This article is nice but does not hit this argument out of the park, which is a shame because it is about time.
Here is what I have suggested to Sal:
Some clear points to dismiss this GAAP GRIPE.
1. It is absolutely wrong and misleading to treat the residual guarantee as a pure liability that is indistinguishable from a loan that Tesla must repay. Contractually it is an offer to trade a liability for an asset.
2. It is absolutely wrong to state that the customer is not fully obliged at the point of sale to deliver the full value of the sale to Tesla. The customer must deliver to Tesla the full value either in cash or as a combination of cash + asset value.
3. It is absolutely wrong to criticise the non-GAAP treatment in consideration of the fact that Tesla definitely holds 100% of the cash up front, and whether or not the asset is substituted for some of the cash at a later date is a matter for speculation. Not the other way round.
4. It is absolutely wrong to suggest that the GAAP liability issue is significant in any way. On the current and expected rate of 100% annual compounding of unit deliveries which forms the central assumption of all stock holders in TSLA (Year of sale [year 0)] ~20,000, Year 1 ~40,000. Year 2: ~80,000 Year 3: ~160,000), 30% of 2013 sales of 21000 units (6300 units) will be eligible for resale guarantee in a year in which 160,000 units are expected to be delivered. Therefore at the limit and upon realistic volume assumptions, the maximum number of units affected in 2016 will be in the order of 4% of units produced based upon every 2013 lease accounting unit. If 50% of "lease" sales are repurchased this represents 2% of the expected total volume. If perhaps more realistically 15% are repurchased, the bears are making a mountain out of a 0.6% mole hill of 2016 total unit production and this 0.6% may or may not result in a profit in its own right. It is an irrelevance, a rounding error at best. If any person or entity fails to purchase, sells, or sells short TSLA in 2013 on the basis of what might be the effect on Tesla's cash flow or profits in 2016 when the first residual guarantees become a live consideration for the business, then they have been sorely mislead by an absolute irrelevance.
BTW. There is a 5th point that is also valid.
The GAAP model classifies the deferred value of the residual guarantee as an interest free unsecured loan to Tesla for working capital. This is the most awesome piece of cost and dilution-free working capital financing on the face of the planet. Not a reason to short anything!
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