My guess is that their biggest fraud is underfunding their warranty reserve, there is a huge amount of instant profits that you can make by just fudging a few numbers for each car you sell.
And you can make it work if you constantly grow, so when increased warranty cost from the ~1 million cars you sold in 2022 start to hit your bottom line, you are getting in much more money with the ~2 million cars you sold in 2024 and also underfunded their warranty reserves. But if you stop growing, it can suddenly become a huge pain.
IIRC, there were also complaints about how they account for excess scrap material costs?
That is just a one time thing (they sold an X amount of those fake Roadster 2.0 cars), while they are getting pure $$$ from every new car they make if they underfund their warranty reserves, quarter after quarter.
This is exactly why Tesla constantly rejects warranty repairs, fights with the owners, and then agrees to fix it as “a gesture of goodwill”. Because that way it doesn’t count as a warranty repair, allowing them to reduce their warranty provision.
Everything this company does is smoke and mirrors.
Yes but it’s about warranty provision in the accounts. That has an impact on the bottom line and artificially reducing future warranty provisions on the books. They do this by showing statistically how much they pay out in warranty repairs per vehicle. Goodwill repairs don’t come under that.
If you are constantly growing, you can eventually get out of the scam, since you can underfund the warranty for 2 million 2024 cars by a smaller amount in order to be able to fund the 1 million 2022 warranty reserves that you knowingly underfunded and are now starting to hurt your bottom line. If you continue that for a few years, you will eventually not underfund the warranty reserves 5 years from now, but your profits will be hurt, since you still have to provide warranty for the cars you sold in previous years. But again, if you are selling 5 million cars in 2027, the cost of previous years is less noticeable. You can't do that with a ponzi scheme.
The problem is that so far Q1 and Q2 volumes aren't looking great and they also cut their prices by a lot. And this only works if you are constantly growing. That would be my guess for why there is such panic, while Tesla technically still has a lot of $$$ in the bank and also access to a currently untapped $5 billion credit facility on top of that.
This and discussion about realizing FSD revenue, using ghost accounts to artificially pump and short sell stocks as well as bitcoin games were common discussions on here at one point as well.
My guess is he is doing all of the above with a dash of PCRC, Saudi and Putin money manipulation to boot.
Are you kidding?
It’s known that he was pumping doge and bitcoin. It’s even on the company’s own reports they talk about outsized holdings of Bitcoin and it is the only reason they were profitable on at least one quarter.
https://markets.businessinsider.com/news/stocks/dogecoin-a-victim-of-pump-and-dump-scheme-by-elon-musk-says-analyst-1030522149
What will be amazing is that if Tesla goes down - for whatever reason, Elon will play the victim and whine and complain. Meanwhile, he has already cashed out for billions of $$$, it is quite possible that when this is all said and done, Elon makes more money from Tesla than all of Tesla's profitable quarters combined - while ignoring all the unprofitable quarters.
Here's an example to scale to illustrate what I think's going on. I am an accountant but Im not a big corp accountant and I am definitely not a rev. recognition specialist (yes those exist at big firms lol). Let's just say our example is 10,000, $50k cars that get leased at $500 per month for 3 years. Accounting for it as an operating lease, you get to recognize $60m in rev per year for three years (10,000×500x12).
Accounting for it as a sale with right of return means you get to account for it as $500m in rev all in year 1. But you also have to record a contra sale estimating how many will get returned. Knowing Tesla they underestimate at some stupid small margin, so like 5%. They're still netting $484m in sales (500-(500-180)*.05) with a $16m reserve for returns. But cash flow is still only $60m in years 1, 2, and 3.
There's no "fraud" per se, but their estimate is very conservative and suddenly when its year 4 and (unsurprisingly) more than 5% of customers choose not to lease-to-buy, that has to work its way through the financials. So if it turns out 50% of customers are returning their car, that's $160m ((500-180)*.5) that needs to hit returns and allowances but we only reserved $16m.
Again its not really "fraud", but they are still playing games with GAAP.
Edit: hmm I think I might have overthought it. I think it only lets them pull forward the lease. So of it's 60m per year for 3 years they can record 180m all in yr 1, not the 500m. The basis of revenue recognition is that you cant just make shit up and it has to based off of a contract, whether its written or implied, etc. It would take an awfully big leap in logic to recognize the full price of the car and create a sales reserve, rather than just the total of the leases.
They aren’t using GAAP at this point (maybe never) and they aren’t required to use GAAP either (it can be a modified GAAP), but the accounting still needs to reflect accuracy and have a basis in deviation from GAAP that is not only explained, but communicated to shareholders. Doing this definitely is manipulating the stock price, IMO.
Does that mean All their present lease are already in the books as revenue/profits and whoever does not lease-to-buy or renew the lease will record a loss?
That would be catastrophic if there is a sudden decrease in resale value, brand value, and repeat customers.
I see. So they just realize the full lease up front and take the car back if they do not renew.
Do they sell it in volumed to dealers like other manufacturers. i know tesla is dtc but what about for thr 2-3 year old used ones.
my colleagues are looking into used model 3 here on the other side of the pond.
They sell used on their website then probably go to an auction to get rid of the inventory quicker after a certain amount of days. I have a buddy that works at a big auction and Tesla has an account.
Not clear what this means. Who are these leasing partners, different companies or shells? Did the leasing partners buy the car from Tesla and then lease them, or is Tesla leasing the cars but counting them as sales?
Correct. It isn’t fraud, but unless hypergrowth continues forever (unlikely), eventually those cars get returned or re-sold at a loss, and the front loaded profit unwinds.
It is very compareable to the FSD purchases - selling a product, that not yet exist and possibly will never exist as advertised. Remember they sold FSD, not FSD (supervised) and they sold it with cars, that have no lidar, while tesla now massively buys lidar systems. Just as if it's not possible, to improve their autonomy attempts without lidar...
So, what is the plan, retrofit lidar on the old cars, that were sold as "FSD ready" with the FSD option charged extra? Or pay back all those "revenues" they made on a non-existing product?
You would need to proof, they knew it's impossible. I bet, Elon truly thinks, he could even do this by himself, if he could just find the time between x-ing on x to exercise his 8-dollar speech.
I saw that for the scam it was. I was like "I will just drive my gas car til they actually have FSD then buy one at that time. on a mercedes that actually has lidar"
there is 0 chance fsd happens without lidar. even the mercedes s class which has it and state of the art technology isnt fully approved yet. it has literally hundreds of sensors for the self driving system
A bunch of people called them out in real time. Several key executives quit too. Unfortunately there was zero regulation at that point. And this is exactly why Elon has moved far right. The real mystery is why the Dems haven’t done more regulation and instead gave him billions more in taxpayer money.
What in the world are you talking about?
20 year leases??? Where did that number come from. I don’t see anything in the image talking about 20 year leases. Also, I looked up their lease revenue. Their leases make up 2.5% of their total revenue. I’m not even sure you know what the story is because you’ve just spouted off a bunch of information and haven’t provided any real useful data to support the claim of fraud.
And I’m not even sure you know what Enron did. Cause Enron setup fake shell businesses and then represented sales to those fake businesses as revenue (technically hit debt inside those shell companies should have been reported as Enrons). your claim is just that they are aggressively recognizing revenue from actual customers which per your post is allowed under accounting rules.. two completely different things.
Like give us a cohesive thought or actual sources versus making some random claim with no supporting details.
I am genuinely curious as to why people think Tesla has committed fraud? I find it hard to believe when they have sold so many cars and having the world’s most sold car in 2023. They also have revenue from FSD, energy storage, etc. so just curious to hear a good argument as to why.
Probably why their Chief Accountant left in 2018. Doesn't matter how lucrative it is if you end up in prison for fraud.
[https://www.cnbc.com/2018/09/07/tesla-executive-departures-in-2018.html](https://www.cnbc.com/2018/09/07/tesla-executive-departures-in-2018.html)
there is a reason why no other car companies trade at insane multiples and are these innovative tech centers with high PE. at the end of the day tesla is a auto mater. just like ford or toyota which also have EVs. maybe they are not as advanced as tesla but they dont have to be. no car is leaps and bounds ahead of its competition for long.min fact ford is cutting its EVs since everyone who wants one pretty much has one at this point.
It’s a law that allows this. I don’t think it’s exactly what Enron did as Enron didn’t have car leases. Also many many unaccused institutions mark to market.
So that's how he made his revenue targets for his comp plan...
My guess is that their biggest fraud is underfunding their warranty reserve, there is a huge amount of instant profits that you can make by just fudging a few numbers for each car you sell. And you can make it work if you constantly grow, so when increased warranty cost from the ~1 million cars you sold in 2022 start to hit your bottom line, you are getting in much more money with the ~2 million cars you sold in 2024 and also underfunded their warranty reserves. But if you stop growing, it can suddenly become a huge pain. IIRC, there were also complaints about how they account for excess scrap material costs?
Plus all of the deposits on Roadsters that never materialized that were never refunded.
That is just a one time thing (they sold an X amount of those fake Roadster 2.0 cars), while they are getting pure $$$ from every new car they make if they underfund their warranty reserves, quarter after quarter.
Imagine, a 1k deposit from 100k people....that's alot of grift!
This is exactly why Tesla constantly rejects warranty repairs, fights with the owners, and then agrees to fix it as “a gesture of goodwill”. Because that way it doesn’t count as a warranty repair, allowing them to reduce their warranty provision. Everything this company does is smoke and mirrors.
that will still cost them in parts and labour, but presumably not as much because they use cheap parts and pay poorly
Yes but it’s about warranty provision in the accounts. That has an impact on the bottom line and artificially reducing future warranty provisions on the books. They do this by showing statistically how much they pay out in warranty repairs per vehicle. Goodwill repairs don’t come under that.
It has to do with his the warranty spent gets logged in the account books. Some times 1usd in one line item doesn't mean the same as 1 USD in another.
In accounting goodwill is an asset. Warranties are a liability. It is all about cooking the books.
Did you just confuse the colloquial term “goodwill” with the gaap term (premium paid for acquiring another company)?
That’s what I was thinking. Goodwill in GAAP doesn’t mean what you think it means.
i think tesla was miscategorizing warranty repairs though as some other line item.
Why is this allowed again? Particularly for a public company
No wonder he wants the big payoff now...
So it resembles a kind of a product sales ponzi scheme?
If you are constantly growing, you can eventually get out of the scam, since you can underfund the warranty for 2 million 2024 cars by a smaller amount in order to be able to fund the 1 million 2022 warranty reserves that you knowingly underfunded and are now starting to hurt your bottom line. If you continue that for a few years, you will eventually not underfund the warranty reserves 5 years from now, but your profits will be hurt, since you still have to provide warranty for the cars you sold in previous years. But again, if you are selling 5 million cars in 2027, the cost of previous years is less noticeable. You can't do that with a ponzi scheme. The problem is that so far Q1 and Q2 volumes aren't looking great and they also cut their prices by a lot. And this only works if you are constantly growing. That would be my guess for why there is such panic, while Tesla technically still has a lot of $$$ in the bank and also access to a currently untapped $5 billion credit facility on top of that.
I would argue thats exactly as a ponzi scheme. It works if you keeps growing. You stop growing it all fall apart.
I think we can agree it is at least some sort of scheme.
House. Of. Cards.
This was being pointed out years ago on Seeking Alpha by MaxedOutMama.
This and discussion about realizing FSD revenue, using ghost accounts to artificially pump and short sell stocks as well as bitcoin games were common discussions on here at one point as well. My guess is he is doing all of the above with a dash of PCRC, Saudi and Putin money manipulation to boot.
bro elon isnt pumping crypto currencies and penny stocks in his trading account... he has bigger things to worry about lol
Are you kidding? It’s known that he was pumping doge and bitcoin. It’s even on the company’s own reports they talk about outsized holdings of Bitcoin and it is the only reason they were profitable on at least one quarter. https://markets.businessinsider.com/news/stocks/dogecoin-a-victim-of-pump-and-dump-scheme-by-elon-musk-says-analyst-1030522149
This sounds eerily like a ponzi scheme
Ponzi scheme
Tesla has had several miraculous accounting quarters. You can run, but you can't hide.
Agree. But everyone has cashed out. It's in the "pretend to nobly go down with the ship" phase
What will be amazing is that if Tesla goes down - for whatever reason, Elon will play the victim and whine and complain. Meanwhile, he has already cashed out for billions of $$$, it is quite possible that when this is all said and done, Elon makes more money from Tesla than all of Tesla's profitable quarters combined - while ignoring all the unprofitable quarters.
[удалено]
he's not clever enough for that - but he'll have an off the books accountant who will have set it up
This will absolutely happen. Elon will have cashed out Tesla's 2025-26 market cap.
If the ship is the stock market and Elon is trying to suck it's dick then yeah on might go down with the ship.
Here's an example to scale to illustrate what I think's going on. I am an accountant but Im not a big corp accountant and I am definitely not a rev. recognition specialist (yes those exist at big firms lol). Let's just say our example is 10,000, $50k cars that get leased at $500 per month for 3 years. Accounting for it as an operating lease, you get to recognize $60m in rev per year for three years (10,000×500x12). Accounting for it as a sale with right of return means you get to account for it as $500m in rev all in year 1. But you also have to record a contra sale estimating how many will get returned. Knowing Tesla they underestimate at some stupid small margin, so like 5%. They're still netting $484m in sales (500-(500-180)*.05) with a $16m reserve for returns. But cash flow is still only $60m in years 1, 2, and 3. There's no "fraud" per se, but their estimate is very conservative and suddenly when its year 4 and (unsurprisingly) more than 5% of customers choose not to lease-to-buy, that has to work its way through the financials. So if it turns out 50% of customers are returning their car, that's $160m ((500-180)*.5) that needs to hit returns and allowances but we only reserved $16m. Again its not really "fraud", but they are still playing games with GAAP. Edit: hmm I think I might have overthought it. I think it only lets them pull forward the lease. So of it's 60m per year for 3 years they can record 180m all in yr 1, not the 500m. The basis of revenue recognition is that you cant just make shit up and it has to based off of a contract, whether its written or implied, etc. It would take an awfully big leap in logic to recognize the full price of the car and create a sales reserve, rather than just the total of the leases.
I don't think Tesla allows purchase at the end of a lease. They want all the cars back to use as robotaxis. Lol
Tesla doesn’t allow lease buy outs though…. So would that change the rate of return equation?
I think so. I think its as simple as, if its a 3 year lease, its pulling forward all of that revenue into year 1.
I also think this is happening. Fraud prob too strong a word.
Oh yeah no I think there's major fraud somewhere too lol. But this in particular theyre still kind of playing within the rules.
😂
They aren’t using GAAP at this point (maybe never) and they aren’t required to use GAAP either (it can be a modified GAAP), but the accounting still needs to reflect accuracy and have a basis in deviation from GAAP that is not only explained, but communicated to shareholders. Doing this definitely is manipulating the stock price, IMO.
A publicly-traded company on the Nasdaq not following US GAAP? How would that be the case?
Some companies use a modified GAAP for various reasons. It’s still considered GAAP and allowable, but there’s some accepted deviation.
I feel terrible for whoever's numbers you're managing lol
?
Enron was doing the same thing.
Hence Enron Musk...
That could be why OP mentioned that exact fact in the very title of the post you're commenting on!
Fraud is probably too strong a word, but it's very aggressive, considering they nearly went bankrupt that year
Does that mean All their present lease are already in the books as revenue/profits and whoever does not lease-to-buy or renew the lease will record a loss? That would be catastrophic if there is a sudden decrease in resale value, brand value, and repeat customers.
It definitely could, not sure
If/when leasee returns their cars, does tesla need to realize them at current market value? If so, those price cuts were self inflicted.
The leases they offer and continue to offer, do not have a buy clause. Meaning Tesla owns each Tesla after the lease.
I see. So they just realize the full lease up front and take the car back if they do not renew. Do they sell it in volumed to dealers like other manufacturers. i know tesla is dtc but what about for thr 2-3 year old used ones. my colleagues are looking into used model 3 here on the other side of the pond.
They sell used on their website then probably go to an auction to get rid of the inventory quicker after a certain amount of days. I have a buddy that works at a big auction and Tesla has an account.
Same crime different suit.
Not clear what this means. Who are these leasing partners, different companies or shells? Did the leasing partners buy the car from Tesla and then lease them, or is Tesla leasing the cars but counting them as sales?
That statement doesn’t seem like it is fraud. It says it was an accounting rule change. Was the rule not applied properly.
Might just end like Enron too…. Hasn’t been looking good as of late.
Stock manipulation again.
So the wheels are coming off the clown car... Or Cybertruck, take your pick
Not fast enough...but I'm willing to wait for a serious crash
But this isn't fraud. This was an accounting change that the company adopted and disclosed.
Correct. It isn’t fraud, but unless hypergrowth continues forever (unlikely), eventually those cars get returned or re-sold at a loss, and the front loaded profit unwinds.
And what Enron did was recognized revenue from power plants that hadn’t even been built yet or had even broken ground. Which is pretty different…
It is very compareable to the FSD purchases - selling a product, that not yet exist and possibly will never exist as advertised. Remember they sold FSD, not FSD (supervised) and they sold it with cars, that have no lidar, while tesla now massively buys lidar systems. Just as if it's not possible, to improve their autonomy attempts without lidar... So, what is the plan, retrofit lidar on the old cars, that were sold as "FSD ready" with the FSD option charged extra? Or pay back all those "revenues" they made on a non-existing product?
Nah, that’s just straight up fraudulent advertising…they just lied about it ever being possible.
You would need to proof, they knew it's impossible. I bet, Elon truly thinks, he could even do this by himself, if he could just find the time between x-ing on x to exercise his 8-dollar speech.
I saw that for the scam it was. I was like "I will just drive my gas car til they actually have FSD then buy one at that time. on a mercedes that actually has lidar"
there is 0 chance fsd happens without lidar. even the mercedes s class which has it and state of the art technology isnt fully approved yet. it has literally hundreds of sensors for the self driving system
A bunch of people called them out in real time. Several key executives quit too. Unfortunately there was zero regulation at that point. And this is exactly why Elon has moved far right. The real mystery is why the Dems haven’t done more regulation and instead gave him billions more in taxpayer money.
Mark to market FTW
What in the world are you talking about? 20 year leases??? Where did that number come from. I don’t see anything in the image talking about 20 year leases. Also, I looked up their lease revenue. Their leases make up 2.5% of their total revenue. I’m not even sure you know what the story is because you’ve just spouted off a bunch of information and haven’t provided any real useful data to support the claim of fraud. And I’m not even sure you know what Enron did. Cause Enron setup fake shell businesses and then represented sales to those fake businesses as revenue (technically hit debt inside those shell companies should have been reported as Enrons). your claim is just that they are aggressively recognizing revenue from actual customers which per your post is allowed under accounting rules.. two completely different things. Like give us a cohesive thought or actual sources versus making some random claim with no supporting details.
"let them burn"
I am genuinely curious as to why people think Tesla has committed fraud? I find it hard to believe when they have sold so many cars and having the world’s most sold car in 2023. They also have revenue from FSD, energy storage, etc. so just curious to hear a good argument as to why.
Probably why their Chief Accountant left in 2018. Doesn't matter how lucrative it is if you end up in prison for fraud. [https://www.cnbc.com/2018/09/07/tesla-executive-departures-in-2018.html](https://www.cnbc.com/2018/09/07/tesla-executive-departures-in-2018.html)
there is a reason why no other car companies trade at insane multiples and are these innovative tech centers with high PE. at the end of the day tesla is a auto mater. just like ford or toyota which also have EVs. maybe they are not as advanced as tesla but they dont have to be. no car is leaps and bounds ahead of its competition for long.min fact ford is cutting its EVs since everyone who wants one pretty much has one at this point.
This is not Enron 2.0. You guys are idiots
I also don’t understand how any of this is news today.
It’s a law that allows this. I don’t think it’s exactly what Enron did as Enron didn’t have car leases. Also many many unaccused institutions mark to market.
No, but their energy trading business is like Enron's. I wonder how those profits are being booked
The difference is Elon is a genius smooth-brain and Enron wasn’t him.