations, body shops, Mobile Service fleet, Supercharger network, energy product installation capabilities and autonomy and other artificial intelligence enabled products.
In addition, because a large portion of our future expenditures will be to fund our growth, we expect that if needed we will be able to adjust our capital and operating expenditures by operating segment. For example, if our near-term manufacturing operations decrease in scale or ramp more slowly than expected, including due to global economic or business conditions, we may choose to correspondingly slow the pace of our capital expenditures. Finally, we continually evaluate our cash needs and may decide it is best to raise additional capital or seek alternative financing sources to fund the rapid growth of our business, including through drawdowns on existing or new debt facilities or financing funds. Conversely, we may also from time to time determine that it is in our best interests to voluntarily repay certain indebtedness early.
Accordingly, we believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following March 31, 2023, as well as in the long-term.
See the sections below for more details regarding the material requirements for cash in our business and our sources of liquidity to meet such needs.
Material Cash Requirements
From time to time in the ordinary course of business, we enter into agreements with vendors for the purchase of components and raw materials to be used in the manufacture of our products. However, due to contractual terms, variability in the precise growth curves of our development and production ramps, and opportunities to renegotiate pricing, we generally do not have binding and enforceable purchase orders under such contracts beyond the short-term, and the timing and magnitude of purchase orders beyond such period is difficult to accurately project.
As discussed in and subject to the considerations referenced in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations—Management Opportunities, Challenges and Uncertainties and 2023 Outlook—Cash Flow and Capital Expenditure Trends in this Quarterly Report on Form 10-Q, we currently expect our capital expenditures to support our projects globally to be between $7.00 to $9.00 billion in 2023 and in each of the following two fiscal years. We also have certain obligations in connection with our operations at Gigafactory New York and Gigafactory Shanghai, as outlined in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Cash Requirements in our Annual Report on Form 10-K for the year ended December 31, 2022.
As of March 31, 2023, we and our subsidiaries had outstanding $1.77 billion in aggregate principal amount of indebtedness, of which $939 million is scheduled to become due in the succeeding 12 months. For details regarding our indebtedness, refer to Note 7, Debt, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
29
Sources and Conditions of Liquidity
Our sources to fund our material cash requirements are predominantly from our deliveries and servicing of new and used vehicles, sales and installations of our energy storage products and solar energy systems, proceeds from debt facilities and proceeds from equity offerings, when applicable.
As of March 31, 2023, we had $16.05 billion and $6.35 billion of cash and cash equivalents and short-term investments, respectively. Balances held in foreign currencies had a U.S. dollar equivalent of $4.26 billion and consisted primarily of Chinese yuan, euros and Canadian dollar. We had $5.16 billion of unused committed amounts under our credit facilities as of March 31, 2023. Certain of such unused committed amounts are subject to satisfying specified conditions prior to draw-down (such as pledging to leased vehicles and our interests in those leases). For details regarding our indebtedness, refer to Note 7 , Debt , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
We continue adapting our strategy to meet our liquidity and risk objectives, such as investing in U.S. government and other investments, to do more vertical integration, expand our product roadmap and provide financing options to our customers.
Summary of Cash Flows
|
|
|
Three Months Ended
|
|
|||||
|
(Dollars in millions) |
|
2023 |
|
|
2022 |
|
||
|
Net cash provided by operating activities |
|
$ |
2,513 |
|
|
$ |
3,995 |
|
|
Net cash used in investing activities |
|
$ |
(2,484 |
) |
|
$ |
(2,167 |
) |
|
Net cash used in financing activities |
|
$ |
(233 |
) |
|
$ |
(1,914 |
) |
Cash Flows from Operating Activities
Net cash provided by operating activities decreased by $1.48 billion to $2.51 billion during the three months ended March 31, 2023 from $4.00 billion during the three months ended March 31, 2022. This decrease was primarily due to the overall increase in net operating assets and liabilities of $928 million and the decrease in net income excluding non-cash expenses, gains and losses of $554 million. The increase in our net operating assets and liabilities was mainly driven by a larger increase of inventory in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.
Cash Flows from Investing Activities
Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $2.07 billion for the three months ended March 31, 2023 and $1.77 billion for the three months ended March 31, 2022, mainly for the expansions of Gigafactory Texas, the Fremont Factory, Gigafactory Berlin-Brandenburg, and Gigafactory Shanghai. We also purchased $411 million and $386 million of investments, net of proceeds from maturities, for the three months ended March 31, 2023 and March 31, 2022, respectively.
Cash Flows from Financing Activities
Net cash used in financing activities decreased by $1.68 billion to $233 million during the three months ended March 31, 2023 from $1.91 billion during the three months ended March 31, 2022. The decrease was primarily due to a $1.64 billion decrease in repayments of convertible and other debt. See Note 7, Debt , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details regarding our debt obligations.
30
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Risk
We transact business globally in multiple currencies and hence have foreign currency risks related to our revenue, costs of revenue, operating expenses and localized subsidiary debt denominated in currencies other than the U.S. dollar (primarily the Chinese yuan, euro, Australian dollar and Canadian dollar in relation to our current year operations). In general, we are a net receiver of currencies other than the U.S. dollar for our foreign subsidiaries. Accordingly, changes in exchange rates affect our revenue and other operating results as expressed in U.S. dollars as we do not typically hedge foreign currency risk.
We have also experienced, and will continue to experience, fluctuations in our net income as a result of gains (losses) on the settlement and the re-measurement of monetary assets and liabilities denominated in currencies that are not the local currency (primarily consisting of our intercompany and cash and cash equivalents balances).
We considered the historical trends in foreign currency exchange rates and determined that it is reasonably possible that adverse changes in foreign currency exchange rates of 10% for all currencies could be experienced in the near-term. These changes were applied to our total monetary assets and liabilities denominated in currencies other than our local currencies at the balance sheet date to compute the impact these changes would have had on our net income before income taxes. These changes would have resulted in a gain or loss of $435 million at March 31, 2023 and $473 million at December 31, 2022, assuming no foreign currency hedging.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that our management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of March 31, 2023, our disclosure controls and procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2023, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
31
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of our material pending legal proceedings, please see Note 9, Commitments and Contingencies , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
In addition, each of the matters below is being disclosed pursuant to Item 103 of Regulation S-K because it relates to environmental regulations and aggregate civil penalties that we currently believe could potentially exceed $1 million. We believe that any proceeding that is material to our business or financial condition is likely to have potential penalties far in excess of such amount.
District attorneys in certain California counties conducted an investigation into Tesla’s waste segregation practices pursuant to Cal. Health & Saf. Code section 25100 et seq. and Cal. Civil Code § 1798.80. Tesla has implemented various remedial measures, including conducting training and audits, and enhancements to its site waste management programs. While the outcome of this matter cannot be determined at this time, it is not currently expected to have a material adverse impact on our business.
ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including the factors discussed in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022, which could adversely affect our business, financial conditions and future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
See Index to Exhibits at the end of this Quarterly Report on Form 10-Q for the information required by this Item.
32
INDEX TO EXHIBITS
|
Exhibit |
|
|
|
Incorporated by Reference |
|
Filed |
||||||
|
Number |
|
Exhibit Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Executive Officer |
|
— |
|
— |
|
— |
|
— |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Financial Officer |
|
— |
|
— |
|
— |
|
— |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1* |
|
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
— |
|
— |
|
— |
|
— |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
— |
|
— |
|
— |
|
— |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
— |
|
— |
|
— |
|
— |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
— |
|
— |
|
— |
|
— |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
— |
|
— |
|
— |
|
— |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
— |
|
— |
|
— |
|
— |
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
|
|
|
|
|
|
|
|
|
|
* Furnished herewith
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
Tesla, Inc. |
|
|
|
|
|
Date: April 21, 2023 |
|
/s/ Zachary J. Kirkhorn |
|
|
|
Zachary J. Kirkhorn |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial Officer and Duly Authorized Officer) |
34