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Tesla 'Services and Other' Revenue Line Item

green48

Member
Aug 2, 2016
96
678
Canada
Does anyone on here know what Tesla's 'services and other' line item includes? Obviously revenues from service centre appointments are included, but how about things like supercharging payments? Is there anything else I'm missing that would be included in the line item?
 

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Doggydogworld

Active Member
Mar 4, 2019
1,741
6,791
Texas
Does anyone on here know what Tesla's 'services and other' line item includes? Obviously revenues from service centre appointments are included, but how about things like supercharging payments? Is there anything else I'm missing that would be included in the line item?
It's a catch-all for a lot of different things, but the biggest item by far is sale of used cars Tesla takes in as trade plus, in some cases, sale of off-lease vehicles.

Trade-ins are a profit center for most car dealers. They keep the creampuffs, regardless of brand, and resell them at a nice profit. They immediately dump less valuable ones at auction, pretty much at breakeven. Tesla keeps all Teslas and dumps all off-brand cars at auction. Their strategy is driven by branding considerations, not profits. I think this plus general operational neglect is why they lose money on trade-ins. Bears claim they overpay for trade-ins (and rig lease residuals) as a backdoor way to discount new cars without hurting gross margins, but they have no evidence.
 

green48

Member
Aug 2, 2016
96
678
Canada
It's a catch-all for a lot of different things, but the biggest item by far is sale of used cars Tesla takes in as trade plus, in some cases, sale of off-lease vehicles.

Trade-ins are a profit center for most car dealers. They keep the creampuffs, regardless of brand, and resell them at a nice profit. They immediately dump less valuable ones at auction, pretty much at breakeven. Tesla keeps all Teslas and dumps all off-brand cars at auction. Their strategy is driven by branding considerations, not profits. I think this plus general operational neglect is why they lose money on trade-ins. Bears claim they overpay for trade-ins (and rig lease residuals) as a backdoor way to discount new cars without hurting gross margins, but they have no evidence.

Hadn't thought of that before. Do you think the trade-in revenues are larger than the service centre revenues? The 'service and other' revenue line item seems to be scaling with Tesla's overall fleet size, so I suppose either could be the driving factor (or both).

Interesting point re: overpaying for trade-ins, but I'm not sure I completely understand your point about how that might affect gross margins. Can you elaborate?

Ex. If I trade in my old car (worth $5,000), and Tesla offers me $10,000 at the same time that I purchase their $50,000 car, I get that they'd be offering me an under-the-table discount, but how might that show up on their income statements? Would the $10,000 they paid me be a cost of 'service and other'?
 

Doggydogworld

Active Member
Mar 4, 2019
1,741
6,791
Texas
Hadn't thought of that before. Do you think the trade-in revenues are larger than the service centre revenues? The 'service and other' revenue line item seems to be scaling with Tesla's overall fleet size, so I suppose either could be the driving factor (or both).

Interesting point re: overpaying for trade-ins, but I'm not sure I completely understand your point about how that might affect gross margins. Can you elaborate?

Ex. If I trade in my old car (worth $5,000), and Tesla offers me $10,000 at the same time that I purchase their $50,000 car, I get that they'd be offering me an under-the-table discount, but how might that show up on their income statements? Would the $10,000 they paid me be a cost of 'service and other'?
Telsa has said used cars are the biggest piece of Services, Other. If they took 50k trades last quarter (roughly have of deliveries) at $10k average value that's $500m. And $10k is probably low.

Tesla's 800k fleet is very new, so the vast majority of repair are done under warranty and not counted as revenue or expense. Non-warranty repairs would only be a fraction of the 59m charged against warranty reserve last quarter.

In your trade example Tesla would count:
50k - Automotive Sales Revenue
40k - Cost of Automotive Sales
------
10k - Automotive Gross Profit
20% - Automotive Gross Margin

When the sold your trade-in they'd report:
5k - Services, Other Revenue
10k - Cost of Services, Other
------
(5k) - Services, Other gross profit

Discounting the new car purchase price to $45k would show as:
45k - Automotive Sales Revenue
40k - Cost of Automotive Sales
------
5k - Automotive Gross Profit
10% - Automotive Gross Margin

When the sold your trade-in they'd report:
5k - Services, Other Revenue
5k - Cost of Services, Other
------
0 - Services, Other gross profit

Overall gross and net profit are the same either way, but Automotive Gross Margin is the metric they promote. As I said, though, I don't think they do this. At least not to any significant degree. I just think they manage used cars in a way that protects and promotes the Tesla brand instead of trying to make money on them.
 

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