Note 7 – Property, Plant and Equipment

Our property, plant and equipment, net, consisted of the following (in thousands):

	June 30,			December 31,
	2018			2017
Machinery, equipment, vehicles and office furniture	$	5,201,349		$	4,251,711
Tooling		1,365,588			1,255,952
Leasehold improvements		905,759			789,751
Land and buildings		3,904,854			2,517,247
Computer equipment, hardware and software		446,959			395,067
Construction in progress		1,333,562			2,541,588
		13,158,071			11,751,316
Less: Accumulated depreciation and amortization		(2,188,723	)		(1,723,794	)
Total	$	10,969,348		$	10,027,522

Construction in progress is primarily comprised of tooling and equipment related to the manufacturing of our vehicles and a portion of Gigafactory 1 construction. Completed assets are transferred to their respective asset classes, and depreciation begins when an asset is ready for its intended use. Construction in progress also includes certain build-to-suit lease costs incurred at our Buffalo manufacturing facility, referred to as Gigafactory 2. During the six months ended June 30, 2018, $540.4 million of costs at Gigafactory 1 and $649.5 million of costs at Gigafactory 2 were transferred to land and buildings from construction in progress as assets were placed in service. Interest on outstanding debt is capitalized during periods of significant capital asset construction and amortized over the useful lives of the related assets. During the three and six months ended June 30, 2018, we capitalized $15.7 million and $34.5 million, respectively, of interest. During the three and six months ended June 30, 2017, we capitalized $35.4 million and $58.7 million, respectively, of interest.

As of June 30, 2018 and December 31, 2017, the table above included $1.67 billion and $1.63 billion, respectively, of build-to-suit lease assets. As of June 30, 2018 and December 31, 2017, the corresponding financing liabilities of $91.3 million and $14.9 million, respectively, were recorded in accrued liabilities and $1.65 billion and $1.67 billion, respectively, were recorded in other long-term liabilities.

Depreciation and amortization expense during the three and six months ended June 30, 2018 was $251.8 million and $497.0 million, respectively. Depreciation and amortization expense during the three and six months ended June 30, 2017 was $176.6 million and $336.7 million, respectively. Gross property and equipment under capital leases as of June 30, 2018 and December 31, 2017 was $1.22 billion and $688.3 million, respectively. Accumulated depreciation on property and equipment under capital leases as of these dates was $161.6 million and $100.6 million, respectively.

Panasonic has partnered with us on Gigafactory 1 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 these terms convey to us the right to use, as defined in ASC 840, Leases, their production equipment, we consider them to be leased assets when production commences. 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 financing obligations. For all suppliers and partners for which we plan to purchase the full output from their production equipment located at Gigafactory 1, we have applied similar accounting. As of June 30, 2018 and December 31, 2017, we had cumulatively capitalized costs of $955.4 million and $473.3 million, respectively, on the consolidated balance sheets in relation to the production equipment under our Panasonic arrangement. We had cumulatively capitalized total costs for the Gigafactory 1 of $4.14 billion and $3.15 billion as of June 30, 2018 and December 31, 2017, respectively.