We provide from time to time guidance regarding our expected financial and business performance. Correctly identifying key factors affecting business conditions and predicting future events is inherently an uncertain process, and our guidance may not ultimately be accurate and has in the past been inaccurate in certain respects, such as the timing of new product manufacturing ramps. Our guidance is based on certain assumptions such as those relating to anticipated production and sales volumes (which generally are not linear throughout a given period), average sales prices, supplier and commodity costs and planned cost reductions. If our guidance varies from actual results, such as due to our assumptions not being met or the impact on our financial performance that could occur as a result of various risks and uncertainties, the market value of our common stock could decline significantly.


TSLA Risks Related to the Ownership of Our Common Stock

If Elon Musk were forced to sell shares of our common stock, either that he has pledged to secure certain personal loan obligations, or in satisfaction of other obligations, such sales could cause our stock price to decline.


Certain banking institutions have made extensions of credit to Elon Musk, our Chief Executive Officer, a portion of which was used to purchase shares of common stock in certain of our public offerings and private placements at the same prices offered to third-party participants in such offerings and placements. We are not a party to these loans, which are partially secured by pledges of a portion of the Tesla common stock currently owned by Mr. Musk. If the price of our common stock were to decline substantially, Mr. Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy his loan obligations if he could not do so through other means. Any such sales could cause the price of our common stock to decline further. Further, Mr. Musk from time to time may commit to investing in significant business or other ventures, and as a result, be required to sell shares of our common stock in satisfaction of such commitments.


Anti-takeover provisions contained in our governing documents, applicable laws and our convertible senior notes could impair a takeover attempt.


Our certificate of incorporation and bylaws afford certain rights and powers to our board of directors that may facilitate the delay or prevention of an acquisition that it deems undesirable. We are also subject to Section 203 of the Delaware General Corporation Law and other provisions of Delaware law that limit the ability of stockholders in certain situations to effect certain business combinations. In addition, the terms of our convertible senior notes may require us to repurchase such notes in the event of a fundamental change, including a takeover of our company. Any of the foregoing provisions and terms that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.


TSLA UNRESOLVED STAFF COMMENTS

None.


TSLA Cybersecurity Risk Management and Strategy

We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws.


Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes. Cybersecurity risks related to our business, technical operations, privacy and compliance issues are identified and addressed through a multi-faceted approach including third party assessments, internal IT Audit, IT security, governance, risk and compliance reviews. To defend, detect and respond to cybersecurity incidents, we, among other things: conduct proactive privacy and cybersecurity reviews of systems and applications, audit applicable data policies, perform penetration testing using external third-party tools and techniques to test security controls, operate a bug bounty program to encourage proactive vulnerability reporting, conduct employee training, monitor emerging laws and regulations related to data protection and information security (including our consumer products) and implement appropriate changes.


We have implemented incident response and breach management processes which have four overarching and interconnected stages: 1) preparation for a cybersecurity incident, 2) detection and analysis of a security incident, 3) containment, eradication and recovery, and 4) post-incident analysis. Such incident responses are overseen by leaders from our Information Security, Product Security, Compliance and Legal teams regarding matters of cybersecurity.


Security events and data incidents are evaluated, ranked by severity and prioritized for response and remediation. Incidents are evaluated to determine materiality as well as operational and business impact, and reviewed for privacy impact.


We also conduct tabletop exercises to simulate responses to cybersecurity incidents. Our team of cybersecurity professionals then collaborate with technical and business stakeholders across our business units to further analyze the risk to the company, and form detection, mitigation and remediation strategies.


As part of the above processes, we regularly engage external auditors and consultants to assess our internal cybersecurity programs and compliance with applicable practices and standards. As of 2023, our Information Security Management System has been certified to conform to the requirements of ISO/IEC 27001:2013.


Our risk management program also assesses third party risks, and we perform third-party risk management to identify and mitigate risks from third parties such as vendors, suppliers, and other business partners associated with our use of third-party service providers. Cybersecurity risks are evaluated when determining the selection and oversight of applicable third-party service providers and potential fourth-party risks when handling and/or processing our employee, business or customer data. In addition to new vendor onboarding, we perform risk management during third-party cybersecurity compromise incidents to identify and mitigate risks to us from third-party incidents.


We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “Our information technology systems or data, or those of our service providers or customers or users could be subject to cyber-attacks or other security incidents, which could result in data breaches, intellectual property theft, claims, litigation, regulatory investigations, significant liability, reputational damage and other adverse consequences” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K.


TSLA Cybersecurity Governance

Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management. Our Audit Committee is responsible for the oversight of risks from cybersecurity threats. Members of the Audit Committee receive updates on a quarterly basis from senior management, including leaders from our Information Security, Product Security, Compliance and Legal teams regarding matters of cybersecurity. This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents (if any) and status on key information security initiatives. Our Board members also engage in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.


TSLA Cybersecurity Governance

Our cybersecurity risk management and strategy processes are overseen by leaders from our Information Security, Product Security, Compliance and Legal teams. Such individuals have an average of over 15 years of prior work experience in various roles involving information technology, including security, auditing, compliance, systems and programming. These individuals are informed about, and monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan, and report to the Audit Committee on any appropriate items.


TSLA PROPERTIES

We are headquartered in Austin, Texas. Our principal facilities include a large number of properties in North America, Europe and Asia utilized for manufacturing and assembly, warehousing, engineering, retail and service locations, Supercharger sites and administrative and sales offices. Our facilities are used to support both of our reporting segments, and are suitable and adequate for the conduct of our business. We generally lease such facilities with the primary exception of some manufacturing facilities. The following table sets forth the location of our primary owned and leased manufacturing facilities. Primary Manufacturing Facilities##Location##Owned or Leased Gigafactory Texas##Austin, Texas##Owned Fremont Factory##Fremont, California##Owned Gigafactory Nevada##Sparks, Nevada##Owned Gigafactory Berlin-Brandenburg##Grunheide, Germany##Owned Gigafactory Shanghai##Shanghai, China##* Gigafactory New York##Buffalo, New York##Leased Megafactory##Lathrop, California##Leased


TSLA PROPERTIES

*We own the building and the land use rights with an initial term of 50 years. The land use rights are treated as operating lease right-of-use assets.


TSLA LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, please see Note 15, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.


TSLA LEGAL PROCEEDINGS

In addition, each of the matters below is being disclosed pursuant to Item 103 of Regulation S-K because it relates to environmental regulations and aggregate civil penalties that we currently believe could potentially exceed $1 million. We believe that any proceeding that is material to our business or financial condition is likely to have potential penalties far in excess of such amount.


TSLA LEGAL PROCEEDINGS

District attorneys in certain California counties conducted an investigation into Tesla’s waste segregation practices pursuant to Cal. Health & Saf. Code § 25100 et seq. and Cal. Civil Code § 1798.80. Tesla has implemented various remedial measures, including conducting training and audits, and enhancements to its site waste management programs, and settlement discussions are ongoing. While the outcome of this matter cannot be determined at this time, it is not currently expected to have a material adverse impact on our business.


TSLA MINE SAFETY DISCLOSURES

Not applicable.


TSLA MINE SAFETY DISCLOSURES

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


TSLA Market Information

Our common stock has traded on The NASDAQ Global Select Market under the symbol “TSLA” since it began trading on June 29, 2010. Our initial public offering was priced at approximately $1.13 per share on June 28, 2010 as adjusted to give effect to the three-for-one stock split effected in the form of a stock dividend in August 2022 (the “2022 Stock Split”) and the five-for-one stock split effected in the form of a stock dividend in August 2020 (the “2020 Stock Split”).


TSLA Holders

As of January 22, 2024, there were 9,300 holders of record of our common stock. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions.


TSLA Dividend Policy

We have never declared or paid cash dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.


TSLA Stock Performance Graph

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing of Tesla, Inc. under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.


TSLA Stock Performance Graph

The following graph shows a comparison, from January 1, 2019 through December 31, 2023, of the cumulative total return on our common stock, The NASDAQ Composite Index and a group of all public companies sharing the same SIC code as us, which is SIC code 3711, “Motor Vehicles and Passenger Car Bodies” (Motor Vehicles and Passenger Car Bodies Public Company Group). Such returns are based on historical results and are not intended to suggest future performance. Data for The NASDAQ Composite Index and the Motor Vehicles and Passenger Car Bodies Public Company Group assumes an investment of $100 on January 1, 2019 and reinvestment of dividends. We have never declared or paid cash dividends on our common stock nor do we anticipate paying any such cash dividends in the foreseeable future.


TSLA Unregistered Sales of Equity Securities and Use of Proceeds

None.


TSLA Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.


TSLA [RESERVED]

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


TSLA [RESERVED]

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. For further discussion of our products and services, technology and competitive strengths, refer to Item 1- Business. For discussion related to changes in financial condition and the results of operations for fiscal year 2022-related items, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year 2022, which was filed with the Securities and Exchange Commission on January 31, 2023.


TSLA Overview and 2023 Highlights

Our mission is to accelerate the world’s transition to sustainable energy. We design, develop, manufacture, lease and sell high-performance fully electric vehicles, solar energy generation systems and energy storage products. We also offer maintenance, installation, operation, charging, insurance, financial and other services related to our products. Additionally, we are increasingly focused on products and services based on artificial intelligence, robotics and automation.


TSLA Overview and 2023 Highlights

In 2023, we produced 1,845,985 consumer vehicles and delivered 1,808,581 consumer vehicles. We are currently focused on increasing vehicle production, capacity and delivery capabilities, reducing costs, improving and developing our vehicles and battery technologies, vertically integrating and localizing our supply chain, improving and further deploying our FSD capabilities, increasing the affordability and efficiency of our vehicles, bringing new products to market and expanding our global infrastructure, including our service and charging infrastructure.


TSLA Overview and 2023 Highlights

In 2023, we deployed 14.72 GWh of energy storage products and 223 megawatts of solar energy systems. We are currently focused on ramping production of energy storage products, improving our Solar Roof installation capability and efficiency, and increasing market share of retrofit solar energy systems.


TSLA Overview and 2023 Highlights

In 2023, we recognized total revenues of $96.77 billion, representing an increase of $15.31 billion, compared to the prior year. We continue to ramp production, build new manufacturing capacity and expand our operations to enable increased deliveries and deployments of our products, and invest in research and development to accelerate our AI, software and fleet-based profits for further revenue growth.


TSLA Overview and 2023 Highlights

In 2023, our net income attributable to common stockholders was $15.00 billion, representing a favorable change of $2.44 billion, compared to the prior year. This included a one-time non-cash tax benefit of $5.93 billion for the release of valuation allowance on certain deferred tax assets. We continue to focus on further cost reductions and operational efficiencies while maximizing delivery volumes.


TSLA Overview and 2023 Highlights

We ended 2023 with $29.09 billion in cash and cash equivalents and investments, representing an increase of $6.91 billion from the end of 2022. Our cash flows provided by operating activities in 2023 and 2022 were $13.26 billion and $14.72 billion, respectively, representing a decrease of $1.47 billion. Capital expenditures amounted to $8.90 billion in 2023, compared to $7.16 billion in 2022, representing an increase of $1.74 billion. Sustained growth has allowed our business to generally fund itself, and we will continue investing in a number of capital-intensive projects and research and development in upcoming periods.


TSLA Automotive—Production

The following is a summary of the status of production of each of our announced vehicle models in production and under development, as of the date of this Annual Report on Form 10-K: Production Location##Vehicle Model(s)##Production Status Fremont Factory##Model S / Model X##Active ##Model 3 / Model Y##Active Gigafactory Shanghai##Model 3 / Model Y##Active Gigafactory Berlin-Brandenburg##Model Y##Active Gigafactory Texas##Model Y##Active ##Cybertruck##Active Gigafactory Nevada##Tesla Semi##Pilot production Various##Next Generation Platform##In development TBD##Tesla Roadster##In development


TSLA Automotive—Production

We are focused on growing our manufacturing capacity, which includes capacity for manufacturing new vehicle models such as our Cybertruck and next generation platform, and ramping all of our production vehicles to their installed production capacities as well as increasing production rate and efficiency at our current factories. The next phase of production growth will depend on the continued ramp at our factories and the introduction of our next generation platform, as well as our ability to add to our available sources of battery cell supply by manufacturing our own cells that we are developing to have high-volume output, lower capital and production costs and longer range. Our goals are to improve vehicle performance, decrease production costs and increase affordability and customer awareness.


TSLA Automotive—Production

These plans are subject to uncertainties inherent in establishing and ramping manufacturing operations, which may be exacerbated by new product and manufacturing technologies we introduce, the number of concurrent international projects, any industry-wide component constraints, labor shortages and any future impact from events outside of our control. For example, during the third quarter of 2023, we experienced a sequential decline in production volumes due to pre-planned shutdowns for upgrades at various factories. Moreover, we have set ambitious technological targets with our plans for battery cells as well as for iterative manufacturing and design improvements for our vehicles with each new factory.


TSLA Automotive—Demand, Sales, Deliveries and Infrastructure

Our cost reduction efforts, cost innovation strategies, and additional localized procurement and manufacturing are key to our vehicles’ affordability and have allowed us to competitively price our vehicles. We will also continue to generate demand and brand awareness by improving our vehicles’ performance and functionality, including through products based on artificial intelligence such as Autopilot, FSD Capability, and other software features and delivering new vehicles, such as our Cybertruck. Moreover, we expect to continue to benefit from ongoing electrification of the automotive sector and increasing environmental regulations and initiatives.


However, we operate in a cyclical industry that is sensitive to political and regulatory uncertainty, including with respect to trade and the environment, all of which can be compounded by inflationary pressures, rising energy prices, interest rate fluctuations and the liquidity of enterprise customers. For example, inflationary pressures have increased across the markets in which we operate. In an effort to curb this trend, central banks in developed countries raised interest rates rapidly and substantially, impacting the affordability of vehicle lease and finance arrangements. Further, sales of vehicles in the automotive industry also tend to be cyclical in many markets, which may expose us to increased volatility as we expand and adjust our operations. Moreover, as additional competitors enter the marketplace and help bring the world closer to sustainable transportation, we will have to adjust and continue to execute well to maintain our momentum. Additionally, our suppliers’ liquidity and allocation plans may be affected by current challenges in the North American automotive industry, which could reduce our access to components or result in unfavorable changes to cost. These macroeconomic and industry trends have had, and will likely continue to have, an impact on the pricing of, and order rate for our vehicles, and in turn our operating margin. Changes in government and economic incentives in relation to electric vehicles may also impact our sales. We will continue to adjust accordingly to such developments, and we believe our ongoing cost reduction, including improved production innovation and efficiency at our newest factories and lower logistics costs, and focus on operating leverage will continue to benefit us in relation to our competitors, while our new products will help enable future growth.


As our production increases, we must work constantly to similarly increase vehicle delivery capability so that it does not become a bottleneck on our total deliveries. We are also committed to reducing the percentage of vehicles delivered in the third month of each quarter, which will help to reduce the cost per vehicle. As we expand our manufacturing operations globally, we will also have to continue to increase and staff our delivery, servicing and charging infrastructure accordingly, maintain our vehicle reliability and optimize our Supercharger locations to ensure cost effectiveness and customer satisfaction. In particular, as other automotive manufacturers have announced their adoption of the North American Charging Standard (“NACS”) and agreements with us to utilize our Superchargers, we must correspondingly expand our network in order to ensure adequate availability to meet customer demands. We also remain focused on continued enhancements of the capability and efficiency of our servicing operations.


TSLA Energy Generation and Storage Demand, Production and Deployment

The long-term success of this business is dependent upon increasing margins through greater volumes. We continue to increase the production of our energy storage products to meet high levels of demand, including the construction of a new Megafactory in Shanghai and the ongoing ramp at our Megafactory in Lathrop, California. For Megapack, energy storage deployments can vary meaningfully quarter to quarter depending on the timing of specific project milestones. We remain committed to growing our retrofit solar energy business by offering a low-cost and simplified online ordering experience. In addition, we continue to seek to improve our installation capabilities and price efficiencies for Solar Roof. As these product lines grow, we will have to maintain adequate battery cell supply for our energy storage products and ensure the availability of qualified personnel, particularly skilled electricians, to support the ramp of Solar Roof.


TSLA Cash Flow and Capital Expenditure Trends

Our capital expenditures are typically difficult to project beyond the short-term given the number and breadth of our core projects at any given time, and may further be impacted by uncertainties in future global market conditions. We are simultaneously ramping new products, building or ramping manufacturing facilities on three continents, piloting the development and manufacture of new battery cell technologies, expanding our Supercharger network and investing in autonomy and other artificial intelligence enabled training and products, and the pace of our capital spend may vary depending on overall priority among projects, the pace at which we meet milestones, production adjustments to and among our various products, increased capital efficiencies and the addition of new projects. Owing and subject to the foregoing as well as the pipeline of announced projects under development, all other continuing infrastructure growth and varying levels of inflation, we currently expect our capital expenditures to exceed $10.00 billion in 2024 and be between $8.00 to $10.00 billion in each of the following two fiscal years.


Our business has been consistently generating cash flow from operations in excess of our level of capital spend, and with better working capital management resulting in shorter days sales outstanding than days payable outstanding, our sales growth is also generally facilitating positive cash generation. We have and will continue to utilize such cash flows, among other things, to do more vertical integration, expand our product roadmap and provide financing options to our customers. At the same time, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects and other potential variables such as rising material prices and increases in supply chain and labor expenses resulting from changes in global trade conditions and labor availability. Overall, we expect our ability to be self-funding to continue as long as macroeconomic factors support current trends in our sales.


TSLA Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe to be reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows may be affected.


The estimates used for, but not limited to, determining significant economic incentive for resale value guarantee arrangements, sales return reserves, the collectability of accounts and financing receivables, inventory valuation, warranties, fair value of long-lived assets, goodwill, fair value of financial instruments, fair value and residual value of operating lease vehicles and solar energy systems subject to leases could be impacted. We have assessed the impact and are not aware of any specific events or circumstances that required an update to our estimates and assumptions or materially affected the carrying value of our assets or liabilities as of the date of issuance of this Annual Report on Form 10-K. 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.


TSLA Automotive Sales

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


TSLA 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.


TSLA Inventory Valuation

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.


TSLA Inventory Valuation

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.


TSLA 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.


TSLA Stock-Based Compensation

We use the fair value method of accounting for our stock options and restricted stock units (“RSUs”) granted to employees and for our employee stock purchase plan (the “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.


TSLA Stock-Based Compensation

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.


TSLA Stock-Based Compensation

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.


TSLA Income Taxes

We are subject to income taxes in the U.S. and in many foreign jurisdictions. 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.


TSLA Income Taxes

Furthermore, significant judgment is required in evaluating our tax positions. In the ordinary course of business, there are many transactions and calculations for which the ultimate tax settlement is uncertain. As a result, we recognize the effect of this uncertainty on our tax attributes or taxes payable based on our estimates of the eventual outcome. These effects are recognized when, despite our belief that our tax return positions are supportable, we believe that it is more likely than not that some of those positions may not be fully sustained upon review by tax authorities. We are required to file income tax returns in the U.S. and various foreign jurisdictions, which requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions. Such returns are subject to audit by the various federal, state and foreign taxing authorities, who may disagree with respect to our tax positions. We believe that our consideration is adequate for all open audit years based on our assessment of many factors, including past experience and interpretations of tax law. We review and update our estimates in light of changing facts and circumstances, such as the closing of a tax audit, the lapse of a statute of limitations or a change in estimate. To the extent that the final tax outcome of these matters differs from our expectations, such differences may impact income tax expense in the period in which such determination is made.


TSLA Revenues

########Year Ended December 31,##########2023 vs. 2022 Change##########2022 vs. 2021 Change#### (Dollars in millions)####2023####2022####2021####$####%######$####%## Automotive sales##$##78,509##$##67,210##$##44,125##$##11,299####17##%##$##23,085####52##% Automotive regulatory credits####1,790####1,776####1,465####14####1##%####311####21##% Automotive leasing####2,120####2,476####1,642####(356)####(14)##%####834####51##% Total automotive revenues####82,419####71,462####47,232####10,957####15##%####24,230####51##% Services and other####8,319####6,091####3,802####2,228####37##%####2,289####60##% Total automotive & services and other segment revenue####90,738####77,553####51,034####13,185####17##%####26,519####52##% Energy generation and storage segment revenue####6,035####3,909####2,789####2,126####54##%####1,120####40##% Total revenues##$##96,773##$##81,462##$##53,823##$##15,311####19##%##$##27,639####51##%


TSLA Automotive & Services and Other Segment

Automotive sales revenue includes revenues related to cash and financing deliveries of new Model S, Model X, Semi, Model 3, Model Y, and Cybertruck vehicles, including access to our FSD Capability features and their ongoing maintenance, internet connectivity, free Supercharging programs and over-the-air software updates. These deliveries are vehicles that are not subject to lease accounting.


Automotive regulatory credits includes sales of regulatory credits to other automotive manufacturers. Our revenue from automotive regulatory credits is directly related to our new vehicle production, sales and pricing negotiated with our customers. We monetize them proactively as new vehicles are sold based on standing arrangements with buyers of such credits, typically as close as possible to the production and delivery of the vehicle or changes in regulation impacting the credits.


Automotive leasing revenue includes the amortization of revenue for vehicles under direct operating lease agreements. Additionally, automotive leasing revenue includes direct sales-type leasing programs where we recognize all revenue associated with the sales-type lease upon delivery to the customer.


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


TSLA 2023 compared to 2022

Automotive sales revenue increased $11.30 billion, or 17%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to an increase of 473,382 combined Model 3 and Model Y cash deliveries from production ramping of Model Y globally. The increase was partially offset by a lower average selling price on our vehicles driven by overall price reductions year over year, sales mix, and a negative impact from the United States dollar strengthening against other foreign currencies in the year ended December 31, 2023 compared to the prior year.


TSLA 2023 compared to 2022

Automotive regulatory credits revenue increased $14 million, or 1%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022.


TSLA 2023 compared to 2022

Automotive leasing revenue decreased $356 million, or 14%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease was primarily due to a decrease in direct sales-type leasing revenue driven by lower deliveries year over year, partially offset by an increase from our growing direct operating lease portfolio.


TSLA 2023 compared to 2022

Services and other revenue increased $2.23 billion, or 37%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily due to higher used vehicle revenue driven by increases in volume, body shop and part sales revenue, non-warranty maintenance services revenue, paid Supercharging revenue and insurance services revenue, all of which are primarily attributable to our growing fleet. The increases were partially offset by a decrease in the average selling price of used vehicles.


TSLA Energy Generation and Storage Segment

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


TSLA 2023 compared to 2022

Energy generation and storage revenue increased $2.13 billion, or 54%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was primarily due to an increase in deployments of Megapack.


TSLA Cost of Revenues and Gross Margin

##########Year Ended December 31,##############2023 vs. 2022 Change##########2022 vs. 2021 Change#### (Dollars in millions)####2023######2022######2021######$####%######$####%## Cost of revenues###################################### Automotive sales##$##65,121####$##49,599####$##32,415####$##15,522####31##%##$##17,184####53##% Automotive leasing####1,268######1,509######978######(241)####(16)##%####531####54##% Total automotive cost of revenues####66,389######51,108######33,393######15,281####30##%####17,715####53##% Services and other####7,830######5,880######3,906######1,950####33##%####1,974####51##% Total automotive & services and other segment cost of revenues####74,219######56,988######37,299######17,231####30##%####19,689####53##% Energy generation and storage segment####4,894######3,621######2,918######1,273####35##%####703####24##% Total cost of revenues##$##79,113####$##60,609####$##40,217####$##18,504####31##%##$##20,392####51##% Gross profit total automotive##$##16,030####$##20,354####$##13,839###################### Gross margin total automotive####19.4##%####28.5##%####29.3##%#################### Gross profit total automotive & services and other segment##$##16,519####$##20,565####$##13,735###################### Gross margin total automotive & services and other segment####18.2##%####26.5##%####26.9##%#################### Gross profit energy generation and storage segment##$##1,141####$##288####$##(129)###################### Gross margin energy generation and storage segment####18.9##%####7.4##%####(4.6)##%#################### Total gross profit##$##17,660####$##20,853####$##13,606###################### Total gross margin####18.2##%####25.6##%####25.3##%####################


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 ongoing maintenance costs, allocations of electricity and infrastructure costs related to our Supercharger network 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.


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.


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 for retail merchandise.


TSLA 2023 compared to 2022

Cost of automotive sales revenue increased $15.52 billion, or 31%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. Cost of automotive sales revenue increased in line with the change in deliveries year over year, as discussed above. The increase was partially offset by a decrease in the average combined cost per unit of our vehicles primarily due to sales mix, lower inbound freight, a decrease in material costs and lower manufacturing costs from better fixed cost absorption. Our costs of revenue were also positively impacted by the United States dollar strengthening against our foreign currencies as compared to the prior periods and by the IRA manufacturing credits earned during the current year.


TSLA 2023 compared to 2022

Cost of automotive leasing revenue decreased $241 million, or 16%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease was primarily due to a decrease in direct sales-type leasing cost of revenue driven by lower deliveries year over year.


TSLA 2023 compared to 2022

Cost of services and other revenue increased $1.95 billion, or 33%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was generally in line with the changes in services and other revenue as discussed above.


TSLA 2023 compared to 2022

Gross margin for total automotive decreased from 28.5% to 19.4% in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease was primarily due to a lower average selling price on our vehicles partially offset by the favorable change in our average combined cost per unit of our vehicles and IRA manufacturing credits earned as discussed above.


TSLA 2023 compared to 2022

Gross margin for total automotive & services and other segment decreased from 26.5% to 18.2% in the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to the automotive gross margin decrease discussed above.


Cost of energy generation and storage revenue includes direct and indirect material and labor costs, warehouse rent, freight, warranty expense, other overhead costs and amortization of certain acquired intangible assets. 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. 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.


TSLA 2023 compared to 2022

Cost of energy generation and storage revenue increased $1.27 billion, or 35%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022, in line with the increase in Megapack deployments year over year, as discussed above. This increase was partially offset by an improvement in production ramping that drove down the average cost per MWh of Megapack as well as IRA manufacturing credits earned during the current year.


TSLA 2023 compared to 2022

Gross margin for energy generation and storage increased from 7.4% to 18.9% in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The increase was driven by an improvement in our Megapack gross margin from lower average cost per MWh and a higher proportion of Megapack, which operated at a higher gross margin, within the segment as compared to the prior year periods. Additionally, there was a margin benefit from IRA manufacturing credits earned.


TSLA Research and Development Expense

##########Year Ended December 31,##############2023 vs. 2022 Change##########2022 vs. 2021 Change#### (Dollars in millions)####2023######2022######2021######$####%######$####%## Research and development##$##3,969####$##3,075####$##2,593####$##894####29##%##$##482####19##% As a percentage of revenues####4##%####4##%####5##%####################


TSLA Research and Development Expense

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


TSLA Research and Development Expense

R&D expenses increased $894 million, or 29%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The overall increase was primarily driven by additional costs in the current year related to the pre-production phase for Cybertruck, AI and other programs.


TSLA Research and Development Expense

R&D expenses as a percentage of revenue stayed consistent at 4% in the year ended December 31, 2023 as compared to the year ended December 31, 2022. Our R&D expenses have increased proportionately with total revenues as we continue to expand our product roadmap and technologies.


TSLA Selling, General and Administrative Expense

##########Year Ended December 31,##############2023 vs. 2022 Change##########2022 vs. 2021 Change#### (Dollars in millions)####2023######2022######2021######$####%######$####%## Selling, general and administrative##$##4,800####$##3,946####$##4,517####$##854####22##%##$##(571)####(13)##% As a percentage of revenues####5##%####5##%####8##%####################


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


SG&A expenses increased $854 million, or 22%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. This was driven by a $447 million increase in employee and labor costs primarily from increased headcount, including professional services and a $363 million increase in facilities related expenses.


TSLA Restructuring and Other

########Year Ended December 31,##########2023 vs. 2022 Change########2022 vs. 2021 Change## (Dollars in millions)####2023####2022####2021####$####%####$####% Restructuring and other##$##—##$##176##$##(27)##$##(176)####(100)%##$##203####Not meaningful


TSLA Restructuring and Other

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.


TSLA Interest Income

########Year Ended December 31,##########2023 vs. 2022 Change##########2022 vs. 2021 Change#### (Dollars in millions)####2023####2022####2021####$####%######$####%## Interest income##$##1,066##$##297##$##56##$##769####259##%##$##241####430##%


TSLA Interest Income

Interest income increased $769 million, or 259%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. This increase was primarily due to higher interest earned on our cash and cash equivalents and short-term investments in the year ended December 31, 2023 as compared to the prior year due to rising interest rates and our increasing portfolio balance.


TSLA Other Income (Expense), Net

########Year Ended December 31,##########2023 vs. 2022 Change########2022 vs. 2021 Change## (Dollars in millions)####2023####2022####2021####$####%####$####% Other income (expense), net##$##172##$##(43)##$##135##$##215####Not meaningful##$##(178)####Not meaningful


TSLA Other Income (Expense), Net

Other income (expense), net, consists primarily of foreign exchange gains and losses related to our foreign currency-denominated monetary assets and liabilities. We expect our foreign exchange gains and losses will vary depending upon movements in the underlying exchange rates.


TSLA Other Income (Expense), Net (Benefit from) Provision for Income Taxes

Other income, net, changed favorably by $215 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The favorable change was primarily due to fluctuations in foreign currency exchange rates on our intercompany balances. ##########Year Ended December 31,##############2023 vs. 2022 Change########2022 vs. 2021 Change#### (Dollars in millions)####2023######2022######2021######$####%####$####%## (Benefit from) provision for income taxes##$##(5,001)####$##1,132####$##699####$##(6,133)####Not meaningful##$##433####62##% Effective tax rate####(50)##%####8##%####11##%##################


We monitor the realizability of our deferred tax assets taking into account all relevant factors at each reporting period. As of December 31, 2023, based on the relevant weight of positive and negative evidence, including the amount of our taxable income in recent years which is objective and verifiable, and consideration of our expected future taxable earnings, we concluded that it is more likely than not that our U.S. federal and certain state deferred tax assets are realizable. As such, we released $6.54 billion of our valuation allowance associated with the U.S. federal and state deferred tax assets, with the exception of our California deferred tax assets. Approximately $5.93 billion of the total valuation allowance release was related to deferred tax assets to be realized in the future years and the remainder benefited us during the year ended December 31, 2023. We continue to maintain a full valuation allowance against our California deferred tax assets as of December 31, 2023, because we concluded they are not more likely than not to be realized as we expect our California deferred tax assets generation in future years to exceed our ability to use these deferred tax assets.


Our (benefit from) provision for income taxes changed by $6.13 billion in the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to the release of $6.54 billion of our valuation allowance associated with the U.S. federal and certain state deferred tax assets.


Our effective tax rate changed from an expense of 8% to a benefit of 50% in the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to the release of the valuation allowance regarding our U.S. federal and certain state deferred tax assets.


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


TSLA Liquidity and Capital Resources

We expect to continue to generate net positive operating cash flow as we have done in the last five fiscal years. The cash we generate from our core operations enables us to fund ongoing operations and production, our research and development projects for new products and technologies including our proprietary battery cells, additional manufacturing ramps at existing manufacturing facilities, the construction of future factories, and the continued expansion of our retail and service locations, body shops, Mobile Service fleet, Supercharger, including to support NACS, energy product installation capabilities and autonomy and other artificial intelligence enabled products.


TSLA Liquidity and Capital Resources

In addition, because a large portion of our future expenditures will be to fund our growth, we expect that if needed we will be able to adjust our capital and operating expenditures by operating segment. For example, if our near-term manufacturing operations decrease in scale or ramp more slowly than expected, including due to global economic or business conditions, we may choose to correspondingly slow the pace of our capital expenditures. Finally, we continually evaluate our cash needs and may decide it is best to raise additional capital or seek alternative financing sources to fund the rapid growth of our business, including through drawdowns on existing or new debt facilities or financing funds. Conversely, we may also from time to time determine that it is in our best interests to voluntarily repay certain indebtedness early.


TSLA Liquidity and Capital Resources

Accordingly, we believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following December 31, 2023, as well as in the long-term.


TSLA Liquidity and Capital Resources

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


TSLA Material Cash Requirements

From time to time in the ordinary course of business, we enter into agreements with vendors for the purchase of components and raw materials to be used in the manufacture of our products. However, due to contractual terms, variability in the precise growth curves of our development and production ramps, and opportunities to renegotiate pricing, we generally do not have binding and enforceable purchase orders under such contracts beyond the short-term, and the timing and magnitude of purchase orders beyond such period is difficult to accurately project.


TSLA Material Cash Requirements

As discussed in and subject to the considerations referenced in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Management Opportunities, Challenges and Uncertainties and 2023 Outlook—Cash Flow and Capital Expenditure Trends in this Annual Report on Form 10-K, we currently expect our capital expenditures to support our projects globally to exceed $10.00 billion in 2024 and be between $8.00 to $10.00 billion in each of the following two fiscal years. In connection with our operations at Gigafactory New York, we have an agreement to spend or incur $5.00 billion in combined capital, operational expenses, costs of goods sold and other costs in the State of New York through December 31, 2029 (pursuant to a deferral of our required timelines to meet such obligations that was granted in April 2021, and which was memorialized in an amendment to our agreement with the SUNY Foundation in August 2021). For details regarding these obligations, refer to Note 15, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.


TSLA Material Cash Requirements

As of December 31, 2023, we and our subsidiaries had outstanding $4.68 billion in aggregate principal amount of indebtedness, of which $1.98 billion is scheduled to become due in the succeeding 12 months. As of December 31, 2023, our total minimum lease payments was $5.96 billion, of which $1.31 billion is due in the succeeding 12 months. For details regarding our indebtedness and lease obligations, refer to Note 11, Debt, and Note 12, Leases, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.


TSLA Sources and Conditions of Liquidity

Our sources to fund our material cash requirements are predominantly from our deliveries and servicing of new and used vehicles, sales and installations of our energy storage products and solar energy systems, proceeds from debt facilities and proceeds from equity offerings, when applicable.


As of December 31, 2023, we had $16.40 billion and $12.70 billion of cash and cash equivalents and short-term investments, respectively. Balances held in foreign currencies had a U.S. dollar equivalent of $4.43 billion and consisted primarily of Chinese yuan and euros. We had $5.03 billion of unused committed credit amounts as of December 31, 2023. For details regarding our indebtedness, refer to Note 11, Debt, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.


We continue adapting our strategy to meet our liquidity and risk objectives, such as investing in U.S. government securities and other investments, to do more vertical integration, expand our product roadmap and provide financing options to our customers.


TSLA Summary of Cash Flows

########Year Ended December 31,#### (Dollars in millions)####2023####2022####2021 Net cash provided by operating activities##$##13,256##$##14,724##$##11,497 Net cash used in investing activities##$##(15,584)##$##(11,973)##$##(7,868) Net cash provided by (used in) financing activities##$##2,589##$##(3,527)##$##(5,203)


TSLA Cash Flows from Operating Activities

Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as research and development and selling, general and administrative and working capital. Our operating cash inflows include cash from vehicle sales and related servicing, customer lease and financing payments, customer deposits, cash from sales of regulatory credits and energy generation and storage products, and interest income on our cash and investments portfolio. These cash inflows are offset by our payments to suppliers for production materials and parts used in our manufacturing process, operating expenses, operating lease payments and interest payments on our financings.


Net cash provided by operating activities decreased by $1.47 billion to $13.26 billion during the year ended December 31, 2023 from $14.72 billion during the year ended December 31, 2022. This decrease was primarily due to the decrease in net income excluding non-cash expenses, gains and losses of $2.93 billion, partially offset by favorable changes in net operating assets and liabilities of $1.46 billion.


TSLA Cash Flows from Investing Activities

Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $8.90 billion for the year ended December 31, 2023 and $7.16 billion for the year ended December 31, 2022, mainly for global factory expansion and machinery and equipment as we expand our product roadmap. We also purchased $6.62 billion and $5.81 billion of investments, net of proceeds from maturities and sales, for the year ended December 31, 2023 and 2022, respectively. Additionally, proceeds from sales of digital assets was $936 million in the year ended December 31, 2022.


TSLA Cash Flows from Financing Activities

Net cash from financing activities changed by $6.12 billion to $2.59 billion net cash provided by financing activities during the year ended December 31, 2023 from $3.53 billion net cash used in financing activities during the year ended December 31, 2022. The change was primarily due to a $3.93 billion increase in proceeds from issuances of debt and a $2.01 billion decrease in repayments of debt. See Note 11, Debt, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details regarding our debt obligations.


TSLA Recent Accounting Pronouncements

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


TSLA Foreign Currency Risk

We transact business globally in multiple currencies and hence have foreign currency risks related to our revenue, costs of revenue and operating expenses denominated in currencies other than the U.S. dollar (primarily the Chinese yuan and euro in relation to our current year operations). In general, we are a net receiver of currencies other than the U.S. dollar for our foreign subsidiaries. Accordingly, changes in exchange rates affect our operating results as expressed in U.S. dollars as we do not typically hedge foreign currency risk.


TSLA Foreign Currency Risk

We have also experienced, and will continue to experience, fluctuations in our net income as a result of gains (losses) on the settlement and the re-measurement of monetary assets and liabilities denominated in currencies that are not the local currency (primarily consisting of our intercompany and cash and cash equivalents balances).


TSLA Foreign Currency Risk

We considered the historical trends in foreign currency exchange rates and determined that it is reasonably possible that adverse changes in foreign currency exchange rates of 10% for all currencies could be experienced in the near-term. These changes were applied to our total monetary assets and liabilities denominated in currencies other than our local currencies at the balance sheet date to compute the impact these changes would have had on our net income before income taxes. These changes would have resulted in a gain or loss of $1.01 billion at December 31, 2023 and $473 million at December 31, 2022, assuming no foreign currency hedging.


TSLA Index to Consolidated Financial Statements

##Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)##47 Consolidated Balance Sheets##49 Consolidated Statements of Operations##50 Consolidated Statements of Comprehensive Income##51 Consolidated Statements of Redeemable Noncontrolling Interests and Equity##52 Consolidated Statements of Cash Flows##53


TSLA 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, 2023 and 2022, 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, 2023, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.


TSLA Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible debt in 2021.


TSLA 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.


TSLA Basis for Opinions

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.


TSLA Basis for Opinions

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.


TSLA 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.


TSLA 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.


TSLA Automotive Warranty Reserve

As described in Note 2 to the consolidated financial statements, total accrued warranty, which primarily relates to the automotive segment, was $5,152 million as of December 31, 2023. 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.


TSLA Automotive Warranty Reserve

The principal considerations for our determination that performing procedures relating to the automotive warranty reserve is a critical audit matter are the significant judgment by management in determining the automotive warranty reserve for certain Tesla vehicle models; this in turn led to significant auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumptions related to the nature, frequency and costs of future claims for certain Tesla vehicle models, and the audit effort involved the use of professionals with specialized skill and knowledge.


TSLA Automotive Warranty Reserve

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, performing one of the following: (i) testing management’s process for determining the automotive warranty reserve for certain Tesla vehicle models or (ii) developing an independent estimate of the automotive warranty reserve for certain Tesla vehicle models and comparing the independent estimate to management’s estimate to evaluate the reasonableness of the estimate. Testing management’s process involved evaluating the reasonableness of significant assumptions related to the nature and frequency of future claims and the related costs to repair or replace items under warranty. Evaluating the assumptions related to the nature and frequency of future claims and the related costs to repair or replace items under warranty involved evaluating whether the assumptions used were reasonable by performing a lookback analysis comparing prior period forecasted claims to actual claims incurred. Developing the independent estimate involved 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. Professionals with specialized skill and knowledge were used to assist in developing an independent estimate of the automotive warranty reserve for certain Tesla vehicle models and in evaluating the appropriateness of certain aspects of management’s significant assumptions related to the nature and frequency of future claims.


TSLA January 26, 2024

We have served as the Company’s auditor since 2005.


TSLA January 26, 2024

Tesla, Inc.


TSLA Consolidated Balance Sheets (in millions, except per share data)

####December 31, 2023####December 31, 2022 Assets######## Current assets######## Cash and cash equivalents##$##16,398##$##16,253 Short-term investments####12,696####5,932 Accounts receivable, net####3,508####2,952 Inventory####13,626####12,839 Prepaid expenses and other current assets####3,388####2,941 Total current assets####49,616####40,917 Operating lease vehicles, net####5,989####5,035 Solar energy systems, net####5,229####5,489 Property, plant and equipment, net####29,725####23,548 Operating lease right-of-use assets####4,180####2,563 Digital assets, net####184####184 Intangible assets, net####178####215 Goodwill####253####194 Deferred tax assets####6,733####328 Other non-current assets####4,531####3,865 Total assets##$##106,618##$##82,338 Liabilities######## Current liabilities######## Accounts payable##$##14,431##$##15,255 Accrued liabilities and other####9,080####8,205 Deferred revenue####2,864####1,747 Current portion of debt and finance leases####2,373####1,502 Total current liabilities####28,748####26,709 Debt and finance leases, net of current portion####2,857####1,597 Deferred revenue, net of current portion####3,251####2,804 Other long-term liabilities####8,153####5,330 Total liabilities####43,009####36,440 Commitments and contingencies (Note 15)######## Redeemable noncontrolling interests in subsidiaries####242####409 Equity######## Stockholders’ equity######## Preferred stock; $0.001 par value; 100 shares authorized; no shares issued and outstanding####—####— Common stock; $0.001 par value; 6,000 shares authorized; 3,185 and 3,164 shares issued and outstanding as of December 31, 2023 and 2022, respectively####3####3 Additional paid-in capital####34,892####32,177 Accumulated other comprehensive loss####(143)####(361) Retained earnings####27,882####12,885 Total stockholders’ equity####62,634####44,704 Noncontrolling interests in subsidiaries####733####785 Total liabilities and equity##$##106,618##$##82,338


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


Tesla, Inc.


TSLA Consolidated Statements of Operations (in millions, except per share data)

########Year Ended December 31,#### ####2023####2022####2021 Revenues############ Automotive sales##$##78,509##$##67,210##$##44,125 Automotive regulatory credits####1,790####1,776####1,465 Automotive leasing####2,120####2,476####1,642 Total automotive revenues####82,419####71,462####47,232 Energy generation and storage####6,035####3,909####2,789 Services and other####8,319####6,091####3,802 Total revenues####96,773####81,462####53,823 Cost of revenues############ Automotive sales####65,121####49,599####32,415 Automotive leasing####1,268####1,509####978 Total automotive cost of revenues####66,389####51,108####33,393 Energy generation and storage####4,894####3,621####2,918 Services and other####7,830####5,880####3,906 Total cost of revenues####79,113####60,609####40,217 Gross profit####17,660####20,853####13,606 Operating expenses############ Research and development####3,969####3,075####2,593 Selling, general and administrative####4,800####3,946####4,517 Restructuring and other####—####176####(27) Total operating expenses####8,769####7,197####7,083 Income from operations####8,891####13,656####6,523 Interest income####1,066####297####56 Interest expense####(156)####(191)####(371) Other income (expense), net####172####(43)####135 Income before income taxes####9,973####13,719####6,343 (Benefit from) provision for income taxes####(5,001)####1,132####699 Net income####14,974####12,587####5,644 Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries####(23)####31####125 Net income attributable to common stockholders##$##14,997##$##12,556##$##5,519 Net income per share of common stock attributable to common stockholders############ Basic##$##4.73##$##4.02##$##1.87 Diluted##$##4.30##$##3.62##$##1.63 Weighted average shares used in computing net income per share of common stock############ Basic####3,174####3,130####2,959 Diluted####3,485####3,475####3,386


TSLA Consolidated Statements of Comprehensive Income (in millions)

########Year Ended December 31,#### ####2023####2022####2021 Net income##$##14,974##$##12,587##$##5,644 Other comprehensive income (loss):############ Foreign currency translation adjustment####198####(392)####(308) Unrealized net gain (loss) on investments####16####(23)####(1) Adjustment for net loss realized and included in net income####4####—####— Comprehensive income####15,192####12,172####5,335 Less: Comprehensive (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries####(23)####31####125 Comprehensive income attributable to common stockholders##$##15,215##$##12,141##$##5,210


TSLA Consolidated Statements of Redeemable Noncontrolling Interests and Equity (in millions)

####Redeemable Noncontrolling Interests####Common Stock########Additional Paid-In Capital####Accumulated Other Comprehensive Income (Loss)####(Accumulated Deficit) Retained Earnings####Total Stockholders’ Equity####Noncontrolling Interests in Subsidiaries ######Shares######Amount#################### Balance as of December 31, 2020##$##604##2,879####$##3##$##27,260##$##363##$##(5,401)##$##22,225##$##850 Adjustments for prior periods from adopting ASU 2020-06####—##—######—####(474)####—####211####(263)####— Exercises of conversion feature of convertible senior notes####—##2######—####6####—####—####6####— Settlements of warrants####—##112######—####—####—####—####—####— Issuance of common stock for equity incentive awards####—##107######—####707####—####—####707####— Stock-based compensation####—##—######—####2,299####—####—####2,299####— Contributions from noncontrolling interests####2##—######—####—####—####—####—####— Distributions to noncontrolling interests####(66)##—######—####—####—####—####—####(106) Buy-outs of noncontrolling interests####(15)##—######—####5####—####—####5####— Net income####43##—######—####—####—####5,519####5,519####82 Other comprehensive loss####—##—######—####—####(309)####—####(309)####— Balance as of December 31, 2021##$##568##3,100####$##3##$##29,803##$##54##$##329##$##30,189##$##826 Settlements of warrants####—##37######—####—####—####—####—####— Issuance of common stock for equity incentive awards####—##27######—####541####—####—####541####— Stock-based compensation####—##—######—####1,806####—####—####1,806####— Distributions to noncontrolling interests####(46)##—######—####—####—####—####—####(113) Buy-outs of noncontrolling interests####(11)##—######—####27####—####—####27####(61) Net (loss) income####(102)##—######—####—####—####12,556####12,556####133 Other comprehensive loss####—##—######—####—####(415)####—####(415)####— Balance as of December 31, 2022##$##409##3,164####$##3##$##32,177##$##(361)##$##12,885##$##44,704##$##785 Issuance of common stock for equity incentive awards####—##21######—####700####—####—####700####— Stock-based compensation####—##—######—####2,013####—####—####2,013####— Distributions to noncontrolling interests####(32)##—######—####—####—####—####—####(108) Buy-outs of noncontrolling interests####(39)##—######—####2####—####—####2####(17) Net (loss) income####(96)##—######—####—####—####14,997####14,997####73 Other comprehensive income####—##—######—####—####218####—####218####— Balance as of December 31, 2023##$##242##3,185####$##3##$##34,892##$##(143)##$##27,882##$##62,634##$##733


TSLA Consolidated Statements of Cash Flows (in millions)

########Year Ended December 31,#### ####2023####2022####2021 Cash Flows from Operating Activities############ Net income##$##14,974##$##12,587##$##5,644 Adjustments to reconcile net income to net cash provided by operating activities:############ Depreciation, amortization and impairment####4,667####3,747####2,911 Stock-based compensation####1,812####1,560####2,121 Inventory and purchase commitments write-downs####463####177####140 Foreign currency transaction net unrealized (gain) loss####(144)####81####(55) Deferred income taxes####(6,349)####(196)####(149) Non-cash interest and other operating activities####81####340####245 Digital assets loss (gain), net####—####140####(27) Changes in operating assets and liabilities:############ Accounts receivable####(586)####(1,124)####(130) Inventory####(1,195)####(6,465)####(1,709) Operating lease vehicles####(1,952)####(1,570)####(2,114) Prepaid expenses and other assets####(2,652)####(3,713)####(1,540) Accounts payable, accrued and other liabilities####2,605####8,029####5,367 Deferred revenue####1,532####1,131####793 Net cash provided by operating activities####13,256####14,724####11,497 Cash Flows from Investing Activities############ Purchases of property and equipment excluding finance leases, net of sales####(8,898)####(7,158)####(6,482) Purchases of solar energy systems, net of sales####(1)####(5)####(32) Purchases of digital assets####—####—####(1,500) Proceeds from sales of digital assets####—####936####272 Purchase of intangible assets####—####(9)####— Purchases of investments####(19,112)####(5,835)####(132) Proceeds from maturities of investments####12,353####22####— Proceeds from sales of investments####138####—####— Receipt of government grants####—####76####6 Business combinations, net of cash acquired####(64)####—####— Net cash used in investing activities####(15,584)####(11,973)####(7,868) Cash Flows from Financing Activities############ Proceeds from issuances of debt####3,931####—####8,883 Repayments of debt####(1,351)####(3,364)####(14,167) Collateralized lease repayments####—####—####(9) Proceeds from exercises of stock options and other stock issuances####700####541####707 Principal payments on finance leases####(464)####(502)####(439) Debt issuance costs####(29)####—####(9) Proceeds from investments by noncontrolling interests in subsidiaries####—####—####2 Distributions paid to noncontrolling interests in subsidiaries####(144)####(157)####(161) Payments for buy-outs of noncontrolling interests in subsidiaries####(54)####(45)####(10) Net cash provided by (used in) financing activities####2,589####(3,527)####(5,203) Effect of exchange rate changes on cash and cash equivalents and restricted cash####4####(444)####(183) Net increase (decrease) in cash and cash equivalents and restricted cash####265####(1,220)####(1,757) Cash and cash equivalents and restricted cash, beginning of period####16,924####18,144####19,901 Cash and cash equivalents and restricted cash, end of period##$##17,189##$##16,924##$##18,144 Supplemental Non-Cash Investing and Financing Activities############ Acquisitions of property and equipment included in liabilities##$##2,272##$##2,148##$##2,251 Supplemental Disclosures############ Cash paid during the period for interest, net of amounts capitalized##$##126##$##152##$##266 Cash paid during the period for income taxes, net of refunds##$##1,119##$##1,203##$##561


TSLA Note 1 – Overview

Tesla, Inc. (“Tesla”, the “Company”, “we”, “us” or “our”) was incorporated in the State of Delaware on July 1, 2003. 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. Our Chief Executive Officer, as the chief operating decision maker (“CODM”), organizes our company, manages resource allocations and measures performance among two operating and reportable segments: (i) automotive and (ii) energy generation and storage.


TSLA 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 16, 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.


TSLA 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, 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.


TSLA Reclassifications

Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes.


TSLA Revenue by source

The following table disaggregates our revenue by major source (in millions): ########Year Ended December 31,#### ####2023####2022####2021 Automotive sales##$##78,509##$##67,210##$##44,125 Automotive regulatory credits####1,790####1,776####1,465 Energy generation and storage sales####5,515####3,376####2,279 Services and other####8,319####6,091####3,802 Total revenues from sales and services####94,133####78,453####51,671 Automotive leasing####2,120####2,476####1,642 Energy generation and storage leasing####520####533####510 Total revenues##$##96,773##$##81,462##$##53,823


TSLA 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 Capability 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 Capability 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.


TSLA Automotive Sales

Any fees that are paid or payable by us to a customer’s lender when we arrange the financing are recognized as an offset against automotive sales revenue. Costs to obtain a contract mainly relate to commissions paid to our sales personnel for the sale of vehicles. 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.


TSLA Automotive Sales

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. 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 contract 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 this program to determine whether there have been changes to the amount of expected resale value guarantee payments. 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 guarantee liability on vehicles sold under this program was immaterial as of December 31, 2023.


TSLA Automotive Sales

Deferred revenue related to the access to our FSD Capability 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,#### ####2023######2022 Deferred revenue— beginning of period##$##2,913####$##2,382 Additions####1,201######1,178 Net changes in liability for pre-existing contracts####17######(67) Revenue recognized####(595)######(580) Deferred revenue— end of period##$##3,536####$##2,913


TSLA Automotive Sales

Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the balance sheet date. Revenue recognized from the deferred revenue balance as of December 31, 2022 was $469 million for the year ended December 31, 2023. We had recognized revenue of $472 million from the deferred revenue balance as of December 31, 2021, for the year ended December 31, 2022, primarily related to the general FSD Capability feature release in North America in the fourth quarter of 2022. Of the total deferred revenue balance as of December 31, 2023, we expect to recognize $926 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.


TSLA Automotive Sales

We have been providing loans for financing our automotive deliveries in volume since fiscal year 2022. As of December 31, 2023 and 2022, we have recorded net financing receivables on the consolidated balance sheets, of which $242 million and $128 million, respectively, is recorded within Accounts receivable, net, for the current portion and $1.04 billion and $665 million, respectively, is recorded within Other non-current assets for the long-term portion.


TSLA 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.