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Economics of guaranteed resale value

Discussion in 'TSLA Investor Discussions' started by daniel Ox9EFD, Aug 1, 2014.

  1. daniel Ox9EFD

    daniel Ox9EFD Member

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    I read recently that the difference between the GAAP and non GAAP earnings (revenue of $858 million vs. $61.9 million loss) was attributed to the guaranteed resale value.

    I was wondering if there is an estimate for how much this is costing Tesla, and how will this cost look in the future? how long until the reliability of the car is self evident and the guarantee is no longer needed?


    Link to article-
    Tesla Q2 Earnings Live: EPS And Production Up, Ground Broken In Nevada For Gigafactory - Forbes

    Also, does anyone have a link to the earnings report itself? googled around a bit but couldn't find it.

    Thanks,
    Daniel
     
  2. bsd

    bsd Member

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    It's not "costing" Tesla, but rather the revenue is accrued over the course of the lease rather than included immediately like a normal sale. And IIRC the guaranteed "residual" is registered as a liability.
     
  3. RobStark

    RobStark Active Member

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    The guarantee has not cost Tesla a dime so far. It has required Tesla to put money into a reserve just in case buyers invoke the buyback clause. If Tesla buys Model S 36-39 months after purchase and re-sells for a loss then that is counted against the reserve. If not then those monies become realized profits after the 36-39 months.

    GAAP $61.9M loss Non-GAAP $16M profit.

    Financial Results
    Tesla - Investors Overview

    - - - Updated - - -

    Tesla has "business lease" aimed at small business owners i.e. real estate agents, lawyers and doctors with medical practice.

    Then it has a hybrid sales lease deal. If you finance through Tesla Finance there is a resale value guarantee. You buy the car like normal but there is a buyback clause that allows you to sell the car back to Tesla at 51% of base price plus 40%?(I am not sure of this number) of the options price. Then the final result is like a lease.
     
  4. daniel Ox9EFD

    daniel Ox9EFD Member

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    So its only reserve. Ok. That would explain posting the non GAAP numbers not including this expense.

    Just noticed, yea I posted the revenue instead of the profit.

    Thanks for the replies. As you could tell I'm new to this.
     

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