Elon Musk’s ambitious vision for a world powered by Tesla’s robotaxis and humanoid robot, Optimus, requires a substantial amount of capital. In the latter half of last year, Tesla spent $6.3 billion in capital expenditures, yet the total value of the company’s assets only increased by $4.9 billion. This discrepancy raises questions about where Tesla’s money is being allocated.
While such discrepancies would typically be cause for concern, accounting experts suggest that there may be valid reasons for the variance that are not immediately apparent in Tesla’s financial statements. Tim Morrison, an accounting professor at Notre Dame and former audit partner at Ernst & Young, explains that the complexity of Tesla’s global operations could explain the discrepancies. Despite this, the discrepancy has prompted scrutiny of Tesla’s internal controls.
This is not the first time Tesla’s accounting practices have come under scrutiny, with analysts like Garrett Nelson from CFRA Research calling for further clarification from the company and its auditors, PwC. Tesla’s stock has experienced significant volatility, with concerns about declining sales and distractions from Musk’s other ventures contributing to a sharp decline in market value.
Despite these challenges, Tesla remains optimistic about its future, with plans to expand beyond electric vehicles and battery storage. CFO Vaibhav Taneja emphasized the company’s commitment to investing in AI initiatives to bring Musk’s vision to life, acknowledging the significant capital required for these endeavors.
As Tesla navigates these financial mysteries, investors and analysts await further insights into the company’s financial health and strategic direction.
Excluding depreciation, the increase in Tesla’s assets was only $4.9 billion during that time period. Typically, for a domestic company, one would expect the numbers to match up. The company confirmed that no property, plant, and equipment (PP&E) were sold, and no impairments were recognized on its long-term assets meant for long-term use. However, fluctuations in foreign currency can disrupt the balance. If the euro weakens against the dollar, assets at Tesla’s German facilities are devalued, impacting the financials. While this may not be explicitly stated on the financial statements, it could still explain a significant discrepancy. Tesla may have also disposed of assets that were no longer useful, leading to their removal from the books. According to the Corporate Finance Institute, when fully depreciated assets are disposed of, their value and accumulated depreciation are written off the balance sheet. Therefore, investors may not need to be concerned about Tesla’s capital expenditures just yet. Despite raising $3.9 billion in new debt last year, Tesla holds a significant cash reserve of $36.5 billion and does not pay dividends. This move could be seen as strategic for a company focusing on future growth. Despite recent stock declines, Tesla shares are still trading at approximately 90 times projected earnings for the next year. It remains to be seen whether Elon Musk’s investments will yield substantial returns. This information was originally published on Fortune.com.
