TSLA - Reality: 1. The Capital Efficiency IllusionTesla presents as extremely capital-efficient, but:
• Subsidies & Tax Credits: Tesla has benefited from billions in government tax breaks, green energy subsidies, and regulatory credits—often underplayed in earnings discussions.
• Regulatory Credits: In some years, Tesla’s entire profit came from selling zero-emission credits to other automakers, not from actual car sales. Without those, some quarters would’ve been negative.
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2. Depreciation & R&D Spend
Tesla’s accounting methods also smooth out their costs:
• Capital Expenditures (CapEx) for Gigafactories are depreciated over years, so the real-time costs don’t hit the income statement all at once.
• R&D Spend is relatively low compared to traditional automakers (~5% of revenue vs. 10–15% at some legacy firms), raising questions about how innovation is sustained.
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3. Inventory Accounting
Tesla uses “cost of goods sold” (COGS) in a way that doesn’t always reflect immediate manufacturing expenses. Some critics argue that:
• Costs are capitalized instead of expensed immediately, pushing profitability higher on paper.
• There’s limited transparency into how vehicle production and delivery delays affect the books.
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4. Bitcoin and Other Financial Moves
In 2021, Tesla bought and sold Bitcoin, booking a large profit. That added to earnings—but wasn’t related to cars.
Similarly, selling equity during high stock valuations brought in billions without affecting debt—but inflates perceived financial strength.
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5. Margin Compression & China Competition
By 2023–2024, Tesla started slashing prices to remain competitive with BYD and others. This hurt margins dramatically—Tesla’s net income dropped from
15B to 77B in a year.
