dajo9 said:
LudwigsFountain said:
I read that Tesla produced 50,000 more vehicles than it sold last quarter, about 15%. Knowing Musk, I bet this is a ploy to absorb less depreciation and overhead per unit, improving margins. I guess when you have that much cash spending a billion (?) to pretty up the income statement makes sense.
This is one of the more financially illiterate things I've read on this board
How so? It's been decades since I've been a practicing CPA, but my recollection is that overhead and depreciation are allocated to production on some basis (units, direct labor hours, etc) that is calculated at the typical production level. If production exceeds that expected level, the allocation is capped at actual. However, if production is below the anticipated level so that the period's overhead and depreciation are not fully allocated to production, the difference must be expensed to cost of goods sold and not included in inventory. So I looked it up and Tesla's production has been running at around 400,000 per quarter. It had 20,000 in inventory at the end of 2025 and added 50,000 more in the first quarter. Now I have to believe that Tesla's ability to predict sales would allow it to scale back production (and save considerable money) to avoid ending with 70,000 cars in inventory, which is probably twice the historical average.
I don't know enough about the details of Tesla's overhead accounting to know exactly what's going on, but one way or another, runnning production above sales to this extent is going to shift costs from current expense to inventory. It's pretty clear to me that Musk has an incentive to keep production at higher levels, at least in the short run. It still looks to me like he's burning cash to pretty up the financial and avoiding the stock hit that might occur if production cut backs were announced
