TSLA Automotive Regulatory Credits

Payments for automotive regulatory credits are typically received at the point control transfers to the customer, or in accordance with payment terms customary to the business. We recognize revenue on the sale of automotive regulatory credits, which have negligible incremental costs associated with them, at the time control of the regulatory credits is transferred to the purchasing party. Deferred revenue related to sales of automotive regulatory credits was immaterial as of December 31, 2023 and 2022. Revenue recognized from the deferred revenue balance as of December 31, 2022 and 2021 was immaterial for the years ended December 31, 2023 and 2022. During the year ended December 31, 2022, we had also recognized $288 million in revenue due to changes in regulation which entitled us to additional consideration for credits sold previously.


TSLA Direct Vehicle Operating Leasing Program

We have outstanding leases under our direct vehicle operating leasing programs in the U.S., Canada and in certain countries in Europe. Qualifying customers are permitted to lease a vehicle directly from Tesla for up to 48 months. At the end of the lease term, customers are generally required to return the vehicles to us. We account for these leasing transactions as operating leases. We record leasing revenues to automotive leasing revenue on a straight-line basis over the contractual term, and we record the depreciation of these vehicles to cost of automotive leasing revenue. For the years ended December 31, 2023, 2022 and 2021, we recognized $1.86 billion, $1.75 billion and $1.25 billion of direct vehicle leasing revenue, respectively. As of December 31, 2023 and 2022, we had deferred $458 million and $407 million, respectively, of lease-related upfront payments, which will be recognized on a straight-line basis over the contractual terms of the individual leases.


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


TSLA Direct Sales-Type Leasing Program

We have outstanding direct leases and vehicles financed by us under loan arrangements accounted for as sales-type leases under ASC 842, Leases (“ASC 842”), in certain countries in Asia and Europe. Depending on the specific program, customers may or may not have a right to return the vehicle to us during or at the end of the lease term. If the customer does not have a right to return, the customer will take title to the vehicle at the end of the lease term after making all contractual payments. Under the programs for which there is a right to return, the purchase option is reasonably certain to be exercised by the lessee and we therefore expect the customer to take title to the vehicle at the end of the lease term after making all contractual payments. Our arrangements under these programs can have terms for up to 72 months. We recognize all revenue and costs associated with the sales-type lease as automotive leasing revenue and automotive leasing cost of revenue, respectively, upon delivery of the vehicle to the customer. Interest income based on the implicit rate in the lease is recorded to automotive leasing revenue over time as customers are invoiced on a monthly basis. For the years ended December 31, 2023, 2022 and 2021, we recognized $215 million, $683 million and $369 million, respectively, of sales-type leasing revenue and $164 million, $427 million and $234 million, respectively, of sales-type leasing cost of revenue.


TSLA Services and Other Revenue

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 Services and Other Revenue

Revenues related to repair, maintenance and vehicle insurance services are recognized over time as services are provided and extended service plans are recognized over the performance period of the service contract as the obligation represents a stand-ready obligation to the customer. We sell used vehicles, services, service plans, vehicle components and merchandise separately and thus use standalone selling prices as the basis for revenue allocation to the extent that these items are sold in transactions with other performance obligations. Payment for used vehicles, services, vehicle components, and merchandise are typically received at the point when control transfers to the customer or in accordance with payment terms customary to the business. Payments received for prepaid plans are refundable upon customer cancellation of the related contracts and are included within Customer deposits on the consolidated balance sheets. We record in Deferred revenue any non-refundable prepayment amounts that are collected from customers and unearned insurance premiums, which is recognized as revenue ratably over the respective customer contract term. Deferred revenue excluding unearned insurance premiums was immaterial as of December 31, 2023 and 2022.


TSLA Energy Generation and Storage Sales

Energy generation and storage sales revenue consists of the sale of solar energy systems and energy storage systems to residential, small commercial, large commercial and utility grade customers. Sales of solar energy systems to residential and small scale commercial customers consist of the engineering, design and installation of the system. Residential and small scale commercial customers pay the full purchase price of the solar energy system upfront. Revenue for the design and installation obligation is recognized when control transfers, which is when we install a solar energy system and the system passes inspection by the utility or the authority having jurisdiction. Sales of energy storage systems to residential and small scale commercial customers consist of the installation of the energy storage system and revenue is recognized when control transfers, which is when the product has been delivered or, if we are performing installation, when installed and commissioned. Payment for such storage systems is made upon invoice or in accordance with payment terms customary to the business.


For large commercial and utility grade energy storage system sales which consist of the engineering, design and installation of the system, customers make milestone payments that are consistent with contract-specific phases of a project. Revenue from such contracts is recognized over time using the percentage of completion method based on cost incurred as a percentage of total estimated contract costs for energy storage system sales.


In instances where there are multiple performance obligations in a single contract, we allocate the consideration to the various obligations in the contract based on the relative standalone selling price method. Standalone selling prices are estimated based on estimated costs plus margin or by using market data for comparable products. Costs to obtain a contract relate mainly to commissions paid to our sales personnel related to the sale of energy storage systems. As our contract costs related to energy storage system sales are typically fulfilled within one year, the costs to obtain a contract are expensed as incurred.


As part of our energy storage system contracts, we may provide the customer with performance guarantees that warrant that the underlying system will meet or exceed the minimum energy performance requirements specified in the contract. If an energy storage system does not meet the performance guarantee requirements, we may be required to pay liquidated damages. Other forms of variable consideration related to our large commercial and utility grade energy storage system contracts include variable customer payments that will be made based on our energy market participation activities. Such guarantees and variable customer payments represent a form of variable consideration and are estimated at contract inception at their most likely amount and updated at the end of each reporting period as additional performance data becomes available. Such estimates are included in the transaction price only to the extent that it is probable a significant reversal of revenue will not occur.


We record as deferred revenue any non-refundable amounts that are collected from customers related to fees charged for prepayments, which is recognized as revenue ratably over the respective customer contract term. As of December 31, 2023 and 2022, deferred revenue related to such customer payments amounted to $1.60 billion and $863 million, respectively, mainly due to contractual payment terms. Revenue recognized from the deferred revenue balance as of December 31, 2022 and 2021 was $571 million and $171 million for the years ended December 31, 2023 and 2022, respectively. We have elected the practical expedient to omit disclosure of the amount of the transaction price allocated to remaining performance obligations for energy generation and storage sales with an original expected contract length of one year or less and the amount that we have the right to invoice when that amount corresponds directly with the value of the performance to date. As of December 31, 2023, total transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied for contracts with an original expected length of more than one year was $3.43 billion. Of this amount, we expect to recognize $1.05 billion in the next 12 months and the rest over the remaining performance obligation period.


We have been providing loans for financing our energy generation products in volume since fiscal year 2022. As of December 31, 2023 and 2022, we have recorded net financing receivables on the consolidated balance sheets, of which $31 million and $24 million, respectively, is recorded within Accounts receivable, net, for the current portion and $578 million and $387 million, respectively, is recorded within Other non-current assets for the long-term portion.


TSLA Energy Generation and Storage Leasing

For revenue arrangements where we are the lessor under operating lease agreements for energy generation and storage products, we record lease revenue from minimum lease payments, including upfront rebates and incentives earned from such systems, on a straight-line basis over the life of the lease term, assuming all other revenue recognition criteria have been met. The difference between the payments received and the revenue recognized is recorded as deferred revenue or deferred asset on the consolidated balance sheet.


For solar energy systems where customers purchase electricity from us under PPAs prior to January 1, 2019, we have determined that these agreements should be accounted for as operating leases pursuant to ASC 840, Leases. Revenue is recognized based on the amount of electricity delivered at rates specified under the contracts, assuming all other revenue recognition criteria are met.


We record as deferred revenue any amounts that are collected from customers, including lease prepayments, in excess of revenue recognized, which is recognized as revenue ratably over the respective customer contract term. As of December 31, 2023 and 2022, deferred revenue related to such customer payments amounted to $181 million and $191 million, respectively. Deferred revenue also includes the portion of rebates and incentives received from utility companies and various local and state government agencies, which is recognized as revenue over the lease term. As of December 31, 2023 and 2022, deferred revenue from rebates and incentives was immaterial.


We capitalize initial direct costs from the execution of agreements for solar energy systems and PPAs, which include the referral fees and sales commissions, as an element of solar energy systems, net, and subsequently amortize these costs over the term of the related agreements.


TSLA Automotive Sales

Cost of automotive sales revenue includes direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, shipping and logistic costs, vehicle connectivity costs, FSD Capability 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.


TSLA Automotive Leasing

Cost of automotive leasing revenue includes the depreciation of operating lease vehicles, cost of goods sold associated with direct sales-type leases and warranty expense related to leased vehicles.


TSLA Services and Other

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


TSLA Energy Generation and Storage

Cost of energy generation and storage revenue includes direct and indirect material and labor costs, overhead costs, freight, warranty expense, 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 Research and Development Costs

Research and development costs are expensed as incurred.


TSLA Income Taxes

We are subject to income taxes in the U.S. and in many foreign jurisdictions. Income taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.


TSLA Income Taxes

We monitor the realizability of our deferred tax assets taking into account all relevant factors at each reporting period. 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. 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

We record liabilities related to uncertain tax positions when, despite our belief that our tax return positions are supportable, we believe that it is more likely than not that those positions may not be fully sustained upon review by tax authorities. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense.


TSLA Income Taxes

The Tax Cuts and Jobs Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. Under GAAP, we can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense or factor such amounts into our measurement of deferred taxes. We elected the deferred method, under which we recorded the corresponding deferred tax assets and liabilities in our consolidated balance sheets.


TSLA Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustments and unrealized net gains and losses on investments that have been excluded from the determination of net income.


TSLA Stock-Based Compensation

We use the fair value method of accounting for our stock options and RSUs granted to employees and for our ESPP to measure the cost of employee services received in exchange for the stock-based awards. The fair value of stock option awards with only service and/or performance conditions is estimated on the grant or offering date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. These inputs are subjective and generally require significant judgment. The fair value of RSUs is measured on the grant date based on the closing fair market value of our common stock. The resulting cost is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period, which is generally four years for stock options and RSUs and six months for the ESPP. Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period.


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 Noncontrolling Interests and Redeemable Noncontrolling Interests

Noncontrolling interests and redeemable noncontrolling interests represent third-party interests in the net assets under certain funding arrangements, or funds, that we have entered into to finance the costs of solar energy systems and vehicles under operating leases. We have determined that the contractual provisions of the funds represent substantive profit-sharing arrangements. We have further determined that the methodology for calculating the noncontrolling interest and redeemable noncontrolling interest balances that reflects the substantive profit-sharing arrangements is a balance sheet approach using the hypothetical liquidation at book value (“HLBV”) method. We, therefore, determine the amount of the noncontrolling interests and redeemable noncontrolling interests in the net assets of the funds at each balance sheet date using the HLBV method, which is presented on the consolidated balance sheet as noncontrolling interests in subsidiaries and redeemable noncontrolling interests in subsidiaries. Under the HLBV method, the amounts reported as noncontrolling interests and redeemable noncontrolling interests in the consolidated balance sheet represent the amounts the third parties would hypothetically receive at each balance sheet date under the liquidation provisions of the funds, assuming the net assets of the funds were liquidated at their recorded amounts determined in accordance with GAAP and with tax laws effective at the balance sheet date and distributed to the third parties. The third parties’ interests in the results of operations of the funds are determined as the difference in the noncontrolling interest and redeemable noncontrolling interest balances in the consolidated balance sheets between the start and end of each reporting period, after taking into account any capital transactions between the funds and the third parties. However, the redeemable noncontrolling interest balance is at least equal to the redemption amount. The redeemable noncontrolling interest balance is presented as temporary equity in the mezzanine section of the consolidated balance sheet since these third parties have the right to redeem their interests in the funds for cash or other assets. For certain funds, there have been significant fluctuations in net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries due to changes in the liquidation provisions as time-based milestones have been reached.


Net Income per Share of Common Stock Attributable to Common Stockholders


Basic net income per share of common stock attributable to common stockholders is calculated by dividing net income attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards, warrants and convertible senior notes using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income per share of common stock attributable to common stockholders when their effect is dilutive.


Furthermore, in connection with the offerings of our convertible senior notes, we entered into convertible note hedges and warrants (see Note 11, Debt). However, our convertible note hedges are not included when calculating potentially dilutive shares since their effect is always anti-dilutive. The strike price on the warrants were below our average share price during the period and were included in the tables below. Warrants are included in the weighted-average shares used in computing basic net income per share of common stock in the period(s) they are settled.


The following table presents the reconciliation of net income attributable to common stockholders to net income used in computing basic and diluted net income per share of common stock (in millions): ########Year Ended December 31,#### ####2023####2022####2021 Net income attributable to common stockholders##$##14,997##$##12,556##$##5,519 Less: Buy-out of noncontrolling interest####(2)####(27)####(5) Net income used in computing basic net income per share of common stock####14,999####12,583####5,524 Less: Dilutive convertible debt####—####(1)####(9) Net income used in computing diluted net income per share of common stock##$##14,999##$##12,584##$##5,533


The following table presents the reconciliation of basic to diluted weighted average shares used in computing net income per share of common stock attributable to common stockholders (in millions): ####Year Ended December 31,## ##2023##2022##2021 Weighted average shares used in computing net income per share of common stock, basic##3,174##3,130##2,959 Add:###### Stock-based awards##298##310##292 Convertible senior notes##2##3##29 Warrants##11##32##106 Weighted average shares used in computing net income per share of common stock, diluted##3,485##3,475##3,386


The following table presents the potentially dilutive shares that were excluded from the computation of diluted net income per share of common stock attributable to common stockholders, because their effect was anti-dilutive (in millions): ####Year Ended December 31,## ##2023##2022##2021 Stock-based awards##12##4##1


TSLA Business Combinations

We account for business acquisitions under ASC 805, Business Combinations. The total purchase consideration for an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities assumed at the acquisition date. Costs that are directly attributable to the acquisition are expensed as incurred. Identifiable assets (including intangible assets), liabilities assumed (including contingent liabilities) and noncontrolling interests in an acquisition are measured initially at their fair values at the acquisition date. We recognize goodwill if the fair value of the total purchase consideration and any noncontrolling interests is in excess of the net fair value of the identifiable assets acquired and the liabilities assumed. We recognize a bargain purchase gain within Other income (expense), net, in the consolidated statement of operations if the net fair value of the identifiable assets acquired and the liabilities assumed is in excess of the fair value of the total purchase consideration and any noncontrolling interests. We include the results of operations of the acquired business in the consolidated financial statements beginning on the acquisition date.


TSLA Cash and Cash Equivalents

All highly liquid investments with an original maturity of three months or less at the date of purchase are considered cash equivalents. Our cash equivalents are primarily comprised of U.S. government securities, money market funds and commercial paper.


TSLA Restricted Cash

We maintain certain cash balances restricted as to withdrawal or use. Our restricted cash is comprised primarily of cash held to service certain payments under various secured debt facilities. In addition, restricted cash includes cash held as collateral for sales to lease partners with a resale value guarantee, letters of credit, real estate leases and deposits held for our insurance services. We record restricted cash as other assets in the consolidated balance sheets and determine current or non-current classification based on the expected duration of the restriction.


TSLA Restricted Cash

Our total cash and cash equivalents and restricted cash, as presented in the consolidated statements of cash flows, was as follows (in millions): ####December 31, 2023####December 31, 2022####December 31, 2021 Cash and cash equivalents##$##16,398##$##16,253##$##17,576 Restricted cash included in prepaid expenses and other current assets####543####294####345 Restricted cash included in other non-current assets####248####377####223 Total as presented in the consolidated statements of cash flows##$##17,189##$##16,924##$##18,144


TSLA Investments

Investments may be comprised of a combination of marketable securities, including U.S. government securities, corporate debt securities, commercial paper, time deposits, and certain certificates of deposit, which are all designated as available-for-sale and reported at estimated fair value, with unrealized gains and losses recorded in accumulated other comprehensive income which is included within stockholders’ equity. Available-for-sale marketable securities with maturities greater than three months at the date of purchase are included in short-term investments in our consolidated balance sheets. Interest, dividends, amortization and accretion of purchase premiums and discounts on these investments are included within Interest income in our consolidated statements of operations.


TSLA Investments

The cost of available-for-sale investments sold is based on the specific identification method. Realized gains and losses on the sale of available-for-sale investments are recorded in Other income (expense), net.


TSLA Investments

We regularly review all of our investments for declines in fair value. The review includes but is not limited to (i) the consideration of the cause of the decline, (ii) any currently recorded expected credit losses and (iii) the creditworthiness of the respective security issuers. The amortized cost basis of our investments approximates its fair value.


TSLA Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable primarily include amounts related to receivables from financial institutions and leasing companies offering various financing products to our customers, sales of energy generation and storage products, sales of regulatory credits to other automotive manufacturers and government rebates already passed through to customers. We provide an allowance against accounts receivable for the amount we expect to be uncollectible. We write-off accounts receivable against the allowance when they are deemed uncollectible.


Depending on the day of the week on which the end of a fiscal quarter falls, our accounts receivable balance may fluctuate as we are waiting for certain customer payments to clear through our banking institutions and receipts of payments from our financing partners, which can take up to approximately two weeks based on the contractual payment terms with such partners. Our accounts receivable balances associated with our sales of regulatory credits are dependent on contractual payment terms. Additionally, government rebates can take up to a year or more to be collected depending on the customary processing timelines of the specific jurisdictions issuing them. These various factors may have a significant impact on our accounts receivable balance from period to period. As of December 31, 2023 and 2022, we had $207 million and $753 million, respectively, of long-term government rebates receivable in Other non-current assets in our consolidated balance sheets.


TSLA Financing Receivables

We provide financing options to our customers for our automotive and energy products. Financing receivables are carried at amortized cost, net of allowance for loan losses. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at levels considered adequate to cover expected credit losses on the financing receivables. In determining expected credit losses, we consider our historical level of credit losses, current economic trends, and reasonable and supportable forecasts that affect the collectability of the future cash flows.


TSLA Financing Receivables

When originating consumer receivables, we review the credit application, the proposed contract terms, credit bureau information (e.g., FICO score) and other information. Our evaluation emphasizes the applicant’s ability to pay and creditworthiness focusing on payment, affordability, and applicant credit history as key considerations. Generally, all customers in this portfolio have strong creditworthiness at loan origination.


TSLA Financing Receivables

After origination, we review the credit quality of retail financing based on customer payment activity and aging analysis. For all financing receivables, we define “past due” as any payment, including principal and interest, which is at least 31 days past the contractual due date. As of December 31, 2023 and 2022, the vast majority of our financing receivables were at current status with only an immaterial balance being past due. As of December 31, 2023, the majority of our financing receivables, excluding MyPower notes receivable, were originated in 2023 and 2022, and as of December 31, 2022, the majority of our financing receivables, excluding MyPower notes receivable, were originated in 2022.


TSLA Financing Receivables

We have customer notes receivable under the legacy MyPower loan program, which provided residential customers with the option to finance the purchase of a solar energy system through a 30-year loan and were all originated prior to year 2018. The outstanding balances, net of any allowance for expected credit losses, are presented on the consolidated balance sheets as a component of Prepaid expenses and other current assets for the current portion and as Other non-current assets for the long-term portion. As of December 31, 2023 and 2022, the total outstanding balance of MyPower customer notes receivable, net of allowance for expected credit losses, was $266 million and $280 million, respectively, of which $5 million and $7 million were due in the next 12 months as of December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, the allowance for expected credit losses was $36 million and $37 million, respectively.


TSLA Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, investments, restricted cash, accounts receivable and other finance receivables. Our cash and investments balances are primarily on deposit at high credit quality financial institutions or invested in money market funds. These deposits are typically in excess of insured limits. As of December 31, 2023 and 2022, no entity represented 10% or more of our total receivables balance.


TSLA Supply Risk

We are dependent on our suppliers, including single source suppliers, and the inability of these suppliers to deliver necessary components of our products in a timely manner at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components from these suppliers, could have a material adverse effect on our business, prospects, financial condition and operating results.


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 Operating Lease Vehicles

Vehicles that are leased as part of our direct vehicle leasing program are classified as operating lease vehicles at cost less accumulated depreciation. We generally depreciate their cost, less residual value, using the straight-line-method to cost of automotive leasing revenue over the contractual period. The gross cost of operating lease vehicles as of December 31, 2023 and 2022 was $7.36 billion and $6.08 billion, respectively. Operating lease vehicles on the consolidated balance sheets are presented net of accumulated depreciation of $1.38 billion and $1.04 billion as of December 31, 2023 and 2022, respectively.


TSLA Digital Assets, Net

We currently account for all digital assets held as indefinite-lived intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. We have ownership of and control over our digital assets and we may use third-party custodial services to secure it. The digital assets are initially recorded at cost and are subsequently remeasured on the consolidated balance sheet at cost, net of any impairment losses incurred since acquisition.


TSLA Digital Assets, Net

We determine the fair value of our digital assets on a nonrecurring basis in accordance with ASC 820, Fair Value Measurement (“ASC 820”), based on quoted prices on the active exchange(s) that we have determined is the principal market for such assets (Level I inputs). We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted prices on active exchanges, indicate that it is more likely than not that our digital assets are impaired. In determining if an impairment has occurred, we consider the lowest market price of one unit of digital asset quoted on the active exchange since acquiring the digital asset. When the then current carrying value of a digital asset exceeds the fair value determined each quarter, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the prices determined.


TSLA Digital Assets, Net

Impairment losses are recognized within Restructuring and other in the consolidated statements of operations in the period in which the impairment is identified. Gains are not recorded until realized upon sale(s), at which point they are presented net of any impairment losses for the same digital assets held within Restructuring and other. In determining the gain to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.


TSLA Digital Assets, Net

See Note 3, Digital Assets, Net, for further information regarding digital assets.


TSLA Solar Energy Systems, Net

We are the lessor of solar energy systems. Solar energy systems are stated at cost less accumulated depreciation.


TSLA Solar Energy Systems, Net

Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the respective assets, as follows: Solar energy systems in service 30 to 35 years


TSLA Solar Energy Systems, Net

Initial direct costs related to customer solar energy system lease acquisition costs Lease term (up to 25 years)


TSLA Solar Energy Systems, Net

Solar energy systems pending interconnection will be depreciated as solar energy systems in service when they have been interconnected and placed in-service. Solar energy systems under construction represents systems that are under installation, which will be depreciated as solar energy systems in service when they are completed, interconnected and placed in service. Initial direct costs related to customer solar energy system agreement acquisition costs are capitalized and amortized over the term of the related customer agreements.


TSLA Property, Plant and Equipment, Net

Property, plant and equipment, net, including leasehold improvements, are recognized at cost less accumulated depreciation. Depreciation is generally computed using the straight-line method over the estimated useful lives of the respective assets, as follows: Machinery, equipment, vehicles and office furniture##3 to 15 years Tooling##4 to 7 years Building and building improvements##15 to 30 years Computer equipment and software##3 to 10 years


TSLA Property, Plant and Equipment, Net

Leasehold improvements are depreciated on a straight-line basis over the shorter of their estimated useful lives or the terms of the related leases.


TSLA Property, Plant and Equipment, Net

Upon the retirement or sale of our property, plant and equipment, the cost and associated accumulated depreciation are removed from the consolidated balance sheet, and the resulting gain or loss is reflected on the consolidated statement of operations. Maintenance and repair expenditures are expensed as incurred while major improvements that increase the functionality, output or expected life of an asset are capitalized and depreciated ratably over the identified useful life.


TSLA Property, Plant and Equipment, Net

Interest expense on outstanding debt is capitalized during the period of significant capital asset construction. Capitalized interest on construction in progress is included within Property, plant and equipment, net and is amortized over the life of the related assets.


TSLA Long-Lived Assets Including Acquired Intangible Assets

We review our property, plant and equipment, solar energy systems, long-term prepayments and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. We measure recoverability by comparing the carrying amount to the future undiscounted cash flows that the asset is expected to generate. If the asset is not recoverable, its carrying amount would be adjusted down to its fair value. For the years ended December 31, 2023, 2022 and 2021, we have recognized no material impairments of our long-lived assets.


Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives, which range from seven to thirty years.


TSLA Goodwill

We assess goodwill for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit’s fair value. For the years ended December 31, 2023, 2022, and 2021, we did not recognize any impairment of goodwill.


TSLA Capitalization of Software Costs

We capitalize costs incurred in the development of internal use software, during the application development stage to Property, plant and equipment, net on the consolidated balance sheets. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Such costs are amortized on a straight-line basis over their estimated useful life of three to five years.


TSLA Capitalization of Software Costs

Software development costs incurred in development of software to be sold, leased, or otherwise marketed, incurred subsequent to the establishment of technological feasibility and prior to the general availability of the software are capitalized when they are expected to become significant. Such costs are amortized over the estimated useful life of the applicable software once it is made generally available to our customers.


TSLA Capitalization of Software Costs

We evaluate the useful lives of these assets on an annual basis, and we test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. For the years ended December 31, 2023, 2022, and 2021, we have recognized no impairments of capitalized software costs.


TSLA Foreign Currency

We determine the functional and reporting currency of each of our international subsidiaries and their operating divisions based on the primary currency in which they operate. In cases where the functional currency is not the U.S. dollar, we recognize a cumulative translation adjustment created by the different rates we apply to current period income or loss and the balance sheet. For each subsidiary, we apply the monthly average functional exchange rate to its monthly income or loss and the month-end functional currency rate to translate the balance sheet.


TSLA Foreign Currency

Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency of the respective subsidiary. Transaction gains and losses are recognized in Other income (expense), net, in the consolidated statements of operations. For the years ended December 31, 2023, 2022 and 2021, we recorded a net foreign currency transaction gain of $122 million, loss of $89 million and gain of $97 million, respectively.


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. Accrued warranty activity consisted of the following (in millions): ########Year Ended December 31,#### ####2023####2022####2021 Accrued warranty—beginning of period##$##3,505##$##2,101##$##1,468 Warranty costs incurred####(1,225)####(803)####(525) Net changes in liability for pre-existing warranties, including expirations and foreign exchange impact####539####522####102 Provision for warranty####2,333####1,685####1,056 Accrued warranty—end of period##$##5,152##$##3,505##$##2,101


TSLA Customer Deposits

Customer deposits primarily consist of refundable cash payments from customers at the time they place an order or reservation for a vehicle or an energy product and any additional payments up to the point of delivery or the completion of installation. Customer deposits also include prepayments on contracts that can be cancelled without significant penalties, such as vehicle maintenance plans. Customer deposits are included in Accrued liabilities and other on the consolidated balance sheets until refunded, forfeited or applied towards the customer’s purchase balance.


TSLA Government Assistance Programs and Incentives

Globally, the operation of our business is impacted by various government programs, incentives, and other arrangements. Government incentives are recorded in our consolidated financial statements in accordance with their purpose as a reduction of expense, or an offset to the related capital asset. The benefit is generally recorded when all conditions attached to the incentive have been met or are expected to be met and there is reasonable assurance of their receipt.


TSLA The IRA Incentives

On August 16, 2022, the IRA was enacted into law and is effective for taxable years beginning after December 31, 2022. The IRA includes multiple incentives to promote clean energy, electric vehicles, battery and energy storage manufacture or purchase, in addition to a new corporate alternative minimum tax of 15% on adjusted financial statement income of corporations with profits greater than $1 billion. Some of these measures are expected to materially affect our consolidated financial statements. For the year ended December 31, 2023, the impact from our IRA incentive was primarily a reduction of our material costs in our consolidated statement of operations. We will continue to evaluate the effects of the IRA as more guidance is issued and the relevant implications to our consolidated financial statements.


TSLA Gigafactory New York—New York State Investment and Lease

We have a lease through the Research Foundation for the SUNY Foundation with respect to Gigafactory New York. Under the lease and a related research and development agreement, we are continuing to designate further buildouts at the facility. We are required to comply with certain covenants, including hiring and cumulative investment targets. Under the terms of the arrangement, the SUNY Foundation paid for a majority of the construction costs related to the manufacturing facility and the acquisition and commissioning of certain manufacturing equipment; and we are responsible for any construction or equipment costs in excess of such amount (refer to Note 15, Commitments and Contingencies). This incentive reduces the related lease costs of the facility within the Energy generation and storage cost of revenues and operating expense line items in our consolidated statements of operations.


TSLA Gigafactory Shanghai—Land Use Rights and Economic Benefits

We have an agreement with the local government of Shanghai for land use rights at Gigafactory Shanghai. Under the terms of the arrangement, we are required to meet a cumulative capital expenditure target and an annual tax revenue target starting at the end of 2023. In addition, the Shanghai government has granted to our Gigafactory Shanghai subsidiary certain incentives to be used in connection with eligible capital investments at Gigafactory Shanghai (refer to Note 15, Commitments and Contingencies). For the year ended December 31, 2022, we received grant funding of $76 million. These incentives offset the related costs of our facilities and are recorded as a reduction of the cost of the capital investment within the Property, plant and equipment, net line item in our consolidated balance sheets. The incentive therefore reduces the depreciation expense over the useful lives of the related equipment.


TSLA Nevada Tax Incentives

In connection with the construction of Gigafactory Nevada, we entered into agreements with the State of Nevada and Storey County in Nevada that provide abatements for specified taxes, discounts to the base tariff energy rates and transferable tax credits of up to $195 million in consideration of capital investment and hiring targets that were met at Gigafactory Nevada.


TSLA Gigafactory Texas Tax Incentives

In connection with the construction of Gigafactory Texas, we entered into a 20-year agreement with Travis County in Texas pursuant to which we would receive grant funding equal to 70-80% of property taxes paid by us to Travis County and a separate 10-year agreement with the Del Valle Independent School District in Texas pursuant to which a portion of the taxable value of our property would be capped at a specified amount, in each case subject to our meeting certain minimum economic development metrics through our construction and operations at Gigafactory Texas. This incentive is recorded as a reduction of the related expenses within the Cost of automotive revenues and operating expense line items of our consolidated statements of operations. As of December 31, 2023, the grant funding related to property taxes paid were immaterial.


TSLA Defined Contribution Plan

We have a 401(k) savings plan in the U.S. that is intended to qualify as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code and a number of savings plans internationally. Under the 401(k) savings plan, participating employees may elect to contribute up to 90% of their eligible compensation, subject to certain limitations. Beginning in January 2022, we began to match 50% of each employee’s contributions up to a maximum of 6% (capped at $3,000) of the employee’s eligible compensation, vested upon one year of service. During the years ended December 31, 2023 and 2022, we recognized $99 million and $91 million, respectively, of expenses related to employer contributions for the 401(k) savings plan.


TSLA Recently issued accounting pronouncements not yet adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. We are currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024.


In December 2023, the FASB issued ASU No. 2023-08, Accounting for and Disclosure of Crypto Assets (Subtopic 350-60). This ASU requires certain crypto assets to be measured at fair value separately in the balance sheet and income statement each reporting period. This ASU also enhances the other intangible asset disclosure requirements by requiring the name, cost basis, fair value, and number of units for each significant crypto holding. The ASU is effective for annual periods beginning after December 15, 2024, including interim periods within those fiscal years. Adoption of the ASU requires a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period in which an entity adopts the amendments. Early adoption is also permitted, including adoption in an interim period. However, if the ASU is early adopted in an interim period, an entity must adopt the ASU as of the beginning of the fiscal year that includes the interim period. This ASU will result in gains and losses recorded in the consolidated financial statements of operations and additional disclosures when adopted. We are currently evaluating the adoption of this ASU and it will affect the carrying value of our crypto assets held and the gains and losses relating thereto, once adopted.


In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.


TSLA Recently adopted accounting pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). This ASU requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We adopted this ASU prospectively on January 1, 2023. This ASU has not and is currently not expected to have a material impact on our consolidated financial statements.


In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which we adopted on January 1, 2020. This ASU also enhances the disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, the ASU amends the guidance on vintage disclosures to require entities to disclose current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. We adopted the ASU prospectively on January 1, 2023. This ASU has not and is currently not expected to have a material impact on our consolidated financial statements.


TSLA ASU 2020-06

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for convertible instruments by removing certain separation models in ASC 470-20, Debt—Debt with Conversion and Other Options, for convertible instruments. The ASU updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. This will also result in the interest expense recognized for convertible debt instruments to be typically closer to the coupon interest rate when applying the guidance in Topic 835, Interest. Further, the ASU made amendments to the EPS guidance in Topic 260 for convertible debt instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method. The ASU also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities.


TSLA ASU 2020-06

On January 1, 2021, we adopted the ASU using the modified retrospective method. We recognized a favorable $211 million cumulative effect of initially applying the ASU as an adjustment to the January 1, 2021 opening balance of accumulated deficit. Due to the recombination of the equity conversion component of our convertible debt remaining outstanding, additional paid in capital was reduced by $474 million and convertible senior notes (mezzanine equity) was reduced by $51 million. The removal of the remaining debt discounts recorded for this previous separation had the effect of increasing our net debt balance by $269 million and we reduced property, plant and equipment by $45 million related to previously capitalized interest. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.


TSLA Note 3 – Digital Assets, Net

During the years ended December 31, 2023 and 2022, we purchased and/or received immaterial amounts of digital assets. During the year ended December 31, 2023, we recorded an immaterial amount of impairment losses on digital assets. During the year ended December 31, 2022, we recorded $204 million of impairment losses on digital assets and realized gains of $64 million in connection with converting our holdings of digital assets into fiat currency. The gains are presented net of impairment losses in Restructuring and other in the consolidated statements of operations. As of December 31, 2023 and 2022, the carrying value of our digital assets held reflects cumulative impairment of $204 million.


TSLA Note 4 – Goodwill and Intangible Assets

Goodwill increased $59 million within the automotive segment from $194 million as of December 31, 2022 to $253 million as of December 31, 2023 primarily from a business combination, net of the impact of a divestiture. There were no accumulated impairment losses as of December 31, 2023 and 2022.


The net carrying value of our intangible assets decreased from $215 million as of December 31, 2022 to $178 million as of December 31, 2023 mainly from amortization.


TSLA Note 5 – Fair Value of Financial Instruments

ASC 820, Fair Value Measurements (“ASC 820”) states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, is comprised of: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices in active markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair value hierarchy requires the use of observable market data when available in determining fair value. Our assets and liabilities that were measured at fair value on a recurring basis were as follows (in millions): ##########December 31, 2023##################December 31, 2022######## ####Fair Value####Level I######Level II####Level III####Fair Value####Level I######Level II####Level III Money market funds##$##109##$##109####$##—##$##—##$##2,188##$##2,188####$##—##$##— U.S. government securities####5,136####—######5,136####—####894####—######894####— Corporate debt securities####480####—######480####—####885####—######885####— Certificates of deposit and time deposits####6,996####—######6,996####—####4,253####—######4,253####— Commercial paper####470####—######470####—####—####—######—####— Total##$##13,191##$##109####$##13,082##$##—##$##8,220##$##2,188####$##6,032##$##—


All of our money market funds were classified within Level I of the fair value hierarchy because they were valued using quoted prices in active markets. Our U.S. government securities, certificates of deposit, commercial paper, time deposits and corporate debt securities are classified within Level II of the fair value hierarchy and the market approach was used to determine fair value of these investments.


Our cash, cash equivalents and investments classified by security type as of December 31, 2023 and 2022 consisted of the following (in millions): ##############December 31, 2023############ ####Adjusted Cost####Gross Unrealized Gains####Gross Unrealized Losses######Fair Value####Cash and Cash Equivalents####Short-Term Investments Cash##$##15,903##$##—##$##—####$##15,903##$##15,903##$##— Money market funds####109####—####—######109####109####— U.S. government securities####5,136####1####(1)######5,136####277####4,859 Corporate debt securities####485####1####(6)######480####—####480 Certificates of deposit and time deposits####6,995####1####—######6,996####—####6,996 Commercial paper####470####—####—######470####109####361 Total cash, cash equivalents and short-term investments##$##29,098##$##3##$##(7)####$##29,094##$##16,398##$##12,696 ##############December 31, 2022############ ####Adjusted Cost####Gross Unrealized Gains####Gross Unrealized Losses######Fair Value####Cash and Cash Equivalents####Short-Term Investments Cash##$##13,965##$##—##$##—####$##13,965##$##13,965##$##— Money market funds####2,188####—####—######2,188####2,188####— U.S. government securities####897####—####(3)######894####—####894 Corporate debt securities####907####—####(22)######885####—####885 Certificates of deposit and time deposits####4,252####1####—######4,253####100####4,153 Total cash, cash equivalents and short-term investments##$##22,209##$##1##$##(25)####$##22,185##$##16,253##$##5,932


We record gross realized gains, losses and credit losses as a component of Other income (expense), net in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, we did not recognize any material gross realized gains, losses or credit losses. The ending allowance balances for credit losses were immaterial as of December 31, 2023 and 2022. We have determined that the gross unrealized losses on our investments as of December 31, 2023 and 2022 were temporary in nature.


The following table summarizes the fair value of our investments by stated contractual maturities as of December 31, 2023 (in millions): Due in 1 year or less##$##12,374 Due in 1 year through 5 years####297 Due in 5 years through 10 years####25 Total##$##12,696


TSLA Disclosure of Fair Values

Our financial instruments that are not re-measured at fair value include accounts receivable, financing receivables, other receivables, digital assets, accounts payable, accrued liabilities, customer deposits and debt. The carrying values of these financial instruments materially approximate their fair values, other than our 2.00% Convertible Senior Notes due in 2024 (“2024 Notes”) and digital assets.


TSLA Disclosure of Fair Values

We estimate the fair value of the 2024 Notes using commonly accepted valuation methodologies and market-based risk measurements that are indirectly observable, such as credit risk (Level II). In addition, we estimate the fair values of our digital assets based on quoted prices in active markets (Level I). The following table presents the estimated fair values and the carrying values (in millions): ######December 31, 2023##########December 31, 2022#### ####Carrying Value######Fair Value####Carrying Value######Fair Value 2024 Notes##$##37####$##443##$##37####$##223 Digital assets, net##$##184####$##487##$##184####$##191


TSLA Note 6 – Inventory

Our inventory consisted of the following (in millions): ####December 31, 2023####December 31, 2022 Raw materials##$##5,390##$##6,137 Work in process####2,016####2,385 Finished goods (1)####5,049####3,475 Service parts####1,171####842 Total##$##13,626##$##12,839


TSLA Note 6 – Inventory

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


TSLA Note 6 – Inventory

We write-down inventory for any excess or obsolete inventories or when we believe that the net realizable value of inventories is less than the carrying value. During the years ended December 31, 2023, 2022 and 2021 we recorded write-downs of $233 million, $144 million and $106 million, respectively, in Cost of revenues in the consolidated statements of operations.


TSLA Note 7 – Solar Energy Systems, Net

Our solar energy systems, net, consisted of the following (in millions): ####December 31, 2023####December 31, 2022 Solar energy systems in service##$##6,755##$##6,785 Initial direct costs related to customer solar energy system lease acquisition costs####104####104 ####6,859####6,889 Less: accumulated depreciation and amortization (1)####(1,643)####(1,418) ####5,216####5,471 Solar energy systems under construction####1####2 Solar energy systems pending interconnection####12####16 Solar energy systems, net (2)##$##5,229##$##5,489


TSLA Note 7 – Solar Energy Systems, Net

(1)Depreciation and amortization expense during the years ended December 31, 2023, 2022 and 2021 was $235 million, $235 million and $236 million, respectively.


TSLA Note 7 – Solar Energy Systems, Net

(2)As of December 31, 2023 and 2022, there were $740 million and $802 million, respectively, of gross solar energy systems under lease pass-through fund arrangements with accumulated depreciation of $157 million and $148 million, respectively.


TSLA Note 8 – Property, Plant and Equipment, Net

Our property, plant and equipment, net, consisted of the following (in millions): ####December 31, 2023####December 31, 2022 Machinery, equipment, vehicles and office furniture##$##16,372##$##13,558 Tooling####3,147####2,579 Leasehold improvements####3,168####2,366 Land and buildings####9,505####7,751 Computer equipment, hardware and software####3,799####2,072 Construction in progress####5,791####4,263 ####41,782####32,589 Less: Accumulated depreciation####(12,057)####(9,041) Total##$##29,725##$##23,548


Construction in progress is primarily comprised of ongoing construction and expansion of our facilities, and equipment and tooling related to the manufacturing of our products. Completed assets are transferred to their respective asset classes and depreciation begins when an asset is ready for its intended use.


Depreciation expense during the years ended December 31, 2023, 2022 and 2021 was $3.33 billion, $2.42 billion and $1.91 billion, respectively.


Panasonic has partnered with us on Gigafactory Nevada with investments in the production equipment that it uses to manufacture and supply us with battery cells. Under our arrangement with Panasonic, we plan to purchase the full output from their production equipment at negotiated prices. As the terms of the arrangement convey a finance lease under ASC 842, we account for their production equipment as leased assets when production commences. We account for each lease and any non-lease components associated with that lease as a single lease component for all asset classes, except production equipment classes embedded in supply agreements. This results in us recording the cost of their production equipment within Property, plant and equipment, net, on the consolidated balance sheets with a corresponding liability recorded to debt and finance leases. Depreciation on Panasonic production equipment is computed using the units-of-production method whereby capitalized costs are amortized over the total estimated productive life of the respective assets. As of December 31, 2023 and 2022, we had cumulatively capitalized gross costs of $2.02 billion and $2.01 billion, respectively, on the consolidated balance sheets in relation to the production equipment under our Panasonic arrangement.


TSLA Note 9 – Accrued Liabilities and Other

Our accrued liabilities and other current liabilities consisted of the following (in millions): ####December 31, 2023####December 31, 2022 Accrued purchases (1)##$##2,721##$##2,747 Accrued warranty reserve, current portion####1,546####1,025 Payroll and related costs####1,325####1,026 Taxes payable (2)####1,204####1,235 Customer deposits####876####1,063 Operating lease liabilities, current portion####672####485 Sales return reserve, current portion####219####270 Other current liabilities####517####354 Total##$##9,080##$##8,205


(1)Accrued purchases primarily reflects receipts of goods and services for which we had not yet been invoiced. As we are invoiced for these goods and services, this balance will reduce and accounts payable will increase.


(2)Taxes payable includes value added tax, income tax, sales tax, property tax and use tax payables.


TSLA Note 10 – Other Long-Term Liabilities

Our other long-term liabilities consisted of the following (in millions): ####December 31, 2023####December 31, 2022 Operating lease liabilities##$##3,671##$##2,164 Accrued warranty reserve####3,606####2,480 Other non-current liabilities####876####686 Total other long-term liabilities##$##8,153##$##5,330


TSLA Note 11 – Debt

The following is a summary of our debt and finance leases as of December 31, 2023 (in millions): ######Net Carrying Value########Unpaid Principal Balance####Unused Committed Amount (1)##Contractual Interest Rates## ####Current######Long-Term############ Recourse debt:###################### 2024 Notes##$##37####$##—##$##37##$##—##2.00##% RCF Credit Agreement####—######—####—####5,000##Not applicable## Solar Bonds####—######7####7####—##4.70-5.75%## Other####—######—####—####28##Not applicable## Total recourse debt####37######7####44####5,028#### Non-recourse debt:###################### Automotive Asset-backed Notes####1,906######2,337####4,259####—##0.60-6.57%## Solar Asset-backed Notes####4######8####13####—##4.80##% Cash Equity Debt####28######330####367####—##5.25-5.81%## Total non-recourse debt####1,938######2,675####4,639####—#### Total debt####1,975######2,682##$##4,683##$##5,028#### Finance leases####398######175############ Total debt and finance leases##$##2,373####$##2,857############


TSLA Note 11 – Debt

The following is a summary of our debt and finance leases as of December 31, 2022 (in millions): ######Net Carrying Value########Unpaid Principal Balance####Unused Committed Amount (2)##Contractual Interest Rates## ####Current######Long-Term############ Recourse debt:###################### 2024 Notes##$##—####$##37##$##37##$##—##2.00##% Credit Agreement####—######—####—####2,266##Not applicable## Solar Bonds####—######7####7####—##4.70-5.75%## Total recourse debt####—######44####44####2,266#### Non-recourse debt:###################### Automotive Asset-backed Notes####984######613####1,603####—##0.36-4.64%## Solar Asset-backed Notes####4######13####17####—##4.80##% Cash Equity Debt####28######359####397####—##5.25-5.81%## Automotive Lease-backed Credit Facilities####—######—####—####151##Not applicable## Total non-recourse debt####1,016######985####2,017####151#### Total debt####1,016######1,029##$##2,061##$##2,417#### Finance leases####486######568############ Total debt and finance leases##$##1,502####$##1,597############


TSLA Note 11 – Debt

(1)There are no restrictions on draw-down or use for general corporate purposes with respect to any available committed funds under our RCF Credit Agreement, except certain specified conditions prior to draw-down. Refer to the section below for the terms of the facility.


TSLA Note 11 – Debt

(2)There were no restrictions on draw-down or use for general corporate purposes with respect to any available committed funds under our credit facilities, except certain specified conditions prior to draw-down, including pledging to our lenders sufficient amounts of qualified receivables, inventories, leased vehicles and our interests in those leases or various other assets as described below.


TSLA Note 11 – Debt

Recourse debt refers to debt that is recourse to our general assets. Non-recourse debt refers to debt that is recourse to only assets of our subsidiaries. The differences between the unpaid principal balances and the net carrying values are due to debt discounts or deferred issuance costs. As of December 31, 2023, we were in material compliance with all financial debt covenants.


TSLA 2024 Notes

The closing price of our common stock continued to exceed 130% of the applicable conversion price of our 2024 Notes on at least 20 of the last 30 consecutive trading days of each quarter in 2023, causing the 2024 Notes to be convertible by their holders in the subsequent quarter. As of December 31, 2023, the if-converted value of the notes exceeds the outstanding principal amount by $406 million. Upon conversion, the 2024 Notes will be settled in cash, shares of our common stock or a combination thereof, at our election.


TSLA Credit Agreement

In June 2015, we entered into a senior asset-based revolving credit agreement (as amended from time to time, the “Credit Agreement”) with a syndicate of banks. Borrowed funds bear interest, at our option, at an annual rate of (a) 1% plus LIBOR or (b) the highest of (i) the federal funds rate plus 0.50%, (ii) the lenders’ “prime rate” or (iii) 1% plus LIBOR. The fee for undrawn amounts is 0.25% per annum. The Credit Agreement is secured by certain of our accounts receivable, inventory and equipment. Availability under the Credit Agreement is based on the value of such assets, as reduced by certain reserves.


TSLA Credit Agreement

In January 2023, we entered into a 5-year senior unsecured revolving credit facility (the “RCF Credit Agreement”) with a syndicate of banks to replace the existing Credit Agreement, which was terminated. The RCF Credit Agreement contains two optional one-year extensions and has a total commitment of up to $5.00 billion, which could be increased up to $7.00 billion under certain circumstances. The underlying borrowings may be used for general corporate purposes. Borrowed funds accrue interest at a variable rate equal to: (i) for dollar-denominated loans, at our election, (a) Term SOFR (the forward-looking secured overnight financing rate) plus 0.10%, or (b) an alternate base rate; (ii) for loans denominated in pounds sterling, SONIA (the sterling overnight index average reference rate); or (iii) for loans denominated in euros, an adjusted EURIBOR (euro interbank offered rate); in each case, plus an applicable margin. The applicable margin will be based on the rating assigned to our senior, unsecured long-term indebtedness (the “Credit Rating”) from time to time. The fee for undrawn amounts is variable based on the Credit Rating and is currently 0.125% per annum.


TSLA Automotive Asset-backed Notes

From time to time, we transfer receivables and/or beneficial interests related to certain vehicles (either leased or financed) into special purpose entities (“SPEs”) and issue Automotive Asset-backed Notes, backed by these automotive assets to investors. The SPEs are consolidated in the financial statements. The cash flows generated by these automotive assets are used to service the principal and interest payments on the Automotive Asset-backed Notes and satisfy the SPEs’ expenses, and any remaining cash is distributed to the owners of the SPEs. We recognize revenue earned from the associated customer lease or financing contracts in accordance with our revenue recognition policy. The SPEs’ assets and cash flows are not available to our other creditors, and the creditors of the SPEs, including the Automotive Asset-backed Note holders, have no recourse to our other assets.


TSLA Automotive Asset-backed Notes

In 2023, we transferred beneficial interests related to certain leased vehicles and financing receivables into SPEs and issued $3.93 billion in aggregate principal amount of Automotive Asset-backed Notes, with terms similar to our other previously issued Automotive Asset-backed Notes. The proceeds from the issuance, net of debt issuance costs, were $3.92 billion.


TSLA Cash Equity Debt

In connection with the cash equity financing deals closed in 2016, our subsidiaries issued $502 million in aggregate principal amount of debt that bears interest at fixed rates. This debt is secured by, among other things, our interests in certain financing funds and is non-recourse to our other assets.


TSLA Automotive Lease-backed Credit Facilities

In the third quarter of 2023, we terminated our Automotive Lease-backed Credit Facilities and the previously committed funds are no longer available for future borrowings.


TSLA Pledged Assets

As of December 31, 2023 and 2022, we had pledged or restricted $4.64 billion and $2.02 billion of our assets (consisting principally of operating lease vehicles, financing receivables, restricted cash, and equity interests in certain SPEs) as collateral for our outstanding debt.


TSLA Schedule of Principal Maturities of Debt

The future scheduled principal maturities of debt as of December 31, 2023 were as follows (in millions): ####Recourse debt####Non-recourse debt####Total 2024##$##37##$##1,941##$##1,978 2025####4####1,663####1,667 2026####—####494####494 2027####—####276####276 2028####—####44####44 Thereafter####3####221####224 Total##$##44##$##4,639##$##4,683


TSLA Note 12 – Leases

We have entered into various operating and finance lease agreements for certain of our offices, manufacturing and warehouse facilities, retail and service locations, data centers, equipment, vehicles, and solar energy systems, worldwide. We determine if an arrangement is a lease, or contains a lease, at inception and record the leases in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.


TSLA Note 12 – Leases

We have lease agreements with lease and non-lease components, and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease.


TSLA Note 12 – Leases

We have elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.


TSLA Note 12 – Leases

Our leases, where we are the lessee, often include options to extend the lease term for up to 10 years. Some of our leases also include options to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.


TSLA Note 12 – Leases

Lease expense for operating leases is recognized on a straight-line basis over the lease term as cost of revenues or operating expenses depending on the nature of the leased asset. Certain operating leases provide for annual increases to lease payments based on an index or rate. We calculate the present value of future lease payments based on the index or rate at the lease commencement date for new leases. Differences between the calculated lease payment and actual payment are expensed as incurred. Amortization of finance lease assets is recognized over the lease term as cost of revenues or operating expenses depending on the nature of the leased asset. Interest expense on finance lease liabilities is recognized over the lease term within Interest expense in the consolidated statements of operations.


TSLA Note 12 – Leases

The balances for the operating and finance leases where we are the lessee are presented as follows (in millions) within our consolidated balance sheets: ####December 31, 2023####December 31, 2022 Operating leases:######## Operating lease right-of-use assets##$##4,180##$##2,563 Accrued liabilities and other##$##672##$##485 Other long-term liabilities####3,671####2,164 Total operating lease liabilities##$##4,343##$##2,649 Finance leases:######## Solar energy systems, net##$##23##$##25 Property, plant and equipment, net####601####1,094 Total finance lease assets##$##624##$##1,119 Current portion of long-term debt and finance leases##$##398##$##486 Long-term debt and finance leases, net of current portion####175####568 Total finance lease liabilities##$##573##$##1,054


TSLA Note 12 – Leases

The components of lease expense are as follows (in millions) within our consolidated statements of operations: ########Year Ended December 31,#### ####2023####2022####2021 Operating lease expense:############ Operating lease expense (1)##$##1,153##$##798##$##627 Finance lease expense:############ Amortization of leased assets##$##506##$##493##$##415 Interest on lease liabilities####45####72####89 Total finance lease expense##$##551##$##565##$##504 Total lease expense##$##1,704##$##1,363##$##1,131


TSLA Note 12 – Leases

(1)Includes short-term leases and variable lease costs, which are immaterial.


TSLA Note 12 – Leases

Other information related to leases where we are the lessee is as follows: ##December 31, 2023####December 31, 2022## Weighted-average remaining lease term:######## Operating leases##7.4 years####6.4 years## Finance leases##2.3 years####3.1 years## Weighted-average discount rate:######## Operating leases##5.6##%##5.3##% Finance leases##5.5##%##5.7##%


TSLA Note 12 – Leases

Supplemental cash flow information related to leases where we are the lessee is as follows (in millions): ########Year Ended December 31,#### ####2023####2022####2021 Cash paid for amounts included in the measurement of lease liabilities:############ Operating cash outflows from operating leases##$##1,084##$##754##$##616 Operating cash outflows from finance leases (interest payments)##$##47##$##75##$##89 Leased assets obtained in exchange for finance lease liabilities##$##10##$##58##$##486 Leased assets obtained in exchange for operating lease liabilities##$##2,170##$##1,059##$##818


TSLA Note 12 – Leases

As of December 31, 2023, the maturities of our operating and finance lease liabilities (excluding short-term leases) are as follows (in millions): ####Operating Leases####Finance Leases 2024##$##892##$##418 2025####831####81 2026####706####57 2027####603####38 2028####508####2 Thereafter####1,820####4 Total minimum lease payments####5,360####600 Less: Interest####1,017####27 Present value of lease obligations####4,343####573 Less: Current portion####672####398 Long-term portion of lease obligations##$##3,671##$##175


TSLA Note 12 – Leases

As of December 31, 2023, we have excluded from the table above additional operating leases that have not yet commenced with aggregate rent payments of $1.53 billion. These operating leases will commence between fiscal year 2024 and 2025 with lease terms of 2 years to 20 years.


TSLA Operating Lease and Sales-type Lease Receivables

We are the lessor of certain vehicle and solar energy system arrangements as described in Note 2, Summary of Significant Accounting Policies. As of December 31, 2023, maturities of our operating lease and sales-type lease receivables from customers for each of the next five years and thereafter were as follows (in millions): ####Operating Leases####Sales-type Leases 2024##$##1,405##$##227 2025####960####214 2026####461####210 2027####227####102 2028####197####25 Thereafter####1,492####2 Gross lease receivables##$##4,742##$##780


The above table does not include vehicle sales to customers or leasing partners with a resale value guarantee as the cash payments were received upfront. For our solar PPA arrangements, customers are charged solely based on actual power produced by the installed solar energy system at a predefined rate per kilowatt-hour of power produced. The future payments from such arrangements are not included in the above table as they are a function of the power generated by the related solar energy systems in the future.


TSLA Net Investment in Sales-type Leases

Net investment in sales-type leases, which is the sum of the present value of the future contractual lease payments, is presented on the consolidated balance sheets as a component of Prepaid expenses and other current assets for the current portion and as Other non-current assets for the long-term portion. Lease receivables relating to sales-type leases are presented on the consolidated balance sheets as follows (in millions): ####December 31, 2023####December 31, 2022 Gross lease receivables##$##780##$##837 Unearned interest income####(78)####(95) Allowance for expected credit losses####(6)####(4) Net investment in sales-type leases##$##696##$##738 Reported as:######## Prepaid expenses and other current assets##$##189##$##164 Other non-current assets####507####574 Net investment in sales-type leases##$##696##$##738


TSLA Lease Pass-Through Financing Obligation

As of December 31, 2023, we have five transactions referred to as “lease pass-through fund arrangements.” Under these arrangements, our wholly owned subsidiaries finance the cost of solar energy systems with investors through arrangements contractually structured as master leases for an initial term ranging between 10 and 25 years. These solar energy systems are subject to lease or PPAs with customers with an initial term not exceeding 25 years.


Under a lease pass-through fund arrangement, the investor makes a large upfront payment to the lessor, which is one of our subsidiaries, and in some cases, subsequent periodic payments. As of December 31, 2023, the future minimum master lease payments to be received from investors, for each of the next five years and thereafter, were as follows (in millions): 2024##$##18 2025####27 2026####28 2027####29 2028####29 Thereafter####337 Total##$##468


TSLA Note 13 – Equity Incentive Plans

In June 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the grant of stock options, restricted stock, RSUs, stock appreciation rights, performance units and performance shares to our employees, directors and consultants. Stock options granted under the 2019 Plan may be either incentive stock options or nonstatutory stock options. Incentive stock options may only be granted to our employees. Nonstatutory stock options may be granted to our employees, directors and consultants. Generally, our stock options and RSUs vest over four years and our stock options are exercisable over a maximum period of 10 years from their grant dates. Vesting typically terminates when the employment or consulting relationship ends.


TSLA Note 13 – Equity Incentive Plans

As of December 31, 2023, 131.1 million shares were reserved and available for issuance under the 2019 Plan.


TSLA Note 13 – Equity Incentive Plans

The following table summarizes our stock option and RSU activity for the year ended December 31, 2023: ########Stock Options##########RSUs#### ##Number of Options (in thousands)####Weighted- Average Exercise Price####Weighted- Average Remaining Contractual Life (years)####Aggregate Intrinsic Value (in billions)##Number of RSUs (in thousands)######Weighted- Average Grant Date Fair Value Beginning of period##343,564##$##30.65##########21,333####$##162.32 Granted##9,521##$##226.50##########11,743####$##228.33 Exercised or released##(7,626)##$##43.07##########(11,085)####$##116.47 Cancelled##(1,438)##$##194.23##########(2,903)####$##192.22 End of period##344,021##$##35.11####4.31##$##73.57##19,088####$##225.01 Vested and expected to vest, December 31, 2023##340,884##$##33.38####4.27##$##73.45##18,446####$##225.76 Exercisable and vested, December 31, 2023##329,124##$##27.07####4.11##$##72.90########


TSLA Note 13 – Equity Incentive Plans

The weighted-average grant date fair value of RSUs granted in the years ended December 31, 2023, 2022 and 2021 was $228.33, $239.85 and $261.33, respectively. The aggregate release date fair value of RSUs in the years ended December 31, 2023, 2022 and 2021 was $2.50 billion, $4.32 billion and $5.70 billion, respectively.


TSLA Note 13 – Equity Incentive Plans

The aggregate intrinsic value of options exercised in the years ended December 31, 2023, 2022, and 2021 was $1.33 billion, $1.90 billion and $26.88 billion, respectively. During the year ended December 31, 2021, our CEO exercised all of the remaining vested options from the 2012 CEO Performance Award, which amounted to an intrinsic value of $23.45 billion.


TSLA ESPP

Our employees are eligible to purchase our common stock through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The purchase price would be 85% of the lower of the fair market value on the first and last trading days of each six-month offering period. During the years ended December 31, 2023, 2022 and 2021, under the ESPP we issued 2.1 million, 1.4 million and 1.5 million shares, respectively. As of December 31, 2023, there were 97.8 million shares available for issuance under the ESPP.


TSLA Fair Value Assumptions

We use the fair value method in recognizing stock-based compensation expense. Under the fair value method, we estimate the fair value of each stock option award with service or service and performance conditions and the ESPP on the grant date generally using the Black-Scholes option pricing model. The weighted-average assumptions used in the Black-Scholes model for stock options are as follows: ##########Year Ended December 31,######## ####2023######2022######2021## Risk-free interest rate####3.90##%####3.11##%####0.66##% Expected term (in years)####4.5######4.1######4.3## Expected volatility####63##%####63##%####59##% Dividend yield####0.0##%####0.0##%####0.0##% Grant date fair value per share##$##121.62####$##114.51####$##128.02##


TSLA Fair Value Assumptions

The fair value of RSUs with service or service and performance conditions is measured on the grant date based on the closing fair market value of our common stock. The risk-free interest rate is based on the U.S. Treasury yield for zero-coupon U.S. Treasury notes with maturities approximating each grant’s expected life. We use our historical data in estimating the expected term of our employee grants. The expected volatility is based on the average of the implied volatility of publicly traded options for our common stock and the historical volatility of our common stock.


TSLA 2018 CEO Performance Award

In March 2018, our stockholders approved the Board of Directors’ grant of 304.0 million stock option awards, as adjusted to give effect to the 2020 Stock Split and the 2022 Stock Split, to our CEO (the “2018 CEO Performance Award”). The 2018 CEO Performance Award consisted of 12 vesting tranches with a vesting schedule based entirely on the attainment of both operational milestones (performance conditions) and market conditions, assuming continued employment either as the CEO or as both Executive Chairman and Chief Product Officer and service through each vesting date. Each of the 12 vesting tranches of the 2018 CEO Performance Award vested upon certification by the Board of Directors that both (i) the market capitalization milestone for such tranche, which began at $100.0 billion for the first tranche and increases by increments of $50.0 billion thereafter (based on both a six calendar month trailing average and a 30 calendar day trailing average, counting only trading days), had been achieved, and (ii) any one of the following eight operational milestones focused on total revenue or any one of the eight operational milestones focused on Adjusted EBITDA had been achieved for the four consecutive fiscal quarters on an annualized basis and subsequently reported by us in our consolidated financial statements filed with our Forms 10-Q and/or 10-K. Adjusted EBITDA was defined as net income (loss) attributable to common stockholders before interest expense, provision (benefit) for income taxes, depreciation and amortization and stock-based compensation. Upon vesting and exercise, including the payment of the exercise price of $23.34 per share as adjusted to give effect to the 2020 Stock Split and the 2022 Stock Split, our CEO must hold shares that he acquires for five years post-exercise, other than a cashless exercise where shares are simultaneously sold to pay for the exercise price and any required tax withholding.


TSLA 2018 CEO Performance Award

The achievement status of the operational milestones as of December 31, 2023 is provided below. ####Total Annualized Revenue########Annualized Adjusted EBITDA## ##Milestone (in billions)####Achievement Status####Milestone (in billions)####Achievement Status $##20.0####Achieved##$##1.5####Achieved $##35.0####Achieved##$##3.0####Achieved $##55.0####Achieved##$##4.5####Achieved $##75.0####Achieved##$##6.0####Achieved $##100.0####-##$##8.0####Achieved $##125.0####-##$##10.0####Achieved $##150.0####-##$##12.0####Achieved $##175.0####-##$##14.0####Achieved


TSLA 2018 CEO Performance Award

Stock-based compensation under the 2018 CEO Performance Award represented a non-cash expense and was recorded as a Selling, general, and administrative operating expense in our consolidated statements of operations. In each quarter since the grant of the 2018 CEO Performance Award, we had recognized expense, generally on a pro-rated basis, for only the number of tranches (up to the maximum of 12 tranches) that corresponded to the number of operational milestones that had been achieved or had been determined probable of being achieved in the future, in accordance with the following principles.


TSLA 2018 CEO Performance Award

On the grant date, a Monte Carlo simulation was used to determine for each tranche (i) a fixed amount of expense for such tranche and (ii) the future time when the market capitalization milestone for such tranche was expected to be achieved, or its “expected market capitalization milestone achievement time.” Separately, based on a subjective assessment of our future financial performance each quarter, we determined whether it was probable that we would achieve each operational milestone that had not previously been achieved or deemed probable of achievement and if so, the future time when we expected to achieve that operational milestone, or its “expected operational milestone achievement time.”


TSLA 2018 CEO Performance Award

As of December 31, 2022, all remaining unrecognized stock-based compensation expense under the 2018 CEO Performance Award had been recognized. For the years ended December 31, 2022 and 2021, we recorded stock-based compensation expense of $66 million and $910 million, respectively, related to the 2018 CEO Performance Award.


TSLA Other Performance-Based Grants

From time to time, the Compensation Committee of our Board of Directors grants certain employees performance-based RSUs and stock options.


TSLA Other Performance-Based Grants

As of December 31, 2023, we had unrecognized stock-based compensation expense of $655 million under these grants to purchase or receive an aggregate 5.3 million shares of our common stock. For awards probable of achievement, we estimate the unrecognized stock-based compensation expense of $110 million will be recognized over a weighted-average period of 4.0 years.


TSLA Other Performance-Based Grants

For the years ended December 31, 2023 and 2022, we recorded $57 million and $159 million, respectively, of stock-based compensation expense related to these grants, net of forfeitures.


TSLA Summary Stock-Based Compensation Information

The following table summarizes our stock-based compensation expense by line item in the consolidated statements of operations (in millions): ########Year Ended December 31,#### ####2023####2022####2021 Cost of revenues##$##741##$##594##$##421 Research and development####689####536####448 Selling, general and administrative####382####430####1,252 Total##$##1,812##$##1,560##$##2,121