Is Tesla turning a profit on Cybertrucks?

[3cyberbeast]

Seeing as Ford for example, is taking a huge loss on each lightning sold I was wondering if Tesla is actually making money or losing money for every cyber truck they deliver. Also, does anyone have an idea of how many cyber trucks have been built so far? My last 4 digits of my Vin number is 7777 But does that relate to an actual number of production? Or should I just go to Vegas and play The blazing seven slot machines.

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[SSonnentag]

Based on the information available up to September 13, 2024, Tesla has indicated that the Cybertruck is on track to achieve profitability by the end of 2024. This projection was part of Tesla's updates in their shareholder communications for Q2 2024, where they mentioned that the Cybertruck's production rate had more than tripled sequentially, moving towards profitability.

 

[3cyberbeast]

Based on the information available up to September 13, 2024, Tesla has indicated that the Cybertruck is on track to achieve profitability by the end of 2024. This projection was part of Tesla's updates in their shareholder communications for Q2 2024, where they mentioned that the Cybertruck's production rate had more than tripled sequentially, moving towards profitability.

Amazing and aclegacy automaker like Ford cannot achieve profitability with much more time.

 

[VAF84]

Amazing and aclegacy automaker like Ford cannot achieve profitability with much more time.

Bloated, bureaucratic, unionized, legacy companies. No surprise there.

 

[HaulingAss]

Based on the information available up to September 13, 2024, Tesla has indicated that the Cybertruck is on track to achieve profitability by the end of 2024. This projection was part of Tesla's updates in their shareholder communications for Q2 2024, where they mentioned that the Cybertruck's production rate had more than tripled sequentially, moving towards profitability.

I believe every Cybertruck sale increases positive cash flow already, even when Tesla made the statement that they expect Cybertruck production to achieve profitability by the end of the year. This is in direct contrast to other EV trucks like the Lightning and the R1T in which everyone they produce creates negative cashflow.

How can Cybertruck create positive cashflow while not being profitable yet? Multiple reasons. Producing vehicles creates a liability for things like warranty service that must be estimated for each vehicle and expensed against the sale revenue (even though much of that cost will happen years later). Also, a vehicle model has a finite lifespan with which all the engineering, design, tooling, crash testing, etc. must be costed against. A portion of the revenue of each sale must be attributed to paying those costs, even though the money has already been spent. If Tesla makes more Cybertrucks than assumed in these calculations, the actual cost per truck is lower.

 

[Tony2times]

Who cares? Elon still be rich AF flyin in that PJ. The Cybertruck is badass, Tesla is badass and Elon is gonna rule the world!

 

[Brandon708]

I believe in order to turn a profit on the Cybertruck they have to exceed the costs associated with getting them built. A lot of factors such as R&D, Giga Texas, Giga Presses and all other equipment and material costs.
anyone know what that number is or where to find it?

 

[MadMaxTX]

Generally, R&D costs are expensed and not capitalized. But it depends on the circumstances. I've seen it done both ways. It just depends.

 

[HaulingAss]

Generally, R&D costs are expensed and not capitalized. But it depends on the circumstances. I've seen it done both ways. It just depends.

I believe R&D costs that are specific to the design and engineering of a specific model are capitalized over the expected production volume of that vehicle. Of course, Tesla can only make educated guesses how many they will end up making, the latter ones can be sold at a profit, even with absurdly low prices, due to those costs having been paid off, warranty reserves being reduced based upon data showing lower warranty costs than originally assumed, and increases in production and supply chain efficiencies.

 

[HaulingAss]

I believe in order to turn a profit on the Cybertruck they have to exceed the costs associated with getting them built. A lot of factors such as R&D, Giga Texas, Giga Presses and all other equipment and material costs.
anyone know what that number is or where to find it?

This type of detailed cost data is typically never broken out on a per model basis.

 

[mongo]

I believe R&D costs that are specific to the design and engineering of a specific model are capitalized over the expected production volume of that vehicle. Of course, Tesla can only make educated guesses how many they will end up making, the latter ones can be sold at a profit, even with absurdly low prices, due to those costs having been paid off, warranty reserves being reduced based upon data showing lower warranty costs than originally assumed, and increases in production and supply chain efficiencies.

Tesla puts development, including early line setup, into R&D expense.

From the 2023 10-K

Research and development (“R&D”) expenses consist primarily of personnel costs for our teams in engineering and research, manufacturing engineering and manufacturing test organizations, prototyping expense, contract and professional services and amortized equipment expense.

R&D expenses increased $894 million, or 29%, in the year ended December 31, 2023 as compared to the year ended December 31, 2022. The overall increase was primarily driven by additional costs in the current year related to the pre-production phase for Cybertruck, AI and other programs.

 

[MadMaxTX]

I believe R&D costs that are specific to the design and engineering of a specific model are capitalized over the expected production volume of that vehicle. Of course, Tesla can only make educated guesses how many they will end up making, the latter ones can be sold at a profit, even with absurdly low prices, due to those costs having been paid off, warranty reserves being reduced based upon data showing lower warranty costs than originally assumed, and increases in production and supply chain efficiencies.

Yes, that's the kind of thing that can be done, but most conservatively run companies stay away from capitalizing such costs. As you say, it can spew cash but it can also sink you. It affects the balance sheet, cash flow, future profits/losses and not least, taxes. You have to be very careful with capital that is not a tangible item especially after Enron and the Dodd-Franks requirements. You have to mark assets to market, which means a regular estimate of the value, which gets difficult with aging products and sales as you point out. We (and I won't name companies) had to revaluate every quarter. You might write down some amount if you think sales are impaired or you might write them up. These laws are designed to make it illegal to do what you suggest in the example of getting the costs paid in early sales and then be able to reduce prices, or more likely, show large profits in the future. You can see how such techniques can be used to show a misleading financial situation for a company. It's a long discussion, but also, it's a warning flag for wall street analysts if they see questionable capitalization of costs -- not just R&D.

As far as a car, you could make an argument either way for a lot of R&D costs. Just about anything you do in R&D could be argued applies to future EVs in general, not just a specific model, if you want to. If the company is in good shape, the CFOs I worked with would take the cost as an expense if they could, get the appropriate tax deductions and have the cost behind them. Of course, you have to have the earnings to do that so a weaker company might elect to capitalize if they can and hope for good sales. There are criminal penalties, but people still try it!

 

[HaulingAss]

Yes, that's the kind of thing that can be done, but most conservatively run companies stay away from capitalizing such costs. As you say, it can spew cash but it can also sink you. It affects the balance sheet, cash flow, future profits/losses and not least, taxes. You have to be very careful with capital that is not a tangible item especially after Enron and the Dodd-Franks requirements. You have to mark assets to market, which means a regular estimate of the value, which gets difficult with aging products and sales as you point out. We (and I won't name companies) had to revaluate every quarter. You might write down some amount if you think sales are impaired or you might write them up. These laws are designed to make it illegal to do what you suggest in the example of getting the costs paid in early sales and then be able to reduce prices, or more likely, show large profits in the future. You can see how such techniques can be used to show a misleading financial situation for a company. It's a long discussion, but also, it's a warning flag for wall street analysts if they see questionable capitalization of costs -- not just R&D.

As far as a car, you could make an argument either way for a lot of R&D costs. Just about anything you do in R&D could be argued applies to future EVs in general, not just a specific model, if you want to. If the company is in good shape, the CFOs I worked with would take the cost as an expense if they could, get the appropriate tax deductions and have the cost behind them. Of course, you have to have the earnings to do that so a weaker company might elect to capitalize if they can and hope for good sales. There are criminal penalties, but people still try it!

In my experience, Tesla is generally quite conservative with their accounting, because they know they are under fire.

For example, if you look at the history of the Model 3, you will see they had to periodically adjust the warranty reserves lower, because they had estimated future warranty expenses as being much higher than they actually turned out to be.

This is the exact opposite of what many Tesla detractors were claiming, that Tesla was gaming the accounting by not holding enough warranty reserves for future warranty claims.

So, to be clear, even if Tesla was spreading certain development costs over the life of the vehicle platform, it would not necessarily make their stock more attractive/valuable because it would reduce the gross profit per vehicle. It could also delay the point at which they would have to start paying taxes. So, yes, they have to be very careful to avoid litigating how they handled the accounting. It's very rare for corporate officers to be sent to prison unless there is blatant fraud. Enron is not what we are discussing here.

A company can game the numbers in an unlimited number of ways, but it largely only impacts two things:

When and how much tax they pay, and the way investors view the company. The two are often at odds with one another.

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