Tesla filed its annual report with the Securities and Exchange Commission on Monday evening.
Allison Dinner/Getty Images
Every
Tesla
data point matters to both bulls and bears, and there is a treasure trove of them to be found in the company’s annual report filed on a form 10-K with the Securities and Exchange Commission.
This year, there are disclosures about a request for information by Justice Department, capital investment, and expenses for warranties. Here are six things to note, along with some context:
Full Self Driving
The Justice Department has requested documents related to the autonomous driving software that
Tesla
calls Full Self Driving, or FSD. Neither the company nor the department immediately responded to requests for comment.
Automotive safety regulators, of course, look at accidents associated with advanced driver-assistance features from all auto makers.
Beyond safety, past inquiries about Tesla’s FSD have generally boiled down to whether or not the name fits. The system doesn’t actually do all the driving; drivers must stay engaged on the road 100% of the time.
Investments
Tesla’s holdings of corporate debt securities—borrowings by other companies—rose to $885 million at the end of 2022 from $131 million at the end of 2022. There isn’t any detail about what debt securities the company holds. Tesla didn’t respond to a request for comment.
The company finished out the year with $22.2 billion in cash and investments on its books, up from $17.7 billion at the end of 2021.
Not much was disclosed about CEO Elon Musk’s relationship with Twitter in Tesla’s 10-K. Musk completed the purchase of Twitter in October 2022 and now runs the social media platform.
The filing does mention that “Tesla periodically does business with certain entities with which its CEO and directors are affiliated, such as SpaceX and Twitter, Inc., in accordance with our Related Person Transactions Policy.” That policy requires a board-level audit committee to approve certain transactions between Tesla and the other, related entity.
The annual proxy statement typically provides more detail about a company’s related-party transactions. That document will be out later in the year.
Warranty Expenses
Tesla’s expense for warranties amounted to about 2% of sales in 2022, right in line with the expense for 2021. Warranty expenses are an accrual, meaning they represent cash that is set aside, rather than money going out the door. Cash is spent as warranty repairs happen.
Tesla’s warranty expense is greater than the cash spent fixing cars, which is appropriate for a growing company.
If a warranty provision is rising or falling as a percentage of sales from year to year it can be a red flag for investors. A decline could signal that a company might not be accruing enough money to fix cars in the future, while an increase might indicate that quality is slipping.
That doesn’t appear to be the case with Tesla.
R&D Spending
Tesla’s 2022 research and development outlay amounted to $3.1 billion, up from $2.6 billion in 2021, but it fell by about 1 percentage point as a share of sales. That added roughly $900 million in pretax profit in 2022.
Capital Spending
Tesla spent $7.2 billion on plants and equipment in 2022, up from $6.5 billion in 2021.
Tesla plans to spend between $6 billion and $8 billion in 2023 and between $7 billion and $9 billion in both 2024 and 2025. Spending at that level implies the company will build new plants to assemble its vehicles.
The 10-K filing doesn’t appear to be affecting Tesla stock all that much. Shares were up 1.6% in midday trading on Tuesday, but car stocks were generally higher because
General Motors
(GM) issued better 2023 financial guidance than expected. GM stock was up 8% in midday trading, while
Ford Motor
(F) shares had gained 3.3%.
The S&P 500 and Nasdaq Composite were up 0.5% and 0.8%, respectively.
Write to Al Root at allen.root@dowjones.com
Credit: marketwatch.com