What changed in this filing

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Item 1. Financial Statements

2023-07-24 compared with 2023-04-24 · 238 added, 151 removed, 745 unchanged (34% of the section changed)

37 unchanged sentences

3,174 and 3,164 shares issued and outstanding as of

March 31, 2023 and December 31, 2022, respectively

June 30, 2023 and December 31, 2022, 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

15 unchanged sentences

Selling, general and administrative

Restructuring and other

Total operating expenses

2 unchanged sentences

Interest expense

Other (expense) income, net

Other income, net

Income before income taxes

Provision for income taxes

Net income (loss) attributable to noncontrolling

Net (loss) income attributable to noncontrolling

interests and redeemable noncontrolling interests

9 unchanged sentences

(in millions)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income (loss):

Foreign currency translation adjustment

Unrealized net gain (loss) on investments

Unrealized net (loss) gain on investments

Adjustment for net loss realized and included in net income

Comprehensive income

Comprehensive income (loss) attributable to

Comprehensive (loss) income attributable to

noncontrolling interests and redeemable

9 unchanged sentences

Stockholders’

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Balance as of March 31, 2023

Exercises of conversion feature of

convertible senior notes

Issuance of common stock for equity

incentive awards

Stock-based compensation

Distributions to noncontrolling interests

Buy-outs of noncontrolling interests

Other comprehensive income

Balance as of June 30, 2023

Noncontrolling

Comprehensive

Stockholders’

Six Months Ended June 30, 2023

Balance as of December 31, 2022

7 unchanged sentences

Other comprehensive income

Balance as of June 30, 2023

Noncontrolling

Comprehensive

Stockholders’

Three Months Ended June 30, 2022

Balance as of March 31, 2022

Exercises of conversion feature of

convertible senior notes

Settlement 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

2 unchanged sentences

Stockholders’

Three Months Ended March 31, 2022

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 March 31, 2022

Balance as of June 30, 2022

(1) Prior period results have been adjusted to reflect the three -for-one stock split effected in the form of a stock dividend in August 2022 .

2 unchanged sentences

(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

Changes in operating assets and liabilities:

11 unchanged sentences

Purchases of solar energy systems, net of sales

Proceeds from sales of digital assets

Purchase of intangible assets

1 unchanged sentence

Proceeds from maturities of investments

Proceeds from sales of investments

Business combinations, net of cash acquired

Net cash used in investing activities

8 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents and restricted cash

Net decrease in cash and cash equivalents and restricted cash

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

Cash and cash equivalents and restricted cash, beginning of period

11 unchanged sentences

(“Tesla”, the “Company”, “we”, “us”

or “our”), including the consolidated balance sheet as of March 31, 2023, the consolidated statements of operations, the consolidated statements of comprehensive income, the consolidated statements of redeemable noncontrolling interests and equity, and the consolidated statements of cash flows for the three months ended March 31, 2023 and 2022, as well as other information disclosed in the accompanying notes, are unaudited.

or “our”), including the consolidated balance sheet as of June 30, 2023, 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, 2023 and 2022, and the consolidated statements of cash flows for the six months ended June 30, 2023 and 2022, as well as other information disclosed in the accompanying notes, are unaudited.

The consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements as of that date.

7 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

8 unchanged sentences

Automotive Sales Revenue

The total sales return reserve on vehicles sold with resale value guarantees was $ 68 million and $ 91 million as of March 31, 2023 and December 31, 2022, respectively, of which $ 34 million and $ 40 million was short-term, respectively.

Deferred revenue is related to the access to our Full Self Driving (“FSD”) features and ongoing maintenance, internet connectivity, free Supercharging programs and over-the-air software updates primarily on automotive sales, which amounted to $ 3.04 billion and $ 2.91 billion as of March 31, 2023 and December 31, 2022, respectively.

Deferred revenue is related to the access to our Full Self Driving (“FSD”) features and ongoing maintenance, internet connectivity, free Supercharging programs and over-the-air software updates primarily on automotive sales, which amounted to $ 3.17 billion and $ 2.91 billion as of June 30, 2023 and December 31, 2022, 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, 2022 and 2021 was $ 134 million and $ 66 million for three months ended March 31, 2023 and 2022, respectively.

Of the total deferred revenue balance as of March 31, 2023, we expect to recognize $ 679 million of revenue in the next 12 months.

Revenue recognized from the deferred revenue balance as of December 31, 2022 and 2021 was $ 256 million and $ 121 million for six months ended June 30, 2023 and 2022, respectively.

Of the total deferred revenue balance as of June 30, 2023, we expect to recognize $ 747 million 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.

We have been providing loans for financing our automotive deliveries in volume since fiscal year 2022.

As of March 31, 2023 and December 31, 2022 , we have recorded net financing receivables on the consolidated balance sheets, of which $ 191 million and $ 128 million, respectively, is recorded within Accounts receivable, net, for the current portion and $ 966 million and $ 665 million, respectively, is recorded within Other non-current assets for the long-term portion.

As of June 30, 2023 and December 31, 2022 , we have recorded net financing receivables on the consolidated balance sheets, of which $ 234 million and $ 128 million, respectively, is recorded within Accounts receivable, net, for the current portion and $ 1.15 billion and $ 665 million, respectively, is recorded within Other non-current assets for the long-term portion.

Automotive Regulatory Credits

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.

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, 2023, we recognized $ 101 million of sales-type leasing revenue and $ 76 million of sales-type leasing cost of revenue.

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 and six months ended June 30, 2023, we recognized $ 76 million and $ 177 million, respectively, of sales-type leasing revenue and $ 57 million and $ 133 million, respectively, 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.

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

March 31, 2023

June 30, 2023

December 31, 2022

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

As of March 31, 2023 and December 31, 2022, deferred revenue related to such customer payments amounted to $ 770 million and $ 863 million, respectively, mainly due to billings for milestone payments.

Revenue recognized from the deferred revenue balance as of December 31, 2022 and 2021 was $ 230 million and $ 52 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, 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 $ 209 million.

Of this amount, we expect to recognize $ 12 million in the next 12 months and the remaining over a period up to 25 years.

As of June 30, 2023 and December 31, 2022, deferred revenue related to such customer payments amounted to $ 1.10 billion and $ 863 million, respectively, mainly due to billings for milestone payments.

Revenue recognized from the deferred revenue balance as of December 31, 2022 and 2021 was $ 329 million and $ 79 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, 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 $ 814 million.

Of this amount, we expect to recognize $ 207 million in the next 12 months and the rest over the remaining performance obligation period.

We have been providing loans for financing our energy generation products in volume since fiscal year 2022.

As of March 31, 2023 and December 31, 2022 , we have recorded net financing receivables on the consolidated balance sheets, of which $ 29 million and $ 24 million, respectively, is recorded within Accounts receivable, net, for the current portion and $ 448 million and $ 387 million, respectively, is recorded within Other non-current assets for the long-term portion.

As of June 30, 2023 and December 31, 2022 , we have recorded net financing receivables on the consolidated balance sheets, of which $ 28 million and $ 24 million, respectively, is recorded within Accounts receivable, net, for the current portion and $ 504 million and $ 387 million, respectively, is recorded within Other non-current assets for the long-term portion.

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

As of March 31, 2023 and December 31, 2022 , the aggregate balances of our gross unrecognized tax benefits were $ 926 million and $ 870 million, respectively, of which $ 578 million and $ 572 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, 2023 and December 31, 2022 , the aggregate balances of our gross unrecognized tax benefits were $ 1.01 billion and $ 870 million, respectively, of which $ 601 million and $ 572 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.

We file income tax returns in the U.S.

9 unchanged sentences

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

4 unchanged sentences

The following table presents the reconciliation of basic to diluted weighted average shares used in computing net income per share of common stock attributable to common stockholders, as adjusted to give effect to the three -for-one stock split effected in the form of a stock dividend in August 2022 (the “2022 Stock Split”) (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

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

3 unchanged sentences

The following table presents the potentially dilutive shares that were excluded from the computation of diluted net income per share of common stock attributable to common stockholders, because their effect was anti-dilutive, as adjusted to give effect to the 2022 Stock Split (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock-based awards

11 unchanged sentences

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

As of March 31, 2023 and December 31, 2022 , we had $ 575 million and $ 753 million, respectively, of long-term government rebates receivable in Other non-current assets in our consolidated balance sheets.

As of June 30, 2023 and December 31, 2022 , we had $ 330 million and $ 753 million, respectively, of long-term government rebates receivable in Other non-current assets in our consolidated balance sheets.

Financing Receivables

As of March 31, 2023 and December 31, 2022, the majority of our financing receivables were at current status with only immaterial balances being past due.

As of March 31, 2023, the majority of our financing receivables, excluding MyPower notes receivable, were originated in 2023 and 2022, and as of December 31, 2022, the majority of our financing receivables, excluding MyPower notes receivable, were originated in 2022.

As of March 31, 2023 and December 31, 2022 , the total outstanding balance of MyPower customer notes receivable, net of allowance for expected credit losses, was $ 276 million and $ 280 million, respectively, of which $ 6 million and $ 7 million were due in the next 12 months as of March 31, 2023 and December 31, 2022, respectively.

As of March 31, 2023 and December 31, 2022 , the allowance for expected credit losses was $ 37 million.

As of June 30, 2023 and December 31, 2022, the majority of our financing receivables were at current status with only immaterial balances being past due.

As of June 30, 2023, the majority of our financing receivables, excluding MyPower notes receivable, were originated in 2023 and 2022, and as of December 31, 2022, the majority of our financing receivables, excluding MyPower notes receivable, were originated in 2022.

As of June 30, 2023 and December 31, 2022 , the total outstanding balance of MyPower customer notes receivable, net of allowance for expected credit losses, was $ 272 million and $ 280 million, respectively, of which $ 7 million was due in the next 12 months as of June 30, 2023 and December 31, 2022.

As of June 30, 2023 and December 31, 2022 , the allowance for expected credit losses was $ 37 million.

Concentration of Risk

3 unchanged sentences

These deposits are typically in excess of insured limits.

As of March 31, 2023 and December 31, 2022 , no entity represented 10 % or more of our total receivables balance.

As of June 30, 2023 and December 31, 2022 , 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, 2023 and December 31, 2022 was $ 6.56 billion and $ 6.08 billion, respectively.

Operating lease vehicles on the consolidated balance sheets are presented net of accumulated depreciation of $ 1.09 billion and $ 1.04 billion as of March 31, 2023 and December 31, 2022 , respectively.

The gross cost of operating lease vehicles as of June 30, 2023 and December 31, 2022 was $ 7.13 billion and $ 6.08 billion, respectively.

Operating lease vehicles on the consolidated balance sheets are presented net of accumulated depreciation of $ 1.19 billion and $ 1.04 billion as of June 30, 2023 and December 31, 2022 , respectively.

Goodwill increased $ 69 million within the automotive segment from $ 194 million as of December 31, 2022 to $ 263 million as of June 30, 2023 primarily from a business combination.

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

23 unchanged sentences

Some of these measures are expected to materially affect our consolidated financial statements.

For the three month period ended March 31, 2023, the impact was primarily a reduction of our material costs.

For the six months ended June 30, 2023, the impact was primarily a reduction of our material costs.

We will continue to evaluate the effects of IRA as more guidance is issued and the relevant implications to our consolidated financial statements.

9 unchanged sentences

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

March 31, 2023

June 30, 2023

December 31, 2022

5 unchanged sentences

government securities, certificates of deposit, time deposits and corporate debt securities are classified within Level II of the fair value hierarchy and the market approach was used to determine fair value of these investments.

Our cash, cash equivalents and investments classified by security type as of March 31, 2023 and December 31, 2022 consisted of the following (in millions):

March 31, 2023

Our cash, cash equivalents and investments classified by security type as of June 30, 2023 and December 31, 2022 consisted of the following (in millions):

June 30, 2023

Adjusted Cost

19 unchanged sentences

Total cash, cash equivalents and short-term investments

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

For the three months ended March 31, 2023 and 2022, we did not recognize any material gross realized gains, losses or credit losses.

The ending allowance balances for credit losses were immaterial as of March 31, 2023 and December 31, 2022.

We have determined that the gross unrealized losses on our investments as of March 31, 2023 and December 31, 2022 were temporary in nature.

The following table summarizes the fair value of our investments by stated contractual maturities as of March 31, 2023 (in millions):

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 and six months ended June 30, 2023 and 2022, we did not recognize any material gross realized gains, losses or credit losses.

The ending allowance balances for credit losses were immaterial as of June 30, 2023 and December 31, 2022.

We have determined that the gross unrealized losses on our investments as of June 30, 2023 and December 31, 2022 were temporary in nature.

The following table summarizes the fair value of our investments by stated contractual maturities as of June 30, 2023 (in millions):

Due in 1 year or less

3 unchanged sentences

Our financial instruments that are not re-measured at fair value include accounts receivable, financing receivables, digital assets, accounts payable, accrued liabilities, customer deposits and debt.

The carrying values of these financial instruments approximate their fair values, other than our 2.00 % Convertible Senior Notes due in 2024 (“2024 Notes”) and digital assets.

The carrying values of these financial instruments materially approximate their fair values, other than our 2.00 % Convertible Senior Notes due in 2024 (“2024 Notes”) and digital assets.

We estimate the fair value of the 2024 Notes using commonly accepted valuation methodologies and market-based risk measurements that are indirectly observable, such as credit risk (Level II).

1 unchanged sentence

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

March 31, 2023

June 30, 2023

December 31, 2022

10 unchanged sentences

We write-down inventory for any excess or obsolete inventories or when we believe that the net realizable value of inventories is less than the carrying value.

During the three months ended March 31, 2023 and 2022, we recorded write-downs of $ 39 million and $ 26 million, respectively, in Cost of revenues in the consolidated statements of operations.

During the three and six months ended June 30, 2023, we recorded write-downs of $ 66 million and $ 105 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.

Note 4 –

7 unchanged sentences

Accumulated depreciation

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

Depreciation expense during the three months ended March 31, 2023 and 2022 was $ 722 million and $ 551 million, respectively.

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

Depreciation expense during the three and six months ended June 30, 2023 was $ 816 million and $ 1.54 billion, respectively.

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

Note 5 –

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Note 7 –

The following is a summary of our debt and finance leases as of March 31, 2023 (in millions):

The following is a summary of our debt and finance leases as of June 30, 2023 (in millions):

Net Carrying Value

8 unchanged sentences

Automotive Asset-backed Notes

February 2024 - September 2025

March 2025 - September 2025

Solar Asset-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, 2023, we were in material compliance with all financial debt covenants.

During the first quarter of 2023, 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 2023.

As of June 30, 2023, we were in material compliance with all financial debt covenants.

During the first two quarters of 2023, 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 2023.

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’

5 unchanged sentences

During the fourth quarter of 2021, the Compensation Committee of our Board of Directors granted to certain employees performance-based RSUs and stock options to purchase an aggregate 2.2 million shares of our common stock, as adjusted to give effect to the 2022 Stock Split.

As of March 31, 2023, we had unrecognized stock-based compensation expense of $ 170 million, which will be recognized over a weighted-average period of 3 years.

For the three months ended March 31, 2023 and 2022, we recorded $ 25 million and $ 69 million, respectively, of stock-based compensation expense related to this grant, net of forfeitures.

As of June 30, 2023, we had unrecognized stock-based compensation expense of $ 140 million, which will be recognized over a weighted-average period of 2.75 years.

For the three and six months ended June 30, 2023, we recorded $ 20 million and $ 45 million, respectively, of stock-based compensation expense related to this grant, net of forfeitures.

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

6 unchanged sentences

For a description of our operating lease arrangements in Buffalo, New York, and Shanghai, China, refer to Note 15, Commitments and Contingencies , in our Annual Report on Form 10-K for the year ended December 31, 2022.

As of March 31, 2023, we expect to meet the requirements under these arrangements based on our current and anticipated level of operations.

As of June 30, 2023, we expect to meet the requirements under these arrangements based on our current and anticipated level of operations.

Legal Proceedings

14 unchanged sentences

On May 26, 2022, the plaintiff filed a notice of appeal.

Oral argument was held before the Supreme Court of Delaware on March 29, 2023.

Oral argument was held before the Supreme Court of Delaware on March 29, 2023, and on June 6, 2023, the Supreme Court of Delaware affirmed the Court of Chancery’s decision.

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

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Trial is currently set for November 27, 2023, to December 1, 2023.

On July 14, 2023, the parties filed a Stipulation and Agreement of Compromise and Settlement, which does not involve an admission of any wrongdoing by any party.

If the settlement is approved by the Court, this action will be fully settled and dismissed with prejudice.

Pursuant to the terms of the agreement, Tesla will provide notice of the proposed settlement to stockholders of record as of July 14, 2023.

The Court will hold a hearing regarding the settlement on October 13, 2023.

The general terms, conditions and timing of this proposed settlement are further set forth in the Form 8-K filed on July 20, 2023, which includes, among other things, the court-approved notice of the proposed settlement.

The settlement is not expected to have an adverse impact on our results of operations, cash flows or financial position.

Litigation Relating to Potential Going Private Transaction

5 unchanged sentences

Trial started on January 17, 2023, and on February 3, 2023, a jury rendered a verdict in favor of the defendants on all counts.

After trial, plaintiffs filed a motion for judgment as a matter of law and a motion for new trial, which the defendants opposed.

After trial, plaintiffs filed a motion for judgment as a matter of law and a motion for new trial, which the Court denied and judgement was entered in favor of defendants on July 11, 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.

8 unchanged sentences

Among other things, the plaintiff seeks reforms to the Company’s corporate governance and internal procedures, unspecified damages, and attorneys’

The parties reached an agreement to stay the case until June 5, 2023.

The parties reached an agreement to stay the case until September 5, 2023.

On November 15, 2021, JPMorgan Chase Bank (“JP Morgan”) filed a lawsuit against Tesla in the Southern District of New York alleging breach of a stock warrant agreement that was entered into as part of a convertible notes offering in 2014.

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Additionally, on June 1, 2022 the Equal Employment Opportunity Commission (“EEOC”) issued a cause finding against Tesla that closely parallels the CRD’s allegations.

Tesla will engage in a mandatory mediation with the EEOC in June 2023.

Tesla engaged in a mandatory mediation with the EEOC in June 2023, which did not result in a resolution.

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

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(FSDC), (2) cease the sale and activation of FSDC and deactivate FSDC on Tesla vehicles, and (3) provide certain notices to consumers about proposed court-findings about the accuracy of the use of the terms Autopilot and FSDC.

Tesla opposed the motion.

On February 27, 2023, a proposed class action was filed in the U.S.

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District Court for the Northern District of California.

Several similar complaints have also been filed in the same court.

Several similar complaints have also been filed in the same court and these cases have now all been consolidated.

These complaints allege that Tesla violates federal antitrust and warranty laws through its repair, service, and maintenance practices and seeks, among other relief, damages for persons who paid Tesla for repairs services or Tesla compatible replacement parts from March 2019 to March 2023.

On July 17, 2023, these plaintiffs filed a consolidated amended complaint.

The Company intends to vigorously defend itself in these matters;

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Should the government decide to pursue an enforcement action, there exists the possibility of a material adverse impact on our business, results of operation, prospects, cash flows and financial position.

We are also subject to various other legal proceedings and claims that arise from the normal course of business activities.

If an unfavorable ruling or development were to occur, there exists the possibility of a material adverse impact on our business, results of operations, prospects, cash flows, financial position and brand.

We are also subject to various other legal proceedings, risks and claims that arise from the normal course of business activities.

For example, during the second quarter of 2023, a foreign news outlet reported that it obtained certain misappropriated data including, purportedly, among other things, non-public Tesla business and personal information.

While Tesla’s investigation remains ongoing, we are working with certain law enforcement and other authorities.

If an unfavorable ruling or development were to occur in this or other possible legal proceedings, risks and claims, there exists the possibility of a material adverse impact on our business, results of operations, prospects, cash flows, financial position or brand.

Note 10 –

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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

1 unchanged sentence

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

11 unchanged sentences

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

In 2023, we produced 440,808 consumer vehicles and delivered 422,875 consumer vehicles through the first quarter.

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

In 2023, we deployed 3.89 GWh of energy storage products and 67 megawatts of solar energy systems through the first quarter.

In 2023, we produced 920,508 consumer vehicles and delivered 889,015 consumer vehicles through the second quarter.

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

In 2023, we deployed 7.54 GWh of energy storage products and 133 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 solar energy systems.

During the three months ended March 31, 2023, we recognized total revenues of $23.33 billion, representing an increase of $4.57 billion, compared to the prior year.

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

During the three months ended March 31, 2023, our net income attributable to common stockholders was $2.51 billion, representing an unfavorable change of $805 million, compared to the prior year.

During the three and six months ended June 30, 2023, we recognized total revenues of $24.93 billion and $48.26 billion, respectively, representing increases of $7.99 billion and $12.57 billion, respectively, over the same periods ended June 30, 2022.

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

During the three and six months ended June 30, 2023, our net income attributable to common stockholders was $2.70 billion and $5.22 billion, respectively, representing a favorable change of $444 million and an unfavorable change of $361 million, respectively, over the same periods ended June 30, 2022.

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

We ended the first quarter of 2023 with $22.40 billion in cash and cash equivalents and investments, representing an increase of $217 million from the end of 2022.

Our cash flows provided by operating activities during the three months ended March 2023 and 2022 were $2.51 billion and $4.00 billion, respectively, representing a decrease of $1.48 billion.

Capital expenditures amounted to $2.07 billion during the three months ended March 31, 2023, compared to $1.77 billion during the same period ended March 31, 2022.

We ended the second quarter of 2023 with $23.08 billion in cash and cash equivalents and investments, representing an increase of $890 million from the end of 2022.

Our cash flows provided by operating activities during the six months ended June 30, 2023 and 2022 were $5.58 billion and $6.35 billion, respectively, representing a decrease of $768 million.

Capital expenditures amounted to $4.13 billion during the six months ended June 30, 2023, compared to $3.50 billion during the same period ended June 30, 2022.

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

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Pilot production

Tesla Roadster

Next Generation Platform

In development

Robotaxi & Others

Tesla Roadster

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.

We are focused on growing our manufacturing capacity, which includes capacity for manufacturing new vehicle models such as our Cybertruck and next generation platform, and ramping all of our production vehicles to their installed production capacities as well as increasing production rate and efficiency at our current factories.

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

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

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.

These plans are subject to uncertainties inherent in establishing and ramping manufacturing operations, which may be exacerbated by new product and manufacturing technologies we introduce, the number of concurrent international projects, any industry-wide component constraints, labor shortages and any future impact from events outside of our control.

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.

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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.

affordability and have allowed us to competitively price our vehicles.

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

performance and functionality, including through products based on artificial intelligence such as Autopilot and FSD, and other software features, and delivering new vehicles, such as our upcoming Cybertruck.

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

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

However, we operate in a cyclical industry that is sensitive to political and regulatory uncertainty, including with respect to trade and the environment, all of which can be compounded by inflationary pressures, rising energy prices, increases in interest rates and the liquidity of enterprise customers.

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These macroeconomic and industry trends have had, and will likely continue to have, an impact on the pricing of, and order rate for our vehicles, and in turn our operating margin.

We will continue to adjust accordingly to such developments, and we believe our ongoing cost reduction, including improved production innovation and efficiency at our newest factories and lower logistics costs, and focus on operating leverage will continue to benefit us in relation to our competitors.

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

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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.

In particular, as other automotive manufacturers have announced their adoption of the North American Charging Standard (“NACS”) and agreements with us to utilize our Superchargers, we must correspondingly expand our network in order to ensure adequate availability to meet customer demands.

We also remain focused on continued enhancements of the capability and efficiency of our servicing operations.

Energy Generation and Storage Demand, Production and Deployment

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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.

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

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

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

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

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

Cash Flow and Capital Expenditure Trends

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

We are simultaneously ramping new products, ramping manufacturing facilities on three continents, piloting the development and manufacture of new battery cell technologies and investing in autonomy and other artificial intelligence enabled products, and the pace of our capital spend may vary depending on overall priority among projects, the pace at which we meet milestones, production adjustments to and among our various products, increased capital efficiencies and the addition of new projects.

We are simultaneously ramping new products, building or ramping manufacturing facilities on three continents, piloting the development and manufacture of new battery cell technologies, expanding our Supercharger network and investing in autonomy and other artificial intelligence enabled training and products, and the pace of our capital spend may vary depending on overall priority among projects, the pace at which we meet milestones, production adjustments to and among our various products, increased capital efficiencies and the addition of new projects.

Owing and subject to the foregoing as well as the pipeline of announced projects under development, all other continuing infrastructure growth and varying levels of inflation, we currently expect our capital expenditures to be between $7.00 to $9.00 billion in 2023 and in each of the following two fiscal years.

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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.

At the same time, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects and other potential variables such as rising material prices and increases in supply chain and labor expenses resulting from changes in global trade conditions and labor availability.

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

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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 increased $3.36 billion, or 22%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to an increase of 108,378 combined Model 3 and Model Y deliveries year over year despite a negative impact from the United States dollar strengthening against other foreign currencies in the three months ended March 31, 2023 as compared to the prior period.

This was achieved from production ramping of Model Y at Gigafactory Shanghai, Gigafactory Berlin-Brandenburg, Gigafactory Texas and the Fremont Factory.

This increase was partially offset by lower average selling price on our vehicles driven by overall price reductions year over year.

There was also a decrease of 2,630 Model S and Model X deliveries year over year.

Automotive regulatory credits revenue decreased $158 million, or 23%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

We recognized $288 million in revenue in the first quarter of 2022 primarily due to changes in regulation which entitled us to additional consideration for credits sold previously, in the absence of which we had an increase in automotive regulatory credits revenue year over year.

This increase was primarily due to the increase in volume as well as the regional mix of the credits sold.

Automotive leasing revenue decreased $104 million, or 16%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

The change is primarily due to a decrease in direct sales-type leasing revenue driven by lower deliveries year over year.

This was partially offset by an increase from the growing portfolio of our direct operating lease program.

Services and other revenue increased $558 million, or 44%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

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

Automotive sales revenue increased $6.75 billion, or 49%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, primarily due to increases of 196,382 combined Model 3 and Model Y cash deliveries and 3,395 combined Model S and Model X cash deliveries year over year despite a negative impact from the United States dollar strengthening against other foreign currencies in the three months ended June 30, 2023 compared to the prior period.

This was achieved from production ramping of Model Y globally.

The increases were partially offset by lower average selling price on our vehicles driven by overall price reductions year over year.

Automotive sales revenue increased $10.11 billion, or 35%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to an increase of 304,760 combined Model 3 and Model Y cash deliveries year over year despite a negative impact from the United States dollar strengthening against other foreign currencies in the six months ended June 30, 2023 as compared to the prior period.

This was achieved from production ramping and partially offset by lower average selling price on our vehicles as mentioned above.

Automotive regulatory credits revenue decreased $62 million, or 18%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Automotive regulatory credits revenue decreased $220 million, or 22%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to the recognition of $288 million in revenue in the first quarter of 2022 primarily due to changes in regulation which entitled us to additional consideration for credits sold previously.

Automotive leasing revenue decreased $21 million, or 4%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Automotive leasing revenue decreased $125 million, or 10%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

The decreases were primarily due to a decrease in direct sales-type leasing revenue driven by lower deliveries year over year, partially offset by an increase from our growing direct operating lease portfolio.

Services and other revenue increased $684 million, or 47%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Services and other revenue increased $1.24 billion, or 45%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

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

Energy Generation and Storage Segment

Energy generation and storage revenue increased $913 million, or 148%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to an increase in deployments of Megapack, higher solar cash and loan deployments at a higher average selling price, as well as increase in deployments of Powerwall at a higher average selling price, year over year.

Energy generation and storage revenue increased $643 million, or 74%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Energy generation and storage revenue increased $1.56 billion, or 105%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

The increases were primarily due to an increase in deployments of Megapack at a lower average selling price.

Cost of Revenues and Gross Margin

Three Months Ended

Six Months Ended

(Dollars in millions)

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Automotive & Services and Other Segment

Cost of automotive sales revenue increased $4.51 billion, or 41%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, in line with the growth in deliveries year over year, as discussed above.

Further, the average combined cost per unit of our vehicles increased year over year due to increasing prices of raw materials, manufacturing, logistics and warranty costs.

These costs were partially offset by manufacturing credits earned as part of the IRA during the three months ended March 31, 2023.

There were also idle capacity charges primarily related to the ramping up of production in Gigafactory Texas and our proprietary battery cells manufacturing during the three months ended March 31, 2023.

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

These increases in costs of revenue were positively impacted by the United States dollar strengthening against other foreign currencies in the three months ended March 31, 2023 as compared to the prior period.

Cost of automotive leasing revenue decreased $75 million, or 18%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to a decrease in direct sales-type leasing cost of revenue driven by lower deliveries year over year.

This was partially offset by an increase in cost of revenue from the growing portfolio of our direct operating lease program.

Cost of services and other revenue increased $416 million, or 32%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

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

Gross margin for total automotive decreased from 32.9% to 21.1% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

This was driven by the changes in automotive sales revenue and cost of automotive sales revenue, as well as a decrease in regulatory credits revenue, as discussed earlier.

Gross margin for total automotive & services and other segment decreased from 30.5% to 19.9% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to the automotive gross margin decrease discussed above, partially offset by an improvement in our services and other gross margin.

Additionally, services and other was a higher percentage of the segment gross margin during the first quarter of 2023 as compared to the prior year.

Cost of automotive sales revenue increased $6.69 billion, or 66%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Cost of automotive sales revenue increased $11.20 billion, or 53%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

Cost of automotive sales revenue increased in line with the growth in deliveries year over year, as discussed above.

The increase was partially offset by a decrease in the average combined cost per unit of our vehicles primarily due to decrease in material costs, lower manufacturing costs from better fixed cost absorption offset by higher outbound freight and duties.

Our costs of revenue were also positively impacted by the IRA manufacturing credits earned during the current periods and by the United States dollar strengthening against our foreign currencies as compared to the prior periods.

Cost of automotive leasing revenue decreased $30 million, or 8%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Cost of automotive leasing revenue decreased $105 million, or 14%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

The decreases were primarily due to a decrease in direct sales-type leasing cost of revenue driven by lower deliveries year over year.

Cost of services and other revenue increased $574 million, or 41%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Cost of services and other revenue increased $990 million, or 37%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

The increases were in line with the changes in services and other revenue as discussed above.

Gross margin for total automotive decreased from 27.9% to 19.2% in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Gross margin for total automotive decreased from 30.6% to 20.1% in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

The decreases were primarily due to lower average selling price on our vehicles, margin headwinds from underutilization of new factories, and a decrease in regulatory credits revenue, partially offset by the overall favorable change in our average combined cost per unit of our vehicles as discussed above.

Gross margin for total automotive & services and other segment decreased from 25.7% to 18.2% in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Gross margin for total automotive & services and other segment decreased from 28.3% to 19.0% in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to the automotive gross margin decrease discussed above, partially offset by an improvement in our services and other gross margin.

Additionally, there was a higher proportion of services and other, which operated at a lower gross margin, within the segment during the first half of 2023 as compared to the prior year.

Energy Generation and Storage Segment

Cost of energy generation and storage revenue increased $673 million, or 98%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to increase in deployments of Megapack, increase in solar cash and loan deployments at a higher average cost due to increased component costs, as well as increase in deployments of Powerwall.

Gross margin for energy generation and storage improved from -11.7% to 11.0% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

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

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

Cost of energy generation and storage revenue increased $462 million, or 60%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Cost of energy generation and storage revenue increased $1.14 billion, or 78%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, in line with the changes in Megapack deployments year over year, as discussed above.

These increases were partially offset by improvements in production ramping that drove down the average cost per MWh of Megapack.

Gross margin for energy generation and storage improved from 11.2% to 18.4% in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Gross margin for energy generation and storage improved from 1.7% to 14.7% in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

The increases were driven by the changes in Megapack revenue and cost per MWh as described above.

Research and Development Expense

Three Months Ended

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(Dollars in millions)

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As a percentage of revenues

Research and development (“R&D”) expenses decreased $94 million, or 11%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

The overall decrease was primarily driven by additional costs in the three months ended March 31, 2022 as compared to the current period, as we were in the pre-production phase at Gigafactory Texas and started production at Gigafactory Berlin-Brandenburg only closer to the end of the first quarter of 2022.

R&D expenses as a percentage of revenue decreased from 5% to 3% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

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

Research and development (“R&D”) expenses increased $276 million, or 41%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

R&D expenses increased $182 million, or 12%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

The overall increases were primarily driven by additional costs in the current period related to the pre-production phase for Cybertruck, AI and other programs.

R&D expenses as a percentage of revenue stayed consistent at 4% in the three and six months ended June 30, 2023 compared to the same periods in the prior year.

Our R&D expenses have increased proportionately with total revenues as we continue to expand our product roadmap and technologies.

Selling, General and Administrative Expense

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As a percentage of revenues

Selling, general and administrative (“SG&A”) expenses increased $84 million, or 8%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

This was driven by a $84 million increase in facilities-related expenses and a $49 million increase in employee and labor costs primarily from increased headcount, including professional services.

These increases were offset by a decrease of $52 million in stock-based compensation expense, most of which is attributable to the lower stock-based compensation expense of $48 million on the 2018 CEO Performance Award which was fully expensed as of December 31, 2022.

Selling, general and administrative (“SG&A”) expenses increased $230 million, or 24%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

This was driven by a $135 million increase in employee and labor costs primarily from increased headcount, including professional services and an $81 million increase in facilities related expenses.

SG&A expenses increased $314 million, or 16%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

This was driven by a $183 million increase in employee and labor costs primarily from increased headcount, including professional services and a $166 million increase in facilities related expenses.

The increases were partially offset by a decrease of $52 million in stock-based compensation expense, primarily attributable to the lower stock-based compensation expense on the 2018 CEO Performance Award which was fully expensed as of December 31, 2022.

Restructuring and Other

Three Months Ended

Six Months Ended

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Restructuring and other

During the three 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.

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

Interest Income

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Interest income

Interest income increased $185 million, or 661%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

This increase was primarily due to higher interest earned on our cash and cash equivalents and short-term investments during the three months ended March 31, 2023 as compared to the prior period.

Interest income increased $212 million, or 815%, in the three months ended June 30, 2023 and increased $397 million, or 735%, in the six months ended June 30, 2023 as compared to the three and six months ended June 30, 2022, respectively.

This increase was primarily due to higher interest earned on our cash and cash equivalents and short-term investments in the three and six months ended June 30, 2023 as compared to the prior periods.

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

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Three Months Ended

Six Months Ended

(Dollars in millions)

Other (expense) income, net

Not meaningful

Other (expense) income, net, changed unfavorably by $104 million in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

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

Other income, net

Other income, net, changed favorably by $300 million in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Other income, net, changed favorably by $196 million in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

The favorable changes were primarily due to fluctuations in foreign currency exchange rates on our intercompany balances.

Provision for Income Taxes

Three Months Ended

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Effective tax rate

Our provision for income taxes decreased by $85 million, or 25%, in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to the change in our pre-tax income year over year.

Our effective tax rate decreased from 10% to 9% in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to changes in mix of jurisdictional earnings.

Our provision for income taxes increased by $118 million, or 58%, in the three months ended June 30, 2023 and increased by $33 million, or 6%, in the six months ended June 30, 2023 as compared to the three months ended June 30, 2022 and six months ended June 30, 2022, respectively, primarily due to the change in our pre-tax income year over year and changes in mix of jurisdictional earnings.

Our effective tax rate increased from 8% to 11% in the three months ended June 30, 2023 and increased from 9% to 10% in the six months ended June 30, 2023 as compared to the three and six months ended June 30, 2022, respectively, primarily due to changes in mix of jurisdictional earnings.

See Note 1, Summary of Significant Accounting Policies , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

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We expect to continue to generate net positive operating cash flow as we have done in the last four fiscal years.

The cash we generate from our core operations enables us to fund ongoing operations and production, our research and development projects for new products and technologies including our proprietary battery cells, additional manufacturing ramps at existing manufacturing facilities such as the Fremont Factory, Gigafactory Nevada, Gigafactory Shanghai and Gigafactory New York, the ramp of Gigafactory Berlin-Brandenburg and Gigafactory Texas, the construction of future factories, and the continued expansion of our retail and service locations, body shops, Mobile Service fleet, Supercharger network, energy product installation capabilities and autonomy and other artificial intelligence enabled products.

The cash we generate from our core operations enables us to fund ongoing operations and production, our research and development projects for new products and technologies including our proprietary battery cells, additional manufacturing ramps at existing manufacturing facilities such as the Fremont Factory, Gigafactory Nevada, Gigafactory Shanghai and Gigafactory New York, the ramp of Gigafactory Berlin-Brandenburg and Gigafactory Texas, the construction of future factories, and the continued expansion of our retail and service locations, body shops, Mobile Service fleet, Supercharger, including to support NACS, energy product installation capabilities and autonomy and other artificial intelligence enabled products.

In addition, because a large portion of our future expenditures will be to fund our growth, we expect that if needed we will be able to adjust our capital and operating expenditures by operating segment.

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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, 2023, 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, 2023, as well as in the long-term.

See the sections below for more details regarding the material requirements for cash in our business and our sources of liquidity to meet such needs.

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We also have certain obligations in connection with our operations at Gigafactory New York and Gigafactory Shanghai, as outlined in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Cash Requirements in our Annual Report on Form 10-K for the year ended December 31, 2022.

As of March 31, 2023, we and our subsidiaries had outstanding $1.77 billion in aggregate principal amount of indebtedness, of which $939 million is scheduled to become due in the succeeding 12 months.

As of June 30, 2023, we and our subsidiaries had outstanding $1.53 billion in aggregate principal amount of indebtedness, of which $1.02 billion is scheduled to become due in the succeeding 12 months.

For details regarding our indebtedness, refer to Note 7, Debt, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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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, 2023, we had $16.05 billion and $6.35 billion of cash and cash equivalents and short-term investments, respectively.

As of June 30, 2023, we had $15.30 billion and $7.78 billion of cash and cash equivalents and short-term investments, respectively.

Balances held in foreign currencies had a U.S.

dollar equivalent of $3.85 billion and consisted primarily of Chinese yuan, euros and Canadian dollar.

We had $5.16 billion of unused committed amounts under our credit facilities as of March 31, 2023.

We had $5.16 billion of unused committed amounts under our credit facilities as of June 30, 2023.

Certain of such unused committed amounts are subject to satisfying specified conditions prior to draw-down (such as pledging to leased vehicles and our interests in those leases).

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Summary of Cash Flows

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Cash Flows from Operating Activities

Net cash provided by operating activities decreased by $1.48 billion to $2.51 billion during the three months ended March 31, 2023 from $4.00 billion during the three months ended March 31, 2022.

This decrease was primarily due to the overall increase in net operating assets and liabilities of $928 million and the decrease in net income excluding non-cash expenses, gains and losses of $554 million.

The increase in our net operating assets and liabilities was mainly driven by a larger increase of inventory in the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

Net cash provided by operating activities decreased by $768 million to $5.58 billion during the six months ended June 30, 2023 from $6.35 billion during the six months ended June 30, 2022.

This decrease was primarily due to unfavorable changes in net operating assets and liabilities of $683 million and the decrease in net income excluding non-cash expenses, gains and losses of $85 million.

Cash Flows from Investing Activities

Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $2.07 billion for the three months ended March 31, 2023 and $1.77 billion for the three months ended March 31, 2022, mainly for the expansions of Gigafactory Texas, the Fremont Factory, Gigafactory Berlin-Brandenburg, and Gigafactory Shanghai.

We also purchased $411 million and $386 million of investments, net of proceeds from maturities, for the three months ended March 31, 2023 and March 31, 2022, respectively.

Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $4.13 billion for the six months ended June 30, 2023 and $3.50 billion for the six months ended June 30, 2022, mainly for the expansions of Gigafactory Texas, Gigafactory Berlin-Brandenburg, Gigafactory Shanghai and the Fremont Factory.

We also purchased $1.81 billion and $476 million of investments, net of proceeds from maturities and sales, for the six months ended June 30, 2023 and June 30, 2022, respectively.

Cash Flows from Financing Activities

Net cash used in financing activities decreased by $1.68 billion to $233 million during the three months ended March 31, 2023 from $1.91 billion during the three months ended March 31, 2022.

Net cash used in financing activities decreased by $1.76 billion to $561 million during the six months ended June 30, 2023 from $2.32 billion during the six months ended June 30, 2022.

The decrease was primarily due to a $1.68 billion decrease in repayments of convertible and other debt.

1 unchanged sentence

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