Industry worst under GAAP. Only better than industry using magical unicorn fairy dust accounting.

If you have evidence of improper accounting or reporting, short the stock and publish the evidence. Otherwise, all US-based companies operate under the same laws and can take advantage of the same rules.

Tesla leaves R&D out of gross margins, as is typical of tech companies, but automakers amortize it over each unit and include it in the calculation.

GM for example would add about $3k per car to gross margin if they did it the Tesla way.

There's nothing wrong or shady either way, but it does make comparison less straight forward.

Note that Tesla doesn't just exclude R&D from gross margins, they also exclude unit marketing costs as well. (Tesla doesn't spend money on ads, but they spend $50-100 million annually on marketing.) Additionally, a number of QC-related costs (like taking back lemon cars, or paying for repairs before cars are accepted by customers) are excluded from the calculation of automotive sales revenues.

But that's not all: Tesla adds regulatory credit sales to their "automotive" gross margin figures.

Yes, that's right, Tesla's "automotive" gross margin isn't just vehicle sales like it is for other car manufacturers. For example, look at Q2 2020 filings. The clean-car credits that they sell to other manufacturers are treated as automotive revenue, and that accounting chicanery is entirely what lets Tesla claim a 20+% gross margin on their vehicles. (The clean-car credits are also what lets Tesla claim to be profitable, though it has yet to make a profit actually selling cars.)

Without treating the sale of clean-car credits as automotive revenue, Tesla's gross margins are at best in line with industry gross margins (and fall below industry margins once you apply automotive GAAP to standardize the financials).

So you're arguing that Tesla should apply R&D costs to vehicles but not count credits directly resulting from the sale of a vehicle?

The sale of a vehicle results in a credit that can then also be sold, so why can't that profit be tied to the vehicle?

On the flip side, the company can spend lots on R&D that never makes it way into a vehicle. Why should that then count against the profit from selling a vehicle?

Unlike parent, I agree credits should be included in gross margin, whether positive or negative. Companies in Europe facing significant CO2 fines should have that reflected in their reported margins.

I don't understand your R&D point though. It's perfectly logical either way to include or exclude it. There's nothing wrong with how Tesla does it, and there's nothing wrong with how the rest of the auto industry does it. It just means you can't blindly compare the figures.

Thanks, I didn't know that. For 2019, GM had R&D costs of $6.8B. They sold 2,887,888 cars in the US and 7,710,000 worldwide. Per car, that would be either $2,355 or $882 depending on whether the R&D number is a worldwide roll up (I'd think yes?).

Either way, adding the $6.8B to their gross margin number for 2019 would have increased automotive gross margins from about 10% to about 15%. Tesla's 2019 automotive gross margin was 21%. MRQ was 24%.

Your figures are correct, sorry, I did a quick back of the envelope and as you suspected compared worldwide R&D with US sales.

Yeah, I'm not claiming Tesla has bad margins, just that the figures on the balance sheet aren't apples to apples. 10% vs 21% compared to 15% vs 21% makes a huge difference. It's a 40% gap instead of a 110% gap.

Shorting is based on fundamentals, but Tesla has not traded on fundamentals in years. Tesla stock is proof that the market can remain irrational for a very long time.

As for the evidence, simply read Tesla's SEC filings. The financial parts, not the marketing fluff.