Tesla, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 238 ) 46 Consolidated Balance Sheets 48 Consolidated Statements of Operations 49 Consolidated Statements of Comprehensive Income 50 Consolidated Statements of Redeemable Noncontrolling Interests and Equity 51 Consolidated Statements of Cash Flows 52 Notes to Consolidated Financial Statements 53 45 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Tesla, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Tesla, Inc. and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations, of comprehensive income, of redeemable noncontrolling interests and equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for digital assets in 2024. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 46 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Automotive Warranty Reserve As described in Note 2 to the consolidated financial statements, total accrued warranty, which primarily relates to the automotive segment, was $6,716 million as of December 31, 2024. The Company provides a manufacturer’s warranty on all new and used Tesla vehicles. A warranty reserve is accrued for these products sold, which includes management’s best estimate of the projected costs to repair or replace items under warranty and recalls if identified. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. The principal considerations for our determination that performing procedures relating to the automotive warranty reserve is a critical audit matter are (i) the significant judgment by management in determining the automotive warranty reserve for certain Tesla vehicle models; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the nature, frequency and costs of future claims for certain Tesla vehicle models; and, (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s estimate of the automotive warranty reserve for certain Tesla vehicle models, including controls over management’s significant assumptions related to the nature, frequency and costs of future claims as well as the completeness and accuracy of actual claims incurred to date. These procedures also included, among others, (i) testing the completeness and accuracy of historical vehicle claims processed and testing that such claims were appropriately used by management in the estimation of future claims and (ii) the involvement of professionals with specialized skill and knowledge to assist in evaluating the reasonableness of management’s estimate by (a) developing an independent estimate of the automotive warranty reserve for certain Tesla vehicle models and (b) comparing the independent estimate to management’s estimate. Developing the independent estimate involved evaluating the appropriateness of certain aspects of management’s significant assumptions related to the nature and frequency of future claims. /s/ PricewaterhouseCoopers LLP San Jose, California January 29, 2025 We have served as the Company’s auditor since 2005. 47 Tesla, Inc. Consolidated Balance Sheets (in millions, except per share data) December 31, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 16,139 $ 16,398 Short-term investments 20,424 12,696 Accounts receivable, net 4,418 3,508 Inventory 12,017 13,626 Prepaid expenses and other current assets 5,362 3,388 Total current assets 58,360 49,616 Operating lease vehicles, net 5,581 5,989 Solar energy systems, net 4,924 5,229 Property, plant and equipment, net 35,836 29,725 Operating lease right-of-use assets 5,160 4,180 Digital assets, net 1,076 184 Intangible assets, net 150 178 Goodwill 244 253 Deferred tax assets 6,524 6,733 Other non-current assets 4,215 4,531 Total assets $ 122,070 $ 106,618 Liabilities Current liabilities Accounts payable $ 12,474 $ 14,431 Accrued liabilities and other 10,723 9,080 Deferred revenue 3,168 2,864 Current portion of debt and finance leases 2,456 2,373 Total current liabilities 28,821 28,748 Debt and finance leases, net of current portion 5,757 2,857 Deferred revenue, net of current portion 3,317 3,251 Other long-term liabilities 10,495 8,153 Total liabilities 48,390 43,009 Commitments and contingencies (Note 14) Redeemable noncontrolling interests in subsidiaries 63 242 Equity Stockholders’ equity Preferred stock; $ 0.001 par value; 100 shares authorized; no shares issued and outstanding — — Common stock; $ 0.001 par value; 6,000 shares authorized; 3,216 and 3,185 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 3 3 Additional paid-in capital 38,371 34,892 Accumulated other comprehensive loss ( 670 ) ( 143 ) Retained earnings 35,209 27,882 Total stockholders’ equity 72,913 62,634 Noncontrolling interests in subsidiaries 704 733 Total liabilities and equity $ 122,070 $ 106,618 The accompanying notes are an integral part of these consolidated financial statements. 48 Tesla, Inc. Consolidated Statements of Operations (in millions, except per share data) Year Ended December 31, 2024 2023 2022 Revenues Automotive sales $ 72,480 $ 78,509 $ 67,210 Automotive regulatory credits 2,763 1,790 1,776 Automotive leasing 1,827 2,120 2,476 Total automotive revenues 77,070 82,419 71,462 Energy generation and storage 10,086 6,035 3,909 Services and other 10,534 8,319 6,091 Total revenues 97,690 96,773 81,462 Cost of revenues Automotive sales 61,870 65,121 49,599 Automotive leasing 1,003 1,268 1,509 Total automotive cost of revenues 62,873 66,389 51,108 Energy generation and storage 7,446 4,894 3,621 Services and other 9,921 7,830 5,880 Total cost of revenues 80,240 79,113 60,609 Gross profit 17,450 17,660 20,853 Operating expenses Research and development 4,540 3,969 3,075 Selling, general and administrative 5,150 4,800 3,946 Restructuring and other 684 — 176 Total operating expenses 10,374 8,769 7,197 Income from operations 7,076 8,891 13,656 Interest income 1,569 1,066 297 Interest expense ( 350 ) ( 156 ) ( 191 ) Other income (expense), net 695 172 ( 43 ) Income before income taxes 8,990 9,973 13,719 Provision for (benefit from) income taxes 1,837 ( 5,001 ) 1,132 Net income 7,153 14,974 12,587 Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries 62 ( 23 ) 31 Net income attributable to common stockholders $ 7,091 $ 14,997 $ 12,556 Net income per share of common stock attributable to common stockholders Basic $ 2.23 $ 4.73 $ 4.02 Diluted $ 2.04 $ 4.30 $ 3.62 Weighted average shares used in computing net income per share of common stock Basic 3,197 3,174 3,130 Diluted 3,498 3,485 3,475 The accompanying notes are an integral part of these consolidated financial statements. 49 Tesla, Inc. Consolidated Statements of Comprehensive Income (in millions) Year Ended December 31, 2024 2023 2022 Net income $ 7,153 $ 14,974 $ 12,587 Other comprehensive income (loss): Foreign currency translation adjustment ( 539 ) 198 ( 392 ) Unrealized net gain (loss) on investments, net of tax 12 16 ( 23 ) Net loss realized and included in net income — 4 — Comprehensive income 6,626 15,192 12,172 Less: Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries 62 ( 23 ) 31 Comprehensive income attributable to common stockholders $ 6,564 $ 15,215 $ 12,141 The accompanying notes are an integral part of these consolidated financial statements. 50 Tesla, Inc. Consolidated Statements of Redeemable Noncontrolling Interests and Equity (in millions) Redeemable Noncontrolling Interests Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Stockholders’ Equity Noncontrolling Interests in Subsidiaries Total Equity Shares Amount Balance as of December 31, 2021 $ 568 3,100 $ 3 $ 29,803 $ 54 $ 329 $ 30,189 $ 826 $ 31,015 Settlements of warrants — 37 — — — — — — — Issuance of common stock for equity incentive awards — 27 — 541 — — 541 — 541 Stock-based compensation — — — 1,806 — — 1,806 — 1,806 Distributions to noncontrolling interests ( 46 ) — — — — — — ( 113 ) ( 113 ) Buy-outs of noncontrolling interests ( 11 ) — — 27 — — 27 ( 61 ) ( 34 ) Net (loss) income ( 102 ) — — — — 12,556 12,556 133 12,689 Other comprehensive loss — — — — ( 415 ) — ( 415 ) — ( 415 ) Balance as of December 31, 2022 $ 409 3,164 $ 3 $ 32,177 $ ( 361 ) $ 12,885 $ 44,704 $ 785 $ 45,489 Issuance of common stock for equity incentive awards — 21 — 700 — — 700 — 700 Stock-based compensation — — — 2,013 — — 2,013 — 2,013 Distributions to noncontrolling interests ( 32 ) — — — — — — ( 108 ) ( 108 ) Buy-outs of noncontrolling interests ( 39 ) — — 2 — — 2 ( 17 ) ( 15 ) Net (loss) income ( 96 ) — — — — 14,997 14,997 73 15,070 Other comprehensive income — — — — 218 — 218 — 218 Balance as of December 31, 2023 $ 242 3,185 $ 3 $ 34,892 $ ( 143 ) $ 27,882 $ 62,634 $ 733 $ 63,367 Adjustments for prior periods from adopting ASU 2023-08, net of tax — — — — — 236 236 — 236 Settlements of warrants — 11 — — — — — — — Issuance of common stock for equity incentive awards — 20 — 1,241 — — 1,241 — 1,241 Stock-based compensation — — — 2,199 — — 2,199 — 2,199 Distributions to noncontrolling interests ( 13 ) — — — — — — ( 85 ) ( 85 ) Buy-outs of noncontrolling interests ( 172 ) — — 39 — — 39 — 39 Net income 6 — — — — 7,091 7,091 56 7,147 Other comprehensive loss — — — — ( 527 ) — ( 527 ) — ( 527 ) Balance as of December 31, 2024 $ 63 3,216 $ 3 $ 38,371 $ ( 670 ) $ 35,209 $ 72,913 $ 704 $ 73,617 The accompanying notes are an integral part of these consolidated financial statements. 51 Tesla, Inc. Consolidated Statements of Cash Flows (in millions) Year Ended December 31, 2024 2023 2022 Cash Flows from Operating Activities Net income $ 7,153 $ 14,974 $ 12,587 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and impairment 5,368 4,667 3,747 Stock-based compensation 1,999 1,812 1,560 Inventory and purchase commitments write-downs 335 463 177 Foreign currency transaction net unrealized (gain) loss ( 73 ) ( 144 ) 81 Deferred income taxes 477 ( 6,349 ) ( 196 ) Non-cash interest and other operating activities 172 81 340 Digital assets (gain) loss, net ( 589 ) — 140 Changes in operating assets and liabilities: Accounts receivable ( 1,083 ) ( 586 ) ( 1,124 ) Inventory 937 ( 1,195 ) ( 6,465 ) Operating lease vehicles ( 590 ) ( 1,952 ) ( 1,570 ) Prepaid expenses and other assets ( 3,273 ) ( 2,652 ) ( 3,713 ) Accounts payable, accrued and other liabilities 3,588 2,605 8,029 Deferred revenue 502 1,532 1,131 Net cash provided by operating activities 14,923 13,256 14,724 Cash Flows from Investing Activities Purchases of property and equipment excluding finance leases, net of sales ( 11,339 ) ( 8,898 ) ( 7,158 ) Purchases of solar energy systems, net of sales ( 3 ) ( 1 ) ( 5 ) Proceeds from sales of digital assets — — 936 Purchase of intangible assets — — ( 9 ) Purchases of investments ( 35,955 ) ( 19,112 ) ( 5,835 ) Proceeds from maturities of investments 28,310 12,353 22 Proceeds from sales of investments 200 138 — Receipt of government grants — — 76 Business combinations, net of cash acquired — ( 64 ) — Net cash used in investing activities ( 18,787 ) ( 15,584 ) ( 11,973 ) Cash Flows from Financing Activities Proceeds from issuances of debt 5,744 3,931 — Repayments of debt ( 2,500 ) ( 1,351 ) ( 3,364 ) Proceeds from exercises of stock options and other stock issuances 1,241 700 541 Principal payments on finance leases ( 381 ) ( 464 ) ( 502 ) Debt issuance costs ( 14 ) ( 29 ) — Distributions paid to noncontrolling interests in subsidiaries ( 104 ) ( 144 ) ( 157 ) Payments for buy-outs of noncontrolling interests in subsidiaries ( 133 ) ( 54 ) ( 45 ) Net cash provided by (used in) financing activities 3,853 2,589 ( 3,527 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash ( 141 ) 4 ( 444 ) Net (decrease) increase in cash and cash equivalents and restricted cash ( 152 ) 265 ( 1,220 ) Cash and cash equivalents and restricted cash, beginning of period 17,189 16,924 18,144 Cash and cash equivalents and restricted cash, end of period $ 17,037 $ 17,189 $ 16,924 Supplemental Non-Cash Investing and Financing Activities Acquisitions of property and equipment included in liabilities $ 1,410 $ 2,272 $ 2,148 Supplemental Disclosures Cash paid during the period for interest $ 277 $ 126 $ 152 Cash paid during the period for income taxes, net of refunds $ 1,331 $ 1,119 $ 1,203 The accompanying notes are an integral part of these consolidated financial statements. 52 Tesla, Inc. Notes to Consolidated Financial Statements Note 1 – Overview Tesla, Inc. (“Tesla”, the “Company”, “we”, “us” or “our”) was incorporated in the State of Delaware on July 1, 2003 and converted to a Texas corporation on June 13, 2024. We design, develop, manufacture, sell and lease high-performance fully electric vehicles and energy generation and storage systems, and offer services related to our products. Note 2 – Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with GAAP and reflect our accounts and operations and those of our subsidiaries in which we have a controlling financial interest. In accordance with the provisions of ASC 810, Consolidation (“ASC 810”), we consolidate any variable interest entity (“VIE”) of which we are the primary beneficiary. We have formed VIEs with financing fund investors in the ordinary course of business in order to facilitate the funding and monetization of certain attributes associated with solar energy systems and leases under our direct vehicle leasing programs. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. We do not consolidate a VIE in which we have a majority ownership interest when we are not considered the primary beneficiary. We have determined that we are the primary beneficiary of all the VIEs (see Note 15 , Variable Interest Entity Arrangements ). We evaluate our relationships with all the VIEs on an ongoing basis to ensure that we continue to be the primary beneficiary. All intercompany transactions and balances have been eliminated upon consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures in the accompanying notes. The estimates used for, but not limited to, determining significant economic incentive for resale value guarantee arrangements, sales return reserves, resale value guarantee liabilities, income taxes, the collectability of accounts and finance 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. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. Reclassifications Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes. 53 Revenue Recognition Revenue by source The following table disaggregates our revenue by major source (in millions): Year Ended December 31, 2024 2023 2022 Automotive sales $ 72,480 $ 78,509 $ 67,210 Automotive regulatory credits 2,763 1,790 1,776 Energy generation and storage sales 9,564 5,515 3,376 Services and other 10,534 8,319 6,091 Total revenues from sales and services 95,341 94,133 78,453 Automotive leasing 1,827 2,120 2,476 Energy generation and storage leasing 522 520 533 Total revenues $ 97,690 $ 96,773 $ 81,462 Automotive Segment 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 ASC 606, including access to our FSD(Supervised) features and their ongoing maintenance, internet connectivity, free Supercharging programs 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, 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, 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 (Supervised) features is recognized when functionality is delivered to the customer and their ongoing maintenance 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. Any fees that are paid or payable by us to a customer’s lender when we arrange the financing are recognized upfront as an offset against automotive sales revenue. Costs to obtain a contract mainly relate to commissions for the sale of vehicles. As our contract costs related to automotive sales are typically fulfilled within one year, the costs to obtain a contract are expensed as incurred. Amounts billed to customers related to shipping and handling are classified as automotive sales revenue, and we have elected to recognize the cost for freight and shipping when control over vehicles, parts or accessories have transferred to the customer as an expense in cost of automotive sales revenue. Our policy is to exclude taxes collected from a customer from the transaction price of automotive contracts. We offer resale value guarantees to our commercial banking partners in connection with certain vehicle leasing programs. Under these programs, we originate the lease with our end customer and immediately transfer the lease and the underlying vehicle to our commercial banking partner, with the transaction being accounted for as a sale under ASC 606. 54 We receive upfront payment for the vehicle, do not bear casualty and credit risks during the lease term, and we provide a guarantee capped to a limit if they are unable to sell the vehicle at or above the vehicle’s contractual or determined residual value at the end of the lease term. We estimate a guarantee liability in accordance with ASC 460, Guarantees and record it within other liabilities on our consolidated balance sheet. On a quarterly basis, we assess the estimated market value of vehicles sold under these programs to determine whether there have been changes to the amount of expected resale value guarantee liabilities. As we accumulate more data related to the resale values of our vehicles or as market conditions change, there may be material changes to their estimated values. The total recorded guarantee liabilities on vehicles sold under these programs were immaterial as of December 31, 2024 and 2023. Our maximum exposure on the guarantees we provide if they are unable to sell the vehicle at or above the vehicle’s contractual residual value at the end of the lease term was $ 1.45 billion and $ 166 million as of December 31, 2024 and 2023, respectively. Deferred revenue related to the access to our FSD (Supervised) features and their ongoing maintenance, internet connectivity, free Supercharging programs and over-the-air software updates primarily on automotive sales consisted of the following (in millions): Year Ended December 31, 2024 2023 Deferred revenue — beginning of period $ 3,536 $ 2,913 Additions 1,343 1,201 Net changes in liability for pre-existing contracts, including foreign exchange impact ( 92 ) 17 Revenue recognized ( 1,188 ) ( 595 ) Deferred revenue — end of period $ 3,599 $ 3,536 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, 2023 and 2022 was $ 872 million and $ 469 million for the years ended December 31, 2024 and 2023, respectively. Of the total deferred revenue balance as of December 31, 2024, we expect to recognize $ 840 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 as discussed above in Automotive Sales. We have financing receivables on our consolidated balance sheets related to loans we provide for financing our automotive deliveries. As of December 31, 2024 and 2023, we had current net financing receivables of $ 247 million and $ 242 million, respectively, in Accounts receivable, net, and $ 821 million and $ 1.04 billion, respectively, in Other non-current assets for the long-term portion. Automotive Regulatory Credits We earn tradable credits in the operation of our automotive business under various regulations related to ZEVs, greenhouse gas, fuel economy and clean fuel. We sell these credits to other regulated entities who can use the credits to comply with emission standards and other regulatory requirements. Payments for automotive regulatory credits are typically received at the point control transfers to the customer, or in accordance with payment terms customary to the business. We recognize revenue on the sale of automotive regulatory credits, which have negligible incremental costs associated with them, at the time control of the regulatory credits is transferred to the purchasing party. Deferred revenue related to sales of automotive regulatory credits was immaterial as of December 31, 2024 and 2023. Revenue recognized from the deferred revenue balance as of December 31, 2023 and 2022 was immaterial for the years ended December 31, 2024 and 2023. During the year ended December 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. We have elected the practical expedient to omit disclosure of the amount of the transaction price allocated to remaining performance obligations for contracts with an original expected contract length of one year or less. As of December 31, 2024, 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 $ 4.68 billion. Of this amount, we expect to recognize $ 863 million in the next 12 months and the rest over the remaining performance obligation period. Additionally, changes in regulations on automotive regulatory credits may significantly impact our remaining performance obligations and revenue to be recognized under these contracts. 55 Automotive Leasing Revenue Direct Vehicle Operating Leasing Program We have outstanding leases under our direct vehicle operating leasing programs in the U.S., Canada and in certain countries in Europe. Qualifying customers are permitted to lease a vehicle directly from Tesla for up to 48 months. At the end of the lease term, customers may opt to return the vehicles to us or purchase the vehicles when contractually permitted. We account for these leasing transactions as operating leases. We record leasing revenues to automotive leasing revenue on a straight-line basis over the contractual term, and we record the depreciation of these vehicles to cost of automotive leasing revenue. For the years ended December 31, 2024, 2023 and 2022, we recognized $ 1.78 billion, $ 1.86 billion and $ 1.75 billion of direct vehicle leasing revenue, respectively. As of December 31, 2024 and 2023, we had deferred $ 394 million and $ 458 million, respectively, of lease-related upfront payments, which will be recognized on a straight-line basis over the contractual terms of the individual leases. Our policy is to exclude taxes collected from a customer from the transaction price of automotive contracts. Direct Sales-Type Leasing Program We have outstanding direct leases and vehicles financed by us under loan arrangements accounted for as sales-type leases under ASC 842, Leases (“ASC 842”), in certain countries in Asia and Europe. Our arrangements under these programs can have terms for up to 72 months. We recognize all revenue and costs associated with the sales-type lease as automotive leasing revenue and automotive leasing cost of revenue, respectively, upon delivery of the vehicle to the customer. Interest income based on the implicit rate in the lease is recorded to automotive leasing revenue over time as customers are invoiced on a monthly basis. For the years ended December 31, 2024, 2023 and 2022, we recognized $ 12 million, $ 215 million and $ 683 million, respectively, of sales-type leasing revenue and $ 7 million, $ 164 million and $ 427 million, respectively, of sales-type leasing cost of revenue. Services and Other Revenue Services and other revenue consists of sales of used vehicles, non-warranty maintenance services and collision, part sales, paid Supercharging, insurance services revenue and retail merchandise sales. Revenues related to repair, maintenance and vehicle insurance services are recognized over time as services are provided and extended service plans are recognized over the performance period of the service contract as the obligation represents a stand-ready obligation to the customer. We sell used vehicles, services, service plans, vehicle components and merchandise separately and thus use standalone selling prices as the basis for revenue allocation to the extent that these items are sold in transactions with other performance obligations. Payment for used vehicles, services, vehicle components, and merchandise are typically received at the point when control transfers to the customer or in accordance with payment terms customary to the business. Payments received for prepaid plans are refundable upon customer cancellation of the related contracts and are included within Accrued liabilities and other on the consolidated balance sheets. We record in Deferred revenue any non-refundable prepayment amounts that are collected from customers and unearned insurance premiums, which is recognized as revenue ratably over the respective customer contract term. Deferred revenue excluding unearned insurance premiums was not material as of December 31, 2024 and 2023. Energy Generation and Storage Segment Energy Generation and Storage Sales Energy generation and storage sales revenue consists of the sale of solar energy systems and energy storage systems to residential, small commercial, large commercial and utility grade customers. Sales of solar energy systems to residential and small-scale commercial customers consist of the engineering, design and installation of the system. Residential and small-scale commercial customers pay the full purchase price of the solar energy system upfront. Revenue for the design and installation obligation is recognized when control transfers, which is when we install a solar energy system and the system passes inspection by the utility or the authority having jurisdiction. Sales of energy storage systems to residential and small-scale commercial customers consist of the installation of the energy storage system and revenue is recognized when control transfers, which is when the product has been delivered or, if we are performing installation, when installed and commissioned. Payment for such storage systems is made upon invoice or in accordance with payment terms customary to the business. 56 For certain large commercial and utility grade energy storage system sales which consist of the engineering, design and installation of the system, customers make milestone payments that are consistent with contract-specific phases of a project. Revenue from such contracts is recognized over time using the percentage of completion method based on cost incurred as a percentage of total estimated contract costs for energy storage system sales. In instances where there are multiple performance obligations in a single contract, we allocate the consideration to the various obligations in the contract based on the relative standalone selling price method. Standalone selling prices are estimated based on estimated costs plus margin or by using market data for comparable products. Costs to obtain a contract relate mainly to commissions paid to our sales personnel related to the sale of energy storage systems. As our contract costs related to energy storage system sales are typically fulfilled within one year, the costs to obtain a contract are expensed as incurred. As part of certain energy storage system contracts, we may provide the customer with performance guarantees that warrant that the underlying system will meet or exceed the minimum energy performance requirements specified in the contract. If an energy storage system does not meet the performance guarantee requirements, we may be required to pay liquidated damages. Other forms of variable consideration related to our large commercial and utility grade energy storage system contracts include variable customer payments that will be made based on our energy market participation activities. Such guarantees and variable customer payments represent a form of variable consideration and are estimated at contract inception at their most likely amount and updated at the end of each reporting period as additional performance data becomes available. Such estimates are included in the transaction price only to the extent that it is probable a significant reversal of revenue will not occur. We record as deferred revenue any non-refundable amounts that are primarily related to prepayments from customers, which is recognized as revenue as or when the performance obligations are satisfied. As of December 31, 2024 and 2023, deferred revenue related to such customer payments amounted to $ 1.77 billion and $ 1.60 billion, respectively, mainly due to contractual payment terms. Revenue recognized from the deferred revenue balance as of December 31, 2023 and 2022 was $ 1.27 billion and $ 571 million for the years ended December 31, 2024 and 2023, respectively. We have elected the practical expedient to omit disclosure of the amount of the transaction price allocated to remaining performance obligations for energy generation and storage sales with an original expected contract length of one year or less and the amount that we have the right to invoice when that amount corresponds directly with the value of the performance to date. As of December 31, 2024, 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 $ 7.18 billion. Of this amount, we expect to recognize $ 4.51 billion in the next 12 months and the rest over the remaining performance obligation period. We have financing receivables on our consolidated balance sheets related to loans we provide for financing our energy products. As of December 31, 2024 and 2023, we had current net financing receivables of $ 34 million and $ 31 million, respectively, in Accounts receivable, net, and $ 658 million and $ 578 million, respectively, in Other non-current assets for the long-term portion. Energy Generation and Storage Leasing For revenue arrangements where we are the lessor under operating lease agreements for energy generation and storage products, we record lease revenue from minimum lease payments, including upfront rebates and incentives earned from such systems, on a straight-line basis over the life of the lease term, assuming all other revenue recognition criteria have been met. The difference between the payments received and the revenue recognized is recorded as deferred revenue or deferred asset on the consolidated balance sheet. For solar energy systems where customers purchase electricity from us under PPAs prior to January 1, 2019, we have determined that these agreements should be accounted for as operating leases pursuant to ASC 840, Leases . Revenue is recognized based on the amount of electricity delivered at rates specified under the contracts, assuming all other revenue recognition criteria are met. We record as deferred revenue any amounts that are collected from customers, including lease prepayments, in excess of revenue recognized, which is recognized as revenue ratably over the respective customer contract term. As of December 31, 2024 and 2023, deferred revenue related to such customer payments amounted to $ 164 million and $ 181 million, respectively. Deferred revenue also includes the portion of rebates and incentives received from utility companies and various local and state government agencies, which is recognized as revenue over the lease term. As of December 31, 2024 and 2023, deferred revenue from rebates and incentives was immaterial. 57 We capitalize initial direct costs from the execution of agreements for solar energy systems and PPAs, which include the referral fees and sales commissions, as an element of solar energy systems, net, and subsequently amortize these costs over the term of the related agreements. Cost of Revenues Automotive Segment Automotive Sales 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, FSD (Supervised) ongoing maintenance costs, electricity costs for 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. Additionally, cost of automotive sales revenue benefits from manufacturing credits earned, amounting to $ 625 million and $ 359 million for the years ended December 31, 2024 and 2023, respectively. Automotive Leasing Cost of automotive leasing revenue includes the depreciation of operating lease vehicles, cost of goods sold associated with direct sales-type leases and warranty expense related to leased vehicles. Services and Other Costs of services and other revenue includes cost of used vehicles including refurbishment costs, costs associated with providing non-warranty after-sales services, costs associated with our body shops and part sales, costs of paid Supercharging, costs to provide vehicle insurance and costs of retail merchandise sales. Energy Generation and Storage Segment Energy Generation and Storage Cost of energy generation and storage revenue includes direct and indirect material and labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, freight, warranty expense, and cost of servicing. Cost of energy generation and storage revenue also includes 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. Additionally, cost of energy generation and storage revenue benefits from manufacturing credits earned, amounting to $ 756 million and $ 115 million for the years ended December 31, 2024 and 2023, respectively. In agreements for solar energy systems and PPAs where we are the lessor, the cost of revenue is primarily comprised of depreciation of the cost of leased solar energy systems, maintenance costs associated with those systems and amortization of any initial direct costs. Research and Development Costs Research and development costs are expensed as incurred. Income Taxes We are subject to income taxes in the U.S. and in many foreign jurisdictions. Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. 58 Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets that are not more likely than not to be realized. We monitor the realizability of our deferred tax assets taking into account all relevant factors at each reporting period. In completing our assessment of realizability of our deferred tax assets, we consider our history of income (loss) measured at pre-tax income (loss) adjusted for permanent book-tax differences on a jurisdictional basis, volatility in actual earnings, excess tax benefits related to stock-based compensation in recent prior years and impacts of the timing of reversal of existing temporary differences. We also rely on our assessment of the Company’s projected future results of business operations, including uncertainty in future operating results relative to historical results, volatility in the market price of our common stock and its performance over time, variable macroeconomic conditions impacting our ability to forecast future taxable income, and changes in business that may affect the existence and magnitude of future taxable income. Our valuation allowance assessment is based on our best estimate of future results considering all available information. We record liabilities related to uncertain tax positions when, despite our belief that our tax return positions are supportable, we believe that it is more likely than not that those positions may not be fully sustained upon review by tax authorities. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense. The Tax Cuts and Jobs Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. Under GAAP, we can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense or factor such amounts into our measurement of deferred taxes. We elected the deferred method, under which we recorded the corresponding deferred tax assets and liabilities in our consolidated balance sheets. Comprehensive Income Comprehensive income is comprised of net income and other comprehensive income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustments and unrealized net gains and losses on investments that have been excluded from the determination of net income. Stock-Based Compensation We use the fair value method of accounting for our stock options and RSUs granted to employees and for our ESPP to measure the cost of employee services received in exchange for the stock-based awards. The fair value of stock option awards with only service and/or performance conditions is estimated on the grant or offering date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. These inputs are subjective and generally require significant judgment. The fair value of RSUs is measured on the grant date based on the closing fair market value of our common stock. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period, which is generally four years for stock options and RSUs and six months for the ESPP. Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period. 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. 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. Stock-based compensation expense is recorded in Cost of revenues, Research and development expense and Selling, general and administrative expense in the consolidated statements of operations. 59 Noncontrolling Interests and Redeemable Noncontrolling Interests Noncontrolling interests and redeemable noncontrolling interests represent third-party interests in the net assets under certain funding arrangements, or funds, that we have entered into to finance the costs of solar energy systems and vehicles under operating leases. We have determined that the contractual provisions of the funds represent substantive profit-sharing arrangements. We have further determined that the methodology for calculating the noncontrolling interest and redeemable noncontrolling interest balances that reflects the substantive profit-sharing arrangements is a balance sheet approach using the hypothetical liquidation at book value (“HLBV”) method. We, therefore, determine the amount of the noncontrolling interests and redeemable noncontrolling interests in the net assets of the funds at each balance sheet date using the HLBV method, which is presented on the consolidated balance sheet as noncontrolling interests in subsidiaries and redeemable noncontrolling interests in subsidiaries. Under the HLBV method, the amounts reported as noncontrolling interests and redeemable noncontrolling interests in the consolidated balance sheet represent the amounts the third parties would hypothetically receive at each balance sheet date under the liquidation provisions of the funds, assuming the net assets of the funds were liquidated at their recorded amounts determined in accordance with GAAP and with tax laws effective at the balance sheet date and distributed to the third parties. The third parties’ interests in the results of operations of the funds are determined as the difference in the noncontrolling interest and redeemable noncontrolling interest balances in the consolidated balance sheets between the start and end of each reporting period, after taking into account any capital transactions between the funds and the third parties. However, the redeemable noncontrolling interest balance is at least equal to the redemption amount. The redeemable noncontrolling interest balance is presented as temporary equity in the mezzanine section of the consolidated balance sheet since these third parties have the right to redeem their interests in the funds for cash or other assets. Net Income per Share of Common Stock Attributable to Common Stockholders Basic net income per share of common stock attributable to common stockholders is calculated by dividing net income attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards, warrants and convertible senior notes using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income per share of common stock attributable to common stockholders when their effect is dilutive. 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): Year Ended December 31, 2024 2023 2022 Net income attributable to common stockholders $ 7,091 $ 14,997 $ 12,556 Less: Buy-outs of noncontrolling interests ( 39 ) ( 2 ) ( 27 ) Net income used in computing basic net income per share of common stock 7,130 14,999 12,583 Less: Dilutive convertible debt — — ( 1 ) Net income used in computing diluted net income per share of common stock $ 7,130 $ 14,999 $ 12,584 60 The following table presents the reconciliation of basic to diluted weighted average shares used in computing net income per share of common stock attributable to common stockholders (in millions): Year Ended December 31, 2024 2023 2022 Weighted average shares used in computing net income per share of common stock, basic 3,197 3,174 3,130 Add: Stock-based awards 292 298 310 Convertible senior notes 1 2 3 Warrants 8 11 32 Weighted average shares used in computing net income per share of common stock, diluted 3,498 3,485 3,475 The following table presents the potentially dilutive shares that were excluded from the computation of diluted net income per share of common stock attributable to common stockholders, because their effect was anti-dilutive (in millions): Year Ended December 31, 2024 2023 2022 Stock-based awards 15 12 4 Cash and Cash Equivalents All highly liquid investments with an original maturity of three months or less at the date of purchase are considered cash equivalents. Restricted Cash We maintain certain cash balances restricted as to withdrawal or use. Our restricted cash is comprised primarily of cash held to service certain payments under various secured debt facilities, cash held as collateral for sales to lease partners with a resale value guarantee and deposits held for our insurance services. We record restricted cash as other assets in the consolidated balance sheets and determine current or non-current classification based on the expected duration of the restriction. Our total cash and cash equivalents and restricted cash, as presented in the consolidated statements of cash flows, was as follows (in millions): December 31, 2024 December 31, 2023 December 31, 2022 Cash and cash equivalents $ 16,139 $ 16,398 $ 16,253 Restricted cash included in prepaid expenses and other current assets 494 543 294 Restricted cash included in other non-current assets 404 248 377 Total as presented in the consolidated statements of cash flows $ 17,037 $ 17,189 $ 16,924 Investments Our investments are all designated as available-for-sale and reported at estimated fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss which is included within stockholders’ equity. Available-for-sale marketable securities with maturities greater than three months at the date of purchase are included in short-term investments in our consolidated balance sheets. Interest, dividends, amortization and accretion of purchase premiums and discounts on these investments are included within Interest income in our consolidated statements of operations. Interest income on our short-term investments for the years ended December 31, 2024, 2023 and 2022 was $ 763 million, $ 388 million and an immaterial amount, respectively. 61 The cost of available-for-sale investments sold is based on the specific identification method. Realized gains and losses on the sale of available-for-sale investments are recorded in Other income (expense), net. We regularly review all of our investments for declines in fair value. The review includes but is not limited to (i) the consideration of the cause of the decline, (ii) any currently recorded expected credit losses and (iii) the creditworthiness of the respective security issuers. The amortized cost basis of our investments approximates its fair value. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable primarily include amounts related to receivables from financial institutions and leasing companies offering various financing products to our customers, sales of energy generation and storage products, sales of regulatory credits to other automotive manufacturers and government rebates already passed through to customers. We provide an allowance against accounts receivable for the amount we expect to be uncollectible. We write-off accounts receivable against the allowance when they are deemed uncollectible. Depending on the day of the week on which the end of a fiscal quarter falls, our accounts receivable balance may fluctuate as we are waiting for certain customer payments to clear through our banking institutions and receipts of payments from our financing partners, which can take up to approximately two weeks based on the contractual payment terms with such partners. Our accounts receivable balances associated with sales of energy storage products are dependent on billing milestones and payment terms negotiated for each contract, and our accounts receivable balances associated with our sales of regulatory credits are dependent on contractual payment terms. Additionally, government rebates can take up to a year or more to be collected depending on the customary processing timelines of the specific jurisdictions issuing them. These various factors may have a significant impact on our accounts receivable balance from period to period. As of December 31, 2024 and 2023, government rebates receivable was $ 315 million and $ 378 million, respectively, in Accounts receivable, net for the current portion and an immaterial amount and $ 207 million, respectively, in Other non-current assets for the long-term portion in our consolidated balance sheets. Financing Receivables We provide financing options to our customers for our automotive and energy products. Financing receivables are carried at amortized cost, net of allowance for loan losses. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at levels considered adequate to cover expected credit losses on the financing receivables. In determining expected credit losses, we consider our historical level of credit losses, current economic trends, and reasonable and supportable forecasts that affect the collectability of the future cash flows. Interest income on financing receivables is recognized over the loan term as revenue in the consolidated statements of operations. When originating consumer receivables, we review the credit application, the proposed contract terms, credit bureau information (e.g., FICO score) and other information. Our evaluation emphasizes the applicant’s ability to pay and creditworthiness focusing on payment, affordability, and applicant credit history as key considerations. Generally, all customers in this portfolio have strong creditworthiness at loan origination. After origination, we review the credit quality of retail financing based on customer payment activity and aging analysis. For all financing receivables, we define “past due” as any payment, including principal and interest, which is at least 31 days past the contractual due date. As of December 31, 2024 and 2023, the vast majority of our financing receivables were at current status with an immaterial balance being past due. As of December 31, 2024 and 2023, the majority of our financing receivables, excluding MyPower notes receivable, were originated in 2023 and 2022. We have customer notes receivable under the legacy MyPower loan program, which provided residential customers with the option to finance the purchase of a solar energy system through a 30-year loan and were all originated prior to year 2018. The outstanding balances, net of any allowance for expected credit losses, are presented on the consolidated balance sheets as a component of Prepaid expenses and other current assets for the current portion and as Other non-current assets for the long-term portion. As of December 31, 2024 and 2023, the total outstanding balance of MyPower customer notes receivable, net of allowance for expected credit losses, was $ 248 million and $ 266 million, respectively, of which $ 4 million and $ 5 million were due in the next 12 months as of December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, the allowance for expected credit losses was $ 33 million and $ 36 million, respectively. 62 Concentration of Risk Credit Risk Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, investments, restricted cash, accounts receivable and other finance receivables. Our cash and investments balances are primarily on deposit at high credit quality financial institutions or invested in highly rated, investment-grade securities. These deposits are typically in excess of insured limits. As of December 31, 2024 and 2023, no entity represented 10% or more of our total receivables balance. Supply Risk We are dependent on our suppliers, including single source suppliers, and the inability of these suppliers to deliver necessary components of our products in a timely manner at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components from these suppliers, could have a material adverse effect on our business, prospects, financial condition and operating results. Inventory Valuation Inventories are stated at the lower of cost or net realizable value. 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. If our inventory on-hand is in excess of our future demand forecast, the excess amounts are written-off. We also review our inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires us to determine the estimated selling price of our vehicles less the estimated cost to convert the inventory on-hand into a finished product. Once inventory is written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. Should our estimates of future selling prices or production costs change, additional and potentially material write-downs may be required. A small change in our estimates may result in a material charge to our reported financial results. Operating Lease Vehicles Vehicles that are leased as part of our direct vehicle leasing program are classified as operating lease vehicles at cost less accumulated depreciation. We generally depreciate their cost, less residual value, using the straight-line-method to cost of automotive leasing revenue over the contractual period. The gross cost of operating lease vehicles as of December 31, 2024 and 2023 was $ 7.03 billion and $ 7.36 billion, respectively. Operating lease vehicles on the consolidated balance sheets are presented net of accumulated depreciation of $ 1.45 billion and $ 1.38 billion as of December 31, 2024 and 2023, respectively. Digital Assets, Net We account for all digital assets held as crypto assets, a subset of indefinite-lived intangible assets in accordance with ASC 350-60, Intangibles - Goodwill and Other - Crypto Assets . We have ownership of and control over our digital assets and we may use third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheet at fair value. Periods prior to January 1, 2024 include digital assets at cost, net of impairment losses incurred since their acquisition. We determine and record the fair value of our digital assets in accordance with ASC 820, Fair Value Measurement (“ASC 820”), based on quoted prices on the active exchange(s) that we have determined is the principal market for such assets (Level I inputs). We determine the cost basis of our digital assets using the specific identification of each unit received. Realized and unrealized gains and losses are now recorded to Other income (expense), net in our consolidated statement of operations. 63 For periods prior to January 1, 2024, impairment losses were recognized within Restructuring and other in the consolidated statements of operations in the period in which the impairment was identified. Also for periods prior to January 1, 2024, gains were not recorded until realized upon sale(s), at which point they were presented net of any impairment losses for the same digital assets held within Restructuring and other. In determining the gain to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale. See Note 3, Digital Assets, Net , for further information regarding digital assets. Solar Energy Systems, Net We are the lessor of solar energy systems, which are stated at cost less accumulated depreciation. Depreciation of solar energy systems is calculated using the straight-line method over the estimated useful lives of 30 to 35 years. The gross cost of solar energy systems as of December 31, 2024 and 2023 was $ 6.79 billion and $ 6.87 billion, respectively. Solar energy systems on the consolidated balance sheets are presented net of accumulated depreciation of $ 1.86 billion and $ 1.64 billion as of December 31, 2024 and 2023, respectively. Property, Plant and Equipment, Net Property, plant and equipment, net, including leasehold improvements, are recognized at cost less accumulated depreciation. Depreciation is generally computed using the straight-line method over the estimated useful lives of the respective assets, as follows: Machinery, equipment, vehicles and office furniture 3 to 15 years Tooling 4 to 7 years Building and building improvements 15 to 30 years Computer equipment and software 3 to 6 years AI infrastructure 5 to 30 years Leasehold improvements are depreciated on a straight-line basis over their estimated useful lives. AI infrastructure includes our owned data centers. Upon the retirement or sale of our property, plant and equipment, the cost and associated accumulated depreciation are removed from the consolidated balance sheet, and the resulting gain or loss is reflected on the consolidated statement of operations. Maintenance and repair expenditures are expensed as incurred while major improvements that increase the functionality, output or expected life of an asset are capitalized and depreciated ratably over the identified useful life. Long-Lived Assets Including Acquired Intangible Assets We review our property, plant and equipment, solar energy systems, long-term prepayments and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. We measure recoverability by comparing the carrying amount to the future undiscounted cash flows that the asset is expected to generate. If the asset is not recoverable, its carrying amount would be adjusted down to its fair value. For the years ended December 31, 2024, 2023 and 2022, we have recognized no material impairments of our long-lived assets. Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives, which range from seven to thirty years . Goodwill We assess goodwill for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit’s fair value. For the years ended December 31, 2024, 2023, and 2022, we did no t recognize any impairment of goodwill. 64 Capitalization of Software Costs We capitalize costs incurred in the development of internal use software, during the application development stage to Property, plant and equipment, net on the consolidated balance sheets. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Such costs are amortized on a straight-line basis over their estimated useful life of three to five years . Software development costs incurred in development of software to be sold, leased, or otherwise marketed, incurred subsequent to the establishment of technological feasibility and prior to the general availability of the software are capitalized when they are expected to become significant. Such costs are amortized over the estimated useful life of the applicable software once it is made generally available to our customers. We evaluate the useful lives of these assets on an annual basis, and we test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. For the years ended December 31, 2024, 2023, and 2022, we have recognized no impairments of capitalized software costs. Foreign Currency We determine the functional and reporting currency of each of our international subsidiaries and their operating divisions based on the primary currency in which they operate. In cases where the functional currency is not the U.S. dollar, we recognize a cumulative translation adjustment created by the different rates we apply to current period income or loss and the balance sheet. For each subsidiary, we apply the monthly average functional exchange rate to its monthly income or loss and the month-end functional currency rate to translate the balance sheet. Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency of the respective subsidiary. Transaction gains and losses are recognized in Other income (expense), net, in the consolidated statements of operations. For the years ended December 31, 2024, 2023 and 2022, we recorded a net foreign currency transaction gain of $ 57 million, gain of $ 122 million and loss of $ 89 million, respectively. Warranties We provide a manufacturer’s warranty on all new and used vehicles and a warranty on the installation and components of the energy generation and storage systems we sell for periods typically between 10 to 25 years. We accrue a warranty reserve for the products sold by us, which includes our best estimate of the projected costs to repair or replace items under warranties and recalls if identified. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain and changes to our historical or projected warranty experience may cause material changes to the warranty reserve in the future. The warranty reserve does not include projected warranty costs associated with our vehicles subject to operating lease accounting and our solar energy systems under lease contracts or PPAs, as the costs to repair these warranty claims are expensed as incurred. The portion of the warranty reserve expected to be incurred within the next 12 months is included within Accrued liabilities and other, while the remaining balance is included within Other long-term liabilities on the consolidated balance sheets. For liabilities that we are entitled to receive indemnification from our suppliers, we record receivables for the contractually obligated amounts on the consolidated balance sheets as a component of Prepaid expenses and other current assets for the current portion and as Other non-current assets for the long-term portion. Warranty expense is recorded as a component of Cost of revenues in the consolidated statements of operations. Due to the magnitude of our automotive business, our accrued warranty balance is primarily related to our automotive segment. Accrued warranty activity consisted of the following (in millions): Year Ended December 31, 2024 2023 2022 Accrued warranty—beginning of period $ 5,152 $ 3,505 $ 2,101 Warranty costs incurred ( 1,453 ) ( 1,225 ) ( 803 ) Net changes in liability for pre-existing warranties, including expirations and foreign exchange impact 287 539 522 Provision for warranty 2,730 2,333 1,685 Accrued warranty—end of period $ 6,716 $ 5,152 $ 3,505 65 Customer Deposits Customer deposits primarily consist of refundable cash payments from customers at the time they place an order or reservation for a vehicle or an energy product and any additional payments up to the point of delivery or the completion of installation. Customer deposits also include prepayments on contracts that can be cancelled without significant penalties, such as vehicle maintenance plans. Customer deposits are included in Accrued liabilities and other on the consolidated balance sheets until refunded, forfeited or applied towards the customer’s purchase balance. Government Assistance Programs and Incentives Globally, the operation of our business is impacted by various government programs, incentives, and other arrangements. Government incentives are recorded in our consolidated financial statements in accordance with their purpose as a reduction of expense, or an offset to the related capital asset. The benefit is generally recorded when all conditions attached to the incentive have been met or are expected to be met and there is reasonable assurance of their receipt. The IRA Incentives On August 16, 2022, the IRA was enacted into law and is effective for taxable years beginning after December 31, 2022. The IRA includes multiple incentives to promote clean energy, electric vehicles, battery and energy storage manufacture or purchase, in addition to a new corporate alternative minimum tax of 15% on adjusted financial statement income of corporations with profits greater than $1 billion. Some of these measures are expected to materially affect our consolidated financial statements. For the years ended December 31, 2024 and 2023, the impact from our IRA incentive was primarily a reduction of our costs of revenue in our consolidated statements of operations. Gigafactory New York—New York State Investment and Lease We have a lease through the Research Foundation for the SUNY Foundation with respect to Gigafactory New York. Under the lease and a related research and development agreement, we are continuing to designate further buildouts at the facility. We are required to comply with certain covenants, including hiring and cumulative investment targets. Under the terms of the arrangement, the SUNY Foundation paid for a majority of the construction costs related to the manufacturing facility and the acquisition and commissioning of certain manufacturing equipment; and we are responsible for any construction or equipment costs in excess of such amount (refer to Note 14, Commitments and Contingencies ). This incentive reduces the related lease costs of the facility within the Energy generation and storage cost of revenues and operating expense line items in our consolidated statements of operations and was not material for any period presented. Gigafactory Shanghai—Land Use Rights and Economic Benefits We have an agreement with the local government of Shanghai for land use rights at Gigafactory Shanghai. Under the terms of the arrangement, we are required to meet a cumulative capital expenditure target and an annual tax revenue target starting at the end of 2023. In addition, the Shanghai government has granted to our Gigafactory Shanghai subsidiary certain incentives to be used in connection with eligible capital investments at Gigafactory Shanghai (refer to Note 14, Commitments and Contingencies ). Incentives that offset costs of our facilities are recorded as a reduction of the cost of the capital investment within the Property, plant and equipment, net line item in our consolidated balance sheets and incentives related to our manufacturing operations are recorded as an offset to cost of revenues in our consolidated statements of operations. For the years ended December 31, 2024 and 2023, the amounts received were immaterial. Nevada Tax Incentives In connection with the construction of Gigafactory Nevada, we entered into agreements in 2014 with the State of Nevada and Storey County in Nevada that provide abatements for specified taxes, discounts to the base tariff energy rates and transferable tax credits of up to $ 195 million in consideration of capital investment and hiring targets that were met at Gigafactory Nevada. 66 Gigafactory Texas Tax Incentives In connection with the construction of Gigafactory Texas, we entered into a 20-year agreement in 2020 with Travis County in Texas pursuant to which we would receive grant funding equal to 70 - 80 % of property taxes paid by us to Travis County and a separate 10-year agreement in 2020 with the Del Valle Independent School District in Texas pursuant to which a portion of the taxable value of our property would be capped at a specified amount, in each case subject to our meeting certain minimum economic development metrics through our construction and operations at Gigafactory Texas. This incentive is recorded as a reduction of the related expenses within the Cost of automotive revenues and operating expense line items of our consolidated statements of operations. For the years ended December 31, 2024, 2023 and 2022, the grant funding related to property taxes paid were immaterial. Defined Contribution Plan We have a 401(k) savings plan in the U.S. that is intended to qualify as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code and a number of savings plans internationally. Under the 401(k) savings plan, participating employees may elect to contribute up to 90 % of their eligible compensation, subject to certain limitations. Beginning in January 2022, we began to match 50 % of each employee’s contributions up to a maximum of 6 % (capped at $ 3,000 ) of the employee’s eligible compensation, vested upon one year of service. During the years ended December 31, 2024, 2023 and 2022, we recognized $ 107 million, $ 99 million and $ 91 million, respectively, of expenses related to employer contributions for the 401(k) savings plan. Recent Accounting Pronouncements Recently issued accounting pronouncements not yet adopted In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted. In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted. We are currently evaluating the provisions of this ASU. Recently adopted accounting pronouncements In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December 31, 2024. Refer to Note 17, Segment Reporting and Information about Geographic Areas for the inclusion of the new required disclosures. 67 ASU 2023-08 In December 2023, the FASB issued ASU No. 2023-08, Accounting for and Disclosure of Crypto Assets (Subtopic 350-60) (“new crypto assets standard”). The new crypto assets standard requires certain crypto assets to be measured at fair value separately on the balance sheet with changes reported in the statement of operations each reporting period. The new crypto assets standard also enhances the other intangible asset disclosure requirements by requiring the name, cost basis, fair value, and number of units for each significant crypto asset holding. The new crypto assets standard is effective for annual periods beginning after December 15, 2024, including interim periods within those fiscal years. Adoption of the new crypto assets standard requires a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period in which an entity adopts the amendments. Early adoption is also permitted, including adoption in an interim period. However, if the new crypto assets standard is early adopted in an interim period, an entity must adopt the new crypto assets standard as of the beginning of the fiscal year that includes the interim period. We adopted the new crypto assets standard on a modified retrospective approach effective January 1, 2024. Refer to Note 3, Digital Assets, Net for the inclusion of the new required disclosures. The cumulative effect of the changes made on our January 1, 2024 consolidated balance sheet for the adoption of the new crypto assets standard was as follows (in millions): Balances at December 31, 2023 Adjustments from Adoption of the New Crypto Assets Standard Balances at January 1, 2024 Assets Digital assets, net $ 184 $ 303 $ 487 Deferred tax assets 6,733 ( 67 ) 6,666 Stockholders' equity Retained earnings 27,882 236 28,118 Note 3 – Digital Assets, Net During the years ended December 31, 2024 and 2023, we purchased and/or received immaterial amounts of digital assets. During the years ended December 31, 2023 and 2022, we recorded an immaterial amount and $ 204 million of impairment losses on digital assets, respectively. The table below summarizes the amounts shown on our consolidated balance sheet as of December 31, 2024 (in millions except units of digital assets). December 31, 2024 Units Cost Basis Fair Value Digital assets held: Bitcoin 11,509 $ 386 $ 1,074 Other 1 2 Total 387 1,076 The following table provides details of the activities related to our digital assets for the year ended December 31, 2024 (in millions): Beginning balance at fair value $ 487 Unrealized gains, net 589 Ending balance $ 1,076 The following tables present summarized unaudited quarterly financial statement data for those impacted line items based on the Company’s adoption of the new crypto assets standard as described in Note 2, Summary of Significant Accounting Policies (in millions, except per share data): 68 As of: Consolidated Balance Sheets (unaudited): March 31, 2024 June 30, 2024 September 30, 2024 Digital assets, net Before adoption $ 184 $ 184 $ 184 Adjustments 638 538 545 As adjusted $ 822 $ 722 $ 729 Deferred tax assets Before adoption $ 6,769 $ 6,692 $ 6,486 Adjustments ( 141 ) ( 119 ) ( 120 ) As adjusted $ 6,628 $ 6,573 $ 6,366 Three Months Ended Condensed Consolidated Statements of Operations (unaudited): March 31, 2024 June 30, 2024 September 30, 2024 Other income (expense), net Before adoption $ 108 $ 20 $ ( 270 ) Adjustments 335 ( 100 ) 7 As adjusted $ 443 $ ( 80 ) $ ( 263 ) Provision for (benefit from) income taxes Before adoption $ 409 $ 393 $ 601 Adjustments 74 ( 22 ) 1 As adjusted $ 483 $ 371 $ 602 Net income attributable to common stockholders Before adoption $ 1,129 $ 1,478 $ 2,167 Adjustments 261 ( 78 ) 6 As adjusted $ 1,390 $ 1,400 $ 2,173 Net income per share of common stock attributable to common stockholders Basic Before adoption $ 0.37 $ 0.46 $ 0.68 Adjustments 0.08 ( 0.02 ) — As adjusted $ 0.45 $ 0.44 $ 0.68 Diluted Before adoption $ 0.34 $ 0.42 $ 0.62 Adjustments 0.07 ( 0.02 ) — As adjusted $ 0.41 $ 0.40 $ 0.62 The unaudited impact of adoption for the three months ended December 31, 2024 was to increase Digital assets, net by $ 347 million, with a corresponding increase in Other income (expense), net and decrease our Deferred tax assets by $ 77 million with a corresponding increase in our Provision for (benefit from) income taxes, thus contributing $ 270 million to Net income attributable to common stockholders. These amounts contributed $ 0.08 to both basic and diluted net income attributable to common stockholders per share of common stock for the three months ended December 31, 2024. There were no impairment losses recorded for any period during the year ended December 31, 2024. As a result, the unaudited interim balances of Digital assets, net did not change throughout the year ended December 31, 2024 prior to the adoption of the new crypto assets standard, which was adopted as of January 1, 2024. Note 4 – Goodwill and Intangible Assets Goodwill decreased $ 9 million within the automotive segment from $ 253 million as of December 31, 2023 to $ 244 million as of December 31, 2024. There were no accumulated impairment losses as of December 31, 2024 and 2023. 69 The net carrying value of our intangible assets decreased from $ 178 million as of December 31, 2023 to $ 150 million as of December 31, 2024 mainly from amortization. Note 5 – Fair Value of Financial Instruments ASC 820 states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, is comprised of: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices in active markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair value hierarchy requires the use of observable market data when available in determining fair value. Our assets and liabilities that were measured at fair value on a recurring basis were as follows (in millions): December 31, 2024 December 31, 2023 Fair Value Level I Level II Level III Fair Value Level I Level II Level III Certificates of deposit and time deposits $ 12,767 $ — $ 12,767 $ — $ 6,996 $ — $ 6,996 $ — Commercial paper 3,919 — 3,919 — 470 — 470 — U.S. government securities 3,620 — 3,620 — 5,136 — 5,136 — Corporate debt securities 118 — 118 — 480 — 480 — Money market funds 1,753 1,753 — — 109 109 — — Digital assets 1,076 1,076 — — Not applicable Total $ 23,253 $ 2,829 $ 20,424 $ — $ 13,191 $ 109 $ 13,082 $ — All of our money market funds and digital assets are classified within Level I of the fair value hierarchy because they were valued using quoted prices in active markets. Our U.S. government securities, certificates of deposit, commercial paper, 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 December 31, 2024 and 2023 consisted of the following (in millions): December 31, 2024 Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Short-Term Investments Cash $ 14,386 $ — $ — $ 14,386 $ 14,386 $ — Certificates of deposit and time deposits 12,767 — — 12,767 — 12,767 Commercial paper 3,908 11 — 3,919 — 3,919 U.S. government securities 3,618 3 ( 1 ) 3,620 — 3,620 Corporate debt securities 117 1 — 118 — 118 Money market funds 1,753 — — 1,753 1,753 — Total cash, cash equivalents and short-term investments $ 36,549 $ 15 $ ( 1 ) $ 36,563 $ 16,139 $ 20,424 70 December 31, 2023 Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and Cash Equivalents Short-Term Investments Cash $ 15,903 $ — $ — $ 15,903 $ 15,903 $ — Certificates of deposit and time deposits 6,995 1 — 6,996 — 6,996 U.S. government securities 5,136 1 ( 1 ) 5,136 277 4,859 Corporate debt securities 485 1 ( 6 ) 480 — 480 Commercial paper 470 — — 470 109 361 Money market funds 109 — — 109 109 — Total cash, cash equivalents and short-term investments $ 29,098 $ 3 $ ( 7 ) $ 29,094 $ 16,398 $ 12,696 As of December 31, 2024, the vast majority of our short-term investments had contractual maturity dates within one year. Disclosure of Fair Values Our financial instruments that are not re-measured at fair value include accounts receivable, financing receivables, other receivables, accounts payable, accrued liabilities, customer deposits and debt. The carrying values of these financial instruments materially approximate their fair values. Note 6 – Inventory Our inventory consisted of the following (in millions): December 31, 2024 December 31, 2023 Raw materials $ 5,242 $ 5,390 Work in process 1,532 2,016 Finished goods (1) 3,940 5,049 Service parts 1,303 1,171 Total $ 12,017 $ 13,626 (1) Finished goods inventory includes products-in-transit to fulfill customer orders, new vehicles, used vehicles and energy products available for sale. We write-down inventory for any excess or obsolete inventory or when we believe that the net realizable value of inventory is less than the carrying value. During the years ended December 31, 2024, 2023 and 2022, we recorded write-downs of $ 190 million, $ 233 million and $ 144 million, respectively, in Cost of revenues in the consolidated statements of operations. 71 Note 7 – Property, Plant and Equipment, Net Our property, plant and equipment, net, consisted of the following (in millions): December 31, 2024 December 31, 2023 Machinery, equipment, vehicles and office furniture $ 18,339 $ 16,309 Land and buildings 10,677 9,498 AI infrastructure 5,152 1,510 Tooling 3,883 3,129 Leasehold improvements 3,688 3,136 Computer equipment, hardware and software 2,902 2,409 Construction in progress 6,783 5,791 51,424 41,782 Less: Accumulated depreciation ( 15,588 ) ( 12,057 ) Total $ 35,836 $ 29,725 Construction in progress is primarily comprised of ongoing construction and expansion of our facilities, equipment and tooling related to the manufacturing of our products as well as AI-related assets which have not yet been placed in service. Completed assets are transferred to their respective asset classes and depreciation begins when an asset is ready for its intended use. Depreciation expense during the years ended December 31, 2024, 2023 and 2022 was $ 4.12 billion, $ 3.33 billion and $ 2.42 billion, respectively. Note 8 – Accrued Liabilities and Other Our accrued liabilities and other current liabilities consisted of the following (in millions): December 31, 2024 December 31, 2023 Accrued purchases (1) $ 2,253 $ 2,721 Accrued warranty reserve, current portion 1,917 1,546 Payroll and related costs 1,532 1,325 Taxes payable (2) 1,367 1,204 Customer deposits 993 876 Operating lease liabilities, current portion 807 672 Sales return reserve, current portion 305 219 Other current liabilities 1,549 517 Total $ 10,723 $ 9,080 (1) Accrued purchases primarily reflects receipts of goods and services for which we had not yet been invoiced. As we are invoiced for these goods and services, this balance will reduce and accounts payable will increase. (2) Taxes payable primarily includes value added tax, income tax, sales tax, property tax and use tax payables. 72 Note 9 – Other Long-Term Liabilities Our other long-term liabilities consisted of the following (in millions): December 31, 2024 December 31, 2023 Operating lease liabilities $ 4,603 $ 3,671 Accrued warranty reserve 4,799 3,606 Other non-current liabilities 1,093 876 Total other long-term liabilities $ 10,495 $ 8,153 Note 10 – Debt The following is a summary of our debt and finance leases as of December 31, 2024 (in millions): Net Carrying Value Unpaid Principal Balance Unused Committed Amount (1) Contractual Interest Rates Contractual Maturity Date Current Long-Term Recourse debt: RCF Credit Agreement — — — 5,000 Not applicable January 2028 Other 4 3 7 — 4.70 - 5.75 % March 2025 - January 2031 Total recourse debt 4 3 7 5,000 Non-recourse debt: Automotive Asset-backed Notes 2,255 2,059 4,329 — 3.45 - 6.57 % September 2025 - June 2035 China Working Capital Facility — 2,740 2,740 — 1.92 % April 2025 (2) Energy Asset-backed Notes 54 434 493 — 4.80 - 6.25 % December 2025-June 2050 Cash Equity Debt 30 299 338 — 5.25 - 5.81 % July 2033 - January 2035 Total non-recourse debt 2,339 5,532 7,900 — Total debt 2,343 5,535 $ 7,907 $ 5,000 Finance leases 113 222 Total debt and finance leases $ 2,456 $ 5,757 The following is a summary of our debt and finance leases as of December 31, 2023 (in millions): Net Carrying Value Unpaid Principal Balance Unused Committed Amount (1) Contractual Interest Rates Contractual Maturity Date Current Long-Term Recourse debt: 2024 Notes $ 37 $ — $ 37 $ — 2.00 % May 2024 RCF Credit Agreement — — — 5,000 Not applicable January 2028 Other — 7 7 28 4.70 - 5.75 % March 2025 - January 2031 Total recourse debt 37 7 44 5,028 Non-recourse debt: Automotive Asset-backed Notes 1,906 2,337 4,259 — 0.60 - 6.57 % July 2024 - May 2031 Cash Equity Debt 28 330 367 — 5.25 - 5.81 % July 2033 - January 2035 Energy Asset-backed Notes 4 8 13 — 4.80 % December 2026 Total non-recourse debt 1,938 2,675 4,639 — Total debt 1,975 2,682 $ 4,683 $ 5,028 Finance leases 398 175 Total debt and finance leases $ 2,373 $ 2,857 (1) There are no restrictions on draw-down or use for general corporate purposes with respect to any available committed funds under our RCF Credit Agreement, except certain specified conditions prior to draw-down. Refer to the section below for the terms of the facility. (2) The contractual maturity date of the China Working Capital Facility is April 2025, renewable until March 2026 at our discretion. As we have the intent and ability to refinance the loan on a long-term basis, we recorded it in Debt and finance leases, net of current portion in the consolidated balance sheets. 73 Recourse debt refers to debt that is recourse to our general assets. Non-recourse debt refers to debt that is recourse to only assets of our subsidiaries. The differences between the unpaid principal balances and the net carrying values are due to debt discounts or deferred issuance costs. As of December 31, 2024, we were in material compliance with all financial debt covenants. 2024 Notes During the second quarter of 2024, the 2024 Notes reached maturity and were fully settled. Additionally, in 2024, we fully settled the warrants entered into in connection with the issuance of the 2024 Notes, resulting in the issuance of 11.4 million shares of our common stock. Credit Agreement In January 2023, we entered into a 5-year senior unsecured revolving credit facility (the “RCF Credit Agreement”) with a syndicate of banks. The RCF Credit Agreement contains two optional one-year extensions and has a total commitment of up to $ 5.00 billion, which could be increased up to $ 7.00 billion under certain circumstances. The underlying borrowings may be used for general corporate purposes. Borrowed funds accrue interest at a variable rate equal to: (i) for dollar-denominated loans, at our election, (a) Term SOFR (the forward-looking secured overnight financing rate) plus 0.10 %, or (b) an alternate base rate; (ii) for loans denominated in pounds sterling, SONIA (the sterling overnight index average reference rate); or (iii) for loans denominated in euros, an adjusted EURIBOR (euro interbank offered rate); in each case, plus an applicable margin. The applicable margin will be based on the rating assigned to our senior, unsecured long-term indebtedness (the “Credit Rating”) from time to time. The fee for undrawn amounts is variable based on the Credit Rating and is currently 0.125 % per annum. Automotive Asset-backed Notes From time to time, we transfer receivables and/or beneficial interests related to certain vehicles (either leased or financed) into special purpose entities (“SPEs”) and issue Automotive Asset-backed Notes, backed by these automotive assets to investors. The SPEs are consolidated in the financial statements. The cash flows generated by these automotive assets are used to service the principal and interest payments on the Automotive Asset-backed Notes and satisfy the SPEs’ expenses, and any remaining cash is distributed to the owners of the SPEs. We recognize revenue earned from the associated customer lease or financing contracts in accordance with our revenue recognition policy. The SPEs’ assets and cash flows are not available to our other creditors, and the creditors of the SPEs, including the Automotive Asset-backed Note holders, have no recourse to our other assets. In 2024, we transferred beneficial interests related to certain leased vehicles and/or financing receivables into SPEs and issued $ 2.45 billion in aggregate principal amount of Automotive Asset-backed Notes, with terms similar to our other previously issued Automotive Asset-backed Notes. The proceeds from the issuance, net of debt issuance costs, were $ 2.44 billion. Energy Asset-backed Notes In 2024, we transferred certain financing receivables into an SPE and issued $ 499 million in aggregate principal amount of Energy Asset-backed Notes, backed by these financing receivables. The proceeds from issuance, net of debt issuance costs, were $ 494 million. The SPE is wholly owned by us and is consolidated in the financial statements. The cash flows generated by these financing receivables are used to service the principal and interest payments on the Energy Asset-backed Notes and satisfy the SPE’s expenses, and any remaining cash is distributed to us. The SPE’s assets and cash flows are not available to our other creditors, and the creditors of the SPE, including the Energy Asset-backed Notes holders, have no recourse to our other assets. Cash Equity Debt In connection with the cash equity financing deals closed in 2016, our subsidiaries issued $ 502 million in aggregate principal amount of debt that bears interest at fixed rates. This debt is secured by, among other things, our interests in certain financing funds and is non-recourse to our other assets. 74 China Working Capital Facility In April 2024, one of our subsidiaries entered into a loan agreement (the “China Working Capital Facility”) with lenders in China for an unsecured revolving facility of up to RMB 20.00 billion to be used for certain production expenditures as well as repayment of certain finance facilities. Borrowed funds bear interest at a rate equal to the Loan Prime Rate published by the People’s Bank of China minus 1.18 %. The China Working Capital Facility is non-recourse to our assets. Pledged Assets As of December 31, 2024 and 2023, we had pledged or restricted $ 5.16 billion and $ 4.64 billion of our assets (consisting principally of operating lease vehicles, financing receivables, restricted cash, and equity interests in certain SPEs) as collateral for our outstanding debt. Schedule of Principal Maturities of Debt The future scheduled principal maturities of debt as of December 31, 2024 were as follows (in millions): Recourse debt Non-recourse debt Total 2025 $ 4 $ 2,349 $ 2,353 2026 — 4,116 4,116 2027 — 699 699 2028 — 243 243 2029 — 95 95 Thereafter 3 398 401 Total $ 7 $ 7,900 $ 7,907 Note 11 – Leases We have entered into various operating and finance lease agreements for certain of our offices, manufacturing and warehouse facilities, retail and service locations, data centers, equipment, vehicles, and solar energy systems, worldwide. We determine if an arrangement is a lease, or contains a lease, at inception and record the lease in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor. We have lease agreements with lease and non-lease components, and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease. We have elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. Our leases, where we are the lessee, often include options to extend the lease term for up to 10 years. Some of our leases also include options to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. 75 Lease expense for operating leases is recognized on a straight-line basis over the lease term as cost of revenues or operating expenses depending on the nature of the leased asset. Certain operating leases provide for annual increases to lease payments based on an index or rate. We calculate the present value of future lease payments based on the index or rate at the lease commencement date for new leases. Differences between the calculated lease payment and actual payment are expensed as incurred. Amortization of finance lease assets is recognized over the lease term as cost of revenues or operating expenses depending on the nature of the leased asset. Interest expense on finance lease liabilities is recognized over the lease term within Interest expense in the consolidated statements of operations. The balances for the operating and finance leases where we are the lessee are presented as follows (in millions) within our consolidated balance sheets: December 31, 2024 December 31, 2023 Operating leases: Operating lease right-of-use assets $ 5,160 $ 4,180 Accrued liabilities and other $ 807 $ 672 Other long-term liabilities 4,603 3,671 Total operating lease liabilities $ 5,410 $ 4,343 Finance leases: Solar energy systems, net $ 21 $ 23 Property, plant and equipment, net 350 601 Total finance lease assets $ 371 $ 624 Current portion of long-term debt and finance leases $ 113 $ 398 Long-term debt and finance leases, net of current portion 222 175 Total finance lease liabilities $ 335 $ 573 The components of lease expense are as follows (in millions) within our consolidated statements of operations: Year Ended December 31, 2024 2023 2022 Operating lease expense: Operating lease expense (1) $ 1,500 $ 1,153 $ 798 Finance lease expense: Amortization of leased assets $ 409 $ 506 $ 493 Interest on lease liabilities 21 45 72 Total finance lease expense $ 430 $ 551 $ 565 Total lease expense $ 1,930 $ 1,704 $ 1,363 (1) Includes short-term leases and variable lease costs, which are immaterial. 76 Other information related to leases where we are the lessee is as follows: December 31, 2024 December 31, 2023 Weighted-average remaining lease term: Operating leases 7.9 years 7.4 years Finance leases 4.4 years 2.3 years Weighted-average discount rate: Operating leases 5.3 % 5.6 % Finance leases 4.7 % 5.5 % Supplemental cash flow information related to leases where we are the lessee is as follows (in millions): Year Ended December 31, 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 1,450 $ 1,084 $ 754 Operating cash outflows from finance leases (interest payments) $ 21 $ 47 $ 75 Leased assets obtained in exchange for finance lease liabilities $ 144 $ 10 $ 58 Leased assets obtained in exchange for operating lease liabilities $ 1,808 $ 2,170 $ 1,059 As of December 31, 2024, the maturities of our operating and finance lease liabilities (excluding short-term leases) are as follows (in millions): Operating Leases Finance Leases 2025 $ 1,066 $ 122 2026 958 84 2027 843 69 2028 742 27 2029 642 22 Thereafter 2,428 45 Total minimum lease payments 6,679 369 Less: Interest 1,269 34 Present value of lease obligations 5,410 335 Less: Current portion 807 113 Long-term portion of lease obligations $ 4,603 $ 222 As of December 31, 2024, we have excluded from the table above additional operating leases that have not yet commenced with aggregate rent payments of $ 1.10 billion. These operating leases will commence between fiscal year 2025 and 2026 with lease terms of 2 years to 20 years. 77 Operating Lease and Sales-type Lease Receivables We are the lessor of certain vehicle and solar energy system arrangements as described in Note 2, Summary of Significant Accounting Policies . As of December 31, 2024, maturities of our operating lease and sales-type lease receivables from customers for each of the next five years and thereafter were as follows (in millions): Operating Leases Sales-type Leases 2025 $ 1,265 $ 177 2026 777 185 2027 454 93 2028 240 27 2029 200 2 Thereafter 1,290 — Gross lease receivables $ 4,226 $ 484 The above table does not include vehicle sales to customers or leasing partners with a resale value guarantee as the cash payments were received upfront. For our solar PPA arrangements, customers are charged solely based on actual power produced by the installed solar energy system at a predefined rate per kilowatt-hour of power produced. The future payments from such arrangements are not included in the above table as they are a function of the power generated by the related solar energy systems in the future. Net Investment in Sales-type Leases Net investment in sales-type leases, which is the sum of the present value of the future contractual lease payments, is presented on the consolidated balance sheets as a component of Prepaid expenses and other current assets for the current portion and as Other non-current assets for the long-term portion. Lease receivables relating to sales-type leases are presented on the consolidated balance sheets as follows (in millions): December 31, 2024 December 31, 2023 Gross lease receivables $ 484 $ 780 Unearned interest income ( 38 ) ( 78 ) Allowance for expected credit losses ( 6 ) ( 6 ) Net investment in sales-type leases $ 440 $ 696 Reported as: Prepaid expenses and other current assets $ 152 $ 189 Other non-current assets 288 507 Net investment in sales-type leases $ 440 $ 696 Note 12 – Equity Incentive Plans In June 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the grant of stock options, restricted stock, RSUs, stock appreciation rights, performance units and performance shares to our employees, directors and consultants. Stock options granted under the 2019 Plan may be either incentive stock options or nonstatutory stock options. Incentive stock options may only be granted to our employees. Nonstatutory stock options may be granted to our employees, directors and consultants. Generally, our stock options and RSUs vest over four years and our stock options are exercisable over a maximum period of 10 years from their grant dates. Vesting typically terminates when the employment or consulting relationship ends. As of December 31, 2024, 113.0 million shares were reserved and available for issuance under the 2019 Plan. 78 The following table summarizes our stock option and RSU activity for the year ended December 31, 2024: Stock Options RSUs Number of Options (in thousands) Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (years) Aggregate Intrinsic Value (in billions) Number of RSUs (in thousands) Weighted- Average Grant Date Fair Value Beginning of period 344,021 $ 35.11 19,088 $ 225.01 Granted 14,979 $ 235.22 12,045 $ 223.98 Exercised or released ( 10,469 ) $ 82.04 ( 7,515 ) $ 206.02 Cancelled ( 3,996 ) $ 205.61 ( 4,957 ) $ 221.15 End of period 344,535 $ 40.41 3.51 $ 125.22 18,661 $ 233.02 Vested and expected to vest, December 31, 2024 344,215 $ 40.23 3.50 $ 125.16 18,409 $ 232.99 Exercisable and vested, December 31, 2024 323,847 $ 27.75 3.14 $ 121.79 The weighted-average grant date fair value per share of RSUs granted in the years ended December 31, 2024, 2023 and 2022 was $ 223.98 , $ 228.33 and $ 239.85 , respectively. The aggregate release date fair value of RSUs in the years ended December 31, 2024, 2023 and 2022 was $ 1.75 billion, $ 2.50 billion and $ 4.32 billion, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2024, 2023, and 2022 was $ 1.77 billion, $ 1.33 billion and $ 1.90 billion, respectively. ESPP Our employees are eligible to purchase our common stock through payroll deductions of up to 15 % of their eligible compensation, subject to any plan limitations. The purchase price would be 85 % of the lower of the fair market value on the first and last trading days of each six-month offering period. During the years ended December 31, 2024, 2023 and 2022, under the ESPP we issued 2.2 million, 2.1 million and 1.4 million shares, respectively. As of December 31, 2024, there were 95.5 million shares available for issuance under the ESPP. Fair Value Assumptions We use the fair value method in recognizing stock-based compensation expense. Under the fair value method, we estimate the fair value of each stock option award with service or service and performance conditions and the ESPP on the grant date generally using the Black-Scholes option pricing model. The weighted-average assumptions used in the Black-Scholes model for stock options are as follows: Year Ended December 31, 2024 2023 2022 Risk-free interest rate 3.92 % 3.90 % 3.11 % Expected term (in years) 4.3 4.5 4.1 Expected volatility 59 % 63 % 63 % Dividend yield 0.0 % 0.0 % 0.0 % Grant date fair value per share $ 114.29 $ 121.62 $ 114.51 The fair value of RSUs with service or service and performance conditions is measured on the grant date based on the closing fair market value of our common stock. The risk-free interest rate is based on the U.S. Treasury yield for zero-coupon U.S. Treasury notes with maturities approximating each grant’s expected life. We use our historical data in estimating the expected term of our employee grants. The expected volatility is based on the average of the implied volatility of publicly traded options for our common stock and the historical volatility of our common stock. 79 Other Performance-Based Grants From time to time, the Compensation Committee of our Board of Directors grants certain employees performance-based RSUs and stock options. As of December 31, 2024, we had unrecognized stock-based compensation expense of $ 490 million under these grants to purchase or receive an aggregate 5.0 million shares of our common stock. For awards probable of achievement, we estimate the unrecognized stock-based compensation expense of $ 421 million will be recognized over a weighted-average period of 4.0 years. For the years ended December 31, 2024, 2023 and 2022, stock-based compensation expense related to these grants, net of forfeitures, were not material. 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): Year Ended December 31, 2024 2023 2022 Cost of revenues $ 776 $ 741 $ 594 Research and development 832 689 536 Selling, general and administrative 389 382 430 Restructuring and other $ 2 $ — $ — Total $ 1,999 $ 1,812 $ 1,560 Our income tax benefits recognized from stock-based compensation arrangements were immaterial while we were under full valuation allowances on our U.S. deferred tax assets during the year ended December 31, 2022. With the release of the valuation allowance associated with our federal and certain state deferred tax assets in 2023, income tax benefits recognized from stock-based compensation expense during the years ended December 31, 2024 and 2023 were $ 371 million and $ 326 million, respectively. During the years ended December 31, 2024, 2023 and 2022, stock-based compensation expense capitalized to our consolidated balance sheets was $ 198 million, $ 199 million and $ 245 million, respectively. As of December 31, 2024, we had $ 5.79 billion of total unrecognized stock-based compensation expense related to non-performance awards, which will be recognized over a weighted-average period of 3.0 years. Note 13 – Income Taxes Our income before provision for (benefit from) income taxes for the years ended December 31, 2024, 2023 and 2022 was as follows (in millions): Year Ended December 31, 2024 2023 2022 Domestic $ 2,292 $ 3,196 $ 5,524 Noncontrolling interest and redeemable noncontrolling interest 62 ( 23 ) 31 Foreign 6,636 6,800 8,164 Income before income taxes $ 8,990 $ 9,973 $ 13,719 80 A provision for (benefit from) income taxes of $ 1.84 billion, $( 5.00 ) billion and $ 1.13 billion has been recognized for the years ended December 31, 2024, 2023 and 2022, respectively. The components of the provision for (benefit from) income taxes for the years ended December 31, 2024, 2023 and 2022 consisted of the following (in millions): Year Ended December 31, 2024 2023 2022 Current: Federal $ — $ 48 $ — State 45 57 62 Foreign 1,315 1,243 1,266 Total current 1,360 1,348 1,328 Deferred: Federal 831 ( 5,246 ) 26 State ( 49 ) ( 653 ) 1 Foreign ( 305 ) ( 450 ) ( 223 ) Total deferred 477 ( 6,349 ) ( 196 ) Total provision for (benefit from) income taxes $ 1,837 $ ( 5,001 ) $ 1,132 81 The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the years ended December 31, 2024, 2023 and 2022 was as follows (in millions): Year Ended December 31, 2024 2023 2022 Tax at statutory federal rate $ 1,887 $ 2,094 $ 2,881 State tax, net of federal benefit 8 ( 372 ) 51 Excess tax benefits related to stock-based compensation ( 267 ) ( 288 ) ( 745 ) Nontaxable manufacturing credit ( 291 ) ( 101 ) — Foreign income rate differential ( 545 ) ( 816 ) ( 923 ) U.S. tax credits ( 317 ) ( 593 ) ( 276 ) GILTI and Subpart F inclusion 882 670 1,279 Unrecognized tax benefits 144 183 252 Change in valuation allowance 163 ( 5,962 ) ( 1,532 ) Other 173 184 145 Provision for (benefit from) income taxes $ 1,837 $ ( 5,001 ) $ 1,132 Deferred tax assets (liabilities) as of December 31, 2024 and 2023 consisted of the following (in millions): December 31, 2024 December 31, 2023 Deferred tax assets: Net operating loss carry-forwards $ 1,295 $ 2,826 Research and development credits 1,735 1,358 Other tax credits and attributes 1,325 827 Deferred revenue 1,101 1,035 Inventory and warranty reserves 1,769 1,258 Operating lease right-of-use liabilities 1,186 930 Capitalized research and development costs 2,448 1,344 Deferred GILTI tax assets 691 760 Other 412 436 Total deferred tax assets 11,962 10,774 Valuation allowance ( 1,224 ) ( 892 ) Deferred tax assets, net of valuation allowance 10,738 9,882 Deferred tax liabilities: Depreciation and amortization ( 2,658 ) ( 2,122 ) Operating lease right-of-use assets ( 1,097 ) ( 859 ) Other ( 561 ) ( 249 ) Total deferred tax liabilities ( 4,316 ) ( 3,230 ) Deferred tax assets (liabilities), net of valuation allowance $ 6,422 $ 6,652 82 As of December 31, 2024, we maintained valuation allowances of $ 1.22 billion for deferred tax assets that are not more likely than not to be realized, which primarily included our California deferred tax assets, U.S. foreign tax credits and certain foreign operating losses. The valuation allowance on our net deferred tax assets increased by $ 332 million during the year ended December 31, 2024, and decreased by $ 6.46 billion and $ 1.73 billion during the years ended December 31, 2023 and 2022, respectively. The valuation allowance increase during the year ended December 31, 2024 was primarily due to the changes of our California deferred tax assets, U.S. foreign tax credits and certain foreign operating losses. The change in valuation allowance during the year ended December 31, 2023 was primarily due to the release of our valuation allowance with respect to our U.S. federal and certain state deferred tax assets. In the fourth quarter of 2023, based on the relevant weight of positive and negative evidence, including the amount of our taxable income in recent years which was objective and verifiable, and consideration of our expected future taxable earnings, we concluded that it is more likely than not that most of our U.S. federal and certain state deferred tax assets are realizable and released the valuation allowance on these deferred tax assets. The valuation allowance change during the years ended December 31, 2022 was primarily due to changes in our U.S. deferred tax assets and liabilities. Our deferred tax assets without a valuation allowance are more likely than not to be realized given the expectation of future earnings in the respective jurisdictions. As of December 31, 2024, we had $ 4.34 billion of federal and $ 8.59 billion of state net operating loss carry-forwards available to offset future taxable income, an immaterial amount of which, if not utilized, will begin to expire in 2026 for federal and 2025 for state purposes. Federal and state laws can impose substantial restrictions on the utilization of net operating loss and tax credit carry-forwards in the event of an “ownership change,” as defined in Section 382 of the Internal Revenue Code. We have determined that no significant limitation would be placed on the utilization of our net operating loss and tax credit carry-forwards due to prior ownership changes or expirations. As of December 31, 2024, we had federal research and development tax credits of $ 1.48 billion, federal renewable energy tax credits of $ 1.01 billion, and state research and development tax credits of $ 1.06 billion. Most of our state research and development tax credits were in the state of California. If not utilized, some of the federal tax credits may expire in various amounts beginning in 2035. However, California research and development tax credits can be carried forward indefinitely. As of December 31, 2024, we intend to indefinitely reinvest our foreign earnings and cash unless such repatriation results in no or minimal tax costs. We have recorded the taxes associated with the foreign earnings we intend to repatriate in the future. For the earnings we intend to indefinitely reinvest, no deferred tax liabilities for foreign withholding or other taxes have been recorded. The estimated amount of such unrecognized withholding tax liability associated with the indefinitely reinvested earnings is approximately $ 309 million. Uncertain Tax Positions The changes to our gross unrecognized tax benefits were as follows (in millions): December 31, 2021 $ 531 Increases in balances related to prior year tax positions 136 Decreases in balances related to prior year tax positions ( 12 ) Increases in balances related to current year tax positions 222 Decreases in balances related to expiration of the statute of limitations ( 7 ) December 31, 2022 870 Increases in balances related to prior year tax positions 59 Decreases in balances related to settlement with tax authorities ( 6 ) Increases in balances related to current year tax positions 255 Decreases in balances related to expiration of the statute of limitations ( 4 ) December 31, 2023 1,174 Increases in balances related to prior year tax positions 51 Decreases in balances related to prior year tax positions ( 27 ) Increases in balances related to current year tax positions 227 Decreases in balances related to settlement with tax authorities ( 4 ) Decreases in balances related to expiration of the statute of limitations ( 4 ) December 31, 2024 $ 1,417 83 We include interest and penalties related to unrecognized tax benefits in income tax expense. We recognized net interest and penalties related to unrecognized tax benefits in provision for (benefit from) income taxes line of our consolidated statements of operations of $ 23 million, $ 17 million and $ 27 million for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, and 2023, we have accrued $ 69 million and $ 47 million, respectively, related to interest and penalties on our unrecognized tax benefits. Unrecognized tax benefits of $ 1.14 billion, if recognized, would affect our effective tax rate. We file income tax returns in the U.S. and various state and foreign jurisdictions. We are currently under examination by the Internal Revenue Service (“IRS”) for the years 2015 to 2018. Additional tax years within the periods 2004 to 2014 and 2019 to 2023 remain subject to examination for federal income tax purposes. All net operating losses and tax credits generated to date are subject to adjustment for U.S. federal and state income tax purposes. Our returns for 2004 and subsequent tax years remain subject to examination in U.S. state and foreign jurisdictions. Given the uncertainty in timing and outcome of our tax examinations, an estimate of the range of the reasonably possible change in gross unrecognized tax benefits within twelve months cannot be made at this time. Note 14 – Commitments and Contingencies Operating Lease Arrangement in Buffalo, New York We have an operating lease arrangement through the Research Foundation for the SUNY Foundation with respect to Gigafactory New York. Under the lease and a related research and development agreement, we are continuing to further develop the facility. Under this agreement, we are obligated to, among other things, meet employment targets as well as specified minimum numbers of personnel in the State of New York and in Buffalo, New York and spend or incur $ 5.00 billion in combined capital, operational expenses, costs of goods sold and other costs in the State of New York during the 10 -year period beginning April 30, 2018. On an annual basis during the initial lease term, as measured on each anniversary of such date, if we fail to meet these specified investment and job creation requirements, it may result in our incurring financial liabilities in the form of “program payments” which would not be expected to have a material adverse effect to our financial operations, the termination of our lease at Gigafactory New York, and/or the need to adjust certain of our operations. In 2021, an amendment was executed to extend our overall 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. As of December 31, 2024, we have met and expect to meet the requirements under this arrangement, as may be modified and discussed from time to time, based on our current and anticipated level of operations. Operating Lease Arrangement in Shanghai, China We have an operating lease arrangement for an initial term of 50 years with the local government of Shanghai for land use rights where we have been constructing Gigafactory Shanghai. Under the terms of the arrangement, we are required to spend RMB 14.08 billion in capital expenditures by the end of 2023, which was achieved in 2023, and to generate RMB 2.23 billion of annual tax revenues starting at the end of 2023. As of December 31, 2024 and 2023, we had met and expect to meet the tax revenue requirements based on our current level of spend and sales. 84 Legal Proceedings Litigation Relating to 2018 CEO Performance Award On June 4, 2018, a purported Tesla stockholder filed a putative class and derivative action in the Delaware Court of Chancery against Elon Musk and the members of Tesla’s board of directors as then constituted, alleging corporate waste, unjust enrichment and that such board members breached their fiduciary duties by approving the stock-based compensation plan awarded to Elon Musk in 2018 (the “2018 CEO Performance Award”). Trial was held November 14-18, 2022. On January 30, 2024, the Court issued an opinion finding that the 2018 CEO Performance Award should be rescinded. Plaintiff’s counsel filed a brief seeking a fee award of 29,402,900 Tesla shares, plus expenses of $ 1,120,115.50 . Tesla opposed the fee request, and at Tesla’s 2024 Annual Meeting of Stockholders, 72 % of the disinterested voting shares of Tesla, excluding shares owned by Mr. Musk and Kimbal Musk, voted to ratify the 2018 CEO Performance Award. Because Tesla’s disinterested stockholders voted to ratify the 2018 CEO Performance Award, Mr. Musk and the other director defendants, joined by Tesla, filed a brief seeking to revise the Court’s January 30, 2024 opinion. On December 2, 2024, the Court issued an opinion denying the motion to revise the Court’s January 30, 2024 opinion and awarded Plaintiff’s counsel fees in the amount of $ 345 million. A final judgment was entered by the Court, and the director defendants and Tesla appealed the decisions to the Delaware Supreme Court. Litigation Related to Directors’ Compensation On June 17, 2020, a purported Tesla stockholder filed a derivative action in the Delaware Court of Chancery, purportedly on behalf of Tesla, against certain of Tesla’s current and former directors regarding compensation awards granted to Tesla’s directors, other than Elon Musk, between 2017 and 2020. The suit asserts claims for breach of fiduciary duty and unjust enrichment and seeks declaratory and injunctive relief, unspecified damages and other relief. Defendants filed their answer on September 17, 2020. 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. Pursuant to the terms of the agreement, Tesla provided notice of the proposed settlement to stockholders of record as of July 14, 2023. The Court held a hearing regarding the settlement on October 13, 2023, after which it took the settlement and plaintiff counsels’ fee request under advisement. On January 8, 2025, the Court approved the settlement and awarded Plaintiff’s counsel fees in the amount of approximately $ 176 million. A final judgment was entered by the Court on January 13, 2025. Tesla intends to appeal the Court’s fee award on or before the appeal deadline of February 12, 2025. 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 Between August 10, 2018 and September 6, 2018, nine purported stockholder class actions were filed against Tesla and Elon Musk in connection with Mr. Musk’s August 7, 2018 Twitter post that he was considering taking Tesla private. On January 16, 2019, Plaintiffs filed their consolidated complaint in the United States District Court for the Northern District of California and added as defendants the members of Tesla’s board of directors. The consolidated complaint asserts claims for violations of the federal securities laws and seeks unspecified damages and other relief. The parties stipulated to certification of a class of stockholders, which the court granted on November 25, 2020. 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 Court denied and judgement was entered in favor of defendants on July 11, 2023. On November 6, 2024, the United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal of all claims. 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. Musk and the members of Tesla’s board of directors, as constituted at relevant times, in relation to statements made and actions connected to a potential going private transaction, with certain of the lawsuits challenging additional Twitter posts by Mr. Musk, among other things. Several of those actions were consolidated, and all have been stayed. In addition to these cases, two derivative lawsuits were filed on October 25, 2018 and February 11, 2019 in the U.S. District Court for the District of Delaware, purportedly on behalf of Tesla, against Mr. Musk and the members of the Tesla board of directors as then constituted. Those cases have also been consolidated and stayed. 85 On October 21, 2022, a lawsuit was filed in the Delaware Court of Chancery by a purported shareholder of Tesla alleging, among other things, that board members breached their fiduciary duties in connection with their oversight of the Company’s 2018 settlement with the SEC, as amended. Among other things, the plaintiff seeks reforms to the Company’s corporate governance and internal procedures, unspecified damages, and attorneys’ fees. The lawsuit has been stayed pending resolution of a motion to consolidate certain derivative lawsuits in the Delaware Court of Chancery referenced below. On November 15, 2021, JPMorgan Chase Bank 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. Tesla denied any wrongdoing and filed multiple counterclaims. On November 27, 2024, the parties agreed to settle their claims. Certain Derivative Lawsuits in Delaware Before converting from a Delaware to Texas corporation on June 13, 2024, three separate derivative actions brought by purported Tesla stockholders were filed in the Delaware Court of Chancery on May 24, June 10 and June 13, 2024, purportedly on behalf of Tesla, against current and former directors regarding topics involving Elon Musk and others, X Corp. (formerly Twitter) and x.AI. These suits assert various claims, including breach of fiduciary duty and breach of contract, and seek unspecified damages and other relief. On August 6, 2024, the plaintiffs in these three actions moved to consolidate the matters into a single case. The Court consolidated two of the three cases. Litigation and Investigations Relating to Alleged Discrimination and Harassment On February 9, 2022, the California Civil Rights Department (“CRD,” formerly “DFEH”) filed a civil complaint against Tesla in Alameda County, California Superior Court, alleging systemic race discrimination, hostile work environment and pay equity claims, among others. CRD’s amended complaint seeks monetary damages and injunctive relief. The case is currently in discovery. Trial is scheduled for September 15, 2025. Additionally, on June 1, 2022 the Equal Employment Opportunity Commission (“EEOC”) issued a cause finding against Tesla that closely parallels the CRD’s allegations. On September 28, 2023, the EEOC filed a civil complaint against Tesla in the United States District Court for the Northern District of California asserting claims for race harassment and retaliation and seeking, among other things, monetary and injunctive relief. On June 16, 2022, two Tesla stockholders filed separate derivative actions in the U.S. District Court for the Western District of Texas, purportedly on behalf of Tesla, against certain of Tesla’s current and former directors. Both suits assert claims for breach of fiduciary duty, unjust enrichment, and violation of the federal securities laws in connection with alleged race and gender discrimination and sexual harassment. Among other things, plaintiffs seek declaratory and injunctive relief, unspecified damages payable to Tesla, and attorneys’ fees. On July 22, 2022, the Court consolidated the two cases and on September 6, 2022, plaintiffs filed a consolidated complaint. On November 7, 2022, the defendants filed a motion to dismiss the case and on September 15, 2023, the Court dismissed the action but granted plaintiffs leave to file an amended complaint. On November 2, 2023, plaintiff filed an amended complaint purportedly on behalf of Tesla, against Elon Musk. On December 19, 2023, the defendants moved to dismiss the amended complaint, which the Court granted on April 12, 2024, with leave for plaintiffs to amend. On May 15, 2024, plaintiffs filed a second amended consolidated complaint purportedly on behalf of Tesla, against Mr. Musk. On July 1, 2024, the defendants moved to dismiss the second amended consolidated complaint. 86 Other Litigation Related to Our Products and Services We are also subject to various lawsuits that seek monetary and other injunctive relief. These lawsuits include proposed class actions and other consumer claims that allege, among other things, purported defects and misrepresentations related to our products and services. For example, on September 14, 2022, a proposed class action was filed against Tesla, Inc. and related entities in the U.S. District Court for the Northern District of California, alleging various claims about the Company’s driver assistance technology systems under state and federal law. This case was later consolidated with several other proposed class actions, and a Consolidated Amended Complaint was filed on October 28, 2022, which seeks damages and other relief on behalf of all persons who purchased or leased from Tesla between January 1, 2016, to the present. On October 5, 2022, a proposed class action complaint was filed in the U.S. District Court for the Eastern District of New York asserting similar state and federal law claims against the same defendants. On September 30, 2023, the Court dismissed this action with leave to amend the complaint. On November 20, 2023, the plaintiff moved to amend the complaint, which Tesla opposed. On August 8, 2024, the Court denied the plaintiff’s motion for leave to file an amended complaint and entered judgment for Tesla. On September 5, 2024, the plaintiff filed a notice of appeal to United States Court of Appeals for the Second Circuit, and the parties are briefing the matter. On March 22, 2023, the plaintiffs in the Northern District of California consolidated action filed a motion for a preliminary injunction to order Tesla to (1) cease using the term “Full Self-Driving Capability” (FSD Capability), (2) cease the sale and activation of FSD Capability and deactivate FSD Capability 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 FSD Capability. Tesla opposed the motion. On September 30, 2023, the Court denied the request for a preliminary injunction, compelled four of five plaintiffs to arbitration, and dismissed the claims of the fifth plaintiff with leave to amend the complaint. On October 31, 2023, the remaining plaintiff in the Northern District of California action filed an amended complaint, which Tesla moved to dismiss, and on May 15, 2024, the Court granted in part and denied in part Tesla’s motion. On October 2, 2023, a similar proposed class action was filed in San Diego County Superior Court in California. Tesla subsequently removed the San Diego County case to federal court and on January 8, 2024, the federal court granted Tesla’s motion to transfer the case to the U.S. District Court for the Northern District of California. Tesla moved to compel arbitration, which the plaintiff did not oppose, and on June 27, 2024, the Court stayed the case pending arbitration. On February 27, 2023, a proposed class action was filed in the U.S. District Court for the Northern District of California against Tesla, Inc., Elon Musk and certain current and former Company executives. The complaint alleges that the defendants made material misrepresentations and omissions about the Company’s Autopilot and FSD Capability technologies and seeks money damages and other relief on behalf of persons who purchased Tesla stock between February 19, 2019, and February 17, 2023. An amended complaint was filed on September 5, 2023, naming only Tesla, Inc. and Elon Musk as defendants. On November 6, 2023, Tesla moved to dismiss the amended complaint. On September 30, 2024, the Court granted Tesla’s motion to dismiss without prejudice. On November 26, 2024, the court issued a final judgment in Tesla’s favor, and on December 23, 2024, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit. On March 14, 2023, a proposed class action was filed against Tesla, Inc. in the U.S. District Court for the Northern District of California. Several similar complaints were also 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. On September 27, 2023, the court granted Tesla’s motion to compel arbitration as to three of the plaintiffs, and on November 17, 2023, the court granted Tesla’s motion to dismiss without prejudice. The plaintiffs filed a Consolidated Second Amended Complaint on December 12, 2023, which Tesla moved to dismiss. Plaintiffs also appealed the court’s arbitration order, which was denied. On June 17, 2024, the Court granted in part and denied in part Tesla’s motion to dismiss the Consolidated Second Amended Complaint. The Company intends to vigorously defend itself in these matters; however, we cannot predict the outcome or impact. We are unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, unless noted. 87 Certain Investigations and Other Matters We regularly receive requests for information, including subpoenas, from regulators and governmental authorities such as the National Highway Traffic Safety Administration, the National Transportation Safety Board, the Securities and Exchange Commission (“SEC”), the Department of Justice (“DOJ”), and various local, state, federal, and international agencies. The ongoing requests for information include topics such as operations, technology (e.g., vehicle functionality, vehicle incidents, Autopilot and FSD Capability), compliance, finance, data privacy, and other matters related to Tesla’s business, its personnel, and related parties. We routinely cooperate with such formal and informal requests for information, investigations, and other inquiries. To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred. We cannot predict the outcome or impact of any ongoing matters. Should the government decide to pursue an enforcement action, there exists the possibility of a material adverse impact on our business, results of operation, prospects, cash flows, financial position or 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 non-public Tesla business and personal information. Tesla has made notifications to potentially affected individuals (current and former employees) and regulatory authorities and we are working with certain law enforcement and other authorities. On August 5, 2023, a putative class action was filed in the United States District Court for the Northern District of California, purportedly on behalf of all U.S. individuals impacted by the data incident, followed by several additional lawsuits, that each assert claims under various state laws and seeks monetary damages and other relief. If an unfavorable ruling or development were to occur in these 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. Letters of Credit As of December 31, 2024, we had $ 448 million of unused letters of credit outstanding. Note 15 – Variable Interest Entity Arrangements We have entered into various arrangements with investors to facilitate the funding and monetization of our solar energy systems and vehicles. In particular, our wholly owned subsidiaries and fund investors have formed and contributed cash and assets into various financing funds and entered into related agreements. We have determined that the funds are VIEs and we are the primary beneficiary of these VIEs by reference to the power and benefits criterion under ASC 810. We have considered the provisions within the agreements, which grant us the power to manage and make decisions that affect the operation of these VIEs, including determining the solar energy systems and the associated customer contracts to be sold or contributed to these VIEs, redeploying solar energy systems and managing customer receivables. We consider that the rights granted to the fund investors under the agreements are more protective in nature rather than participating. As the primary beneficiary of these VIEs, we consolidate in the financial statements the financial position, results of operations and cash flows of these VIEs, and all intercompany balances and transactions between us and these VIEs are eliminated in the consolidated financial statements. Cash distributions of income and other receipts by a fund, net of agreed upon expenses, estimated expenses, tax benefits and detriments of income and loss and tax credits, are allocated to the fund investor and our subsidiary as specified in the agreements. Generally, our subsidiary has the option to acquire the fund investor’s interest in the fund for an amount based on the market value of the fund or the formula specified in the agreements. Upon the sale or liquidation of a fund, distributions would occur in the order and priority specified in the agreements. Pursuant to management services, maintenance and warranty arrangements, we have been contracted to provide services to the funds, such as operations and maintenance support, accounting, lease servicing and performance reporting. In some instances, we have guaranteed payments to the fund investors as specified in the agreements. A fund’s creditors have no recourse to our general credit or to that of other funds. Certain assets of the funds have been pledged as collateral for their obligations. 88 The aggregate carrying values of the VIEs’ assets and liabilities, after elimination of any intercompany transactions and balances, in the consolidated balance sheets were as follows (in millions): December 31, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 49 $ 66 Accounts receivable, net 18 13 Prepaid expenses and other current assets 276 361 Total current assets 343 440 Operating lease vehicles, net 392 — Solar energy systems, net 2,310 3,278 Other non-current assets 183 369 Total assets $ 3,228 $ 4,087 Liabilities Current liabilities Accrued liabilities and other $ 32 $ 67 Deferred revenue 6 6 Current portion of debt and finance leases 2,114 1,564 Total current liabilities 2,152 1,637 Deferred revenue, net of current portion 71 99 Debt and finance leases, net of current portion 1,834 2,041 Total liabilities $ 4,057 $ 3,777 Note 16 – Related Party Transactions Tesla periodically does business with certain entities with which its CEO and directors are affiliated, such as x.AI, SpaceX, The Boring Company, X Corp. and Redwood Materials, in accordance with our Related Person Transactions Policy. Such transactions have not had to date, and are not currently expected to have, a material impact on our consolidated financial statements. 89 Note 17 – Segment Reporting and Information about Geographic Areas Our Chief Executive Officer, as the CODM, organizes our company, manages resource allocations and measures performance among two operating and reportable segments: (i) automotive and (ii) energy generation and storage. The automotive segment includes the design, development, manufacturing, sales and leasing of electric vehicles as well as sales of automotive regulatory credits. Additionally, the automotive segment is also comprised of services and other, which includes sales of used vehicles, non-warranty maintenance services and collision, part sales, paid Supercharging, insurance services revenue and retail merchandise sales. The energy generation and storage segment includes the design, manufacture, installation, sales and leasing of solar energy generation and energy storage products and related services and sales of solar energy systems incentives. Our CODM does not evaluate operating segments using asset or liability information. The CODM uses gross profit to allocate operating and capital resources and assesses performance of each segment by comparing actual gross profit results to historical results and previously forecasted financial information. The following table presents revenues, cost of revenues and gross profit by reportable segment (in millions): Year Ended December 31, 2024 2023 2022 Automotive segment Revenues $ 87,604 $ 90,738 $ 77,553 Cost of revenues (1) $ 72,794 $ 74,219 $ 56,988 Gross profit $ 14,810 $ 16,519 $ 20,565 Energy generation and storage segment Revenues $ 10,086 $ 6,035 $ 3,909 Cost of revenues (2) $ 7,446 $ 4,894 $ 3,621 Gross profit $ 2,640 $ 1,141 $ 288 (1) Depreciation and amortization included in Cost of revenues for the automotive segment for the years ended December 31, 2024, 2023 and 2022 was $ 3.68 billion, $ 3.45 billion and $ 2.81 billion, respectively. (2) Depreciation and amortization included in Cost of revenues for the energy generation and storage segment for the years ended December 31, 2024, 2023 and 2022 was $ 377 million, $ 343 million and $ 331 million, respectively. The following table presents revenues by geographic area based on the sales location of our products (in millions): Year Ended December 31, 2024 2023 2022 United States $ 47,725 $ 45,235 $ 40,553 China 20,944 21,745 18,145 Other international 29,021 29,793 22,764 Total $ 97,690 $ 96,773 $ 81,462 The following table presents long-lived assets by geographic area (in millions): December 31, 2024 December 31, 2023 United States $ 32,461 $ 26,629 Germany 4,175 4,258 Other international 4,124 4,067 Total $ 40,760 $ 34,954 90 The following table presents inventory by reportable segment (in millions): December 31, 2024 December 31, 2023 Automotive $ 9,988 $ 11,139 Energy generation and storage 2,029 2,487 Total $ 12,017 $ 13,626 Note 18 – Restructuring and Other In the second quarter of 2024, we initiated and substantially completed certain restructuring actions to reduce costs and improve efficiency. As a result, we recognized $ 583 million of employee termination expenses in Restructuring and other in our consolidated income statement. These expenses were substantially paid with an immaterial accrual remaining in Accrued liabilities and other in our consolidated balance sheet as of December 31, 2024. During the year ended December 31, 2022, we recorded an impairment loss of $ 204 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 during the second quarter of the year ended December 31, 2022, related to employee terminations. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.