UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-34756

Tesla, Inc.

(Exact name of registrant as specified in its charter)

Delaware	91-2197729
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 Tesla Road Austin, Texas	78725
(Address of principal executive offices)	(Zip Code)

(512) 516-8177

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	TSLA	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of October 16, 2023, there were 3,178,921,391 shares of the registrant’s common stock outstanding.

TESLA, INC.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Comprehensive Income	6
	Consolidated Statements of Redeemable Noncontrolling Interests and Equity	7
	Consolidated Statements of Cash Flows	9
	Notes to Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
Signatures		39

Table of Contents

Forward-Looking Statements

The discussions in this Quarterly Report on Form 10-Q contain forward-looking statements reflecting our current expectations that involve risks and uncertainties. These forward-looking statements include, but are not limited to, statements concerning supply chain constraints, our strategy, competition, future operations and production capacity, future financial position, future revenues, projected costs, profitability, expected cost reductions, capital adequacy, expectations regarding demand and acceptance for our technologies, growth opportunities and trends in the markets in which we operate, prospects and plans and objectives of management. The words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” of the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and that are otherwise described or updated from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). The discussion of such risks is not an indication that any such risks have occurred at the time of this filing. We do not assume any obligation to update any forward-looking statements.

Table of Contents

PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

Tesla, Inc.

Consolidated Balance Sheets

(in millions, except per share data)

(unaudited)

	September 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	15,932	$	16,253
Short-term investments	10,145		5,932
Accounts receivable, net	2,520		2,952
Inventory	13,721		12,839
Prepaid expenses and other current assets	2,708		2,941
Total current assets	45,026		40,917
Operating lease vehicles, net	6,119		5,035
Solar energy systems, net	5,293		5,489
Property, plant and equipment, net	27,744		23,548
Operating lease right-of-use assets	3,637		2,563
Digital assets, net	184		184
Intangible assets, net	191		215
Goodwill	250		194
Other non-current assets	5,497		4,193
Total assets	$	93,941	$	82,338
Liabilities
Current liabilities
Accounts payable	$	13,937	$	15,255
Accrued liabilities and other	7,636		7,142
Deferred revenue	2,206		1,747
Customer deposits	894		1,063
Current portion of debt and finance leases	1,967		1,502
Total current liabilities	26,640		26,709
Debt and finance leases, net of current portion	2,426		1,597
Deferred revenue, net of current portion	3,059		2,804
Other long-term liabilities	7,321		5,330
Total liabilities	39,446		36,440
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests in subsidiaries	277		409
Equity
Stockholders’ equity
Preferred stock; $0.001 par value; 100 shares authorized; no shares issued and outstanding	—		—
Common stock; $0.001 par value; 6,000 shares authorized; 3,179 and 3,164 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	3		3
Additional paid-in capital	34,201		32,177
Accumulated other comprehensive loss	(692)		(361)
Retained earnings	19,954		12,885
Total stockholders’ equity	53,466		44,704
Noncontrolling interests in subsidiaries	752		785
Total liabilities and equity	$	93,941	$	82,338

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

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Tesla, Inc.

Consolidated Statements of Operations

(in millions, except per share data)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues
Automotive sales	$	18,582	$	17,785	$	57,879	$	46,969
Automotive regulatory credits	554		286		1,357		1,309
Automotive leasing	489		621		1,620		1,877
Total automotive revenues	19,625		18,692		60,856		50,155
Energy generation and storage	1,559		1,117		4,597		2,599
Services and other	2,166		1,645		6,153		4,390
Total revenues	23,350		21,454		71,606		57,144
Cost of revenues
Automotive sales	15,656		13,099		47,919		34,166
Automotive leasing	301		381		972		1,157
Total automotive cost of revenues	15,957		13,480		48,891		35,323
Energy generation and storage	1,178		1,013		3,770		2,470
Services and other	2,037		1,579		5,723		4,275
Total cost of revenues	19,172		16,072		58,384		42,068
Gross profit	4,178		5,382		13,222		15,076
Operating expenses
Research and development	1,161		733		2,875		2,265
Selling, general and administrative	1,253		961		3,520		2,914
Restructuring and other	—		—		—		142
Total operating expenses	2,414		1,694		6,395		5,321
Income from operations	1,764		3,688		6,827		9,755
Interest income	282		86		733		140
Interest expense	(38)		(53)		(95)		(158)
Other income (expense), net	37		(85)		317		(1)
Income before income taxes	2,045		3,636		7,782		9,736
Provision for income taxes	167		305		751		856
Net income	1,878		3,331		7,031		8,880
Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries	25		39		(38)		11
Net income attributable to common stockholders	$	1,853	$	3,292	$	7,069	$	8,869
Net income per share of common stock attributable to common stockholders
Basic	$	0.58	$	1.05	$	2.23	$	2.84
Diluted	$	0.53	$	0.95	$	2.03	$	2.55
Weighted average shares used in computing net income per share of common stock
Basic	3,176		3,146		3,171		3,120
Diluted	3,493		3,468		3,481		3,474

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

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Tesla, Inc.

Consolidated Statements of Comprehensive Income

(in millions)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	1,878	$	3,331	$	7,031	$	8,880
Other comprehensive income (loss):
Foreign currency translation adjustment	(289)		(460)		(343)		(977)
Unrealized net gain (loss) on investments	7		(5)		8		(19)
Adjustment for net loss realized and included in net income	—		—		4		—
Comprehensive income	1,596		2,866		6,700		7,884
Less: Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries	25		39		(38)		11
Comprehensive income attributable to common stockholders	$	1,571	$	2,827	$	6,738	$	7,873

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

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Tesla, Inc.

Consolidated Statements of Redeemable Noncontrolling Interests and Equity

(in millions, except per share data)

(unaudited)

Three Months Ended September 30, 2023	Redeemable Noncontrolling Interests		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiaries		Total Equity
			Shares	Amount
Balance as of June 30, 2023	$	288	3,174	$	3	$	33,436	$	(410)	$	18,101	$	51,130	$	764	$	51,894
Exercises of conversion feature of convertible senior notes	—		0	0		0		—		—		0		—		0
Issuance of common stock for equity incentive awards	—		5	0		254		—		—		254		—		254
Stock-based compensation	—		—	—		513		—		—		513		—		513
Distributions to noncontrolling interests	(10)		—	—		—		—		—		—		(33)		(33)
Buy-outs of noncontrolling interests	(5)		—	—		(2)		—		—		(2)		—		(2)
Net income	4		—	—		—		—		1,853		1,853		21		1,874
Other comprehensive loss	—		—	—		—		(282)		—		(282)		—		(282)
Balance as of September 30, 2023	$	277	3,179	$	3	$	34,201	$	(692)	$	19,954	$	53,466	$	752	$	54,218

Nine Months Ended September 30, 2023	Redeemable Noncontrolling Interests		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiaries		Total Equity
			Shares	Amount
Balance as of December 31, 2022	$	409	3,164	$	3	$	32,177	$	(361)	$	12,885	$	44,704	$	785	$	45,489
Exercises of conversion feature of convertible senior notes	—		0	0		0		—		—		0		—		0
Issuance of common stock for equity incentive awards	—		15	0		548		—		—		548		—		548
Stock-based compensation	—		—	—		1,473		—		—		1,473		—		1,473
Distributions to noncontrolling interests	(24)		—	—		—		—		—		—		(83)		(83)
Buy-outs of noncontrolling interests	(8)		—	—		3		—		—		3		(12)		(9)
Net (loss) income	(100)		—	—		—		—		7,069		7,069		62		7,131
Other comprehensive loss	—		—	—		—		(331)		—		(331)		—		(331)
Balance as of September 30, 2023	$	277	3,179	$	3	$	34,201	$	(692)	$	19,954	$	53,466	$	752	$	54,218

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Three Months Ended September 30, 2022	Redeemable Noncontrolling Interests		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiaries		Total Equity
			Shares	Amount
Balance as of June 30, 2022	$	421	3,122	$	3	$	30,944	$	(477)	$	5,906	$	36,376	$	861	$	37,237
Exercises of conversion feature of convertible senior notes	—		0	0		0		—		—		0		—		0
Settlement of warrants	—		29	0		0		—		—		0		—		0
Issuance of common stock for equity incentive awards	—		7	0		229		—		—		229		—		229
Stock-based compensation	—		—	—		419		—		—		419		—		419
Distributions to noncontrolling interests	(11)		—	—		—		—		—		—		(36)		(36)
Net income	11		—	—		—		—		3,292		3,292		27		3,319
Other comprehensive loss	—		—	—		—		(465)		—		(465)		—		(465)
Balance as of September 30, 2022	$	421	3,158	$	3	$	31,592	$	(942)	$	9,198	$	39,851	$	852	$	40,703

Nine Months Ended September 30, 2022	Redeemable Noncontrolling Interests		Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity		Noncontrolling Interests in Subsidiaries		Total Equity
			Shares	Amount
Balance as of December 31, 2021	$	568	3,100	$	3	$	29,803	$	54	$	329	$	30,189	$	826	$	31,015
Exercises of conversion feature of convertible senior notes	—		0	0		0		—		—		0		—		0
Settlements of warrants	—		37	0		0		—		—		0		—		0
Issuance of common stock for equity incentive awards	—		21	0		474		—		—		474		—		474
Stock-based compensation	—		—	—		1,323		—		—		1,323		—		1,323
Distributions to noncontrolling interests	(36)		—	—		—		—		—		—		(84)		(84)
Buy-out of noncontrolling interests	(11)		—	—		(8)		—		—		(8)		—		(8)
Net (loss) income	(100)		—	—		—		—		8,869		8,869		110		8,979
Other comprehensive loss	—		—	—		—		(996)		—		(996)		—		(996)
Balance as of September 30, 2022	$	421	3,158	$	3	$	31,592	$	(942)	$	9,198	$	39,851	$	852	$	40,703

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

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Tesla, Inc.

Consolidated Statements of Cash Flows

(in millions)

(unaudited)

	Nine Months Ended September 30,
	2023		2022
Cash Flows from Operating Activities
Net income	$	7,031	$	8,880
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairment	3,435		2,758
Stock-based compensation	1,328		1,141
Inventory and purchase commitments write-downs	361		118
Foreign currency transaction net unrealized (gain) loss	(317)		1
Non-cash interest and other operating activities	94		159
Digital assets loss, net	—		106
Changes in operating assets and liabilities:
Accounts receivable	377		(426)
Inventory	(1,953)		(4,492)
Operating lease vehicles	(1,858)		(1,136)
Prepaid expenses and other current assets	322		(865)
Other non-current assets	(2,655)		(1,580)
Accounts payable and accrued liabilities	(24)		4,659
Deferred revenue	774		856
Customer deposits	(95)		251
Other long-term liabilities	2,066		1,016
Net cash provided by operating activities	8,886		11,446
Cash Flows from Investing Activities
Purchases of property and equipment excluding finance leases, net of sales	(6,592)		(5,300)
Purchases of solar energy systems, net of sales	—		(5)
Proceeds from sales of digital assets	—		936
Purchase of intangible assets	—		(9)
Purchases of investments	(13,221)		(1,467)
Proceeds from maturities of investments	8,959		3
Proceeds from sales of investments	138		—
Business combinations, net of cash acquired	(64)		—
Net cash used in investing activities	(10,780)		(5,842)
Cash Flows from Financing Activities
Proceeds from issuances of debt	2,526		—
Repayments of debt	(887)		(3,000)
Proceeds from exercises of stock options and other stock issuances	548		474
Principal payments on finance leases	(340)		(369)
Debt issuance costs	(23)		—
Distributions paid to noncontrolling interests in subsidiaries	(105)		(118)
Payments for buy-outs of noncontrolling interests in subsidiaries	(17)		(19)
Net cash provided by (used in) financing activities	1,702		(3,032)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(142)		(567)
Net (decrease) increase in cash and cash equivalents and restricted cash	(334)		2,005
Cash and cash equivalents and restricted cash, beginning of period	16,924		18,144
Cash and cash equivalents and restricted cash, end of period	$	16,590	$	20,149
Supplemental Non-Cash Investing and Financing Activities
Acquisitions of property and equipment included in liabilities	$	1,717	$	1,877
Leased assets obtained in exchange for finance lease liabilities	$	1	$	36
Leased assets obtained in exchange for operating lease liabilities	$	1,548	$	691

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

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Tesla, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 1 – Summary of Significant Accounting Policies

Unaudited Interim Financial Statements

The consolidated financial statements of Tesla, Inc. (“Tesla”, the “Company”, “we”, “us” or “our”), including the consolidated balance sheet as of September 30, 2023, the consolidated statements of operations, the consolidated statements of comprehensive income, the consolidated statements of redeemable noncontrolling interests and equity for the three and nine months ended September 30, 2023 and 2022, and the consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022, as well as other information disclosed in the accompanying notes, are unaudited. The consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements as of that date. The interim consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022.

The interim consolidated financial statements and the accompanying notes have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future years or interim periods.

Reclassifications

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

Revenue Recognition

Revenue by source

The following table disaggregates our revenue by major source (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Automotive sales	$	18,582	$	17,785	$	57,879	$	46,969
Automotive regulatory credits	554		286		1,357		1,309
Energy generation and storage sales	1,416		966		4,188		2,186
Services and other	2,166		1,645		6,153		4,390
Total revenues from sales and services	22,718		20,682		69,577		54,854
Automotive leasing	489		621		1,620		1,877
Energy generation and storage leasing	143		151		409		413
Total revenues	$	23,350	$	21,454	$	71,606	$	57,144

Automotive Segment

Automotive Sales Revenue

Deferred revenue is related to the access to our Full Self Driving (“FSD”) features and ongoing maintenance, internet connectivity, free Supercharging programs and over-the-air software updates primarily on automotive sales, which amounted to $3.27 billion and $2.91 billion as of September 30, 2023 and December 31, 2022, respectively.

Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the balance sheet date. Revenue recognized from the deferred revenue balance as of December 31, 2022 and 2021 was $360 million and $169 million for nine months ended September 30, 2023 and 2022, respectively. Of the total deferred revenue balance as of September 30, 2023, we expect to recognize $815 million of revenue in the next 12 months. The remaining balance will be recognized at the time of transfer of control of the product or over the performance period.

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We have been providing loans for financing our automotive deliveries in volume since fiscal year 2022. As of September 30, 2023 and December 31, 2022, we have recorded net financing receivables on the consolidated balance sheets, of which $239 million and $128 million, respectively, is recorded within Accounts receivable, net, for the current portion and $1.11 billion and $665 million, respectively, is recorded within Other non-current assets for the long-term portion.

Automotive Regulatory Credits

During the nine months ended September 30, 2022, we had also recognized $288 million in revenue due to changes in regulation which entitled us to additional consideration for credits sold previously.

Automotive Leasing Revenue

Direct Sales-Type Leasing Program

For the three and nine months ended September 30, 2023, we recognized $20 million and $197 million, respectively, of sales-type leasing revenue and $16 million and $149 million, respectively, of sales-type leasing cost of revenue. For the three and nine months ended September 30, 2022, we recognized $161 million and $559 million, respectively, of sales-type leasing revenue and $97 million and $343 million, respectively, of sales-type leasing cost of revenue.

Lease receivables relating to sales-type leases are presented on the consolidated balance sheets as follows (in millions):

	September 30, 2023		December 31, 2022
Gross lease receivables	$	803	$	837
Unearned interest income	(84)		(95)
Allowance for expected credit losses	(6)		(4)
Net investment in sales-type leases	$	713	$	738
Reported as:
Prepaid expenses and other current assets	$	178	$	164
Other non-current assets	535		574
Net investment in sales-type leases	$	713	$	738

Energy Generation and Storage Segment

Energy Generation and Storage Sales

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 September 30, 2023 and December 31, 2022, deferred revenue related to such customer payments amounted to $1.05 billion and $863 million, respectively, mainly due to billings for milestone payments. Revenue recognized from the deferred revenue balance as of December 31, 2022 and 2021 was $511 million and $132 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 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 $1.91 billion. Of this amount, we expect to recognize $709 million 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 September 30, 2023 and December 31, 2022, we have recorded net financing receivables on the consolidated balance sheets, of which $29 million and $24 million, respectively, is recorded within Accounts receivable, net, for the current portion and $541 million and $387 million, respectively, is recorded within Other non-current assets for the long-term portion.

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Income Taxes

We are subject to income taxes in the U.S. and in many foreign jurisdictions. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets that are not more likely than not to be realized. The determination of the realizability of deferred tax assets requires significant judgment in assessing the likelihood of future tax consequences. In completing our assessment of realizability of our deferred tax assets, we consider our history of losses measured at pre-tax income (loss) adjusted for permanent book-tax differences on a jurisdictional basis, volatility in actual earnings, excess tax benefits related to stock-based compensation in recent prior years, and impacts of the timing of reversal of existing temporary differences. We also rely on our assessment of the Company’s projected future results of business operations, including uncertainty in future operating results relative to historical results, volatility in the market price of our common stock and its performance over time, variable macroeconomic conditions impacting our ability to forecast future taxable income, and changes in business that may affect the existence and magnitude of future taxable income. Our valuation allowance assessment is based on our best estimate of future results considering all available information.

We monitor the realizability of the U.S. deferred tax assets taking into account all relevant factors. As of September 30, 2023, we continued to maintain a full valuation allowance on our U.S. deferred tax assets. We will release the valuation allowance when there is sufficient positive evidence to support a conclusion that it is more likely than not the deferred tax assets will be realized. Depending on our operating results and the amount of stock-based compensation tax deductions available in the future, we may release the valuation allowance associated with the U.S. deferred tax assets within the next year. The timing and amount of the valuation allowance release could vary based on our assessment of all available evidence. Release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and may result in a material decrease to income tax expense for the period the release is recorded.

There are transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. As of September 30, 2023 and December 31, 2022, the aggregate balances of our gross unrecognized tax benefits were $1.04 billion and $870 million, respectively, of which $616 million and $572 million, respectively, would not give rise to changes in our effective tax rate since these tax benefits would increase a deferred tax asset that is currently fully offset by a valuation allowance.

We file income tax returns in the U.S. and various state and foreign jurisdictions. We are currently under examination by the Internal Revenue Service (“IRS”) for the years 2015 to 2018. Additional tax years within the periods 2004 to 2014 and 2019 to 2022 remain subject to examination for federal income tax purposes. All net operating losses and tax credits generated to date are subject to adjustment for U.S. federal and state income tax purposes. Our returns for 2004 and subsequent tax years remain subject to examination in U.S. state and foreign jurisdictions.

Given the uncertainty in timing and outcome of our tax examinations, an estimate of the range of the reasonably possible change in gross unrecognized tax benefits within twelve months cannot be made at this time.

Net Income per Share of Common Stock Attributable to Common Stockholders

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):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income attributable to common stockholders	$	1,853	$	3,292	$	7,069	$	8,869
Less: Buy-out of noncontrolling interest	2		—		(3)		8
Net income used in computing basic net income per share of common stock	1,851		3,292		7,072		8,861
Less: Dilutive convertible debt	(0)		(0)		(0)		(1)
Net income used in computing diluted net income per share of common stock	$	1,851	$	3,292	$	7,072	$	8,862

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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):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Weighted average shares used in computing net income per share of common stock, basic	3,176	3,146	3,171	3,120
Add:
Stock-based awards	304	301	297	311
Convertible senior notes	2	2	2	4
Warrants	11	19	11	39
Weighted average shares used in computing net income per share of common stock, diluted	3,493	3,468	3,481	3,474

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):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Stock-based awards	13	3	12	3

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):

	September 30, 2023		December 31, 2022		September 30, 2022		December 31, 2021
Cash and cash equivalents	$	15,932	$	16,253	$	19,532	$	17,576
Restricted cash included in prepaid expenses and other current assets	453		294		382		345
Restricted cash included in other non-current assets	205		377		235		223
Total as presented in the consolidated statements of cash flows	$	16,590	$	16,924	$	20,149	$	18,144

Accounts Receivable and Allowance for Doubtful Accounts

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, which are typically transferred to other manufacturers during the last few days of the quarter, is 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 September 30, 2023 and December 31, 2022, we had $328 million and $753 million, respectively, of long-term government rebates receivable in Other non-current assets in our consolidated balance sheets.

Financing Receivables

As of September 30, 2023 and December 31, 2022, the majority of our financing receivables were at current status with only immaterial balances being past due. As of September 30, 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.

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As of September 30, 2023 and December 31, 2022, the total outstanding balance of MyPower customer notes receivable, net of allowance for expected credit losses, was $268 million and $280 million, respectively, of which $6 million and $7 million were due in the next 12 months as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023 and December 31, 2022, the allowance for expected credit losses was $37 million.

Concentration of Risk

Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, investments, restricted cash, accounts receivable and financing receivables. Our cash and investments balances are primarily comprised of deposits which are diversified among high credit quality financial institutions or invested in U.S. government securities. These deposits are typically in excess of insured limits. As of September 30, 2023 and December 31, 2022, no entity represented 10% or more of our total receivables balance.

Supply Risk

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

Operating Lease Vehicles

The gross cost of operating lease vehicles as of September 30, 2023 and December 31, 2022 was $7.40 billion and $6.08 billion, respectively. Operating lease vehicles on the consolidated balance sheets are presented net of accumulated depreciation of $1.28 billion and $1.04 billion as of September 30, 2023 and December 31, 2022, respectively.

Goodwill

Goodwill increased $56 million within the automotive segment from $194 million as of December 31, 2022 to $250 million as of September 30, 2023 primarily from a business combination and divestiture.

Warranties

Accrued warranty activity consisted of the following (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Accrued warranty—beginning of period	$	4,465	$	2,433	$	3,505	$	2,101
Warranty costs incurred	(335)		(236)		(911)		(574)
Net changes in liability for pre-existing warranties, including expirations and foreign exchange impact	15		156		426		158
Provision for warranty	577		418		1,702		1,086
Accrued warranty—end of period	$	4,722	$	2,771	$	4,722	$	2,771

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

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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.

On August 16, 2022, the Inflation Reduction Act of 2022 (“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 nine months ended September 30, 2023, the impact was primarily a reduction of our material costs. We will continue to evaluate the effects of the IRA as more guidance is issued and the relevant implications to our consolidated financial statements.

Note 2 – 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):

	September 30, 2023								December 31, 2022
	Fair Value		Level I		Level II		Level III		Fair Value		Level I		Level II		Level III
Money market funds	$	1,153	$	1,153	$	—	$	—	$	2,188	$	2,188	$	—	$	—
U.S. government securities	4,798		—		4,798		—		894		—		894		—
Corporate debt securities	559		—		559		—		885		—		885		—
Certificates of deposit and time deposits	4,788		—		4,788		—		4,253		—		4,253		—
Total	$	11,298	$	1,153	$	10,145	$	—	$	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, 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.

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Our cash, cash equivalents and investments classified by security type as of September 30, 2023 and December 31, 2022 consisted of the following (in millions):

	September 30, 2023
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Short-Term Investments
Cash	$	14,779	$	—	$	—	$	14,779	$	14,779	$	—
Money market funds	1,153		—		—		1,153		1,153		—
U.S. government securities	4,800		—		(2)		4,798		—		4,798
Corporate debt securities	569		1		(11)		559		—		559
Certificates of deposit and time deposits	4,788		—		—		4,788		—		4,788
Total cash, cash equivalents and short-term investments	$	26,089	$	1	$	(13)	$	26,077	$	15,932	$	10,145

	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 three and nine months ended September 30, 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 September 30, 2023 and December 31, 2022. We have determined that the gross unrealized losses on our investments as of September 30, 2023 and December 31, 2022 were temporary in nature.

The following table summarizes the fair value of our investments by stated contractual maturities as of September 30, 2023 (in millions):

Due in 1 year or less	$	9,734
Due in 1 year through 5 years	383
Due in 5 years through 10 years	28
Total	$	10,145

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.

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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):

	September 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
2024 Notes	$	37	$	452	$	37	$	223
Digital assets, net	$	184	$	311	$	184	$	191

Note 3 – Inventory

Our inventory consisted of the following (in millions):

	September 30, 2023		December 31, 2022
Raw materials	$	5,817	$	6,137
Work in process	2,246		2,385
Finished goods (1)	4,550		3,475
Service parts	1,108		842
Total	$	13,721	$	12,839

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

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 three and nine months ended September 30, 2023, we recorded write-downs of $43 million and $148 million, respectively, in Cost of revenues in the consolidated statements of operations. During the three and nine months ended September 30, 2022, we recorded write-downs of $42 million and $91 million, respectively, in Cost of revenues in the consolidated statements of operations.

Note 4 – Property, Plant and Equipment, Net

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

	September 30, 2023		December 31, 2022
Machinery, equipment, vehicles and office furniture	$	15,077	$	13,558
Tooling	2,865		2,579
Leasehold improvements	2,892		2,366
Land and buildings	8,584		7,751
Computer equipment, hardware and software	3,225		2,072
Construction in progress	6,341		4,263
	38,984		32,589
Less: Accumulated depreciation	(11,240)		(9,041)
Total	$	27,744	$	23,548

Construction in progress is primarily comprised of construction of Gigafactory Texas, and equipment and tooling related to the manufacturing of our products.

Depreciation expense during the three and nine months ended September 30, 2023 was $897 million and $2.44 billion, respectively. Depreciation expense during the three and nine months ended September 30, 2022 was $620 million and $1.75 billion, respectively.

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Note 5 – Accrued Liabilities and Other

Our accrued liabilities and other current liabilities consisted of the following (in millions):

	September 30, 2023		December 31, 2022
Accrued purchases (1)	$	2,708	$	2,747
Taxes payable (2)	1,095		1,235
Payroll and related costs	1,192		1,026
Accrued warranty reserve, current portion	1,376		1,025
Sales return reserve, current portion	218		270
Operating lease liabilities, current portion	613		485
Other current liabilities	434		354
Total	$	7,636	$	7,142

(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.

Note 6 – Other Long-Term Liabilities

Our other long-term liabilities consisted of the following (in millions):

	September 30, 2023		December 31, 2022
Operating lease liabilities	$	3,181	$	2,164
Accrued warranty reserve	3,346		2,480
Other non-current liabilities	794		686
Total other long-term liabilities	$	7,321	$	5,330

Note 7 – Debt

The following is a summary of our debt and finance leases as of September 30, 2023 (in millions):

	Net Carrying Value				Unpaid Principal Balance		Unused Committed Amount (1)		Contractual Interest Rates		Contractual Maturity Date
	Current		Long-Term
Recourse debt:
2024 Notes	$	37	$	—	$	37	$	—	2.00	%	May 2024
RCF Credit Agreement	—		—		—		5,000		Not applicable		January 2028
Solar Bonds	—		7		7		—		4.70-5.75%		March 2025 - January 2031
Total recourse debt	37		7		44		5,000
Non-recourse debt:
Automotive Asset-backed Notes	1,482		1,795		3,290		—		0.36-6.57%		July 2024-August 2027
Solar Asset-backed Notes	4		10		14		—		4.80	%	December 2026
Cash Equity Debt	29		340		378		—		5.25-5.81%		July 2033-January 2035
Total non-recourse debt	1,515		2,145		3,682