Hi, Knightshade --
Note that I am not accusing Tesla of accounting fraud or any wrongdoing at all and resent the implication that I am. I'm surprised to hear this from you, because I think you have high standards for accuracy. I may have unintentionally accused Tesla of fraud; if so, could you provide a quote so that I can properly amend and apologize?
Some auto companies have a separate line item for R&D; some, including Tesla, do not. I don't think either approach is fraudulent. GAAP has rules but still requires significant management judgement. Tesla is perhaps unique among auto manufacturers in conducting (almost?) all of the warranty work in house. I've never inquired as to how exactly Tesla accounts for this because I don't think it all that important, but a quick look at the 10-K shows:
"Services and other revenue consists of sales of used vehicles, non-warranty after-sales vehicle services, body shop and parts, paid Supercharging, vehicle insurance revenue and retail merchandise. "
"Costs of services and other revenue includes cost of used vehicles including refurbishment costs, costs associated with providing non-warranty after-sales services, costs associated with our body shops and part sales, costs of paid Supercharging, costs to provide vehicle insurance and costs for retail merchandise."
I didn't see much more detail, but didn't look too hard because I don't care that much, I'm more than willing to be corrected by those more diligent than I am. My guess is that what this all means is that warranty work is charged to reserves at cost.
In general, though, P&S is a 30%-40% gross margin business. You'll note the wide range there! I'm going from memory and welcome correction. If you're a any other OEM, your warranty expense is going to include that dealership/independent mechanic GM. That doesn't seem to be the case for Tesla. There are two implications:
1: There are analytical difficulties in comparing T's warranty expense, and thus auto gross margins, with other OEMs, and
2: Providing warranty work at cost helps to explain the crap margins in the services and other segment, which is kind of where I came in.
Please let me know if I've misunderstood anything.
Yours,
RP