Tesla Has Many Problems. Its 'PPE' Accounting Isn't One of Them. -- Barrons.com

Al Root

A recent article raised questions about Tesla's spending on assets that didn't show up on the balance sheet, implying potential problems with the company's accounting. The only problem: Spending on assets and the Plant, Property, and Equipment, or PP&E, line on the balance sheet rarely, if ever, match up.

In 2024, Tesla spent $11.3 billion on new PP&E, according to its annual financial statement filed with the Securities and Exchange Commission.

Tesla ended 2024 with $51.4 billion worth of PP&E, before accumulated depreciation, up from $42.8 billion at the end of 2023. The difference in those two numbers is about $9.6 billion, or $1.7 billion short of reported capital spending. Where did it go and is it a big deal?

A word, or two, on accounting and accounting statements. Capital spending is reported in the statement of cash flows, which shows just that: where the cash flowed over a given time period. The income statement shows the value a company created over the course of a time period. The balance sheet explains a company's financial position at a point in time -- how much cash it has, how much debt, how many assets, etc. Gross PP&E is reported in the notes to the financial statement. It is the amount of money a company has spent on plants and equipment before any depreciation charges that account for usage and obsolescence.

The difference in capital spending, or Capex, and gross PP&E is "not a big deal or even a medium one," says accounting expert Robert Willens. "Not every dollar of Capex finds its way into PP&E. There are other [financial] accounts to which Capex would be debited so that it would be surprising to me if any company's Capex matched its PP&E perfectly."

It doesn't match up with any of the other companies Barron's looked at. Based on the most recent annual reports, Amazon.com is missing $13.1 billion in PP&E. Microsoft and Alphabet have extra PP&E of $3.6 billion and $1.7 billion, respectively.

The differences between Capex and gross PP&E for the Magnificent-Seven, General Motors, and GE Aerospace amount to a few percentage points of gross PP&E.

That is also based on only one year's data. In 2023, Tesla had $300 million in extra PP&E over its capital spending -- the reverse of the 2024 situation.

It's impossible to know if Tesla's or other companies' accounting is perfect. Investors only have the reported numbers to go on, though The financials are audited by external accounting firms. Tesla didn't respond to a request for comment about the difference.

If differences were large or started to accumulate over time, a question to management about PP&E accounting might be warranted. Barring that, investors should always read financial reports but spend most of the time thinking about Tesla's valuation, sales data, new product launches, self-driving taxis, and CEO Elon Musk's time management skills.

The latter have been on investors' minds for weeks. Musk has spent seemingly all his time in Washington, D.C. since the Nov. 5 election. Through midday trading Monday, Tesla stock was down 36% since the

That is despite a whopping 9.5% jump on Monday, while the S&P 500 and Dow Jones Industrial Average were up 1.7% and 1.4%, respectively.

Tesla stock also rose 5.3% on Friday after Elon Musk hosted an event for employees to reassure them he was engaged has his car company. That was enough for investors, who don't seem too bothered by PP&E accounting.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 24, 2025 14:57 ET (18:57 GMT)

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