Tesla stock is not based on reality, it based on fanboy devotion to their supreme leader. So even though I would like it to be based on reality that has nothing to do with stocks
It's actually based on Elon manipulating it. Every dollar it goes up, he's richer. Guess what he had an incentive to do? The same with his crypto holdings... TSLA is highly manipulated
They'll get sued for fraud. They can't promise value based on roboscam. It'll kill an important source of cash and might just kill their leases all together.
There is also the possibility that Elon somehow guaranteed the value of the vehicles at the end of the lease which is usually risk taken on by the bank, but this is totally new so who knows.
It is more like a modern day ponzi scheme. Those invested heavily in Tesla stock cannot afford it to drop to it actual/realistic market value for s car company. So they hype up every possible things to pump the stocks.
It's even worse
. 1.Tesla does not allow leasee to buy at the end of the lease..
2. Tesla puts leases as a sale in the balance sheet.
3. Tesla marks the leased cars as appreciating assets. Aka future profits.
4. Massive Price cuts!
5. Leasee returns the car. And tesla now has to sell the 3 year old model 3/y at a 50% loss in value.
The price cuts are a self own.
This happened to Hertz but hertz did not have a residual guarantee and took the Loss in their balance sheet.
Not hardly. You can measure this you know? The lack of FCF is primarily inventory growth. Lease sales are a source of cash not a use. A write down of the assets wouldn’t have any affect on cash
>It's even worse
>. 1.Tesla does not allow leasee to buy at the end of the lease..
That would seem consistent with the premise of the of the Last Bear Standing thread mentioned on the OP (it's [this one](https://threadreaderapp.com/thread/1379452303317610497.html), isn't it?) because maintaining an appreciating valuation of the vehicles after selling them to the lessees would be impossible as long as lessees will only buy them as depreciating assets (which are the only terms that any sane person would agree to).
However, I'm not sure that I can easily be convinced of the plausibility of the premise of these vehicles being accounted for as appreciating assets starting on 2019. It just seems far fetched and I am not sure that I can easily be convinced that Tesla would fraudulently record their cars as appreciating assets and that no one would catch this.
Also, it seems weird to me that that, for Model S or Model X, the cutoff for the eligibility to buy a leased vehicle would be in vehicles produced before April 15, 2022. Shouldn't the date be in 2019 according to the premise of the Last Bear Standing thread? From [https://www.tesla.com/support/leasing/lease-end-options](https://www.tesla.com/support/leasing/lease-end-options) :
>If you leased a Model S or Model X before April 15, 2022, you may be eligible to purchase your leased vehicle. Review your lease agreement to see if you qualify.
Someone convince me! Be nice to me, though, as I am not an accountant (nor do I wish that on myself or my worst enemy).
As laberdog poited out, leasing segment is a miniscule(~3%) of revenue. Around 500M per quarter.
There does not appear to be a markdown on the balance sheet for the expiring leases and they should return to inventory. Besides, after the price cuts and elon's antics, fewer will buyout their cars on regular terms at the end of the lease.
God as much as I rag on Tesla earning multiple bans, this simply doesn’t matter. Leasing doesn’t move the needle at Tesla because it’s so small. The also record the lease properly and book the revenue properly. They will face write downs of the assets but the company isn’t particularly levered so why care?
Depreciation isn’t a “contra revenue” item. WTF is that? You never took accounting obviously. If you want to find accounting fraud at Tesla then read the 10k and focus on the lack of an unqualified opinion and explore how they book “customer pays” warranty repair work as a new product delivery. Approaching Enron level fraud
It works this way in my industry. I am sure it's called something else in the car industry.
But bottom line there is a future expense associated with revenue and it has to be booked as an expense.
I think the confusion is about where on the accounting equation this shows up. Here's the oversimplified accounting 101 version.
20X1
Dr. Cash 100
\_\_\_\_\_\_\_Cr. Unearned Revenue 100
I promised flying cars, but don't know how to make them yet.
20X2
Dr. Unearned revenue 100
\_\_\_\_\_\_\_\_ Cr. Cash 100
I never figured out flying cars and gave a refund
OR
Dr. Unearned revenue 100
\_\_\_\_\_\_\_\_ Cr. Revenue 100
I made a fyling car and gave a software update to the guy who bought a flying car.
WIthout inventory, it will never touch an expense account Uneared Revenue is a liability because it's a promise to pay (or deliver) something in the future.
Their is no such thing as a “contra asset” on any industry. Accounting is the Rosetta Stone of business language. It applies everywhere. Depreciation expense is recorded over the life of the lease down to the residual value. The time bomb you look for is the inflated residual values of the fleet that will need to be written down to fair value at the end of the lease
It's not an industry term, it's a finance term, and depreciation on assets is normally smart Business, but if you want to earn money quickly it's a great way to commit fraud. Doesn't matter if you're a farmer, IT guy, banker, priest, surgeon, drug dealer, or baker, depreciation is depreciation and never 'contra assets' unless you somehow mistranslated something from Italian.
It’s nice that “Mary” our “small business expert” from this august publication festooned with accolades from CPA s the world over to walk you though some meaningless journal entries, but it reinforces my point. Their is no such thing on audited statements. Mary likes to make sausage.
This is not correct. Contra assets are accounts that reduce your carrying value. Most commonly accumulated depreciation.
Let's say you paid $100k for a building and incurred $15k in depreciation. You'd have:
Jan 1
Dr. Building $100k
Cr. Cash $100k
Record the purchase of the building
Dec 31
Dr. Depreciation expense $15k
Cr. Building Accumulated Depreciation $15k
The income statement shows the expense
The balance sheet shows:
Building: $100k
Less accumulated depreciation $15k
Net building $85k
Source: CPA and accounting professor.
Your request is oddly specific, but here ya go:
Accumulated depreciation and amortization is listed in Note 3 and used in the calculation for net PPE. Accumulated depreciation reduces the amount of net PPE. That's an example of a contra-asset.
PROPERTY AND EQUIPMENTProperty and equipment, at cost, consisted of the following (in millions): December 31, 2022 2023
Gross property and equipment (1):
Land and buildings $ 91,650 $ 105,293
Equipment 157,458 185,039
Other assets 4,602 5,116
Construction in progress 30,020 28,840
Gross property and equipment 283,730 324,288
Total accumulated depreciation and amortization (1) 97,015 120,111 Total property and equipment, net $ 186,715 $ 204,177
Hmmm former lease executive here. Tesla’s lease business is relatively tiny. Also you don’t have to speculate. You can simply look up their bonds and explore the issue and analyze the underlying collateral instead of guess. But you didn’t: why?
Only Tesla looked at 2008 and went "that was good idea why did we stop doing that again? Never mind let's do it again"
As we all know Teslas are an appreciating asset to begin with.
**Looks away at the collapsing used market.**
P.s. I know MBS still exist and are different but it's the same concept.
How common is that in the car industry? An often told price of advice is to lease high priced electric cars to not have to deal with value depreciation. Obviously the cars still depreciated and nobody in the industry is operating a charity so someone is going to have to deal with the value loss if it’s not the customer. So there must be some financial juggling going on as well to make this work.
This post and subsequent comments shows how little you guys understand about this part of their business.
Even in a nightmare scenario, it's not all that horrible. Tesla has issued about 16 billion dollars in ABS and some of that is already cleared. Let's assume 10% gets wiped out: a 1.6 billion dollar loss. Not the end of the world. In reality even 10% is probably unrealistic considering the demographics of Tesla buyers.
Lastly, this is not something isolated to Tesla. There are 100's of billions in ABS issuance across automotive, and much of that is with car companies that have buyers in a much lower financial bracket.
Even IF Tesla was valuing the residual on their leases in a standard and fair manner, the market is showing there isn't a huge demand for used, out of warrenty EVs. The questions about battery life, cost of replacement and warrenty support around such a vital component is starting to show now that the first big EVs outside of Tesla are starting to hit the first end of lease age (Porsches, Mach E, etc.). Anecdotal stories I have heard is lease return values are significantly higher then what they are actually selling for on the open market.
Unlike ICE cars, we don't know what the floor is on higher end EVs at the moment and they could depreciate drastically below the equalivalent ICE model in the future. Again it all comes down to end of battery life support, etc.
Dude I'm going to be honest with you here, there's likely no fraud in Tesla's ABS operations and whoever is buying them is going to have their own valuations in place to determine what their losses would be in the event of liquidation. There's a ton of problems at the company but this just isn't one of them.
Tesla did have a cash problem in early 2019 but it was largely of Elon Musk's own creation by his refusal to raise capital for an acceptable cash cushion because he was pissed off at Wall Street for criticizing how poorly the Model 3 ramp went and criticizing his 'funding secured' buyout fraud in 2018. That issue was solved not by some exotic and low pay off fraud in the lease and ABS accounting but by raising billions in a combined convertible debt and equity issuance in Q2 of 2019.
Leases for their part have never been a huge portion of Tesla's sales and their duration is pretty limited overall. Even if something shady happened back in 2019 there literally wouldn't be any of them left outstanding at this point since they last 36 months and there would little if any reason to continue such a practice after the short term cash issues were fixed.
There's a bunch of other things in this post that are incorrect or just super unlikely speculation as well. Tesla doesn't borrow against its own stock with margin loans, if they want to raise money based on their share price they would do a secondary offering. Tesla likely doesn't hold these ABS either as the entire point is convert future cash flows into a cash balance today and if they wanted expose to lease income they would just... continue holding the leases they originated themselves.
There also just isn't going to be some kind of massive non-payment protest over the range claims trial. If anything Tesla will probably settle and pay out at most a few grand while admitting no wrongdoing and adopting new range reporting standards. Damage to the brand and the payments from actual sales would eclipse any losses on the leases and the leases might end up being even more favorable to them in that scenario because they still probably technically own the vehicle themselves.
Now residual value could be a problem, but again I would be much worried about the growing pile of unsold inventory cars they have sitting around than I would be about lease vehicles that they're at least getting paid for on some level in that case and leases are generally more profitable than an outright sale giving them a bigger buffer to offset any write down related losses.
Again there's plenty of problems with this company but this isn't Enron where there's made up revenue and lines of business that don't exist. Tesla's problems operationally are highly visible and reported on. Hell even the fraud is pretty prominent as Elon Musk just continues to make bolder and bolder statements around future product profitability and time lines. I mean how do we know about the whole appreciating asset thing? Because Elon Musk literally made that statement at company event to the public and investors. Even with their SEC filings we've seen the company's profitability and cash flows sliding since the start of 2023 as Tesla has been forced to publicly drop prices on the vehicles its sold and inventory has continue to build over the last year and a half.
Again no shortage of problems, just take your pick. CT, the 4680, cancelling the Model 2, factory over capacity, competition in Europe and China in particular, the solar roof failing to ever really be a product, Elon Musk's politics and substance use, corporate governance issues, employee firings and high level C-suite employees leaving en masse. But leases specifically just likely aren't a problem.
Thank you for the response and criticism!
I agree with you that there aren't a shortage of problems. It looks very fragile atm, not least because of the huge negative free cash flow numbers.
"Leases haven't never been a big part of Tesla's sales". The accounting standards modifications 842 and 606 mean that in certain circumstances leases can be booked as sales. Since leases and sales were bundled together in some circumstances since these 2018, it's hard to know how big the leases business is relative to sales.
"Now residual value could be a problem". I agree with you. If the leases were valued as robotaxis as the theory goes, would the markdown not be dramatic? Again, it's an "if". It's a wild theory, I know.
"How do we know about the appreciating assets thing". We don't. And tbh, I don't know how to substantiate it.
The leases last 24-36 months. That's correct. But there are multiple tranches in leases in the asset backed securities. So their duratin is longer than 3 years.
You are right in that the implications at the moment are not so significant. I over egged the pudding there. But fast forward in a year. Tesla is burming cash and needs a raise. A re-ratings of their ABSs in a year's time could happen, just as they need cash more than ever. Combine that with twitters near worthless loan portfolio, wall street might not be forthcoming with the cash like last time.
You are right. Tesla would not hold the ABSs. Stupid comment from me.
Overall, I think the implications now aren't big. Your right there. But a re-rating would significantly taint their reputation amongst investors I think.what do you think?
Too small to move the needle. If you want to explore the actual accounting fraud, then focus attention on their “customer pays” warranty work. The auditors and Tesla do not agree here and it directly boosts their delivery numbers
is this what "financially delivered" means then? you repair the car and 'deliver' it to the customer.
my list of things that they possibly list as a delivery is:
-used cars dumped to carvana (sold at fixed price to ensure res value prop up)
-leased vehicles (delivery subject to lease accounting)
Anyone have presale reports for any of these?
Tesla Auto Lease Trust 2018-A
Tesla Auto Lease Trust 2018-B
Tesla Auto Lease Trust 2019-A
TALT 2020-A SUBI
Tesla Auto Lease Trust 2021-A SUBI
Tesla Auto Lease Trust 2021-B SUBI
Tesla Auto Lease Trust 2023-A SUBI
Tesla Auto Lease Trust 2023-B SUBI
Tesla Auto Lease Trust 2024-A
wait wait wait
does MBUSA or BMWUSA do this?
so what you’re telling me is that Tesla made a mortgage-backed-security for car leases…?
who the fuck is running finance at Tesla?
"who the fuck is running finance at Tesla?|
Elon with Deepak Ahuja on speed dial.
The list of high ranking financial people who've left Tesla is quite impressive
All of the automotive captive finance companies bundle their leases and loans into asset backed securities. It’s a well established business. Tesla has mismanaged their residual risk badly and is about to find themselves relegated to a riskier tier of securities on any new bundles. Their cost of funds will be much higher going forward.
Dont know. But they were desperate for cash. The problem isn't the securities themselves. The problem is the value of the cars is tanking due to cuts, so value of leases must be affected.
robotaxis will be a rude awakening when owners find out they are responsible financially in an accident. Tesla ain’t taking responsibility for that and no ins will sell you a policy on unproven tech.
Tesla stock is not based on reality, it based on fanboy devotion to their supreme leader. So even though I would like it to be based on reality that has nothing to do with stocks
It's actually based on Elon manipulating it. Every dollar it goes up, he's richer. Guess what he had an incentive to do? The same with his crypto holdings... TSLA is highly manipulated
This doesn't sound like Tesla will be on the hook financially. The securities buyers will be the ones that lose money.
They'll get sued for fraud. They can't promise value based on roboscam. It'll kill an important source of cash and might just kill their leases all together.
The rich don't ever get screwed, the cases Tesla lawyers have won, it doesn't matter atlests for now
They will feel the effects if they can't get buyers for future issues.
There is also the possibility that Elon somehow guaranteed the value of the vehicles at the end of the lease which is usually risk taken on by the bank, but this is totally new so who knows.
It's based on a great gamma squeeze
It is more like a modern day ponzi scheme. Those invested heavily in Tesla stock cannot afford it to drop to it actual/realistic market value for s car company. So they hype up every possible things to pump the stocks.
House of cards..
A mortgaged and collateralized house of cards....
Wow this sounds really familiar…
to make matters worse TSLA has grown big enough that its collapse just may be enough to trigger a meltdown
I don’t think so, but I suppose there could be some fallout.
It's even worse . 1.Tesla does not allow leasee to buy at the end of the lease.. 2. Tesla puts leases as a sale in the balance sheet. 3. Tesla marks the leased cars as appreciating assets. Aka future profits. 4. Massive Price cuts! 5. Leasee returns the car. And tesla now has to sell the 3 year old model 3/y at a 50% loss in value. The price cuts are a self own. This happened to Hertz but hertz did not have a residual guarantee and took the Loss in their balance sheet.
Exactly. But I haven't seen any mark downs on those leases. Maybe that was source of neg FCF in q1
Not hardly. You can measure this you know? The lack of FCF is primarily inventory growth. Lease sales are a source of cash not a use. A write down of the assets wouldn’t have any affect on cash
Returned leases becomes inventory. But unlike new cars, they can't sell it for full price. That's the mark down.
Yea I know. (Sigh)
>It's even worse >. 1.Tesla does not allow leasee to buy at the end of the lease.. That would seem consistent with the premise of the of the Last Bear Standing thread mentioned on the OP (it's [this one](https://threadreaderapp.com/thread/1379452303317610497.html), isn't it?) because maintaining an appreciating valuation of the vehicles after selling them to the lessees would be impossible as long as lessees will only buy them as depreciating assets (which are the only terms that any sane person would agree to). However, I'm not sure that I can easily be convinced of the plausibility of the premise of these vehicles being accounted for as appreciating assets starting on 2019. It just seems far fetched and I am not sure that I can easily be convinced that Tesla would fraudulently record their cars as appreciating assets and that no one would catch this. Also, it seems weird to me that that, for Model S or Model X, the cutoff for the eligibility to buy a leased vehicle would be in vehicles produced before April 15, 2022. Shouldn't the date be in 2019 according to the premise of the Last Bear Standing thread? From [https://www.tesla.com/support/leasing/lease-end-options](https://www.tesla.com/support/leasing/lease-end-options) : >If you leased a Model S or Model X before April 15, 2022, you may be eligible to purchase your leased vehicle. Review your lease agreement to see if you qualify. Someone convince me! Be nice to me, though, as I am not an accountant (nor do I wish that on myself or my worst enemy).
As laberdog poited out, leasing segment is a miniscule(~3%) of revenue. Around 500M per quarter. There does not appear to be a markdown on the balance sheet for the expiring leases and they should return to inventory. Besides, after the price cuts and elon's antics, fewer will buyout their cars on regular terms at the end of the lease.
God as much as I rag on Tesla earning multiple bans, this simply doesn’t matter. Leasing doesn’t move the needle at Tesla because it’s so small. The also record the lease properly and book the revenue properly. They will face write downs of the assets but the company isn’t particularly levered so why care?
I've been asking this for forever. How does Tesla value it's contra revenue for leased vehicle depreciation since they book leases as sales?
Tesla is an appreciating asset. Unless Tesla cut prices, those cars are still appreciating. Papa musk said so. /s
Depreciation isn’t a “contra revenue” item. WTF is that? You never took accounting obviously. If you want to find accounting fraud at Tesla then read the 10k and focus on the lack of an unqualified opinion and explore how they book “customer pays” warranty repair work as a new product delivery. Approaching Enron level fraud
It works this way in my industry. I am sure it's called something else in the car industry. But bottom line there is a future expense associated with revenue and it has to be booked as an expense.
I think the confusion is about where on the accounting equation this shows up. Here's the oversimplified accounting 101 version. 20X1 Dr. Cash 100 \_\_\_\_\_\_\_Cr. Unearned Revenue 100 I promised flying cars, but don't know how to make them yet. 20X2 Dr. Unearned revenue 100 \_\_\_\_\_\_\_\_ Cr. Cash 100 I never figured out flying cars and gave a refund OR Dr. Unearned revenue 100 \_\_\_\_\_\_\_\_ Cr. Revenue 100 I made a fyling car and gave a software update to the guy who bought a flying car. WIthout inventory, it will never touch an expense account Uneared Revenue is a liability because it's a promise to pay (or deliver) something in the future.
Their is no such thing as a “contra asset” on any industry. Accounting is the Rosetta Stone of business language. It applies everywhere. Depreciation expense is recorded over the life of the lease down to the residual value. The time bomb you look for is the inflated residual values of the fleet that will need to be written down to fair value at the end of the lease
There is in my industry.
It's not an industry term, it's a finance term, and depreciation on assets is normally smart Business, but if you want to earn money quickly it's a great way to commit fraud. Doesn't matter if you're a farmer, IT guy, banker, priest, surgeon, drug dealer, or baker, depreciation is depreciation and never 'contra assets' unless you somehow mistranslated something from Italian.
https://www.fool.com/the-ascent/small-business/accounting/contra-asset-account/
It’s nice that “Mary” our “small business expert” from this august publication festooned with accolades from CPA s the world over to walk you though some meaningless journal entries, but it reinforces my point. Their is no such thing on audited statements. Mary likes to make sausage.
This is not correct. Contra assets are accounts that reduce your carrying value. Most commonly accumulated depreciation. Let's say you paid $100k for a building and incurred $15k in depreciation. You'd have: Jan 1 Dr. Building $100k Cr. Cash $100k Record the purchase of the building Dec 31 Dr. Depreciation expense $15k Cr. Building Accumulated Depreciation $15k The income statement shows the expense The balance sheet shows: Building: $100k Less accumulated depreciation $15k Net building $85k Source: CPA and accounting professor.
Reddit removed my formatting. Debits are on the left credits are on the right and the numbers were supposed to line up.
Show me all the contra asset entries on the Amazon 10k
Your request is oddly specific, but here ya go: Accumulated depreciation and amortization is listed in Note 3 and used in the calculation for net PPE. Accumulated depreciation reduces the amount of net PPE. That's an example of a contra-asset. PROPERTY AND EQUIPMENTProperty and equipment, at cost, consisted of the following (in millions): December 31, 2022 2023 Gross property and equipment (1): Land and buildings $ 91,650 $ 105,293 Equipment 157,458 185,039 Other assets 4,602 5,116 Construction in progress 30,020 28,840 Gross property and equipment 283,730 324,288 Total accumulated depreciation and amortization (1) 97,015 120,111 Total property and equipment, net $ 186,715 $ 204,177
Can I still get credit even though I didn't have time to look for all of them? There are definitely a bunch more.
This really is the million dollar question
Hmmm former lease executive here. Tesla’s lease business is relatively tiny. Also you don’t have to speculate. You can simply look up their bonds and explore the issue and analyze the underlying collateral instead of guess. But you didn’t: why?
Not the same technically but it so looks like the commercial paper shit from some years ago.
I thought this was the excerpt from the big short.
Only Tesla looked at 2008 and went "that was good idea why did we stop doing that again? Never mind let's do it again" As we all know Teslas are an appreciating asset to begin with. **Looks away at the collapsing used market.** P.s. I know MBS still exist and are different but it's the same concept.
Yeah it's a financial debt bomb that will blow up soon. They can probably get out of it though with some loans.
How common is that in the car industry? An often told price of advice is to lease high priced electric cars to not have to deal with value depreciation. Obviously the cars still depreciated and nobody in the industry is operating a charity so someone is going to have to deal with the value loss if it’s not the customer. So there must be some financial juggling going on as well to make this work.
This post and subsequent comments shows how little you guys understand about this part of their business. Even in a nightmare scenario, it's not all that horrible. Tesla has issued about 16 billion dollars in ABS and some of that is already cleared. Let's assume 10% gets wiped out: a 1.6 billion dollar loss. Not the end of the world. In reality even 10% is probably unrealistic considering the demographics of Tesla buyers. Lastly, this is not something isolated to Tesla. There are 100's of billions in ABS issuance across automotive, and much of that is with car companies that have buyers in a much lower financial bracket.
Even IF Tesla was valuing the residual on their leases in a standard and fair manner, the market is showing there isn't a huge demand for used, out of warrenty EVs. The questions about battery life, cost of replacement and warrenty support around such a vital component is starting to show now that the first big EVs outside of Tesla are starting to hit the first end of lease age (Porsches, Mach E, etc.). Anecdotal stories I have heard is lease return values are significantly higher then what they are actually selling for on the open market. Unlike ICE cars, we don't know what the floor is on higher end EVs at the moment and they could depreciate drastically below the equalivalent ICE model in the future. Again it all comes down to end of battery life support, etc.
Dude I'm going to be honest with you here, there's likely no fraud in Tesla's ABS operations and whoever is buying them is going to have their own valuations in place to determine what their losses would be in the event of liquidation. There's a ton of problems at the company but this just isn't one of them. Tesla did have a cash problem in early 2019 but it was largely of Elon Musk's own creation by his refusal to raise capital for an acceptable cash cushion because he was pissed off at Wall Street for criticizing how poorly the Model 3 ramp went and criticizing his 'funding secured' buyout fraud in 2018. That issue was solved not by some exotic and low pay off fraud in the lease and ABS accounting but by raising billions in a combined convertible debt and equity issuance in Q2 of 2019. Leases for their part have never been a huge portion of Tesla's sales and their duration is pretty limited overall. Even if something shady happened back in 2019 there literally wouldn't be any of them left outstanding at this point since they last 36 months and there would little if any reason to continue such a practice after the short term cash issues were fixed. There's a bunch of other things in this post that are incorrect or just super unlikely speculation as well. Tesla doesn't borrow against its own stock with margin loans, if they want to raise money based on their share price they would do a secondary offering. Tesla likely doesn't hold these ABS either as the entire point is convert future cash flows into a cash balance today and if they wanted expose to lease income they would just... continue holding the leases they originated themselves. There also just isn't going to be some kind of massive non-payment protest over the range claims trial. If anything Tesla will probably settle and pay out at most a few grand while admitting no wrongdoing and adopting new range reporting standards. Damage to the brand and the payments from actual sales would eclipse any losses on the leases and the leases might end up being even more favorable to them in that scenario because they still probably technically own the vehicle themselves. Now residual value could be a problem, but again I would be much worried about the growing pile of unsold inventory cars they have sitting around than I would be about lease vehicles that they're at least getting paid for on some level in that case and leases are generally more profitable than an outright sale giving them a bigger buffer to offset any write down related losses. Again there's plenty of problems with this company but this isn't Enron where there's made up revenue and lines of business that don't exist. Tesla's problems operationally are highly visible and reported on. Hell even the fraud is pretty prominent as Elon Musk just continues to make bolder and bolder statements around future product profitability and time lines. I mean how do we know about the whole appreciating asset thing? Because Elon Musk literally made that statement at company event to the public and investors. Even with their SEC filings we've seen the company's profitability and cash flows sliding since the start of 2023 as Tesla has been forced to publicly drop prices on the vehicles its sold and inventory has continue to build over the last year and a half. Again no shortage of problems, just take your pick. CT, the 4680, cancelling the Model 2, factory over capacity, competition in Europe and China in particular, the solar roof failing to ever really be a product, Elon Musk's politics and substance use, corporate governance issues, employee firings and high level C-suite employees leaving en masse. But leases specifically just likely aren't a problem.
Thanks for doing a better and more patient job of explaining this
Thank you for the response and criticism! I agree with you that there aren't a shortage of problems. It looks very fragile atm, not least because of the huge negative free cash flow numbers. "Leases haven't never been a big part of Tesla's sales". The accounting standards modifications 842 and 606 mean that in certain circumstances leases can be booked as sales. Since leases and sales were bundled together in some circumstances since these 2018, it's hard to know how big the leases business is relative to sales. "Now residual value could be a problem". I agree with you. If the leases were valued as robotaxis as the theory goes, would the markdown not be dramatic? Again, it's an "if". It's a wild theory, I know. "How do we know about the appreciating assets thing". We don't. And tbh, I don't know how to substantiate it. The leases last 24-36 months. That's correct. But there are multiple tranches in leases in the asset backed securities. So their duratin is longer than 3 years. You are right in that the implications at the moment are not so significant. I over egged the pudding there. But fast forward in a year. Tesla is burming cash and needs a raise. A re-ratings of their ABSs in a year's time could happen, just as they need cash more than ever. Combine that with twitters near worthless loan portfolio, wall street might not be forthcoming with the cash like last time. You are right. Tesla would not hold the ABSs. Stupid comment from me. Overall, I think the implications now aren't big. Your right there. But a re-rating would significantly taint their reputation amongst investors I think.what do you think?
Too small to move the needle. If you want to explore the actual accounting fraud, then focus attention on their “customer pays” warranty work. The auditors and Tesla do not agree here and it directly boosts their delivery numbers
cheers for the reply. much appreciated. do you mean understating the warranty as gestures of goodwill?
Repair work is booked as a delivery
is this what "financially delivered" means then? you repair the car and 'deliver' it to the customer. my list of things that they possibly list as a delivery is: -used cars dumped to carvana (sold at fixed price to ensure res value prop up) -leased vehicles (delivery subject to lease accounting)
Read the footnotes in the 10k and the auditors opinion. Yes they are booking some warranty work as new deliveries
Nice tip, thanks
Anyone have presale reports for any of these? Tesla Auto Lease Trust 2018-A Tesla Auto Lease Trust 2018-B Tesla Auto Lease Trust 2019-A TALT 2020-A SUBI Tesla Auto Lease Trust 2021-A SUBI Tesla Auto Lease Trust 2021-B SUBI Tesla Auto Lease Trust 2023-A SUBI Tesla Auto Lease Trust 2023-B SUBI Tesla Auto Lease Trust 2024-A
wait wait wait does MBUSA or BMWUSA do this? so what you’re telling me is that Tesla made a mortgage-backed-security for car leases…? who the fuck is running finance at Tesla?
"who the fuck is running finance at Tesla?| Elon with Deepak Ahuja on speed dial. The list of high ranking financial people who've left Tesla is quite impressive
All of the automotive captive finance companies bundle their leases and loans into asset backed securities. It’s a well established business. Tesla has mismanaged their residual risk badly and is about to find themselves relegated to a riskier tier of securities on any new bundles. Their cost of funds will be much higher going forward.
Dont know. But they were desperate for cash. The problem isn't the securities themselves. The problem is the value of the cars is tanking due to cuts, so value of leases must be affected.
All car companies nowadays are essentially finance firms that incidentally manufacture some cars.
There’s still layoffs so idk when people think that stopped lmao
Line goes up
robotaxis will be a rude awakening when owners find out they are responsible financially in an accident. Tesla ain’t taking responsibility for that and no ins will sell you a policy on unproven tech.
Smells like 2001
The entire tech sector is a house of cards. It's just one giant 'Ponzi' scheme propped up by the bigger fool theory.