|
|
| Other international | | | | | |
| Total | $ | | | | $ | | |
| | $ | | | | Energy generation and storage | | | | | |
| Total | $ | | | | $ | | |
Note 13 –
million of employee termination expenses in Restructuring and other in our consolidated income statement. These expenses were substantially paid during the quarter with the remaining unpaid immaterial accrual recorded in Accrued liabilities and other in our consolidated balance sheet as of June 30, 2024.
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, charging, insurance, financial and other services related to our products. Additionally, we are increasingly focused on products and services based on AI, robotics and automation.
In 2024, we produced approximately 844,000 consumer vehicles and delivered approximately 831,000 consumer vehicles through the second quarter. We are focused on profitable growth, including by leveraging existing factories and production lines to introduce new and more affordable products, further improving and deploying our FSD capabilities, including through our planned robotaxi product, reducing costs, increasing vehicle production, utilized capacity and delivery capabilities, improving and developing our vehicles and battery technologies, vertically integrating and localizing our supply chain, and expanding our global infrastructure, including our service and charging infrastructure.
In 2024, we deployed 13.46 GWh of energy storage products through the second quarter. We are focused on ramping the production and increasing the market penetration of our energy storage products.
During the three and six months ended June 30, 2024, we recognized total revenues of $25.50 billion and $46.80 billion, respectively, representing an increase of $573 million and a decrease of $1.46 billion, respectively, compared to the same periods in the prior year. During the three and six months ended June 30, 2024, our net income attributable to common stockholders was $1.48 billion and $2.61 billion, respectively, representing decreases of $1.23 billion and $2.61 billion, respectively, compared to the same periods in the prior year. We continue to ramp production and build and optimize our manufacturing capacity, expand our operations while focusing on further cost reductions and operational efficiencies to enable increased deliveries and deployments of our products, and invest in research and development to accelerate our AI, software, and fleet-based profits for further revenue growth.
We ended the second quarter of 2024 with $30.72 billion in cash and cash equivalents and investments, representing an increase of $1.63 billion from the end of 2023. Our cash flows provided by operating activities were $3.85 billion during the six months ended June 30, 2024, compared to $5.58 billion during the same period ended June 30, 2023, representing a decrease of $1.72 billion. Capital expenditures amounted to $5.04 billion during the six months ended June 30, 2024, compared to $4.13 billion during the same period ended June 30, 2023, representing an increase of $911 million. Overall growth has allowed our business to generally fund itself, and we will continue investing in a number of capital-intensive projects and research and development in upcoming periods.
Management Opportunities, Challenges and Uncertainties and 2024 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 | | Active |
| Gigafactory Nevada | | Tesla Semi | | Pilot production |
| Various | | Next Generation Platform | | In development |
| TBD | | Roadster | | In development |
We are focused on growing our manufacturing capacity, which includes capacity for manufacturing new vehicle models such as our Cybertruck, Tesla Semi and future vehicles utilizing aspects of our next generation platform, and ramping the production at our Gigafactories to their installed production capacities as well as increasing production rate and efficiency at our current factories. The next phase of production growth will depend on the continued ramp at our factories and be initiated by advances in autonomy and the introduction of new products, including those built on our next generation vehicle platform, 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.
These plans are subject to uncertainties inherent in establishing and ramping manufacturing operations, which may be exacerbated by new product and manufacturing technologies we introduce, the number of concurrent international projects, any industry-wide component constraints, labor shortages and any future impact from events outside of our control. For example, during the first quarter of 2024, we experienced a sequential decline in production volumes partially caused by the early phase of the production ramp of the updated Model 3 at our Fremont factory, and factory shutdowns at Gigafactory Berlin-Brandenburg resulting from shipping diversions caused by the Red Sea conflict and an arson attack. 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 have allowed us to competitively price our vehicles. We will also continue to generate demand by improving our vehicles’ performance and functionality, including through product offerings and features based on artificial intelligence such as Autopilot, FSD (Supervised), and other software, and delivering new vehicles and vehicle options. In addition, we have been increasing awareness, and expanding our vehicle financing programs, including attractive leasing terms for our customers. Moreover, we expect to continue to benefit from ongoing electrification of the automotive sector and increasing environmental regulations and initiatives.
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, interest rate fluctuations 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. Additionally, our suppliers’ liquidity and allocation plans may be affected by current challenges in the North American automotive industry, which could reduce our access to components or result in unfavorable changes to cost. 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. Changes in government and economic incentives or tariffs may also impact our sales, cost structure and the competitive landscape. 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, while our new products will help enable future growth.
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, as other automotive manufacturers have announced their adoption of the North American Charging Standard (“NACS”) and agreements with us to utilize our Superchargers, we must correspondingly expand our network in order to ensure adequate availability to meet customer demands. We also remain focused on continued enhancements of 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 incremental volume growth. We continue to increase the production of our energy storage products to meet high levels of demand, including the construction of a new Megafactory in Shanghai and the ongoing ramp at our Megafactory in Lathrop, California. For Megapack, energy storage deployments can vary meaningfully quarter to quarter depending on the timing of specific project milestones and logistics. As these product lines grow, we will have to maintain adequate battery cell supply for our energy storage products. At the same time, changes in government and economic incentives or tariffs may also impact our sales, cost structure and the competitive landscape.
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 developing and ramping new products, building or ramping manufacturing facilities on three continents, piloting the development and manufacture of new battery cell technologies, expanding our Supercharger network and investing in autonomy and other artificial intelligence enabled training and 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 exceed $10.00 billion in 2024 and be between $8.00 to $10.00 billion in each of the following two fiscal years.
Our business has generally 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 generally facilitating positive cash generation. We have and will continue to utilize such cash flows, among other things, to invest in autonomy, do more vertical integration, expand our product roadmap and provide financing options to our customers. At the same time, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects and other potential variables such as rising material prices and increases in supply chain and labor expenses resulting from changes in global trade conditions and labor availability. 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, 2023. 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, 2023.
Recent Accounting Pronouncements
See Note 1, Overview & 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 June 30, | Change | | Six Months Ended June 30, | | Change |
| (Dollars in millions) | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % |
| Automotive sales | $ | 18,530 | | | $ | 20,419 | | | $ | (1,889) | | | (9) | % | | $ | 34,990 | | | $ | 39,297 | | | $ | (4,307) | | | (11) | % |
| Automotive regulatory credits | 890 | | | 282 | | | 608 | | | 216 | % | | 1,332 | | | 803 | | | 529 | | | 66 | % |
| Automotive leasing | 458 | | | 567 | | | (109) | | | (19) | % | | 934 | | | 1,131 | | | (197) | | | (17) | % |
| Total automotive revenues | 19,878 | | | 21,268 | | | (1,390) | | | (7) | % | | 37,256 | | | 41,231 | | | (3,975) | | | (10) | % |
| Services and other | 2,608 | | | 2,150 | | | 458 | | | 21 | % | | 4,896 | | | 3,987 | | | 909 | | | 23 | % |
| Total automotive & services and other segment revenue | 22,486 | | | 23,418 | | | (932) | | | (4) | % | | 42,152 | | | 45,218 | | | (3,066) | | | (7) | % |
| Energy generation and storage segment revenue | 3,014 | | | 1,509 | | | 1,505 | | | 100 | % | | 4,649 | | | 3,038 | | | 1,611 | | | 53 | % |
| Total revenues | $ | 25,500 | | | $ | 24,927 | | | $ | 573 | | | 2 | % | | $ | 46,801 | | | $ | 48,256 | | | $ | (1,455) | | | (3) | % |
Automotive & Services and Other Segment
Automotive sales revenue decreased $1.89 billion, or 9%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to lower average selling price on our vehicles driven by overall price reductions and attractive financing options provided year over year. Additionally, there was a decrease of approximately 13,000 combined Model 3 and Model Y cash deliveries partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory. The decreases were partially offset by an increase of approximately 4,000 deliveries of other models, including Model S, Model X and Cybertruck, primarily due to our production ramp of Cybertruck.
Automotive sales revenue decreased $4.31 billion, or 11%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to lower average selling price on our vehicles driven by overall price reductions and attractive financing options provided year over year. Additionally, there was a decrease of approximately 40,000 combined Model 3 and Model Y cash deliveries partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin-Brandenburg. The decreases were partially offset by an increase of approximately 11,000 deliveries of other models, including Model S, Model X and Cybertruck, primarily due to our production ramp of Cybertruck.
Automotive regulatory credits revenue increased $608 million, or 216%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Automotive regulatory credits revenue increased $529 million, or 66%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. These increases were driven by demand for credits in North America as other automobile manufacturers scale back on their battery electric vehicle plans.
Automotive leasing revenue decreased $109 million, or 19%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Automotive leasing revenue decreased $197 million, or 17%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decreases were primarily due to lower direct sales-type leasing deliveries compared to the prior periods.
Services and other revenue increased $458 million, or 21%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Services and other revenue increased $909 million, or 23%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increases were primarily due to increases in non-warranty maintenance services and collision revenue, used vehicle revenue, insurance services revenue, paid Supercharging revenue and part sales revenue.
Energy Generation and Storage Segment
Energy generation and storage revenue increased $1.51 billion, or 100%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Energy generation and storage revenue increased $1.61 billion, or 53%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increases were primarily due to increases in Megapack deployments compared to the prior periods.
Cost of Revenues and Gross Margin
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change |
| (Dollars in millions) | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % |
| Cost of revenues | | | | | | | | | | | | | | | |
| Automotive sales | $ | 15,962 | | | $ | 16,841 | | | $ | (879) | | | (5) | % | | $ | 29,859 | | | $ | 32,263 | | | $ | (2,404) | | | (7) | % |
| Automotive leasing | 245 | | | 338 | | | (93) | | | (28) | % | | 514 | | | 671 | | | (157) | | | (23) | % |
| Total automotive cost of revenues | 16,207 | | | 17,179 | | | (972) | | | (6) | % | | 30,373 | | | 32,934 | | | (2,561) | | | (8) | % |
| Services and other | 2,441 | | | 1,984 | | | 457 | | | 23 | % | | 4,648 | | | 3,686 | | | 962 | | | 26 | % |
| Total automotive & services and other segment cost of revenues | 18,648 | | | 19,163 | | | (515) | | | (3) | % | | 35,021 | | | 36,620 | | | (1,599) | | | (4) | % |
| Energy generation and storage segment | 2,274 | | | 1,231 | | | 1,043 | | | 85 | % | | 3,506 | | | 2,592 | | | 914 | | | 35 | % |
| Total cost of revenues | $ | 20,922 | | | $ | 20,394 | | | $ | 528 | | | 3 | % | | $ | 38,527 | | | $ | 39,212 | | | $ | (685) | | | (2) | % |
| | | | | | | | | | | | | | | |
| Gross profit total automotive | $ | 3,671 | | | $ | 4,089 | | | | | | | $ | 6,883 | | | $ | 8,297 | | | | | |
| Gross margin total automotive | 18.5 | % | | 19.2 | % | | | | | | 18.5 | % | | 20.1 | % | | | | |
| | | | | | | | | | | | | | | |
| Gross profit total automotive & services and other segment | $ | 3,838 | | | $ | 4,255 | | | | | | | $ | 7,131 | | | $ | 8,598 | | | | | |
| Gross margin total automotive & services and other segment | 17.1 | % | | 18.2 | % | | | | | | 16.9 | % | | 19.0 | % | | | | |
| | | | | | | | | | | | | | | |
| Gross profit energy generation and storage segment | $ | 740 | | | $ | 278 | | | | | | | $ | 1,143 | | | $ | 446 | | | | | |
| Gross margin energy generation and storage segment | 24.6 | % | | 18.4 | % | | | | | | 24.6 | % | | 14.7 | % | | | | |
| | | | | | | | | | | | | | | |
| Total gross profit | $ | 4,578 | | | $ | 4,533 | | | | | | | $ | 8,274 | | | $ | 9,044 | | | | | |
| Total gross margin | 18.0 | % | | 18.2 | % | | | | | | 17.7 | % | | 18.7 | % | | | | |
Automotive & Services and Other Segment
Cost of automotive sales revenue decreased $879 million, or 5%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Cost of automotive sales revenue decreased $2.40 billion, or 7%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Cost of automotive sales revenue decreased due to a decrease in the average combined cost per unit of our vehicles primarily from lower raw material costs, freight and duties and higher IRA manufacturing credits in addition to the volume changes in deliveries year over year as discussed above. These decreases were partially offset by higher costs for Cybertruck and the updated Model 3 at our Fremont factory as a result of the temporary under-utilization of manufacturing capacity as production ramps.
Cost of automotive leasing revenue decreased $93 million, or 28%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Cost of automotive leasing revenue decreased $157 million, or 23%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decreases were primarily due to a decrease in direct sales-type leasing cost of revenue driven by lower deliveries compared to the prior periods.
Cost of services and other revenue increased $457 million, or 23%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Cost of services and other revenue increased $962 million, or 26%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increases were generally in line with the changes in services and other revenue as discussed above.
Gross margin for total automotive decreased from 19.2% to 18.5% in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Gross margin for total automotive decreased from 20.1% to 18.5% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decreases were driven by lower average selling price on our vehicles and temporary under-utilization of manufacturing capacity during production ramps, partially offset by increases in regulatory credits revenue and lower average combined cost per unit of our vehicles, as discussed above.
Gross margin for total automotive & services and other segment decreased from 18.2% to 17.1% in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Gross margin for total automotive & services and other segment decreased from 19.0% to 16.9% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to the automotive gross margin decreases discussed above.
Energy Generation and Storage Segment
Cost of energy generation and storage revenue increased $1.04 billion, or 85%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Cost of energy generation and storage revenue increased $914 million, or 35%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increases were primarily due to increases in Megapack deployments, partially offset by increases in IRA manufacturing credits recognized as compared to the prior periods.
Gross margin for energy generation and storage increased from 18.4% to 24.6% in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Gross margin for energy generation and storage increased from 14.7% to 24.6% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increases were primarily due to increases in IRA manufacturing credits and a higher proportion of our storage business, which operated at a higher gross margin, within the segment as compared to the prior periods.
Research and Development Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | Change | | Six Months Ended June 30, | | Change |
| (Dollars in millions) | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % |
| Research and development | $ | 1,074 | | | $ | 943 | | | $ | 131 | | | 14 | % | | $ | 2,225 | | | $ | 1,714 | | | $ | 511 | | | 30 | % |
| As a percentage of revenues | 4 | % | | 4 | % | | | | | | 5 | % | | 4 | % | | | | |
Research and development (“R&D”) expenses increased $131 million, or 14%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. R&D expenses increased $511 million, or 30%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The overall increases were primarily driven by additional costs year over year related to AI and other programs.
R&D expenses as a percentage of revenue stayed consistent at 4% in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. R&D expenses as a percentage of revenue increased from 4% to 5% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 as we continue to expand our product roadmap and technologies.
Selling, General and Administrative Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change |
| (Dollars in millions) | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % |
| Selling, general and administrative | $ | 1,277 | | | $ | 1,191 | | | $ | 86 | | | 7 | % | | $ | 2,651 | | | $ | 2,267 | | | $ | 384 | | | 17 | % |
| As a percentage of revenues | 5 | % | | 5 | % | | | | | | 6 | % | | 5 | % | | | | |
Selling, general and administrative (“SG&A”) expenses increased $86 million, or 7%, in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. This was driven by a $73 million increase in facilities related expenses and a $32 million increase in employee and labor costs, including professional services.
SG&A expenses increased $384 million, or 17%, in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. This was driven by a $208 million increase in employee and labor costs, including professional services, and a $135 million increase in facilities related expenses.
Restructuring and Other
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change |
| (Dollars in millions) | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % |
| Restructuring and other | $ | 622 | | | $ | — | | | $ | 622 | | | Not meaningful | | $ | 622 | | | $ | — | | | $ | 622 | | | Not meaningful |
In the second quarter of 2024, we initiated and substantially completed certain restructuring actions to reduce costs and improve efficiency. As a result, we recognized $583 million of employee termination expenses in Restructuring and other in our consolidated income statement. These expenses were substantially paid during the quarter with the remaining unpaid immaterial accrual recorded in Accrued liabilities and other in our consolidated balance sheet as of June 30, 2024.
Interest Income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change |
| (Dollars in millions) | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % |
| Interest income | $ | 348 | | | $ | 238 | | | $ | 110 | | | 46 | % | | $ | 698 | | | $ | 451 | | | $ | 247 | | | 55 | % |
Interest income increased $110 million, or 46%, in the three months ended June 30, 2024 and increased $247 million, or 55%, in the six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, respectively. The increases were primarily due to higher interest earned on our cash and cash equivalents and short-term investments compared to the prior periods due to rising interest rates and increases in our portfolio balance.
Other Income, Net
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change |
| (Dollars in millions) | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % |
| Other income, net | $ | 20 | | | $ | 328 | | | $ | (308) | | | (94) | % | | $ | 128 | | | $ | 280 | | | $ | (152) | | | (54)% |
Other income, net, changed unfavorably by $308 million in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Other income, net changed unfavorably by $152 million in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The unfavorable changes were primarily due to fluctuations in foreign currency exchange rates on our intercompany balances. As our intercompany balances are significant in nature and we do not typically hedge foreign currency risk, we can experience significant fluctuations in foreign currency exchange rate gains and losses from period to period.
Provision for Income Taxes
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change | | Six Months Ended June 30, | | Change |
| (Dollars in millions) | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % |
| Provision for income taxes | $ | 393 | | | $ | 323 | | | $ | 70 | | | 22% | | $ | 802 | | | $ | 584 | | | $ | 218 | | | 37% |
| Effective tax rate | 21 | % | | 11 | % | | | | | | 23 | % | | 10 | % | | | | |
Our provision for income taxes increased by $70 million in the three months ended June 30, 2024 and increased by $218 million in the six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, respectively. Our effective tax rate increased from 11% to 21% in the three months ended June 30, 2024 and increased from 10% to 23% in the six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, respectively. These increases are primarily due to the impact of releasing the valuation allowance on our U.S. deferred tax assets in the fourth quarter of 2023 and changes in mix of jurisdictional earnings.
See Note 9, Income Taxes, 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 five 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, the construction of future factories, and the continued expansion of our retail and service locations, body shops, Mobile Service fleet, Supercharger, including to support NACS, 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 June 30, 2024, 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 2024 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 exceed $10.00 billion in 2024 and be between $8.00 to $10.00 billion 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, 2023.
As of June 30, 2024, we and our subsidiaries had outstanding $7.39 billion in aggregate principal amount of indebtedness, of which $2.03 billion is current. 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.
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, interest income, and proceeds from debt facilities and equity offerings, when applicable.
As of June 30, 2024, we had $14.64 billion and $16.09 billion of cash and cash equivalents and short-term investments, respectively. Balances held in foreign currencies had a U.S. dollar equivalent of $4.09 billion and consisted primarily of Chinese yuan and euros. We had $5.00 billion of unused committed credit amounts as of June 30, 2024. 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 securities and other investments, invest in autonomy, do more vertical integration, expand our product roadmap and provide financing options to our customers.
Summary of Cash Flows
| | | | | | | | | | | |
| | Six Months Ended June 30, |
| (Dollars in millions) | 2024 | | 2023 |
| Net cash provided by operating activities | $ | 3,854 | | | $ | 5,578 | |
| Net cash used in investing activities | $ | (8,309) | | | $ | (6,018) | |
| Net cash provided by (used in) financing activities | $ | 2,736 | | | $ | (561) | |
Cash Flows from Operating Activities
Net cash provided by operating activities decreased by $1.72 billion to $3.85 billion during the six months ended June 30, 2024 from $5.58 billion during the six months ended June 30, 2023. This decrease was primarily due to the decrease in net income excluding non-cash expenses, gains and losses of $1.63 billion, and unfavorable changes in net operating assets and liabilities of $95 million.
Cash Flows from Investing Activities
Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $5.04 billion for the six months ended June 30, 2024 and $4.13 billion for the six months ended June 30, 2023, mainly for global factory expansion, machinery and equipment and AI-related capital expenditures as we expand and enhance our product roadmap. We also purchased $3.26 billion and $1.81 billion of short-term investments, net of proceeds from maturities and sales, for the six months ended June 30, 2024 and 2023, respectively.
Cash Flows from Financing Activities
Net cash flows from financing activities changed by $3.30 billion to $2.74 billion net cash provided by financing activities during the six months ended June 30, 2024 from $561 million net cash used in financing activities during the six months ended June 30, 2023. The change was primarily due to a $3.90 billion increase in proceeds from issuances of debt, partially offset by a $679 million increase in repayments of 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.
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 and operating expenses denominated in currencies other than the U.S. dollar (primarily the Chinese yuan and euro 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 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 $756 million at June 30, 2024 and $1.01 billion at December 31, 2023, 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 June 30, 2024, 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 June 30, 2024, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of our material pending legal proceedings, please see Note 10, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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, 2023, 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 of the Company’s directors or officers , modified or a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended June 30, 2024, as such terms are defined under Item 408(a) of Regulation S-K, except as follows:
, , , a Rule 10b5-1 trading arrangement for the potential sale of up to shares of our common stock, subject to certain conditions. The arrangement's expiration date is July 31, 2025.
, , one of our s, a Rule 10b5-1 trading arrangement that was originally adopted on February 5, 2024. The arrangement was terminated during the Company’s unrestricted trading window and at a time when Ms. Wilson-Thompson was not in possession of material, non-public information about the Company. No transactions were completed under the arrangement.
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.
INDEX TO EXHIBITS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit
Number | | | | Incorporated by Reference | | Filed
Herewith |
| Exhibit Description | | Form | | File No. | | Exhibit | | Filing Date | |
| | | | | | | | | | | | |
| 3.1 | | | | — | | — | | — | | — | | X |
| | | | | | | | | | | | |
| 3.2 | | | | — | | — | | — | | — | | X |
| | | | | | | | | | | | |
| 31.1 | | | | — | | — | | — | | — | | X |
| | | | | | | | | | | | |
| 31.2 | | | | — | | — | | — | | — | | 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
† Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv)
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: July 23, 2024 | /s/ Vaibhav Taneja |
| Vaibhav Taneja |
| Chief Financial Officer |
| (Principal Financial Officer and
Duly Authorized Officer) |
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