What changed in this filing

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Item 1. Financial Statements

2022-07-25 compared with 2022-04-25 · 316 added, 218 removed, 943 unchanged (36% of the section changed)

37 unchanged sentences

1,041 and 1,033 shares issued and outstanding as of

March 31, 2022 and December 31, 2021, respectively

June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

7 unchanged sentences

(in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Automotive sales

23 unchanged sentences

Provision for income taxes

Net (loss) income attributable to noncontrolling interests and

redeemable noncontrolling interests in subsidiaries

Net income (loss) attributable to noncontrolling

interests and redeemable noncontrolling interests

in subsidiaries

Net income attributable to common stockholders

6 unchanged sentences

(in millions)

Three Months Ended March 31,

Other comprehensive loss:

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive (loss) income:

Foreign currency translation adjustment

1 unchanged sentence

Comprehensive income

Comprehensive (loss) income attributable to

Comprehensive income (loss) attributable to

noncontrolling interests and redeemable

9 unchanged sentences

Stockholders’

Three Months Ended June 30, 2022

Balance as of March 31, 2022

Exercises of conversion feature of

convertible senior notes

Settlements of warrants

Issuance of common stock for equity

incentive awards

Stock-based compensation

Distributions to noncontrolling interests

Buy-out of noncontrolling interests

Net (loss) income

Other comprehensive loss

Balance as of June 30, 2022

Noncontrolling

Comprehensive

Stockholders’

Six Months Ended June 30, 2022

Income (Loss)

2 unchanged sentences

convertible senior notes

Settlements of warrants

Issuance of common stock for equity

5 unchanged sentences

Other comprehensive loss

Balance as of June 30, 2022

Noncontrolling

Comprehensive

Stockholders’

Three Months Ended June 30, 2021

Balance as of March 31, 2021

Exercises of conversion feature of

convertible senior notes

Settlements of warrants

Issuance of common stock for equity

incentive awards

Stock-based compensation

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Other comprehensive income

Balance as of June 30, 2021

Noncontrolling

2 unchanged sentences

Stockholders’

Six Months Ended June 30, 2021

Income (Loss)

4 unchanged sentences

convertible senior notes

Settlements of warrants

Issuance of common stock for equity

1 unchanged sentence

Stock-based compensation

Distributions to noncontrolling

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Other comprehensive loss

Balance as of March 31, 2021

Balance as of June 30, 2021

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

(in millions)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities

5 unchanged sentences

Non-cash interest and other operating activities

Digital assets gain, net

Digital assets loss (gain), net

Changes in operating assets and liabilities:

24 unchanged sentences

Debt issuance costs

Proceeds from investments by noncontrolling interests in subsidiaries

Distributions paid to noncontrolling interests in subsidiaries

Payments for buy-outs of noncontrolling interests in subsidiaries

Net cash used in by financing activities

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

Net increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash, beginning of period

15 unchanged sentences

On the other hand, infection rates and regulations continue to fluctuate in various regions and there are ongoing global impacts resulting from the pandemic, including challenges and increases in costs for logistics and supply chains, such as increased port congestion, intermittent supplier delays and a shortfall of semiconductor supply.

We have also previously been, and are being, affected by temporary manufacturing closures, employment and compensation adjustments and impediments to administrative activities supporting our product deliveries and deployments.

We have been affected by temporary manufacturing closures, employment and compensation adjustments and impediments to administrative activities supporting our product deliveries and deployments.

In addition, we have experienced and are experiencing varying levels of inflation resulting in part from various supply chain disruptions, increased shipping and transportation costs, increased raw material and labor costs and other disruptions caused by the COVID‐19 pandemic and general global economic conditions.

3 unchanged sentences

Unaudited Interim Financial Statements

The consolidated balance sheet as of March 31, 2022, 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, 2022 and 2021, as well as other information disclosed in the accompanying notes, are unaudited.

The consolidated balance sheet as of June 30, 2022, the consolidated statements of operations, the consolidated statements of comprehensive income, the consolidated statements of redeemable noncontrolling interests and equity for the three and six months ended June 30, 2022 and 2021 and the consolidated statements of cash flows for the six months ended June 30, 2022 and 2021, as well as other information disclosed in the accompanying notes, are unaudited.

The consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated financial statements as of that date.

15 unchanged sentences

The following table disaggregates our revenue by major source (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Automotive sales without resale value guarantee

11 unchanged sentences

We recognize revenue when control transfers upon delivery to customers in accordance with ASC 606, Revenue from Contracts with Customers , as a sale with a right of return when we do not believe the customer has a significant economic incentive to exercise the resale value guarantee provided to them at contract inception.

The total sales return reserve on vehicles sold with resale value guarantees was $ 190 million and $ 223 million as of March 31, 2022 and December 31, 2021, respectively, of which $ 80 million and $ 91 million was short-term, respectively.

Deferred revenue is related to the access to our Full Self Driving (“FSD”) features, internet connectivity, Supercharger network and over-the-air software updates on automotive sales with and without resale value guarantee, which amounted to $ 2.56 billion and $ 2.38 billion as of March 31, 2022 and December 31, 2021, respectively.

The total sales return reserve on vehicles sold with resale value guarantees was $ 130 million and $ 223 million as of June 30, 2022 and December 31, 2021, respectively, of which $ 56 million and $ 91 million was short-term, respectively.

Deferred revenue is related to the access to our Full Self Driving (“FSD”) features, internet connectivity, Supercharger network and over-the-air software updates on automotive sales with and without resale value guarantee, which amounted to $ 2.66 billion and $ 2.38 billion as of June 30, 2022 and December 31, 2021, respectively.

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, 2021 and 2020 was $ 66 million and $ 79 million for the three months ended March 31, 2022 and 2021, respectively.

Of the total deferred revenue on automotive sales with and without resale value guarantees as of March 31, 2022, we expect to recognize $ 948 million of revenue in the next 12 months.

Revenue recognized from the deferred revenue balance as of December 31, 2021 and 2020 was $ 121 million and $ 157 million for the six months ended June 30, 2022 and 2021, respectively.

Of the total deferred revenue on automotive sales with and without resale value guarantees as of June 30, 2022, we expect to recognize $ 1.02 billion of revenue in the next 12 months.

The remaining balance will be recognized at the time of transfer of control of the product or over the performance period, which is generally the expected ownership life of the vehicle.

We have been providing loans for financing our automotive deliveries during the six months ended June 30, 2022.

We have recorded net financing receivables of $ 320 million which are presented on the consolidated balance sheets as a component of Accounts receivable, net, for the current portion and as Other non-current assets for the long-term portion, as of June 30, 2022.

Automotive Regulatory Credits

3 unchanged sentences

We recognize revenue on the sale of automotive regulatory credits, which have negligible incremental costs associated with them, at the time control of the regulatory credits is transferred to the purchasing party.

Deferred revenue related to sales of automotive regulatory credits was immaterial as of March 31, 2022 and December 31, 2021, respectively.

Revenue recognized from the deferred revenue balance as of December 31, 2021 and 2020 was immaterial for the three months ended March 31, 2022 and 2021 , respectively.

During the three months ended March 31, 2022, we had also recognized $ 288 million in revenue due to changes in regulation which entitled us to additional consideration for credits sold previously.

Deferred revenue related to sales of automotive regulatory credits was immaterial as of June 30, 2022 and December 31, 2021.

Revenue recognized from the deferred revenue balance as of December 31, 2021 and 2020 was immaterial for the six months ended June 30, 2022 and 2021.

During the six months ended June 30, 2022 , we had also recognized $ 288 million in revenue due to changes in regulation which entitled us to additional consideration for credits sold previously.

Automotive Leasing Revenue

Direct Sales-Type Leasing Program

For the three months ended March 31, 2022, we recognized $ 265 million of sales-type leasing revenue and $ 164 million of sales-type leasing cost of revenue.

For the three months ended March 31, 2021 , we recognized $ 42 million of sales-typing leasing revenue and $ 26 million of sales-type leasing cost of revenue.

For the three and six months ended June 30, 2022, we recognized $ 133 million and $ 398 million, respectively, of sales-type leasing revenue and $ 82 million and $ 246 million, respectively, of sales-type leasing cost of revenue.

For the three and six months ended June 30, 2021 , we recognized $ 55 million and $ 97 million, respectively, of sales-typing leasing revenue and $ 36 million and $ 62 million, respectively, of sales-type leasing cost of revenue.

Net investment in sales-type leases, which is the sum of the present value of the future contractual lease payments, is presented on the consolidated balance sheets as a component of Prepaid expenses and other current assets for the current portion and as Other non-current assets for the long-term portion.

Lease receivables relating to sales-type leases are presented on the consolidated balance sheets as follows (in millions):

March 31, 2022

June 30, 2022

December 31, 2021

9 unchanged sentences

We record as deferred revenue any non-refundable amounts that are collected from customers related to fees charged for prepayments and remote monitoring service and operations and maintenance service, which is recognized as revenue ratably over the respective customer contract term.

As of March 31, 2022 and December 31, 2021, deferred revenue related to such customer payments amounted to $ 481 million and $ 399 million, respectively.

Revenue recognized from the deferred revenue balance as of December 31, 2021 and 2020 was $ 52 million and $ 33 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, total transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied for contracts with an original expected length of more than one year was $ 154 million.

As of June 30, 2022 and December 31, 2021, deferred revenue related to such customer payments amounted to $ 678 million and $ 399 million, respectively.

Revenue recognized from the deferred revenue balance as of December 31, 2021 and 2020 was $ 79 million and $ 66 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, total transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied for contracts with an original expected length of more than one year was $ 211 million.

Of this amount, we expect to recognize $ 12 million in the next 12 months and the remaining over a period up to 26 years.

We have been providing loans for financing our energy generation products during the six months ended June 30, 2022.

We have recorded net financing receivables of $ 238 million which are presented on the consolidated balance sheets as a component of Accounts receivable, net, for the current portion and as Other non-current assets for the long-term portion, as of June 30, 2022.

There are transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain.

As of March 31, 2022 and December 31, 2021 , the aggregate balances of our gross unrecognized tax benefits were $ 562 million and $ 531 million, respectively, of which $ 493 million and $ 473 million, respectively, would not give rise to changes in our effective tax rate since these tax benefits would increase a deferred tax asset that is currently fully offset by a valuation allowance.

As of June 30, 2022 and December 31, 2021 , the aggregate balances of our gross unrecognized tax benefits were $ 601 million and $ 531 million, respectively, of which $ 482 million and $ 473 million, respectively, would not give rise to changes in our effective tax rate since these tax benefits would increase a deferred tax asset that is currently fully offset by a valuation allowance.

The local government of Shanghai granted a beneficial corporate income tax rate of 15 % to certain eligible enterprises, compared to the 25 % statutory corporate income tax rate in China.

14 unchanged sentences

However, our convertible note hedges are not included when calculating potentially dilutive shares since their effect is always anti-dilutive.

The strike price on the warrants were below our average share price during the period and were in the money and included in the tables below.

Warrants have been included in the weighted-average shares used in computing basic net income per share of common stock in the period(s) they are settled.

The strike price on the warrants were below our average share price during the period and were included in the tables below.

Warrants are included in the weighted-average shares used in computing basic net income per share of common stock in the period(s) they are settled.

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,

Three Months Ended June 30,

Six Months Ended June 30,

Net income attributable to common stockholders

Buy-out of noncontrolling interest

Net income used in computing basic net

income per share of common stock

Net income used in computing basic net income per share of common stock

Dilutive convertible debt

Net income used in computing diluted net

income per share of common stock

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 (in millions):

Three Months Ended March 31,

Weighted average shares used in computing

net income per share of common stock, basic

Three Months Ended June 30,

Six Months Ended June 30,

Weighted average shares used in computing net income per share of common stock, basic

Stock-based awards

Convertible senior notes

Weighted average shares used in computing

net income per share of common stock, diluted

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 (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock-based awards

19 unchanged sentences

These various factors may have a significant impact on our accounts receivable balance from period to period.

As of March 31, 2022 and December 31, 2021 , we had $ 703 million and $ 627 million, respectively, of long-term government rebates receivable in Other non-current assets on our consolidated balance sheets.

As of June 30, 2022 and December 31, 2021 , we had $ 759 million and $ 627 million, respectively, of long-term government rebates receivable in Other non-current assets on our consolidated balance sheets.

MyPower Customer Notes Receivable

As of March 31, 2022 and December 31, 2021, the total outstanding balance of MyPower customer notes receivable, net of allowance for expected credit losses, was $ 293 million and $ 299 million, respectively, of which $ 10 million and $ 11 million were due in the next 12 months as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022 and December 31, 2021, the allowance for expected credit losses was $ 41 million.

As of June 30, 2022 and December 31, 2021 , the total outstanding balance of MyPower customer notes receivable, net of allowance for expected credit losses, was $ 287 million and $ 299 million, respectively, of which $ 8 million and $ 11 million were due in the next 12 months as of June 30, 2022 and December 31, 2021, respectively.

As of June 30, 2022 and December 31, 2021 , the allowance for expected credit losses was $ 41 million.

Concentration of Risk

Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, marketable securities, restricted cash, accounts receivable, convertible note hedges and interest rate swaps.

Our cash balances are primarily invested in money market funds, U.S.

government securities , or on deposit at high credit quality financial institutions in the U.S.

Our cash balances are primarily on deposit at high credit quality financial institutions or invested in money market funds.

These deposits are typically in excess of insured limits.

As of March 31, 2022 and December 31, 2021 , no entity represented 10 % or more of our total accounts receivable balance.

The risk of concentration for our convertible note hedges and interest rate swaps is mitigated by transacting with several highly-rated multinational banks.

As of June 30, 2022 and December 31, 2021 , no entity represented 10 % or more of our total receivables balance.

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, 2022 and December 31, 2021 was $ 5.62 billion and $ 5.28 billion, respectively.

Operating lease vehicles on the consolidated balance sheets are presented net of accumulated depreciation of $ 877 million and $ 773 million as of March 31, 2022 and December 31, 2021 , respectively.

The gross cost of operating lease vehicles as of June 30, 2022 and December 31, 2021 was $ 5.73 billion and $ 5.28 billion, respectively.

Operating lease vehicles on the consolidated balance sheets are presented net of accumulated depreciation of $ 955 million and $ 773 million as of June 30, 2022 and December 31, 2021 , respectively.

We provide a manufacturer’s warranty on all new and used vehicles and a warranty on the installation and components of the energy generation and storage systems we sell for periods typically between 10 to 25 years .

7 unchanged sentences

Accrued warranty activity consisted of the following (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Accrued warranty—beginning of period

15 unchanged sentences

This ASU 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.

Adoption of the ASU would be applied prospectively.

Early adoption is also permitted, including adoption in an interim period.

This ASU is currently not expected to have a material impact on our consolidated financial statements.

Recently adopted accounting pronouncements

9 unchanged sentences

Digital Assets, Net

During the three months ended March 31, 2022 and 2021, we purchased and/or received an immaterial amount and $ 1.50 billion, respectively, of digital assets.

During the three months ended March 31, 2022 and 2021, the impairment losses we recorded on such digital assets were immaterial and $ 27 million, respectively.

We also realized gains of $ 128 million in connection with selling a portion of our holdings in March 2021.

Such gains are presented net of impairment losses in Restructuring and other in the consolidated statements of operations.

As of March 31, 2022 and December 31, 2021 , the carrying value of our digital assets held was $ 1.26 billion, which reflects cumulative impairments of $ 101 million, each period.

The fair market value of such digital assets held as of March 31, 2022 was $ 1.96 billion.

During the six months ended June 30, 2022 and 2021 , we purchased and/or received an immaterial amount and $ 1.50 billion, respectively, of digital assets.

As of June 30, 2022, we have converted approximately 75 % of our purchases into fiat currency.

During the three and six months ended June 30, 2022 , we recorded impairment loss of $ 170 million as well as realized gains of $ 64 million in connection with converting our holdings of digital assets into fiat currency.

During the six months ended June 30, 2021, we realized gains of $ 128 million in connection with converting our holdings of digital assets into fiat currency.

During the three and six months ended June 30, 2021 , we recorded $ 23 million and $ 50 million, respectively, of impairment losses on such digital assets.

The gains are presented net of impairment losses in Restructuring and other in the consolidated statements of operations.

As of June 30, 2022 and December 31, 2021 , the carrying value of our digital assets held was $ 218 million and $ 1.26 billion, which reflects cumulative impairments of $ 169 million and $ 101 million, each period, respectively.

The fair market value of such digital assets held as of June 30, 2022 was $ 222 million.

Note 4 –

1 unchanged sentence

Information regarding our intangible assets including assets recognized from our acquisitions was as follows (in millions):

March 31, 2022

June 30, 2022

December 31, 2021

1 unchanged sentence

Gross Carrying

intangible assets:

Finite-lived intangible assets:

Developed technology

Favorable contracts and

Total finite-lived

intangible assets

Indefinite-lived

intangible assets:

Gigafactory Nevada

Total infinite-lived

intangible assets

Favorable contracts and leases, net

Total finite-lived intangible assets

Indefinite-lived intangible assets:

Gigafactory Nevada water rights

Total infinite-lived intangible assets

Total intangible assets

Total future amortization expense for finite-lived intangible assets was estimated as follows (in millions):

Nine months ending December 31, 2022

Six months ending December 31, 2022

Note 5 –

7 unchanged sentences

Our assets and liabilities that were measured at fair value on a recurring basis were as follows (in millions):

March 31, 2022

June 30, 2022

December 31, 2021

6 unchanged sentences

Our interest rate swaps were classified within Level II of the fair value hierarchy because they were valued using alternative pricing sources or models that utilized market observable inputs, including current and forward interest rates.

Our cash, cash equivalents and marketable securities classified by security type as of March 31, 2022 and December 31, 2021 consisted of the following (in millions):

March 31, 2022

Our cash, cash equivalents and marketable securities classified by security type as of June 30, 2022 and December 31, 2021 consisted of the following (in millions):

June 30, 2022

Adjusted Cost

17 unchanged sentences

We record gross realized gains, losses and credit losses as a component of Other income, net in the consolidated statements of operations.

For the three months ended March 31, 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, 2022 and December 31, 2021.

We have determined that the gross unrealized losses on our marketable securities as of March 31, 2022 and December 31, 2021 were temporary in nature.

The following table summarizes the fair value of our marketable securities by stated contractual maturities as of March 31, 2022 (in millions):

For the three and six months ended June 30, 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 June 30, 2022 and December 31, 2021.

We have determined that the gross unrealized losses on our marketable securities as of June 30, 2022 and December 31, 2021 were temporary in nature.

The following table summarizes the fair value of our marketable securities by stated contractual maturities as of June 30, 2022 (in millions):

Due in 1 year or less

1 unchanged sentence

Due in 5 years through 10 years

Asset-backed securities

Interest Rate Swaps

3 unchanged sentences

Our interest rate swaps outstanding were as follows (in millions):

March 31, 2022

June 30, 2022

December 31, 2021

7 unchanged sentences

Our interest rate swaps activity was as follows (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Disclosure of Fair Values

5 unchanged sentences

The following table presents the estimated fair values and the carrying values (in millions):

March 31, 2022

June 30, 2022

December 31, 2021

11 unchanged sentences

(1) Finished goods inventory includes vehicles in transit to fulfill customer orders, new vehicles available for sale, used vehicles, energy storage products and Solar Roof products available for sale.

For solar energy systems, we commence transferring component parts from inventory to construction in progress, a component of solar energy systems, once a lease or PPA contract with a customer has been executed and installation has been initiated.

Additional costs incurred on the leased solar energy systems, including labor and overhead, are recorded within solar energy systems under construction.

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, 2022 and 2021, we recorded write-downs of $ 26 million and $ 23 million, respectively, in Cost of revenues in the consolidated statements of operations.

During the three and six months ended June 30, 2022, we recorded write-downs of $ 23 million and $ 49 million, respectively, in Cost of revenues in the consolidated statements of operations.

During the three and six months ended June 30, 2021, we recorded write-downs of $ 33 million and $ 56 million, respectively, in Cost of revenues in the consolidated statements of operations.

Note 7 –

7 unchanged sentences

Accumulated depreciation

Construction in progress is primarily comprised of construction of Gigafactory Berlin and Gigafactory Texas, expansion of Gigafactory Shanghai and equipment and tooling related to the manufacturing of our products.

Construction in progress is primarily comprised of construction of Gigafactory Berlin-Brandenburg and Gigafactory Texas, expansion of Gigafactory Shanghai and equipment and tooling related to the manufacturing of our products.

Completed assets are transferred to their respective asset classes and depreciation begins when an asset is ready for its intended use.

Interest on outstanding debt is capitalized during periods of significant capital asset construction and amortized over the useful lives of the related assets.

During the three months ended March 31, 2022 and 2021, we capitalized interest of an immaterial amount and $ 15 million, respectively.

Depreciation expense during the three months ended March 31, 2022 and 2021 was $ 551 million and $ 424 million, respectively.

Gross property, plant and equipment under finance leases as of March 31, 2022 and December 31, 2021 was $ 2.76 billion and $ 2.75 billion, respectively, with accumulated depreciation of $ 1.33 billion and $ 1.21 billion, respectively.

During the three and six months ended June 30, 2022, we capitalized interest of an immaterial amount.

During the three and six months ended June 30, 2021, we capitalized $ 23 million and $ 38 million, respectively, of interest.

Depreciation expense during the three and six months ended June 30, 2022 was $ 578 million and $ 1.13 billion , respectively.

Depreciation expense during the three and six months ended June 30, 2021 was $ 461 million and $ 885 million, respectively.

Gross property, plant and equipment under finance leases as of June 30, 2022 and December 31, 2021 was $ 2.77 billion and $ 2.75 billion, respectively, with accumulated depreciation of $ 1.44 billion and $ 1.21 billion, respectively.

Panasonic has partnered with us on Gigafactory Nevada with investments in the production equipment that it uses to manufacture and supply us with battery cells.

4 unchanged sentences

Depreciation on Panasonic production equipment is computed using the units-of-production method whereby capitalized costs are amortized over the total estimated productive life of the respective assets.

As of March 31, 2022 and December 31, 2021, we had cumulatively capitalized gross costs of $ 2.00 billion and $ 1.98 billion , respectively, on the consolidated balance sheets in relation to the production equipment under our Panasonic arrangement.

As of June 30, 2022 and December 31, 2021, we had cumulatively capitalized gross costs of $ 2.01 billion and $ 1.98 billion , respectively, on the consolidated balance sheets in relation to the production equipment under our Panasonic arrangement.

Note 8 –

21 unchanged sentences

Note 10 –

The following is a summary of our debt and finance leases as of March 31, 2022 (in millions):

The following is a summary of our debt and finance leases as of June 30, 2022 (in millions):

Net Carrying Value

8 unchanged sentences

Automotive Asset-backed Notes

September 2022 - September 2025

October 2022 - September 2025

Solar Asset and Loan-backed Notes

35 unchanged sentences

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, 2022, we were in material compliance with all financial debt covenants.

As of June 30, 2022, we were in material compliance with all financial debt covenants.

2022 Notes and 2024 Notes

During the first quarter of 2022, the closing price of our common stock continued to exceed 130 % of the applicable conversion price of our 2024 Notes on at least 20 of the last 30 consecutive trading days of the quarter, causing the 2024 Notes to be convertible by their holders during the second quarter of 2022.

During the first two quarters of 2022, the closing price of our common stock continued to exceed 130 % of the applicable conversion price of our 2024 Notes on at least 20 of the last 30 consecutive trading days of the quarter, causing the 2024 Notes to be convertible by their holders during the second and third quarters of 2022.

Should the closing price conditions continue to be met in a future quarter for the 2024 Notes, the 2024 Notes will be convertible at their holders’

option during the immediately following quarter.

During the first quarter of 2022, $ 29 million and $ 23 million in aggregate principal amount of the 2022 Notes and 2024 Notes, respectively, were converted and settled for $ 29 million and $ 23 million in cash for their par amount, and the issuance of 0.4 million and 0.3 million shares of our common stock for the applicable conversion premium, respectively.

During the first two quarters of 2022, $ 29 million and $ 45 million in aggregate principal amount of the 2022 Notes and 2024 Notes, respectively, were converted and settled in cash for their par amount, and the issuance of 0.4 million and 0.7 million shares of our common stock for the applicable conversion premium, respectively.

The note hedges we entered into in connection with the issuance of the 2022 Notes and 2024 Notes were automatically settled with the respective conversions of the 2022 Notes and 2024 Notes, resulting in the receipt of 0.4 million and 0.7 million shares of our common stock, respectively.

1 unchanged sentence

Solar Asset and Loan-backed Notes

During the first quarter of 2022, we early repaid $ 380 million in aggregate principal of the Solar Asset and Loan-backed Notes and recorded an extinguishment of debt charge of $ 11 million related to the early repayments in Interest expense in the consolidated statement of operations.

During the first two quarters of 2022, we early repaid $ 380 million in aggregate principal of the Solar Asset and Loan-backed Notes and recorded an extinguishment of debt charge of $ 11 million related to the early repayments in Interest expense in the consolidated statement of operations.

Interest Expense

The following table presents the interest expense related to the contractual interest coupon and the amortization of debt issuance costs, which include the 1.25 % Convertible Senior Notes due in 2021 (fully settled in March 2021), the 2022 Notes and the 2024 Notes (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Contractual interest coupon

9 unchanged sentences

Upon vesting and exercise, including the payment of the exercise price of $ 70.01 per share, our CEO must hold shares that he acquires for five years post-exercise, other than a cashless exercise where shares are simultaneously sold to pay for the exercise price and any required tax withholding.

The achievement status of the operational milestones as of March 31, 2022 is provided below.

The achievement status of the operational milestones as of June 30, 2022 is provided below.

Although an operational milestone is deemed achieved in the last quarter of the relevant annualized period, it may be certified only after the financial statements supporting its achievement have been filed with our Forms 10-Q and/or 10-K.

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Achievement Status

(1) Achieved in the first quarter of 2022 and expected to be certified following the filing of this Quarterly Report on Form 10-Q.

Stock-based compensation under the 2018 CEO Performance Award represents a non-cash expense and is recorded as a Selling, general, and administrative operating expense in our consolidated statements of operations.

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All market capitalization milestones were achieved as of the second quarter of 2021.

During the three months ended March 31, 2022 , three operational milestones were achieved and consequently, we recognized an aggregate catch-up expense of $ 11 million.

As of March 31, 2022, we had $ 17 million of total unrecognized stock-based compensation expense remaining, which will be recognized over a weighted-average period of 0.5 years.

For the three months ended March 31, 2022 and 2021, we recorded stock-based compensation expense of $ 48 million and $ 299 million, respectively, related to the 2018 CEO Performance Award.

During the first quarter of 2022, three operational milestones were achieved and consequently, we recognized an aggregate catch-up expense of $ 11 million.

As of June 30, 2022, we had $ 9 million of total unrecognized stock-based compensation expense remaining, which will be recognized over a weighted-average period of 0.3 years.

For the three and six months ended June 30, 2022, we recorded stock-based compensation expense of $ 8 million and $ 57 million, respectively, related to the 2018 CEO Performance Award, and $ 176 million and $ 475 million, respectively, for the same periods in 2021.

Other Performance-Based Grants

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Following achievement, vesting occurs over a two-year period with continued employment.

During the three months ended March 31, 2022, the performance milestones related to this grant became probable of achievement and consequently, we recognized an aggregate catch-up expense of $ 30 million.

As of March 31, 2022, we had unrecognized stock-based compensation expense of $ 334 million , which will be recognized over a weighted-average period of 3.2 years.

For the three months ended March 31, 2022, we recorded $ 69 million of stock-based compensation expense related to this grant.

During the first quarter of 2022, the performance milestones related to this grant became probable of achievement and consequently, we recognized an aggregate catch-up expense of $ 30 million.

As of June 30, 2022, we had unrecognized stock-based compensation expense of $ 283 million, which will be recognized over a weighted-average period of 3 years.

For the three and six months ended June 30, 2022, we recorded $ 34 million and $ 103 million, respectively, of stock-based compensation expense related to this grant, net of forfeitures.

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,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenues

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On February 1, 2022, we reported to the State of New York that we had met and exceeded our annual requirements for jobs and investment in Buffalo and New York State.

As of March 31, 2022, we are currently in excess of such targets relating to investments and personnel in the State of New York and Buffalo and do not currently expect any issues meeting our applicable obligations following this expected deferral or in the years beyond.

As of June 30, 2022, we are currently in excess of such targets relating to investments and personnel in the State of New York and Buffalo and do not currently expect any issues meeting our applicable obligations following this expected deferral or in the years beyond.

However, if our expectations as to the costs and timelines of our investment and operations at Buffalo or our production ramp of the Solar Roof prove incorrect, we may incur additional expenses or be required to make substantial payments to the SUNY Foundation.

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fees and costs.

On January 27, 2017, defendants filed a motion to dismiss the operative complaint.

Rather than respond to the defendants’

motion, the plaintiffs filed an amended complaint.

On March 17, 2017, defendants filed a motion to dismiss the amended complaint.

On December 13, 2017, the Court heard oral argument on the motion.

On March 28, 2018, the Court denied defendants’

motion to dismiss.

Defendants filed a request for interlocutory appeal, and the Delaware Supreme Court denied that request without ruling on the merits but electing not to hear an appeal at this early stage of the case.

Defendants filed their answer on May 18, 2018, and mediations were held on June 10, 2019.

Plaintiffs and defendants filed respective motions for summary judgment on August 25, 2019, and further mediations were held on October 3, 2019.

The Court held a hearing on the motions for summary judgment on November 4, 2019.

On January 22, 2020, all of the director defendants except Elon Musk reached a settlement to resolve the lawsuit against them for an amount to be paid entirely under the applicable insurance policy.

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Following post-trial briefing, post-trial argument was held on January 18, 2022.

The matter is now submitted, and a decision is expected by middle of 2022 .

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.

The parties are in the process of submitting briefing before the Supreme Court of Delaware.

These plaintiffs and others filed parallel actions in the U.S.

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The Company disagrees with the ruling and accordingly, on April 22, 2022, asked the Court for reconsideration or, in the alternative, certification to file an interlocutory appeal.

Trial is set for January 17, 2023.

On June 16, 2022, in response to Tesla’s motions, the Court denied certification to appeal and declined to reconsider its opinion but clarified its summary judgment ruling to make clear that it had not ruled that any misstatements it identified met the required materiality element under the securities statute.

The issue of materiality and reliance will both be questions for the jury to decide at trial, which is set for January 17, 2023.

Between October 17, 2018 and March 8, 2021, seven derivative lawsuits were filed in the Delaware Court of Chancery, purportedly on behalf of Tesla, against Mr.

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Tesla believes that the adjustments made by JP Morgan were neither proper nor commercially reasonable, as required under the stock warrant agreements.

Litigation and Investigations Relating to Alleged Race Discrimination

JP Morgan filed a motion for judgment on the pleadings, which Tesla opposed, and that motion is currently pending before the Court.

Litigation and Investigations Relating to Alleged Discrimination and Harassment

On October 4, 2021, in a case captioned Diaz v.

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On April 13, 2022, the Court granted Tesla’s motion in part, reducing the total damages to $ 15 million and conditionally denied the motion for a new trial subject to the plaintiff’s acceptance of the reduced award.

The plaintiff has 30 days to decide whether to seek a new trial.

On June 21, 2022, the plaintiff rejected the reduced award and, as a result, on June 27, 2022, the Court ordered a new trial to commence on March 27, 2023.

Tesla continues to believe that the facts and law do not justify the damages awarded and is assessing its next steps.

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(1) motion to stay the case, (2) motion to strike and (3) demurrer seeking dismissal of the lawsuit or, in the alternative, certain claims.

Additionally, on March 21, 2022, the United States Equal Employment Opportunity Commission (“EEOC”) updated Tesla on their investigation on similar topics to those of the DFEH.

Tesla intends to engage in additional dialogue with the EEOC before they make a final determination.

On June 8, 2022, the Court denied Tesla’s motion to stay the case.

A hearing on the motion to strike and the demurrer seeking dismissal of the lawsuit is scheduled for August 24, 2022.

Additionally, on June 1, 2022 the EEOC issued a cause finding against Tesla that closely parallels the DFEH’s allegations.

Tesla will begin the mandatory pre-filing conciliation process with the EEOC.

On June 16, 2022, two Tesla stockholders filed separate derivative actions in the U.S.

District Court for the Western District of Texas, purportedly on behalf of Tesla, against certain of Tesla’s current and former directors.

Both suits assert claims for breach of fiduciary duty, unjust enrichment, and violation of the federal securities laws in connection with alleged race and gender discrimination and sexual harassment.

Among other things, plaintiffs seek declaratory and injunctive relief, unspecified damages payable to Tesla, and attorneys’

We anticipate that the directors will move to dismiss both actions because neither shareholder made a demand upon the Tesla’s board of directors prior to filing suit.

Certain Investigations and Other Matters

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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.

On November 16, 2021, the SEC issued a subpoena to us seeking information on our governance processes around compliance with the SEC settlement, as amended.

On November 16, 2021, and June 13, 2022, the SEC issued subpoenas to us seeking information on our governance processes around compliance with the SEC settlement, as amended.

Separately, the DOJ previously asked us to voluntarily provide it with information about the above matter related to taking Tesla private and Model 3 production rates.

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The following table presents revenues and gross profit by reportable segment (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Automotive segment

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The following table presents revenues by geographic area based on the sales location of our products (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

United States

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Additionally, we are increasingly focused on products and services based on artificial intelligence, robotics and automation.

In 2022, we have produced 305,407 vehicles and delivered 310,048 vehicles through the first quarter, despite ongoing supply chain challenges and factory shutdowns.

In 2022, we have produced 563,987 vehicles and delivered 564,743 vehicles through the second quarter, despite ongoing supply chain challenges and factory shutdowns.

We are currently focused on increasing vehicle production and capacity, improving and developing battery technologies, improving our FSD capabilities, increasing the affordability and efficiency of our vehicles and expanding our global infrastructure.

In 2022, we have deployed 846 MWh of energy storage products and 48 megawatts of solar energy systems through the first quarter.

In 2022, we have deployed 1.98 GWh of energy storage products and 154 megawatts of solar energy systems through the second 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 and new build solar energy systems.

During the three months ended March 31, 2022, we recognized total revenues of $18.76 billion, representing a $8.37 billion increase compared to the prior year.

During the three and six months ended June 30, 2022, we recognized total revenues of $16.93 billion and $35.69 billion, respectively, representing increases of $4.98 billion and $13.34 billion, respectively, over the same periods ended June 30, 2021.

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, 2022, our net income attributable to common stockholders was $3.32 billion, representing a favorable change of $2.88 billion, compared to the prior year.

During the three and six months ended June 30, 2022, our net income attributable to common stockholders was $2.26 billion and $5.58 billion, respectively, representing favorable changes of $1.12 billion and $4.00 billion, respectively, over the same periods ended June 30, 2021.

We continue to focus on improving our profitability through production and operational efficiencies.

We ended the first quarter of 2022 with $18.01 billion in cash and cash equivalents and marketable securities, representing an increase of $306 million from the end of 2021.

Our cash flows provided by operating activities during the three month period ended March 31, 2022 was $4.00 billion, representing an increase of $2.35 billion compared to $1.64 billion during the same period ended March 31, 2021.

Capital expenditures amounted to $1.77 billion during the three month period ended March 31, 2022, compared to $1.35 billion during the same period ended March 31, 2021.

Sustained growth has allowed our business to generally fund itself, but we will continue investing in a number of capital-intensive projects in upcoming periods.

We ended the second quarter of 2022 with $18.92 billion in cash and cash equivalents and marketable securities, representing an increase of $1.21 billion from the end of 2021.

Our cash flows provided by operating activities during the six month period ended June 30, 2022 was $6.35 billion, representing an increase of $2.58 billion compared to $3.77 billion during the same period ended June 30, 2021.

Capital expenditures amounted to $3.50 billion during the six month period ended June 30, 2022, compared to $2.85 billion during the same period ended June 30, 2021.

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 Risks and 2022 Outlook

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Beginning in the first quarter of 2021, there has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel and government activities and functions.

We have also previously been, and are being, affected by temporary manufacturing closures, employment and compensation adjustments, and impediments to administrative activities supporting our product deliveries and deployments.

We have been affected by temporary manufacturing closures, employment and compensation adjustments, and impediments to administrative activities supporting our product deliveries and deployments.

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Ultimately, we cannot predict the duration of the COVID-19 pandemic or global economic trends.

We will continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, and we will have to accurately project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly.

We continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, and attempt to optimally project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly.

Automotive—Production

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Model 3 / Model Y

Gigafactory Berlin

Gigafactory Berlin-Brandenburg

Gigafactory Texas

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In development

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 capacity at our current factories.

Our current production continues to be affected by the industry-wide semiconductor and other component shortages, requiring additional workaround manufacturing and production design solutions to be implemented which may be difficult to sustain.

Production at Gigafactory Berlin started in March 2022 and we began Model Y deliveries from Gigafactory Texas in April 2022, which incorporated our 4680 in-house made cells.

The next phase of production growth will depend on the ramp at Gigafactory Berlin 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.

The next phase of production growth will depend on the ramp at Gigafactory Berlin-Brandenburg and Gigafactory Texas and the upgrade and expansion of Gigafactory Shanghai, 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.

Consistent with our approach of innovating manufacturing techniques at our new factories, we expect as well to pioneer new methods related to the mass production of these cells and our unique structural battery pack concept.

Beginning this quarter, at Gigafactory Texas, we began delivering to customers Model Ys with Tesla-made 4680 cells with a structural battery pack.

Our goals are to improve vehicle performance, decrease production costs and increase affordability.

However, these plans are subject to uncertainties inherent in establishing and ramping manufacturing operations, which may be exacerbated by the number of concurrent international projects, any industry-wide component constraints which may increase the number of manufacturing and production design workaround solutions required, labor shortages and any future impact from events outside of our control such as the COVID-19 pandemic.

For example, recent spikes in COVID-19 cases in Shanghai resulted in temporary shutdowns to Gigafactory Shanghai as well as parts of our supply chain.

Moreover, we must meet 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.

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 which may increase the number of manufacturing and production design workaround solutions required, labor shortages and any future impact from events outside of our control such as the COVID-19 pandemic.

For example, spikes in COVID-19 cases in Shanghai resulted in limited production and temporary shutdowns to Gigafactory Shanghai as well as parts of our supply chain in the first and second quarters of 2022.

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 and Sales

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affordability, and for example, have allowed us to competitively price our vehicles in China.

In addition to ramping production in 2022, we will also continue to generate demand and brand awareness by improving our vehicles’

In addition to our ongoing production ramp in 2022, 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.

Moreover, we expect to continue to benefit from a spike in demand in the automotive industry generally, as well as ongoing electrification of the automotive sector and increasing environmental awareness.

However, we operate in a cyclical industry that is sensitive to trade, environmental and political uncertainty, all of which may also be compounded by any future global impact from the COVID-19 pandemic.

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 may also be compounded by any future global impact from the COVID-19 pandemic, inflationary pressures and potential increases in interest rates.

Moreover, as additional competitors enter the marketplace and help bring the world closer to sustainable transportation, we will have to continue to execute well to maintain our momentum.

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As our deliveries increase, we must work constantly to prevent our vehicle delivery capability from becoming a bottleneck on our total deliveries.

Increasing the exports of vehicles manufactured at Gigafactory Shanghai has been effective in mitigating the strain on our deliveries in markets outside of the United States, and we expect to benefit further from situating additional factories closer to local markets, including the recent production launch at Gigafactory Berlin.

As we expand our manufacturing operations globally, we will 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.

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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 construction of our Megafactory in Lathrop, California, but such production is also sensitive to global component constraints.

We continue to increase the production of our energy storage products to meet high levels of demand, including the construction and ramp of our Megafactory in Lathrop, California, but such production is also sensitive to global component constraints.

For Megapack, energy storage deployments can vary meaningfully quarter to quarter depending on the timing of specific project milestones.

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In addition, we continue to improve our installation capabilities and price efficiencies for Solar Roof by on-boarding and training new installers, as well as collaborating with real estate developers and builders on new homes to reduce installation time and costs.

In the first quarter of 2022, however, such growth to our solar business was impeded by import delays on certain solar components.

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.

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We are simultaneously ramping new products, including new iterations of our Megapack, ramping manufacturing facilities on three continents and piloting the development and manufacture of new battery cell technologies, 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 and all other continuing infrastructure growth, we currently expect our capital expenditures to be between $5.00 to $7.00 billion in 2022 and each of the next two fiscal years.

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 $6.00 to $8.00 billion in 2022 and each of the next 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.

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.

Moreover, as our stock price has significantly increased, we have seen higher levels of early conversions of “in-the-money”

convertible senior notes, which obligates us to deliver cash and or shares pursuant to the terms of those notes.

Overall, we expect our ability to be self-funding to continue as long as macroeconomic factors support current trends in our sales.

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In the first quarter of 2021, we invested an aggregate $1.50 billion in bitcoin.

We believe in the long-term potential of digital assets both as an investment and also as a liquid alternative to cash.

As with any investment and consistent with how we manage fiat-based cash and cash-equivalent accounts, we may increase or decrease our holdings of digital assets at any time based on the needs of the business and our view of market and environmental conditions.

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For any digital assets held now or in the future, these charges may negatively impact our profitability in the periods in which such impairments occur even if the overall market values of these assets increase.

For example, in the first quarter of 2021, we recorded approximately $27 million of impairment losses resulting from changes to the carrying value of our bitcoin and gains of $128 million on certain sales of bitcoin by us.

For example, in the six month period ended June 30, 2022, we recorded $170 million of impairment losses resulting from changes to the carrying value of our bitcoin and gains of $64 million on certain conversions of bitcoin into fiat currency by us.

Critical Accounting Policies and Estimates

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Three Months Ended

Six Months Ended

(Dollars in millions)

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Automotive & Services and Other Segment

Automotive sales revenue includes revenues related to cash deliveries of new Model S, Model X, Model 3, and Model Y vehicles, including access to our Supercharger network, internet connectivity, FSD features and over-the-air software updates.

Automotive sales revenue includes revenues related to cash and financing deliveries of new Model S, Model X, Model 3, and Model Y vehicles, including access to our Supercharger network, internet connectivity, FSD features and over-the-air software updates.

These deliveries are vehicles that are not subject to lease accounting.

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Services and other revenue consists of non-warranty after-sales vehicle services, paid supercharging, sales of used vehicles, retail merchandise, sales by our acquired subsidiaries to third party customers and vehicle insurance revenue.

Automotive sales revenue increased $7.33 billion, or 89%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to an increase of 111,915 Model 3 and Model Y cash deliveries, and an increase of 10,305 Model S and Model X cash deliveries year over year.

This was achieved from production ramping at both Gigafactory Shanghai and the Fremont Factory at a higher combined average selling price from a higher proportion of Model Y sales offset by regional sales mix.

There was also an increase in the average selling price of Model S and Model X compared to the prior period as deliveries of the new versions of Model S and Model X only began ramping in the second and fourth quarters of 2021, respectively.

Automotive regulatory credits revenue increased $161 million, or 31%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to changes in regulation which entitled us to additional consideration of $288 million in revenue for credits sold previously, in the absence of which we had a decrease in automotive regulatory credits revenue driven by lower sales of regulatory credits.

Automotive leasing revenue increased $371 million, or 125%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to an increase in direct sales-type leasing revenue and an increase in cumulative vehicles under our direct operating lease program .

Services and other revenue increased $386 million, or 43%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to non-warranty maintenance services revenue as our fleet continues to grow, increase in used vehicle revenue driven by increases in volume and average selling prices of used vehicles, retail merchandise revenue and insurance services revenue.

Automotive sales revenue increased $4.15 billion, or 44%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to an increase of 44,364 Model 3 and Model Y cash deliveries, and an increase of 12,658 Model S and Model X cash deliveries year over year.

This was achieved from production ramping of Model Y at Gigafactory Shanghai and the Fremont Factory as well as the start of production at Gigafactory Berlin-Brandenburg and Gigafactory Texas in 2022, at a higher combined average selling price from a higher proportion of Model Y sales.

There was also an increase in production and an increase in the average selling price of Model S and Model X with a higher proportion of Model X sales, compared to the prior period as deliveries of the new versions of Model S and Model X only began ramping in the second and fourth quarters of 2021, respectively.

Automotive sales revenue increased $11.48 billion, or 65%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to an increase of 156,279 Model 3 and Model Y cash deliveries, and an increase of 22,963 Model S and Model X cash deliveries year over year.

Automotive regulatory credits revenue decreased $10 million, or 3%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 primarily due to changes in pricing in certain regions.

Automotive regulatory credits revenue increased $151 million, or 17%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to changes in regulation which entitled us to additional consideration of $288 million in revenue in the first quarter of 2022 for credits sold previously, in the absence of which we had a decrease in automotive regulatory credits revenue driven by lower sales of regulatory credits.

Automotive leasing revenue increased $256 million, or 77%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Automotive leasing revenue increased $627 million, or 100%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

The changes for both periods are primarily due to an increase in direct sales-type leasing revenue and an increase in activities under our direct operating lease program.

Services and other revenue increased $515 million, or 54%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Services and other revenue increased $901 million, or 49%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

The changes for both periods are primarily due to increase in used vehicle revenue driven by increases in volume and average selling prices of used 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 includes sales, and leasing of solar energy generation and energy storage products, services related to such products and sales of solar energy systems incentives.

Energy generation and storage revenue increased by $122 million, or 25%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to an increase in deployments of Powerwall and Megapack.

This was partially offset by a decrease in solar cash and loan deployments driven by constraints in importing certain components .

Energy generation and storage revenue includes sales and leasing of solar energy generation and energy storage products, financing of solar energy generation products, services related to such products and sales of solar energy systems incentives.

Energy generation and storage revenue increased $65 million, or 8%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to an increase in solar cash and loan deployments and Powerwall.

This was partially offset by lower deployments of Megapack.

Energy generation and storage revenue increased $187 million, or 14%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to an increase in deployments of Powerwall.

This was partially offset by lower deployments of Megapack.

Cost of Revenues and Gross Margin

Three Months Ended

Six Months Ended

(Dollars in millions)

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Cost of services and other revenue also includes direct parts, material and labor costs and manufacturing overhead associated with the sales by our acquired subsidiaries to third party customers.

Cost of automotive sales revenue increased $4.46 billion, or 69%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to an increase of 111,915 Model 3 and Model Y cash deliveries, and an increase of 10,305 Model S and Model X cash deliveries year over year.

These increases were partially offset by a decrease in combined average Model 3 and Model Y costs per unit due to changes in regional production mix as Gigafactory Shanghai ramped in capacity, where costs are lower from localized procurement and manufacturing in China as well as decrease in combined average Model S and Model X costs per unit driven by lower average cost for the new versions of Model S and Model X from ramping up production.

Cost of automotive leasing revenue increased $248 million, or 155%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to an increase in direct sales-type leasing cost of revenues from more sales in the current year and an increase in cumulative vehicles under our direct operating lease program.

Cost of services and other revenue increased $324 million, or 34%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to an increase in costs to support our increase in non-warranty maintenance services revenue, an increase in costs of retail merchandise and insurance services as our sales have increased and an increase in used vehicle cost of revenue driven by increases in volume and costs of non-Tesla used vehicles.

Gross margin for total automotive increased from 26.5% in the three months ended March 31, 2021 to 32.9% in the three months ended March 31, 2022.

The increase was primarily due to favorable changes in sales and production mix of Model Y as Gigafactory Shanghai ramped in capacity.

The average Model 3 and Model Y costs per unit have decreased due to localized procurement and manufacturing in China despite rising raw material, commodity, logistics and expedite costs.

There was also an increase in overall Model S and Model X cash deliveries at a lower combined average cost per unit year over year, as well as an increase of $161 million in sales of regulatory credits, which have negligible incremental costs associated with them.

Gross margin for total automotive & services and other segment increased from 23.4% in the three months ended March 31, 2021 to 30.5% in the three months ended March 31, 2022, primarily due to the automotive gross margin impacts discussed above and an improvement in our services and other gross margin.

Additionally, services and other was a lower percentage of the segment during the three months ended March 31, 2022 compared to the prior year.

Cost of automotive sales revenue increased $3.03 billion, or 43%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, in line with the growth in revenue year over year, as discussed above.

There were also idle capacity charges of $168 million due to the temporary suspension of production at Gigafactory Shanghai as well as the ramping up of production in Gigafactory Texas during the three months ended June 30, 2022.

Further there was an increase in combined average Model 3 and Model Y costs per unit due to overall rising raw material, commodity, logistics and expedite costs and the ramping up of production at Gigafactory Berlin-Brandenburg and Gigafactory Texas during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

These increases were partially offset by a decrease in combined average Model S and Model X costs per unit driven by lower average cost for the new versions of Model S and Model X from ramping up production.

Cost of automotive sales revenue increased $7.49 billion, or 55%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, in line with the growth in revenue year over year, as discussed above.

There were also idle capacity charges of $198 million due to the temporary suspension of production at Gigafactory Shanghai as well as the ramping up of production in Gigafactory Texas during the six months ended June 30, 2022.

Cost of automotive leasing revenue increased $180 million, or 96%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Cost of automotive leasing revenue increased $428 million, or 123%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to an increase in cumulative vehicles under our direct operating lease program and an increase in direct sales-type leasing cost of revenues from more activities in the current year.

Cost of services and other revenue increased $424 million, or 43%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Cost of services and other revenue increased $748 million, or 38%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

The change in both periods is primarily due to an increase in costs to support our increase in non-warranty maintenance services revenue, an increase in used vehicle cost of revenue driven by increases in volume and costs of used Tesla vehicles, an increase in costs of paid supercharging, insurance services and retail merchandise.

Gross margin for total automotive decreased from 28.4% to 27.9% in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

This was driven by the change in automotive sales revenue and cost of automotive sales revenue, as discussed earlier.

Gross margin for total automotive increased from 27.5% to 30.6% in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

This was driven by the growth in automotive sales revenue and cost of automotive sales revenue as well as increase from regulatory credits revenue, as discussed earlier.

Gross margin for total automotive & services and other segment stayed flat at 25.7% in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Gross margin for total automotive & services and other segment increased from 24.6% to 28.3% in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to the automotive gross margin impacts discussed above and an improvement in our services and other gross margin.

Additionally, services and other was a higher percentage of the segment gross margin during the three months and six months ended June 30, 2022 as compared to the prior year.

Energy Generation and Storage Segment

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In agreements for solar energy system and PPAs where we are the lessor, the cost of revenue is primarily comprised of depreciation of the cost of leased solar energy systems, maintenance costs associated with those systems and amortization of any initial direct costs.

Cost of energy generation and storage revenue increased by $93 million, or 16%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to increases in deployments of Powerwall and Megapack, partially offset by a decrease in solar cash and loan costs as deployments have decreased and reductions in average costs per unit of Solar Roof.

Gross margin for energy generation and storage increased from -20.4% in the three months ended March 31, 2021 to -11.7% in the three months ended March 31, 2022, primarily due to higher deployments of Powerwall which operated at a higher gross margin as well as an improvement in Solar Roof gross margin due to reductions in average costs per unit.

These increases were partially offset by a decrease from lower solar cash and loan deployments.

Cost of energy generation and storage revenue decreased $12 million, or 2%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, due to lower deployments of Megapack.

This was partially offset by higher solar cash and loan deployments and higher Powerwall deployments.

Cost of energy generation and storage revenue increased $81 million, or 6%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to increases in deployments of Powerwall and higher average cost of solar and cash and loan deployments due to increased component costs, partially offset by lower deployments of Megapack.

Gross margin for energy generation and storage increased from 2.5% to 11.2% in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Gross margin for energy generation and storage increased from -6.3% to 1.7% in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to higher deployments of Powerwall which operated at a higher gross margin.

This was partially offset by higher average cost of solar and cash and loan deployments due to increased component costs, as well as lower deployments of Megapack.

Research and Development Expense

Three Months Ended

Six Months Ended

(Dollars in millions)

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Research and development (“R&D”) expenses consist primarily of personnel costs for our teams in engineering and research, manufacturing engineering and manufacturing test organizations, prototyping expense, contract and professional services and amortized equipment expense.

R&D expenses increased $199 million, or 30%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

The increase was primarily due to a $90 million increase in facilities, outside services, freight and depreciation expense, a $75 million increase in employee and labor related expenses due to an increase in headcount, an $18 million increase in stock-based compensation expense, and a $13 million increase in R&D expensed materials.

These increases were to support our expanding product roadmap and technologies including our proprietary battery cells, and there were additional R&D expenses as we were in the pre-production phase at Gigafactory Texas and started production at Gigafactory Berlin only closer to the end of the current quarter.

R&D expenses as a percentage of revenue decreased from 6% in the three months ended March 31, 2021 to 5% in the three months ended March 31, 2022.

R&D expenses increased $91 million, or 16%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

The increase was primarily due to a $47 million increase in employee and labor related expenses, an $18 million increase in stock-based compensation expense, a $14 million increase in facilities, outside services, freight and depreciation expense, and a $12 million increase in R&D expensed materials.

These increases were to support our expanding product roadmap and technologies including our proprietary battery cells.

R&D expenses increased $290 million, or 23%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

The increase was primarily due to a $122 million increase in employee and labor related expenses, a $107 million increase in facilities, freight and depreciation expense, a $36 million increase in stock-based compensation expense, and a $25 million increase in R&D expensed materials.

These increases were to support our expanding product roadmap and technologies including our proprietary battery cells and there were additional R&D expenses in the first quarter of 2022 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 4% in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

R&D expenses as a percentage of revenue decreased from 6% to 4% in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

Our R&D expenses have decreased as a proportion of total revenues despite expanding product roadmap and technologies.

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Three Months Ended

Six Months Ended

(Dollars in millions)

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Selling, general and administrative (“SG&A”) expenses generally consist of personnel and facilities costs related to our stores, marketing, sales, executive, finance, human resources, information technology and legal organizations, as well as fees for professional and contract services and litigation settlements.

SG&A expenses decreased $64 million, or 6%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

SG&A expenses decreased $12 million, or 1%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

This is primarily due to a decrease of $166 million in stock-based compensation expense, most of which is attributable to the lower stock-based compensation expense of $167 million on the 2018 CEO Performance Award.

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This was offset by an increase of $109 million in employee and labor related expenses from increased headcount and an increase of $45 million in office, information technology, facilities-related expenses, sales and marketing activities and other costs.

SG&A expenses as a percentage of revenue decreased from 10% in the three months ended March 31, 2021 to 5% in the three months ended March 31, 2022.

SG&A expenses decreased $76 million, or 4%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

This is primarily due to a decrease of $408 million in stock-based compensation expense, most of which is attributable to the lower stock-based compensation expense of $418 million on the 2018 CEO Performance Award.

See Note 11, Equity Incentive Plans , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

This was offset by an increase of $219 million in employee and labor related expenses from increased headcount and an increase of $113 million in office, information technology, facilities-related expenses, sales and marketing activities and other costs.

SG&A expenses as a percentage of revenue decreased from 8% to 6% in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

SG&A expenses as a percentage of revenue decreased from 9% to 5% in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

Our SG&A expenses have decreased as a proportion of total revenues due to operational efficiencies.

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Three Months Ended

Six Months Ended

(Dollars in millions)

Restructuring and other

Not meaningful

As a percentage of revenues

During the three months ended March 31, 2021, we realized gains of $128 million in connection with selling a portion of our holdings of bitcoin and recorded $27 million of impairment losses.

During the three months ended March 31, 2022, we did not record any impairment loss on bitcoin.

During the three and six months ended June 30, 2022, we recorded impairment loss of $170 million as well as realized gains of $64 million in connection with converting our holdings of digital assets into fiat currency.

During the six months ended June 30, 2021, we realized gains of $128 million in connection with converting our holdings of digital assets into fiat currency.

During the three and six months ended June 30, 2021, we recorded $23 million and $50 million, respectively, of impairment losses on bitcoin.

See Note 3, Digital Assets, Net , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

We also recorded other expenses of $36 million during the three months ended June 30, 2022, related to the recent employee terminations.

Interest Expense

Three Months Ended

Six Months Ended

(Dollars in millions)

Interest expense

As a percentage of revenues

Interest expense decreased by $38 million, or 38%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to the continued reduction in our overall debt balance.

Interest expense decreased $31 million, or 41%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Interest expense decreased $69 million, or 40%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

These decreases were primarily due to the continued reduction in our overall debt balance offset by lower capitalized interest.

See Note 10, Debt , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

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Three Months Ended

Six Months Ended

(Dollars in millions)

Other income, net

As a percentage of revenues

Other income, net, consists primarily of foreign exchange gains and losses related to our foreign currency-denominated monetary assets and liabilities and changes in the fair values of our fixed-for-floating interest rate swaps.

We expect our foreign exchange gains and losses will vary depending upon movements in the underlying exchange rates.

Other income, net, changed favorably by $28 million in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to favorable fluctuations in foreign currency exchange rates and offset by a $10 million decrease in gain on our interest rate swaps which were settled in the current period.

Other income, net, changed unfavorably by $17 million in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Other income, net, changed favorably by $11 million in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

The change for both periods was primarily due to fluctuations in foreign currency exchange rates.

Additionally we did not have any outstanding interest rate swaps in the three months ended June 30, 2022 which resulted in no impacts from mark to market movements as compared to the prior period.

Provision for Income Taxes

Three Months Ended

Six Months Ended

(Dollars in millions)

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Effective tax rate

Our provision for income taxes increased by $277 million, or 401%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to the increase in our pre-tax income year over year.

Our effective tax rate decreased from 13% to 10% in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to changes in mix of jurisdictional earnings.

Our provision for income taxes increased by $90 million, or 78%, in the three months ended June 30, 2022 and increased by $367 million, or 199%, in the six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021, primarily due to the increase in our pre-tax income year over year.

Our effective tax rate decreased from 9% to 8% in the three months ended June 30, 2022 and from 10% to 9% in the six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021, primarily due to changes in mix of jurisdictional earnings.

See Note 2, Summary of Significant Accounting Policies , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

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Three Months Ended

Six Months Ended

(Dollars in millions)

Net (loss) income attributable to noncontrolling interests and

redeemable noncontrolling interests in subsidiaries

Not meaningful

Net income attributable to noncontrolling interests and redeemable noncontrolling interests decreased by $64 million in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 due to a decrease in allocations to financing fund investors.

Net income (loss) attributable to noncontrolling

interests and redeemable noncontrolling interests

in subsidiaries

Net income attributable to noncontrolling interests and redeemable noncontrolling interests decreased $26 million, or 72%, in the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Net income attributable to noncontrolling interests and redeemable noncontrolling interests decreased by $90 million, or 145%, in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

These changes were due to a decrease in allocations to financing fund investors.

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 and Gigafactory Texas and the continued expansion of our retail and service locations, body shops, Mobile Service fleet, Supercharger network and energy product installation capabilities.

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 and the continued expansion of our retail and service locations, body shops, Mobile Service fleet, Supercharger network and energy product installation capabilities.

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.

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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, 2022, as well as in the long-term.

Accordingly, we believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following June 30, 2022, 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.

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For details regarding these obligations, refer to Note 12, Commitments and Contingencies , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

As of March 31, 2022, we and our subsidiaries had outstanding $3.45 billion in aggregate principal amount of indebtedness, of which $1.17 billion is scheduled to become due in the succeeding 12 months.

As of June 30, 2022, we and our subsidiaries had outstanding $3.18 billion in aggregate principal amount of indebtedness, of which $1.06 billion is scheduled to become due in the succeeding 12 months.

For details regarding our indebtedness, refer to Note 10, Debt , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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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, 2022, we had $17.51 billion of cash and cash equivalents.

As of June 30, 2022, we had $18.32 billion of cash and cash equivalents.

Balances held in foreign currencies had a U.S.

dollar equivalent of $5.07 billion and consisted primarily of Chinese yuan, euros and Canadian dollars.

In addition, we had $2.36 billion of unused committed amounts under our credit facilities as of March 31, 2022.

In addition, we had $2.44 billion of unused committed amounts under our credit facilities as of June 30, 2022.

Certain of such unused committed amounts are subject to satisfying specified conditions prior to draw-down (such as pledging to our lenders sufficient amounts of qualified receivables, inventories, leased vehicles and our interests in those leases, solar energy systems and the associated customer contracts or various other assets).

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In the first quarter of 2021, we invested an aggregate $1.50 billion in digital assets.

The fair market value of such digital assets held as of March 31, 2022 was $1.96 billion.

We believe in the long-term potential of digital assets both as an investment and also as a liquid alternative to cash.

As with any investment and consistent with how we manage fiat-based cash and cash equivalent accounts, we may increase or decrease our holdings of digital assets at any time based on the needs of the business and our view of market and environmental conditions.

However, digital assets may be subject to volatile market prices, which may be unfavorable at the times when we may want or need to liquidate them.

Additionally, we held short-term marketable securities of $508 million as of March 31, 2022.

The fair market value of our remaining holdings of digital assets as of June 30, 2022 was $222 million.

Additionally, we held short-term marketable securities of $591 million as of June 30, 2022.

Summary of Cash Flows

Three Months Ended

Six Months Ended

(Dollars in millions)

1 unchanged sentence

Net cash used in investing activities

Net cash used in by financing activities

Net cash used in financing activities

Cash Flows from Operating Activities

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These cash inflows are offset by our payments to suppliers for production materials and parts used in our manufacturing process, operating expenses, operating lease payments and interest payments on our financings.

Net cash provided by operating activities increased by $2.35 billion to $4.00 billion during the three months ended March 31, 2022 from $1.64 billion during the three months ended March 31, 2021.

This increase was primarily due to the increase in net income excluding non-cash expenses and gains of $2.94 billion, offset by the overall increase in net operating assets and liabilities of $590 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, 2022 as compared to the three months ended March 31, 2021 to support the ramp up in production at our factories and a larger increase in other non-current assets.

The increase in our net operating assets and other liabilities was partially offset by a larger increase of accounts payable and accrued liabilities .

Net cash provided by operating activities increased by $2.58 billion to $6.35 billion during the six months ended June 30, 2022 from $3.77 billion during the six months ended June 30, 2021.

This increase was primarily due to the increase in net income excluding non-cash expenses, gains and losses of $4.19 billion, offset by the overall increase in net operating assets and liabilities of $1.61 billion.

The increase in our net operating assets and liabilities was mainly driven by a larger increase of inventory in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 to support the ramp up in production at our factories and a larger increase in other non-current assets.

The increase in our net operating assets and other liabilities was partially offset by a larger increase of other long-term liabilities and, an increase of deferred revenue from higher vehicle deliveries.

Cash Flows from Investing Activities

Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $1.77 billion for the three months ended March 31, 2022 and $1.35 billion for the three months ended March 31, 2021, mainly for the construction of Gigafactory Texas and Gigafactory Berlin and the expansions of Gigafactory Shanghai and the Fremont Factory.

We also paid $386 million for purchases of marketable securities in the three months ended March 31, 2022.

Additionally, net cash outflows related to digital assets were $1.23 billion in the three months ended March 31, 2021 from purchases of digital assets of $1.50 billion offset by proceeds from sales of digital assets of $272 million.

Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $3.50 billion for the six months ended June 30, 2022 and $2.85 billion for the six months ended June 30, 2021, mainly for the expansions of Gigafactory Texas, the Fremont Factory, Gigafactory Berlin-Brandenburg, and Gigafactory Shanghai.

We also paid $476 million for purchases of marketable securities in the six months ended June 30, 2022.

Additionally, net cash inflows related to digital assets were $936 million in the six months ended June 30, 2022 from sales of digital assets.

Cash Flows from Financing Activities

Cash outflows from financing activities were $1.91 billion during the three months ended March 31, 2022 compared to $1.02 billion net cash used in financing activities during the three months ended March 31, 2021.

The change was primarily due to $890 million increase in cash outflows from repayments of convertible and other debt, net of proceeds from issuances of convertible and other debt.

Cash outflows from financing activities were $2.32 billion during six months ended June 30, 2022 compared to $2.57 billion net cash used in financing activities during the six months ended June 30, 2021.

The change was primarily due to $327 million decrease in cash outflows from repayments of convertible and other debt, net of proceeds from issuances of convertible and other debt.

See Note 10, Debt , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details regarding our debt obligations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements