tsla_contexts.txt

We design, develop, manufacture, sell and lease high-performance fully electric vehicles and energy generation and storage systems, and offer services related to our products.

We generally sell our products directly to customers, and continue to grow our customer-facing infrastructure through a global network of vehicle showrooms and service centers, Mobile Service, body shops, Supercharger stations and Destination Chargers to accelerate the widespread adoption of our products.

 We also strive to lower the cost of ownership for our customers through continuous efforts to reduce manufacturing costs and by offering financial and other services tailored to our products.

Segment Information We operate as two reportable segments: (i) automotive and (ii) energy generation and storage.

The automotive segment includes the design, development, manufacturing, sales and leasing of high-performance fully electric vehicles as well as sales of automotive regulatory credits.

 Additionally, the automotive segment also includes services and other, which includes sales of used vehicles, non-warranty after-sales vehicle servicens, body shop and parts, paid Supercharging, vehicle insurance revenue and retail merchandise.

Energy Storage Products Powerwall and Megapack are our lithium-ion battery energy storage products.

We offer dual motor powertrain vehicles, which use two electric motors to maximize traction and performance in an all-wheel-drive configuration, as well as vehicle powertrain technology featuring three electric motors for further increased performance in certain versions of Model S and Model X, Cybertruck, and the Tesla Semi.

We have expertise in developing technologies, systems and software to enable self-driving vehicles using primarily vision-based technologies.

 Our FSD Computer runs our neural networks in our vehicles, and we are also developing additional computer hardware to better enable the massive amounts of field data captured by our vehicles to continually train and improve these neural networks for real-world performance.

 We are also applying our artificial intelligence learnings from self-driving technology to the field of robotics, such as through Optimus, a robotic humanoid in development, which is controlled by the same AI system.

Automotive Direct Sales Our vehicle sales channels currently include our website and an international network of company-owned stores.

 In some jurisdictions, we also have galleries to educate and inform customers about our products, but such locations do not transact in the sale of vehicles.

 We believe this infrastructure enables us to better control costs of inventory, manage warranty service and pricing, educate consumers about electric vehicles, make our vehicles more affordable, maintain and strengthen the Tesla brand and obtain rapid customer feedback.

Used Vehicle Sales Our used vehicle business supports new vehicle sales by integrating the trade-in of a customer’s existing Tesla or non-Tesla vehicle with the sale of a new or used Tesla vehicle.

 The Tesla and non-Tesla vehicles we acquire as trade-ins are subsequently remarketed, either directly by us or through third parties.

Public Charging We have a growing global network of Tesla Superchargers, which are our industrial-grade, high-speed vehicle chargers.

 Where possible, we co-locate Superchargers with our solar and energy storage systems to reduce costs and promote renewable power.

In November 2021, we began to offer Supercharger access to non-Tesla vehicles in certain locations in support of our mission to accelerate the world’s transition to sustainable energy, and in November 2022, we opened up our previously proprietary charging connector as the North American Charging Standard (NACS).

 This enables all electric vehicles and charging stations to interoperate — which makes charging easier and more efficient for everyone and advances our mission to accelerate the world’s transition to sustainable energy.

As part of our solar energy system and energy storage contracts, we may provide the customer with performance guarantees that commit that the underlying system will meet or exceed the minimum energy generation or performance requirements specified in the contract.

Internationally, we also have manufacturing facilities in China (Gigafactory Shanghai) and Germany (Gigafactory Berlin-Brandenburg), which allows us to increase the affordability of our vehicles for customers in local markets by reducing transportation and manufacturing costs and eliminating the impact of unfavorable tariffs.

Inflation Reduction Act  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, and remains subject to future guidance releases.

 The IRA includes multiple incentives to promote clean energy, electric vehicles, battery and energy storage manufacture or purchase, including through providing tax credits to consumers.

 For example, qualifying Tesla customers may receive up to $7,500 in federal tax credits for the purchase of qualified electric vehicles in the U.S. through 2032.

Supercharger stations are typically placed along well-traveled routes and in and around dense city centers to allow vehicle owners the ability to enjoy quick, reliable charging along an extensive network with convenient stops.

Automotive Service We provide service for our electric vehicles at our company-owned service locations and through Tesla Mobile Service technicians who perform work remotely at customers’ homes or other locations.

 Servicing the vehicles ourselves allows us to identify problems and implement solutions and improvements faster than traditional automobile manufacturers and their dealer networks.

The Federal Energy Regulatory Commission (“FERC”) has also taken steps to enable the participation of energy storage in wholesale energy markets.

In addition, California and a number of other states have adopted procurement targets for energy storage, and behind-the-meter energy storage systems qualify for funding under the California Self Generation Incentive Program.

Pursuant to the IRA, under Sections 48, 48E and 25D of the Internal Revenue Code (“IRC”), standalone energy storage technology is eligible for a tax credit between 6% and 50% of qualified expenditures, regardless of the source of energy, which may be claimed by our customers for storage systems they purchase or by us for arrangements where we own the systems.

In the U.S., our vehicles are subject to regulation by the National Highway Traffic Safety Administration (“NHTSA”), including all applicable Federal Motor Vehicle Safety Standards (“FMVSS”) and the NHTSA bumper standard.

The U.S. Automobile Information and Disclosure Act also requires manufacturers of motor vehicles to disclose certain information regarding the manufacturer’s suggested retail price, optional equipment and pricing.

Our battery packs are subject to various U.S. and international regulations that govern transport of “dangerous goods,” defined to include lithium-ion batteries, which may present a risk in transportation.

In markets that follow the regulations of the United Nations Economic Commission for Europe (“ECE markets”), some requirements restrict the design of advanced driver-assistance or self-driving features, which can compromise or prevent their use entirely.

To operate our systems, we enter into standard interconnection agreements with applicable utilities.

 Sales of electricity and non-sale equipment leases by third parties, such as our leases and PPAs, have faced regulatory challenges in some states and jurisdictions.

highlighting the attractiveness of electric vehicles relative to the internal combustion vehicle.

 Many major automobile manufacturers have electric vehicles available today in major markets including the U.S., China and Europe, and other current and prospective automobile manufacturers are also developing electric vehicles.

highlighting the attractiveness of electric vehicles relative to the internal combustion vehicle.

 Many major automobile manufacturers have electric vehicles available today in major markets including the U.S., China and Europe, and other current and prospective automobile manufacturers are also developing electric vehicles.

 In addition, several manufacturers offer hybrid vehicles, including plug-in versions.

We believe that there is also increasing competition for our vehicle offerings as a platform for delivering self-driving technologies, charging solutions and other features and services, and we expect to compete in this developing market through continued progress on our Autopilot, FSD and neural network capabilities, Supercharger network and our infotainment offerings.

Solar Energy Systems The primary competitors to our solar energy business are the traditional local utility companies that supply energy to our potential customers.

We compete with these traditional utility companies primarily based on price and the ease by which customers can switch to electricity generated by our solar energy systems.

We compete with these companies based on price, energy density and efficiency.

 We believe that the specifications and features of our products, our strong brand and the modular, scalable nature of our energy storage products give us a competitive advantage in our markets.

We place a strong emphasis on our innovative approach and proprietary designs which bring intrinsic value and uniqueness to our product portfolio.

 As part of our business, we seek to protect the underlying intellectual property rights of these innovations and designs such as with respect to patents, trademarks, copyrights, trade secrets, confidential information and other measures, including through employee and third-party nondisclosure agreements and other contractual arrangements.

ESG The very purpose of Tesla's existence is to accelerate the world's transition to sustainable energy.

we will not tolerate certain behaviors.

 These include harassment, retaliation, violence, intimidation and discrimination of any kind on the basis of race, color, religion, national origin, gender, sexual orientation, gender identity, gender expression, age, disability or veteran status.

Anti-harassment training is conducted on day one of new hire orientation for all employees and reoccurring for leaders.

In addition, we run various leadership development programs throughout the year aimed at enhancing leaders’ skills, and in particular, helping them to understand how to appropriately respond to and address employee concerns.

Employees are encouraged to speak up both in regard to misconduct and safety concerns and can do so by contacting the integrity line, submitting concerns through our Take Charge process, or notifying their Human Resource Partner or any member of management.

The information posted on our website is not incorporated by reference into this Annual Report on Form 10-K.

Available Information We file or furnish periodic reports and amendments thereto, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, proxy statements and other information with the SEC.

In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically.

 Our website is located at www.tesla.com, and our reports, amendments thereto, proxy statements and other information are also made available, free of charge, on our investor relations website at ir.tesla.com as soon as reasonably practicable after we electronically file or furnish such information with the SEC.

Responding to questions timely is key so Human Resource Partners for each functional area are visible throughout facilities and are actively involved in driving culture and engagement alongside business leaders.

For a description of our material pending legal proceedings, please see Note 15, Commitments and Contingencies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Item 103 of Regulation S-K because it relates to environmental regulations and aggregate civil penalties that we currently believe could potentially exceed $1 million.

District attorneys in certain California counties conducted an investigation into Tesla’s waste segregation practices pursuant to Cal.
 Health & Saf.
 Code § 25100 et seq.
 and Cal.
 Civil Code § 1798.80.

Tesla has implemented various remedial measures, including conducting training and audits, and enhancements to its site waste management programs, and settlement discussions are ongoing.

Tesla has implemented various remedial measures, including conducting training and audits, and enhancements to its site waste management programs, and settlement discussions are ongoing.

While the outcome of this matter cannot be determined at this time, it is not currently expected to have a material adverse impact on our business.

While the outcome of this matter cannot be determined at this time, it is not currently expected to have a material adverse impact on our business.

District attorneys in certain California counties conducted an investigation into Tesla’s waste segregation practices pursuant to Cal.
 Health & Saf.
 Code § 25100 et seq.
 and Cal.
 Civil Code § 1798.80.

ITEM 6.
 [RESERVED]

In 2023, our net income attributable to common stockholders was $15.00 billion, representing a favorable change of $2.44 billion, compared to the prior year.

 This included a one-time non-cash tax benefit of $5.93 billion for the release of valuation allowance on certain deferred tax assets.

Capital expenditures amounted to $8.90 billion in 2023, compared to $7.16 billion in 2022, representing an increase of $1.74 billion.

ITEM 7.
 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

 For further discussion of our products and services, technology and competitive strengths, refer to Item 1- Business.

In 2023, we produced 1,845,985 consumer vehicles and delivered 1,808,581 consumer vehicles.

 We are currently focused on increasing vehicle production, capacity and delivery capabilities, reducing costs, improving and developing our vehicles and battery technologies, vertically integrating and localizing our supply chain, improving and further deploying our FSD capabilities, increasing the affordability and efficiency of our vehicles, bringing new products to market and expanding our global infrastructure, including our service and charging infrastructure.

In 2023, we recognized total revenues of $96.77 billion, representing an increase of $15.31 billion, compared to the prior year.

We ended 2023 with $29.09 billion in cash and cash equivalents and investments, representing an increase of $6.91 billion from the end of 2022.

We design, develop, manufacture, lease and sell high-performance fully electric vehicles, solar energy generation systems and energy storage products.

 We also offer maintenance, installation, operation, charging, insurance, financial and other services related to our products.

 Additionally, we are increasingly focused on products and services based on artificial intelligence, robotics and automation.

 In 2023, we produced 1,845,985 consumer vehicles and delivered 1,808,581 consumer vehicles.

The following is a summary of the status of production of each of our announced vehicle models in production and under development, as of the date of this Annual Report on Form 10-K: Production Location | Vehicle Model(s) | Production Status Fremont Factory | Model S / Model X | Active | Model 3 / Model Y | Active Gigafactory Shanghai | Model 3 / Model Y | Active Gigafactory Berlin-Brandenburg | Model Y | Active Gigafactory Texas | Model Y | Active | Cybertruck | Active Gigafactory Nevada | Tesla Semi | Pilot production Various | Next Generation Platform | In development TBD | Tesla Roadster | In development

Owing and subject to the foregoing as well as the pipeline of announced projects under development, all other continuing infrastructure growth and varying levels of inflation, we currently expect our capital expenditures to exceed $10.00 billion in 2024 and be between $8.00 to $10.00 billion in each of the following two fiscal years.

Our business has been consistently generating cash flow from operations in excess of our level of capital spend, and with better working capital management resulting in shorter days sales outstanding than days payable outstanding, our sales growth is also generally facilitating positive cash generation.

At the same time, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects and other potential variables such as rising material prices and increases in supply chain and labor expenses resulting from changes in global trade conditions and labor availability.

We recognize revenue on automotive sales upon delivery to the customer, which is when the control of a vehicle transfers.

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.

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.

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.

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.

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

Significant judgment is required in evaluating our tax positions and during the ordinary course of business, there are many transactions and calculations for which the ultimate tax settlement is uncertain.
 As a result, we recognize the effect of this uncertainty on our tax attributes or taxes payable based on our estimates of the eventual outcome.

We are required to file income tax returns in the U.S. and various foreign jurisdictions, which requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions.
 Such returns are subject to audit by the various federal, state and foreign taxing authorities, who may disagree with respect to our tax positions.

2023 compared to 2022 Automotive sales revenue increased $11.30 billion, or 17%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to an increase of 473,382 combined Model 3 and Model Y cash deliveries from production ramping of Model Y globally.
 The increase was partially offset by a lower average selling price on our vehicles driven by overall price reductions year over year, sales mix, and a negative impact from the United States dollar strengthening against other foreign currencies in the year ended December 31, 2023 compared to the prior year.

Automotive leasing revenue decreased $356 million, or 14%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
 The decrease was primarily due to a decrease in direct sales-type leasing revenue driven by lower deliveries year over year, partially offset by an increase from our growing direct operating lease portfolio.

Automotive regulatory credits revenue increased $14 million, or 1%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Energy generation and storage revenue includes sales and leasing of solar energy generation and energy storage products, financing of solar energy generation products, services related to such products and sales of solar energy systems incentives.
 2023 compared to 2022 Energy generation and storage revenue increased $2.13 billion, or 54%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
 The increase was primarily due to an increase in deployments of Megapack.

Gross profit total automotive & services and other segment | $ | 16,519

Gross margin for total automotive decreased from 28.5% to 19.4% in the year ended December 31, 2023 as compared to the year ended December 31, 2022.

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.

Cost of automotive leasing revenue decreased $241 million, or 16%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Gross profit energy generation and storage segment | $ | 1,141

Gross margin for energy generation and storage increased from 7.4% to 18.9% in the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Research and development | $ | 3,969 | | | $ | 3,075 | | | $ | 2,593 | | $ | 894 | 29 | %

Interest income increased $769 million, or 259%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
 This increase was primarily due to higher interest earned on our cash and cash equivalents and short-term investments in the year ended December 31, 2023 as compared to the prior year due to rising interest rates and our increasing portfolio balance.

Interest income increased $769 million, or 259%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
 This increase was primarily due to higher interest earned on our cash and cash equivalents and short-term investments in the year ended December 31, 2023 as compared to the prior year due to rising interest rates and our increasing portfolio balance.

Other income, net, changed favorably by $215 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
 The favorable change was primarily due to fluctuations in foreign currency exchange rates on our intercompany balances.

Other income, net, changed favorably by $215 million in the year ended December 31, 2023 as compared to the year ended December 31, 2022.
 The favorable change was primarily due to fluctuations in foreign currency exchange rates on our intercompany balances.

Our (benefit from) provision for income taxes changed by $6.13 billion in the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to the release of $6.54 billion of our valuation allowance associated with the U.S. federal and certain state deferred tax assets.

Our (benefit from) provision for income taxes changed by $6.13 billion in the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to the release of $6.54 billion of our valuation allowance associated with the U.S. federal and certain state deferred tax assets.

Our effective tax rate changed from an expense of 8% to a benefit of 50% in the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to the release of the valuation allowance regarding our U.S. federal and certain state deferred tax assets.

Our cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as research and development and selling, general and administrative and working capital.

Our operating cash inflows include cash from vehicle sales and related servicing, customer lease and financing payments, customer deposits, cash from sales of regulatory credits and energy generation and storage products, and interest income on our cash and investments portfolio.

Net cash provided by operating activities decreased by $1.47 billion to $13.26 billion during the year ended December 31, 2023 from $14.72 billion during the year ended December 31, 2022.

This decrease was primarily due to the decrease in net income excluding non-cash expenses, gains and losses of $2.93 billion, partially offset by favorable changes in net operating assets and liabilities of $1.46 billion.

Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $8.90 billion for the year ended December 31, 2023 and $7.16 billion for the year ended December 31, 2022, mainly for global factory expansion and machinery and equipment as we expand our product roadmap.

Net cash from financing activities changed by $6.12 billion to $2.59 billion net cash provided by financing activities during the year ended December 31, 2023 from $3.53 billion net cash used in financing activities during the year ended December 31, 2022.

The change was primarily due to a $3.93 billion increase in proceeds from issuances of debt and a $2.01 billion decrease in repayments of debt.

Foreign Currency Risk We transact business globally in multiple currencies and hence have foreign currency risks related to our revenue, costs of revenue and operating expenses denominated in currencies other than the U.S. dollar (primarily the Chinese yuan and euro in relation to our current year operations).

Accordingly, changes in exchange rates affect our operating results as expressed in U.S. dollars as we do not typically hedge foreign currency risk.

We have also experienced, and will continue to experience, fluctuations in our net income as a result of gains (losses) on the settlement and the re-measurement of monetary assets and liabilities denominated in currencies that are not the local currency (primarily consisting of our intercompany and cash and cash equivalents balances).

These changes were applied to our total monetary assets and liabilities denominated in currencies other than our local currencies at the balance sheet date to compute the impact these changes would have had on our net income before income taxes.
 These changes would have resulted in a gain or loss of $1.01 billion at December 31, 2023 and $473 million at December 31, 2022, assuming no foreign currency hedging.

We have also experienced, and will continue to experience, fluctuations in our net income as a result of gains (losses) on the settlement and the re-measurement of monetary assets and liabilities denominated in currencies that are not the local currency (primarily consisting of our intercompany and cash and cash equivalents balances).

These changes were applied to our total monetary assets and liabilities denominated in currencies other than our local currencies at the balance sheet date to compute the impact these changes would have had on our net income before income taxes.
 These changes would have resulted in a gain or loss of $1.01 billion at December 31, 2023 and $473 million at December 31, 2022, assuming no foreign currency hedging.

Foreign Currency Risk We transact business globally in multiple currencies and hence have foreign currency risks related to our revenue, costs of revenue and operating expenses denominated in currencies other than the U.S. dollar (primarily the Chinese yuan and euro in relation to our current year operations).
 Accordingly, changes in exchange rates affect our operating results as expressed in U.S. dollars as we do not typically hedge foreign currency risk.