What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-01-31 compared with 2022-02-07 · 147 added, 158 removed, 265 unchanged (54% of the section changed)

MARKET FOR REGISTRANT’S COMMO N EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

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since it began trading on June 29, 2010.

Our initial public offering was priced at $3.40 per share on June 28, 2010 as adjusted to give effect to the five-for-one stock split effected in the form of a stock dividend in August 2020 .

Our initial public offering was priced at approximately $1.13 per share on June 28, 2010 as adjusted to give effect to the 2022 Stock Split and the five-for-one stock split effected in the form of a stock dividend in August 2020 (the “2020 Stock Split”).

As of January 25, 2023, there were 8,686 holders of record of our common stock.

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Unregistered Sales of Equity Securities and Use of Proceeds

In connection with the offering of 2.00% Convertible Senior Notes due 2024 in May 2019, we sold warrants to each of Société

Générale, Wells Fargo Bank, National Association, Goldman, Sachs & Co.

LLC and Credit Suisse Capital LLC.

On October 26, 2021, we agreed with each of Société

Générale, Wells Fargo Bank, National Association and Credit Suisse Capital LLC to partially terminate such warrants, and in connection with such partial termination, we issued an aggregate of 2,711,289 shares of our common stock to Société

Générale, Wells Fargo Bank, National Association and Credit Suisse Capital LLC.

Such shares were issued pursuant to an exemption from registration provided by Rule 3(a)(9) of the Securities Act of 1933.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

For further discussion of our products and services, technology and competitive strengths, refer to Item 1- Business.

For discussion related to changes in financial condition and the results of operations for fiscal year 2021-related items, refer to Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year 2020, which was filed with the Securities and Exchange Commission on February 8, 2021.

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year 2021, which was filed with the Securities and Exchange Commission on February 7, 2022.

Overview and 2022 Highlights

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

In 2021, we produced 930,422 vehicles and delivered 936,222 vehicles.

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 produced 1,369,611 consumer vehicles and delivered 1,313,851 consumer vehicles, despite ongoing supply chain and logistics challenges and factory shutdowns.

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

In 2022, we deployed 6.5 GWh of energy storage products and 348 megawatts of solar energy systems.

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.

In 2021, we recognized total revenues of $53.82 billion, representing a 71% increase compared to the prior year.

In 2022, we recognized total revenues of $81.46 billion, respectively, representing an increase of $27.64 billion, compared to the prior year.

We continue to ramp production, build new manufacturing capacity and expand our operations to enable increased deliveries and deployments of our products and further revenue growth.

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

We ended 2021 with $17.58 billion in cash and cash equivalents, representing a decrease of $1.81 billion from the end of 2020.

Our cash flows provided by operating activities during 2021 was $11.50 billion, representing an increase of $5.55 billion compared to $5.94 billion during 2020, and capital expenditures amounted to $6.48 billion during 2021, compared to $3.16 billion during 2020.

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.

Management Opportunities, Challenges and Risks and 2022 Outlook

Impact of COVID-19 Pandemic

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.

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

Ultimately, we cannot predict the duration of the COVID-19 pandemic.

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 ended 2022 with $22.19 billion in cash and cash equivalents and investments, representing an increase of $4.48 billion from the end of 2021.

Our cash flows provided by operating activities during 2022 and 2021 were $14.72 billion and $11.50 billion, respectively, representing an increase of $3.23 billion.

Capital expenditures amounted to $7.16 billion during 2022, compared to $6.48 billion during 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 Uncertainties and 2023 Outlook

Automotive—Production

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Model 3 / Model Y

Gigafactory Berlin

Equipment test

Gigafactory Berlin-Brandenburg

Gigafactory Texas

Equipment test

In development

Gigafactory Nevada

Pilot production

Tesla Roadster

In development

We are focused on 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.

Builds of Model Y in Gigafactory Texas and equipment testing through the vehicle production process in Gigafactory Berlin started in late 2021.

The next phase of production growth will depend on the testing and 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.

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.

Robotaxi & Others

In development

We are focused on growing our manufacturing capacity, which includes ramping all of our production vehicles to their installed production capacities as well as increasing production rate, efficiency and capacity at our current factories.

The next phase of production growth will depend on the ramp at Gigafactory Berlin-Brandenburg and Gigafactory Texas, as well as our ability to add to our available sources of battery cell supply by manufacturing our own cells that we are developing to have high-volume output, lower capital and production costs and longer range.

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

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.

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, labor shortages and any future impact from events outside of our control such as the COVID-19 pandemic.

Moreover, we have set ambitious technological targets with our plans for battery cells as well as for iterative manufacturing and design improvements for our vehicles with each new factory.

Automotive—Demand and Sales

Our cost reduction efforts and additional localized procurement and manufacturing are key to our vehicles’

Our cost reduction efforts, cost innovation strategies, and additional localized procurement and manufacturing are key to our vehicles’

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

In addition to ramping production 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.

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.

We will also continue to generate demand and brand awareness by improving our vehicles’

performance and functionality, including through products based on artificial intelligence such as Autopilot and FSD, and other software features, and delivering new vehicles, such as the Tesla Semi in December 2022.

Moreover, we expect to continue to benefit from ongoing electrification of the automotive sector and increasing environmental awareness.

However, we operate in a cyclical industry that is sensitive to political and regulatory uncertainty, including with respect to trade and the environment, all of which can be compounded by inflationary pressures, rising energy prices, increases in interest rates and any future global impact from the COVID-19 pandemic.

For example, in the earlier part of 2022, the automotive industry in general experienced part shortages and supplier disruptions which impacted production leading to a general increase in vehicle pricing.

As the year progressed, inflationary pressures increased across the markets in which we operate.

In an effort to curb this trend, central banks in developed countries raised interest rates rapidly and substantially, impacting the affordability of vehicle lease and finance arrangements.

Further, sales of vehicles in the automotive industry also tend to be cyclical in many markets, which may expose us to increased volatility as we expand and adjust our operations.

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

These macroeconomic and industry trends have had, and will likely continue to have, an impact on the pricing of, and order rate for our vehicles, and we will continue to adjust accordingly to such developments.

Automotive—Deliveries and Customer Infrastructure

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.

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.

As our production increases, we must work constantly to similarly increase vehicle delivery capability so that it does not become a bottleneck on our total deliveries.

Beginning the second half of 2022, due to continuing challenges caused by vehicle transportation capacity during peak delivery periods, we began transitioning to a more even regional mix of vehicle builds each week, which led to an increase in cars in transit at the end of the year.

Increasing the exports of vehicles manufactured at Gigafactory Shanghai has also 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 production launch at Gigafactory Berlin-Brandenburg and Gigafactory Austin.

As we expand our manufacturing operations globally, we will also have to continue to increase and staff our delivery, servicing and charging infrastructure accordingly, maintain our vehicle reliability and optimize our Supercharger locations to ensure cost effectiveness and customer satisfaction.

In particular, we remain focused on increasing the capability and efficiency of our servicing operations.

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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 beginning 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.

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

For Powerwall, better availability and growing grid stability concerns drive higher customer interest, and we are emphasizing cross-selling with our residential solar energy products.

For Powerwall, better availability and growing grid stability concerns drive higher customer interest.

We remain committed to growing our retrofit solar energy business by offering a low-cost and simplified online ordering experience.

In addition, we continue to 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 addition, we continue to seek to improve our installation capabilities and price efficiencies for Solar Roof.

As these product lines grow, we will have to maintain adequate battery cell supply for our energy storage products and hire additional personnel, particularly skilled electricians, to support the ramp of Solar Roof.

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Our capital expenditures are typically difficult to project beyond the short-term given the number and breadth of our core projects at any given time, and may further be impacted by uncertainties in future global market conditions.

We are simultaneously ramping new products in the new Model S and Model X, Megapack and Solar Roof, 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.

We are simultaneously ramping new products, 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, 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 2023 and between $7.00 to $9.00 billion in each of the following two fiscal years.

Our business has recently been consistently generating cash flow from operations in excess of our level of capital spend, and with better working capital management resulting in shorter days sales outstanding than days payable outstanding, our sales growth is also facilitating positive cash generation.

We have and will continue to utilize such cash flows, among other things, to do more vertical integration, expand our product roadmap and provide financing options to our customers.

On the other hand, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects and rising material prices and increasing supply chain and labor expenses resulting from changes in global trade conditions and labor availability associated with the COVID-19 pandemic.

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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As long as we see expanding sales, and excluding the potential impact of macroeconomic conditions including increased labor costs and impairment charges on certain assets as explained below, we generally expect operating expenses relative to revenues to decrease as we continue to increase operational efficiency and process automation.

We expect operating expenses to grow in 2022 as we are expanding our operations globally.

We expect operating expenses to continue to grow in 2023 as we are expanding our operations globally.

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 year ended December 31, 2021, we recorded approximately $101 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 year ended December 31, 2022, we recorded $204 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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To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows may be affected.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets.

The estimates used for, but not limited to, determining significant economic incentive for resale value guarantee arrangements, sales return reserves, the collectability of accounts receivable, inventory valuation, fair value of long-lived assets, goodwill, fair value of financial instruments, fair value and residual value of operating lease vehicles and solar energy systems subject to leases could be impacted.

The estimates used for, but not limited to, determining significant economic incentive for resale value guarantee arrangements, sales return reserves, the collectability of accounts and financing receivables, inventory valuation, warranties, fair value of long-lived assets, goodwill, fair value of financial instruments, fair value and residual value of operating lease vehicles and solar energy systems subject to leases could be impacted.

We have assessed the impact and are not aware of any specific events or circumstances that required an update to our estimates and assumptions or materially affected the carrying value of our assets or liabilities as of the date of issuance of this Annual Report on Form 10-K.

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Revenue Recognition

Automotive Sales without Resale Value Guarantee

Automotive sales revenue includes revenues related to deliveries of new vehicles and pay-per-use charges, and specific other features and services that meet the definition of a performance obligation under ASC 606, including access to our Supercharger network, internet connectivity, FSD features and over-the-air software updates.

Automotive Sales

Automotive sales revenue includes revenues related to cash and financing deliveries of new vehicles, and specific other features and services that meet the definition of a performance obligation under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), including access to our FSD features, internet connectivity, Supercharger network and over-the-air software updates.

We recognize revenue on automotive sales upon delivery to the customer, which is when the control of a vehicle transfers.

Payments are typically received at the point control transfers or in accordance with payment terms customary to the business.

Other features and services such as access to our Supercharger network, internet connectivity and over-the-air software updates are provisioned upon control transfer of a vehicle and recognized over time on a straight-line basis as we have a stand-ready obligation to deliver such services to the customer.

We recognize revenue related to these other features and services over the performance period, which is generally the estimated useful life of the vehicle.

Revenue related to FSD features is recognized when functionality is delivered to the customer.

Payments are typically received at the point control transfers or in accordance with payment terms customary to the business, except sales we finance for which payments are collected over the contractual loan term.

We also recognize a sales return reserve based on historical experience plus consideration for expected future market values, when we offer resale value guarantees or similar buyback terms.

Other features and services such as access to our internet connectivity, legacy programs offering unlimited free Supercharging and over-the-air software updates are provisioned upon control transfer of a vehicle and recognized over time on a straight-line basis as we have a stand-ready obligation to deliver such services to the customer.

Other limited free Supercharging incentives are recognized based on actual usage or expiration, whichever is earlier.

We recognize revenue related to these other features and services over the performance period, which is generally the expected ownership life of the vehicle.

Revenue related to FSD is recognized when functionality is delivered to the customer and the portion related to software updates is recognized over time.

For our obligations related to automotive sales, we estimate standalone selling price by considering costs used to develop and deliver the service, third-party pricing of similar options and other information that may be available.

At the time of revenue recognition, we reduce the transaction price and record a sales return reserve against revenue for estimated variable consideration related to future product returns.

Such return rate estimates are based on historical experience and are immaterial in all periods presented.

In addition, any fees that are paid or payable by us to a customer’s lender when we arrange the financing are recognized as an offset against automotive sales revenue.

Any fees that are paid or payable by us to a customer’s lender when we arrange the financing are recognized as an offset against automotive sales revenue.

Costs to obtain a contract mainly relate to commissions paid to our sales personnel for the sale of vehicles.

Commissions are not paid on other obligations such as access to our Supercharger network, internet connectivity, FSD features and over-the-air software updates.

As our contract costs related to automotive sales are typically fulfilled within one year, the costs to obtain a contract are expensed as incurred.

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Our policy is to exclude taxes collected from a customer from the transaction price of automotive contracts.

Automotive Sales with Resale Value Guarantee or a Buyback Option

We offer resale value guarantees or similar buy-back terms to certain international customers who purchase vehicles and who finance their vehicles through one of our specified commercial banking partners.

We also offer resale value guarantees in connection with automotive sales to certain leasing partners.

Under these programs, we receive full payment for the vehicle sales price at the time of delivery and our counterparty has the option of selling their vehicle back to us during the guarantee period, which currently is generally at the end of the term of the applicable loan or financing program, for a pre-determined resale value.

We recognize revenue when control transfers upon delivery to customers in accordance with ASC 606 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.

We account for such automotive sales 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 process to determine whether there is a significant economic incentive includes a comparison of a vehicle’s estimated market value at the time the option is exercisable with the guaranteed resale value to determine the customer’s economic incentive to exercise.

The performance obligations and the pattern of recognizing automotive sales with resale value guarantees are consistent with automotive sales without resale value guarantees with the exception of our estimate for sales return reserve.

Sales return reserves for automotive sales with resale value guarantees are estimated based on historical experience plus consideration for expected future market values.

On a quarterly basis, we assess the estimated market values of vehicles sold with resale value guarantees to determine whether there have been changes to the likelihood of future product returns.

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Inventories are stated at the lower of cost or net realizable value.

Cost is computed using standard cost for vehicles and energy storage products, which approximates actual cost on a first-in, first-out basis.

In addition, cost for solar energy systems is recorded using actual cost.

Cost is computed using standard cost for vehicles and energy products, which approximates actual cost on a first-in, first-out basis.

We record inventory write-downs for excess or obsolete inventories based upon assumptions about current and future demand forecasts.

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For performance-based awards, stock-based compensation expense is recognized over the expected performance achievement period of individual performance milestones when the achievement of each individual performance milestone becomes probable.

For performance-based awards with a vesting schedule based entirely on the attainment of both performance and market conditions, stock-based compensation expense associated with each tranche is recognized over the longer of (i) the expected achievement period for the operational milestone for such tranche and (ii) the expected achievement period for the related market capitalization milestone determined on the grant date, beginning at the point in time when the relevant operational milestone is considered probable of being achieved.

If such operational milestone becomes probable any time after the grant date, we will recognize a cumulative catch-up expense from the grant date to that point in time.

If the related market capitalization milestone is achieved earlier than its expected achievement period and the achievement of the related operational milestone, then the stock-based compensation expense will be recognized over the expected achievement period for the operational milestone, which may accelerate the rate at which such expense is recognized.

The fair value of such awards is estimated on the grant date using Monte Carlo simulations.

As we accumulate additional employee stock-based awards data over time and as we incorporate market data related to our common stock, we may calculate significantly different volatilities and expected lives, which could materially impact the valuation of our stock-based awards and the stock-based compensation expense that we will recognize in future periods.

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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.

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

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

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

Automotive regulatory credits includes sales of regulatory credits to other automotive manufacturers.

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We monetize them proactively as new vehicles are sold based on standing arrangements with buyers of such credits, typically as close as possible to the production and delivery of the vehicle or changes in regulation impacting the credits.

Automotive leasing revenue includes the amortization of revenue for vehicles under direct operating lease agreements as well as those sold with resale value guarantees accounted for as operating leases under lease accounting.

Automotive leasing revenue includes the amortization of revenue for vehicles under direct operating lease agreements.

Additionally, automotive leasing revenue includes direct sales-type leasing programs where we recognize all revenue associated with the sales-type lease upon delivery to the customer.

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

Services and other revenue consists of non-warranty after-sales vehicle services and parts, paid Supercharging, sales of used vehicles, retail merchandise and vehicle insurance revenue.

2022 compared to 2021

Automotive sales revenue increased $19.52 billion, or 79%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to an increase of 433,815 Model 3 and Model Y cash deliveries year over year from production ramping at both Gigafactory Shanghai and the Fremont Factory at a slightly higher combined average selling price from a higher proportion of Model Y sales offset by regional sales mix.

Additionally, we had a $365 million net release of our sales return reserve on vehicles sold with resale value guarantees, which increased our automotive sales revenue, due to actual return rates being lower than expected and increases in resale values of our vehicles in 2021.

The increases in automotive sales revenue were partially offset by a decrease of 28,819 Model S and Model X cash deliveries at a higher combined average selling price 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 decreased $115 million, or 7%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to changes in regulation which entitled us to additional credits in the prior year and changes in pricing in certain regions.

Automotive leasing revenue increased $590 million, or 56%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to an increase in cumulative vehicles under our direct operating lease program and an increase in direct sales-type leasing revenue as we have a full year of sales in 2021 since we began offering the program during the third quarter of 2020 .

These increases were partially offset by the decrease in automotive leasing revenue associated with our resale value guarantee leasing programs accounted for as operating leases as those portfolios have declined.

Services and other revenue increased $1.50 billion, or 65%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to an increase in used vehicle revenue driven by increases in volume and average selling prices of used vehicles, non-warranty maintenance services revenue as our fleet continues to grow and retail merchandise revenue.

Automotive sales revenue increased $23.09 billion, or 52%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to an increase of 347,024 Model 3 and Model Y deliveries, and an increase of 38,183 Model S and Model X 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 despite a negative impact from the United States dollar strengthening against other foreign currencies in 2022 compared to the prior period.

There was also an increase in production of Model S and Model X and an increase in the combined 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 began ramping in the second and fourth quarters of 2021, respectively.

Further, during the fourth quarter of 2022, we recognized $324 million in revenue related to the general FSD feature release in North America.

Automotive regulatory credits revenue increased $311 million, or 21%, in the year ended December 31, 2022 as compared to the year ended December 31, 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 only an immaterial increase in automotive regulatory credits revenue.

Automotive leasing revenue increased $834 million, or 51%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

The change is primarily due to an increase in activities under our direct operating lease program as well as an increase in direct sales-type leasing revenue.

Services and other revenue increased $2.29 billion, or 60%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

The change is primarily due to increase in used vehicle revenue driven by increases in volume and average selling prices of used Tesla and non-Tesla vehicles, non-warranty maintenance services revenue as our fleet continues to grow, paid Supercharging revenue, insurance services revenue and retail merchandise revenue.

Energy Generation and Storage Segment

Energy generation and storage revenue 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 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.

2022 compared to 2021

Energy generation and storage revenue increased by $795 million, or 40%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to an increase in deployments of Megapack, solar cash and loan jobs, Powerwall and Solar Roof, partially offset by a decrease in Powerpack deployments as we phase out the product following the introduction of Megapack .

Energy generation and storage revenue increased $1.12 billion, or 40%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to an increase in energy storage deployments of Megapack, Powerwall and higher average selling price of Megapack, as well as on solar cash and loan deployments driven by price increases in 2022.

Cost of Revenues and Gross Margin

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Automotive & Services and Other Segment

Cost of automotive sales revenue includes direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, shipping and logistic costs, vehicle connectivity costs, allocations of electricity and infrastructure costs related to our Supercharger network and reserves for estimated warranty expenses.

Cost of automotive sales revenue includes direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, shipping and logistic costs, vehicle connectivity costs, allocations of electricity and infrastructure costs related to our free Supercharging programs and reserves for estimated warranty expenses.

Cost of automotive sales revenues also includes adjustments to warranty expense and charges to write down the carrying value of our inventory when it exceeds its estimated net realizable value and to provide for obsolete and on-hand inventory in excess of forecasted demand.

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Cost of automotive leasing revenue also includes vehicle connectivity costs and allocations of electricity and infrastructure costs related to our Supercharger network for vehicles under our leasing programs.

Cost of services and other revenue includes costs associated with providing non-warranty after-sales services, cost of used vehicles including refurbishment costs, costs for retail merchandise, and costs to provide vehicle insurance.

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 services and other revenue includes costs associated with providing non-warranty after-sales services and parts, costs of paid Supercharging, cost of used vehicles including refurbishment costs, costs for retail merchandise, and costs to provide vehicle insurance.

2022 compared to 2021

Cost of automotive sales revenue increased $12.72 billion, or 65%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to an increase of 433,815 Model 3 and Model Y cash deliveries.

Additionally, the net release of our sales return reserve on vehicles sold with resale value guarantees resulted in a corresponding increase of $286 million in cost of automotive sales revenue.

These increases were partially offset by a decrease of 28,819 Model S and Model X cash deliveries at higher costs per unit due to temporary under-utilization of manufacturing capacity at lower production volumes during our current production ramp of the new versions of Model S and Model X.

Additionally, there was a decrease in combined average Model 3 and Model Y costs per unit due to changes in regional production mix as Gigafactory Shanghai has ramped in capacity, where costs are lower from localized procurement and manufacturing in China.

Cost of automotive leasing revenue increased $415 million, or 74%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, 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 sales in the current year.

These increases were partially offset by the decrease in cost of automotive leasing revenue associated with our resale value guarantee leasing programs accounted for as operating leases as those portfolios have declined.

Cost of services and other revenue increased $1.24 billion, or 46%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to an increase in used vehicle cost of revenue driven by increases in volume and costs of non-Tesla used vehicles, costs to support our increase in non-warranty maintenance services revenue and costs of retail merchandise as our sales have increased.

Gross margin for total automotive increased from 25.6% in the year ended December 31, 2020 to 29.3% in the year ended December 31, 2021.

The increase was primarily due to favorable changes in sales and production mix of Model 3 and Model Y as Gigafactory Shanghai has ramped in capacity.

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

Additionally, our Model Y gross margin has benefitted from shared manufacturing of Model 3 and learnings from the scaling of past products.

These increases were partially offset by a decrease of $115 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 22.4% in the year ended December 31, 2020 to 26.9% in the year ended December 31, 2021, primarily due to the automotive gross margin impacts discussed above and an improvement in our services and other gross margin.

Additionally, there was a lower proportion of services and other, which operated at a lower gross margin than our automotive business, within the segment in the year ended December 31, 2021 compared to the prior year.

Cost of automotive sales revenue increased $17.18 billion, or 53%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021, in line with the growth in revenue year over year, as discussed above.

The average combined cost per unit of Model 3 and Model Y increased year over year due to rising raw material, logistics and warranty costs.

There were also idle capacity charges of $306 million primarily related to the temporary suspension of production at Gigafactory Shanghai as well as the ramping up of production in Gigafactory Texas and our proprietary battery cells manufacturing during the year ended December 31, 2022.

We had also incurred costs related to the ramp up of production in Gigafactory Berlin-Brandenburg during the year ended December 31, 2022.

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 from ramping up production.

Further, these increases in costs of revenue were positively impacted by the United States dollar strengthening against other foreign currencies in 2022 compared to the prior period.

Cost of automotive leasing revenue increased $531 million, or 54%, in the year ended December 31, 2022 as compared to the year ended December 31, 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 $1.97 billion, or 51%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

The change is primarily due to an increase in used vehicle cost of revenue driven by increases in volume and costs of used Tesla and non-Tesla vehicle sales, an increase in non-warranty maintenance service revenue, and an increase in costs of paid Supercharging, insurance services and retail merchandise.

Gross margin for total automotive decreased from 29.3% to 28.5% in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

This was driven by the changes in automotive sales revenue and cost of automotive sales revenue, partially offset by an increase in regulatory credits revenue, as discussed earlier.

Gross margin for total automotive & services and other segment decreased from 26.9% to 26.5% in the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to the automotive gross margin decrease discussed above, partially offset by an improvement in our services and other gross margin.

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

Energy Generation and Storage Segment

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2022 compared to 2021

Cost of energy generation and storage revenue increased by $942 million, or 48%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to increases in deployments of Solar Roof, solar cash and loan jobs, Megapack and Powerwall, partially offset by reductions in average costs per unit of Solar Roof as deployments have increased and a decrease in Powerpack deployments as we phase out the product following the introduction of Megapack.

Gross margin for energy generation and storage decreased from 0.9% in the year ended December 31, 2020 to -4.6% in the year ended December 31, 2021, primarily due to a higher proportion of Solar Roof in our overall energy business which operated at a lower gross margin as a result of temporary manufacturing underutilization during product ramp despite an improvement in gross margin compared to the prior year and lower Powerpack gross margin as fixed cost absorptions are negatively impacted as we phase out the product following the introduction of Megapack.

These decreases were partially offset by a higher proportion of Powerwall in our overall energy business which operated at a higher gross margin as well as an increase in Megapack gross margin as we continue to scale the products.

Cost of energy generation and storage revenue increased $703 million, or 24%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to increases in energy storage deployments of Megapack and Powerwall, as well as higher average cost of solar cash and loan deployments due to increased component costs.

Gross margin for energy generation and storage increased from -4.6% to 7.4% in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

This was driven by the growth in energy generation and storage revenue and cost of energy generation and storage revenue as discussed above.

Additionally, there was a higher proportion of energy storage sales, which operated at a higher gross margin, within the segment.

Research and Development Expense

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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 $1.10 billion, or 74%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020.

The increase was primarily due to a $506 million increase in employee and labor related expenses due to an increase in headcount, a $263 million increase in R&D expensed materials, a $211 million increase in facilities, outside services, freight and depreciation expense and an $103 million increase in stock-based compensation expense.

These increases were to support our expanding product roadmap such as the new versions of Model S and Model X and technologies including our proprietary battery cells and there were additional R&D expenses as we were in the pre-production phases at both Gigafactory Texas and Gigafactory Berlin in the current year.

R&D expenses as a percentage of revenue remained consistent at 5% in the year ended December 31, 2021 as compared to the year ended December 31, 2020.

R&D expenses increased proportionately with the increase in total revenues from expanding sales.

R&D expenses increased $482 million, or 19%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

The increase was primarily due to a $175 million increase in employee and labor related expenses, a $132 million increase in facilities, outside services, freight and depreciation expense, a $101 million increase in R&D expensed materials and an $87 million increase in stock-based compensation expense.

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

Further, 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 year ended December 31, 2022 as compared to the year ended December 31, 2021.

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

Selling, General and Administrative Expense

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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 increased $1.37 billion, or 44%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020.

The increase is primarily due to an increase of $568 million in employee and labor related expenses from increased headcount and increased payroll taxes due to our higher average share price in the year ended December 31, 2021 compared to the prior year.

Additionally, there was $340 million of additional payroll tax due to our CEO's option exercises from the 2012 CEO Performance Award, a $319 million increase in office, information technology, facilities-related expenses, sales and marketing activities and other costs and an increase of $145 million in stock-based compensation expense, of which $72 million was attributable to the 2018 CEO Performance Award.

SG&A expenses decreased $571 million, or 13%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

This is primarily due to a decrease of $822 million in stock-based compensation expense, most of which is attributable to the lower stock-based compensation expense of $844 million on the 2018 CEO Performance Award.

This was partially offset by the overall growth in stock-based compensation due to increased headcount.

See Note 13, Equity Incentive Plans , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

SG&A expenses as a percentage of revenue decreased from 10% in the year ended December 31, 2020 to 8% in the year ended December 31, 2021.

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

There was also a decrease of $87 million in overall employee and labor related expenses driven by a decrease of $340 million of additional payroll tax due to our CEO's option exercises from the 2012 CEO Performance Award in 2021, partially offset by an increase in other employee and labor costs from increased headcount.

These decreases were partially offset by an increase of $222 million in facilities-related expenses, and an increase of $117 million in professional services, sales and marketing activities and other costs.

SG&A expenses as a percentage of revenue decreased from 8% to 5% in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

Our SG&A expenses have decreased as a proportion of total revenues due to the decrease in expenses as discussed above, in addition to operational efficiencies.

Restructuring and Other Expense

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Not meaningful

As a percentage of revenues

During the year ended December 31, 2021, we recorded $101 million of impairment losses on bitcoin.

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

See Note 2, Summary of Significant Accounting Policies , and Note 3, Digital Assets, Net , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.

Not meaningful

During the years ended December 31, 2022 and 2021, we recorded $204 million and $101 million, respectively, of impairment losses on digital assets, respectively.

During the years ended December 31, 2022 and 2021, we also realized gains of $64 million and $128 million, respectively, in connection with converting our holdings of digital assets into fiat currency.

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

Additionally, we recorded other expenses of $36 million during the second quarter of the year ended December 31, 2022, related to employee terminations.

Interest Income

Year Ended December 31,

(Dollars in millions)

Interest income

Interest income increased $241 million, or 430%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

This increase was primarily due to higher interest earned on our cash and cash equivalents and short-term investments during the year ended 2022 compared to the prior period.

This was driven by an increase in our average cash and cash equivalents and short-term investments balance and rising interest rates.

Interest Expense

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Interest expense

As a percentage of revenues

Interest expense decreased by $377 million, or 50%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to a reduction of $173 million as a result of the adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, on January 1, 2021, whereby we have de-recognized the remaining debt discounts on the 2022 Notes and 2024 Notes and therefore no longer recognize any amortization of debt discounts as interest expense, as well as the continued reduction in our overall debt balance.

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

Other Income (Expense), Net

Interest expense decreased $180 million, or 49%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

This decrease was primarily due to the continued reduction in our overall debt balance offset by lower capitalized interest.

See Note 11, Debt , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.

Other (Expense) Income, Net

Year Ended December 31,

(Dollars in millions)

Other income (expense), net

Other (expense) income, net

Not meaningful

As a percentage of revenues

Other income (expense), 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.

Other (expense) income, net, consists primarily of foreign exchange gains and losses related to our foreign currency-denominated monetary assets and liabilities.

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

Other income (expense), net, changed favorably by $257 million in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to favorable fluctuations in foreign currency exchange rates and a $49 million favorable change in the mark-to-market remeasurement of our interest rate swaps.

Other (expense) income, net, changed unfavorably by $178 million in the year ended December 31, 2022 as compared to the year ended December 31, 2021.

The change is primarily due to fluctuations in foreign currency exchange rates.

Provision for Income Taxes

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Effective tax rate

Our provision for income taxes increased by $407 million, or 139%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to the increases in taxable profits within our foreign jurisdictions year over year.

Our effective tax rate decreased from 25% to 11% in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily due to growth in pre-tax income and changes in mix of jurisdictional earnings.

Our provision for income taxes increased by $433 million, or 62%, in the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to the increase in our pre-tax income year over year.

Our effective tax rate decreased from 11% to 8% in the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to changes in mix of jurisdictional earnings.

See Note 14, Income Taxes , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.

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(Dollars in millions)

Net income attributable to noncontrolling interests and

redeemable noncontrolling interests in subsidiaries

Net income attributable to noncontrolling

interests and redeemable noncontrolling interests

in subsidiaries

Net income attributable to noncontrolling interests and redeemable noncontrolling interests decreased by $94 million, or 75%, in the year ended December 31, 2022 as compared to the year ended December 31, 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 construction and 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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However, due to contractual terms, variability in the precise growth curves of our development and production ramps, and opportunities to renegotiate pricing, we generally do not have binding and enforceable purchase orders under such contracts beyond the short-term, and the timing and magnitude of purchase orders beyond such period is difficult to accurately project.

As discussed in and subject to the considerations referenced in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Management Opportunities, Challenges and Risks and 2022 Outlook—Cash Flow and Capital Expenditure Trends in this Annual Report on Form 10-K, we currently expect our capital expenditures to support our projects globally to be between $5.00 to $7.00 billion in 2022 and each of the next two fiscal years.

As discussed in and subject to the considerations referenced in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Management Opportunities, Challenges and Risks and 2023 Outlook—Cash Flow and Capital Expenditure Trends in this Annual Report on Form 10-K, we currently expect our capital expenditures to support our projects globally to be between $6.00 to $8.00 billion in 2023 and between $7.00 to $9.00 billion in each of the following two fiscal years.

In connection with our operations at Gigafactory New York, we have an agreement to spend or incur $5.00 billion in combined capital, operational expenses, costs of goods sold and other costs in the State of New York through December 31, 2029 (pursuant to a deferral of our required timelines to meet such obligations that was granted in April 2021, and which was memorialized in an amendment to our agreement with the SUNY Foundation in August 2021).

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As of December 31, 2022, we and our subsidiaries had outstanding $2.06 billion in aggregate principal amount of indebtedness, of which $1.02 billion is scheduled to become due in the succeeding 12 months.

As of December 31, 2021, our total minimum lease payments are $4.03 billion, of which $1.04 billion is due in the succeeding 12 months.

As of December 31, 2022, our total minimum lease payments was $4.28 billion, of which $1.14 billion is due in the succeeding 12 months.

For details regarding our indebtedness and lease obligations, refer to Note 11, Debt , and Note 12, Leases , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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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 December 31, 2021, we had $17.58 billion of cash and cash equivalents.

As of December 31, 2022, we had $16.25 billion and $5.93 billion of cash and cash equivalents and short-term investments, respectively.

Balances held in foreign currencies had a U.S.

dollar equivalent of $7.22 billion and consisted primarily of Chinese yuan, euros and Canadian dollars.

In addition, we had $1.11 billion of unused committed amounts under our credit facilities as of December 31, 2021.

dollar equivalent of $3.42 billion and consisted primarily of Chinese yuan, euros and British pounds.

In addition, we had $2.42 billion of unused committed amounts under our credit facilities as of December 31, 2022, which included $2.27 billion under our Credit Agreement which was terminated in January 2023.

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).

In January 2023, we entered into an unsecured revolving credit facility providing for a commitment of up to $5.0 billion.

For details regarding our indebtedness, refer to Note 11 , Debt , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We continue adapting our investment strategy to meet our liquidity and risk objectives, such as investing in U.S.

government and other marketable securities, digital assets and providing product related financing.

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

The fair market value of our bitcoin holdings as of December 31, 2021 was $1.99 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 $131 million as of December 31, 2021.

We continue adapting our strategy to meet our liquidity and risk objectives, such as investing in U.S.

government and other investments, to do more vertical integration, expand our product roadmap and provide financing options to our customers.

Summary of Cash Flows

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Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as research and development and selling, general and administrative and working capital.

Our operating cash inflows include cash from vehicle sales and related servicing, customer lease payments, customer deposits, cash from sales of regulatory credits and energy generation and storage products.

Our operating cash inflows include cash from vehicle sales and related servicing, customer lease and financing payments, customer deposits, cash from sales of regulatory credits and energy generation and storage products.

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 $3.23 billion to $14.72 billion during the year ended December 31, 2022 from $11.50 billion during the year ended December 31, 2021.

This increase was primarily due to the increase in net income excluding non-cash expenses and gains of $5.22 billion and the overall decrease in net operating assets and liabilities of $334 million.

The decrease in our net operating assets and liabilities was mainly driven by a larger increase of accounts payable and accrued liabilities in the year ended December 31, 2021 as compared to the prior year from ramp up in production at Gigafactory Shanghai and the Fremont Factory.

The decrease in our net operating assets and liabilities was partially offset by larger increases of inventory and operating lease vehicles compared to the prior year.

This increase was primarily due to the increase in net income excluding non-cash expenses, gains and losses of $7.65 billion, offset by the overall increase in net operating assets and liabilities of $4.43 billion.

The increase in our net operating assets and liabilities was mainly driven by a larger increase of inventory in the year ended December 31, 2022 as compared to the year ended December 31, 2021, partially offset by a larger increase of accounts payable and accrued liabilities, to support the ramp up in production at our factories and larger increases in other non-current assets and prepaid expenses and other current assets.

Additionally, the increase in our net operating assets and other liabilities was partially offset by a larger increase in other long-term liabilities as compared to the prior year.

Cash Flows from Investing Activities

Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $6.48 billion for the year ended December 31, 2021 and $3.16 billion for the year ended December 31, 2020, mainly for the construction of Gigafactory Texas and Gigafactory Berlin and the expansions of Gigafactory Shanghai and the Fremont Factory.

Additionally, net cash outflows related to digital assets were $1.23 billion in the year ended December 31, 2021 from purchases of digital assets for $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 $7.16 billion for the year ended December 31, 2022 and $6.48 billion for the year ended December 31, 2021, mainly for the expansions of Gigafactory Texas, the Fremont Factory, Gigafactory Berlin-Brandenburg, and Gigafactory Shanghai.

We also purchased $5.84 billion of investments in the year ended December 31, 2022.

Additionally, cash inflows related to sales of digital assets were $936 million in the year ended December 31, 2022, and net cash outflows related to digital assets were $1.23 billion in the year ended December 31, 2021 from purchases of digital assets for $1.50 billion offset by proceeds from sales of digital assets of $272 million.

Cash Flows from Financing Activities

Cash outflows from financing activities were $5.20 billion during the year ended December 31, 2021 compared to $9.97 billion net cash provided by financing activities during the year ended December 31, 2020.

The change was primarily due to no equity offerings in 2021 compared to $12.27 billion of proceeds from issuances of common stock net of issuance costs in 2020, a $3.37 billion increase in net repayments of convertible and other debt compared to the prior year, offset by an increase in proceeds from exercise of stock options and other stock issuances of $290 million and a decrease in collateralized lease repayments of $231 million compared to the prior year.

Net cash used in financing activities decreased by $1.68 billion to $3.53 billion during the year ended December 31, 2022 from $5.20 billion during the year ended December 31, 2021.

The decrease was primarily due to a $1.92 billion decrease in repayments of convertible and other debt, net of proceeds from issuances of debt.

See Note 11, Debt , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details regarding our debt obligations.

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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-K

Item 5. Market for Registrant’s Common Equity