Tesla 2016 Annual Report Download - page 34
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Please find page 34 of the 2016 Tesla annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Inadditiontoexpandingourvehicleproduction,weexpecttocontinuetolowerthecostofmanufacturingourvehiclesoverthenextseveralquarters.We
expectthatthistrendwillcontributetoimprovedautomotivegrossmarginovertime,excludingtheimpactofforeigncurrencymovements.Significantcost
improvementsforModelSwereachievedin2014and2015relatingtomaterialcostreductionsfrombothengineeringandcommercialactions,andmanufacturing
efficiencies,excludingtheimpactofnewlyintroducedModelSvariantsandModelX.However,duringourproductintroductionsoverthelastfewyears,we
incurredmanufacturinginefficiencieswhichnegativelyimpactedourgrossmargin.Weexpectthatautomotivegrossmarginshouldincreaseduring2016dueto
costreductionsforModelSandimprovingmarginonModelXasourmanufacturingefficiencyimprovesforthatvehicle,supportingourplantobeprofitablefor
thefourthquarterof2016.Ifwearenotabletoachievetheplannedcostreductionsfromourvariouscostsavingsandprocessimprovementinitiativesorramp
ModelXefficiently,ourabilitytoreachourgrossmargingoalswouldbenegativelyaffectedintheshort-term.
Tosupportourplannedvehiclegrowthin2016,weplantocontinueexpandingstoresandserviceinfrastructureworldwide,providemoretimelyservicein
areaswithahighconcentrationofTeslacustomers,andcontinueexpandingourSuperchargeranddestinationchargernetwork.Sincewenowofferourvehiclesin
manycountriesthroughoutNorthAmerica,EuropeandAsia,ourexpansionwillprimarilyoccuringeographicareasinwhichwealreadyhaveapresence.We
expectourlong-termsalesoutsideofNorthAmericawillbealmosthalfofourworldwideautomotiverevenue.AscomparedtomarketsintheUnitedStates,we
haverelativelylimitedexperienceininternationalmarkets,andthuswemayfacedifficultiesmeetingourfutureinternationalexpansionplans.Ifweexperience
unexpecteddifficultiesordelaysinfindingandopeningdesirablelocationsforstoresandservicecenters,wemaynotbeabletomeetourdeliveryplans.
TrendsinCashFlow,CapitalExpendituresandOperatingExpenses
Weexpecttoseeanetincreaseincashandcashequivalentsforthefull-year2016.Weplantofundabout$1.5billionincapitalexpenditureswithout
accessinganyoutsidecapitalotherthanourexistingsourcesthatsupportourleasingandfinishedgoodsinventory.Weplantoinvestinequipmenttosupportcell
productionattheGigafactory,begininstallationofModel3vehicleproductionmachinery,openabout80retaillocationsandservicecenters,andenergizeabout
300newSuperchargerlocations.
Ouroperatingexpensesareexpectedtogrowbyabout20%in2016ascomparedto2015,drivenprimarilybytheexpansionofourretailandservicecenters
aswellasincreasesingeneralandadministrativecoststosupportthegrowthofthebusiness.Weexpectsales,generalandadministrativeexpensestodeclineover
timeasapercentageofrevenueaswefocusonincreasingoperationalefficiencywhilecontinuingtoexpandourcustomerandcorporateinfrastructure.Overtime,
wealsoexpecttotaloperatingexpensestodecreaseasapercentageofrevenue.
AsofDecember31,2015andDecember31,2014,thenetbookvalueofourSuperchargernetworkwas$339.2millionand$107.8millionandasof
December31,2015included584locationsglobally.WeplantocontinueinvestinginourSuperchargernetworkfortheforeseeablefuture,includinginNorth
America,EuropeandAsiaandexpectsuchspendingtobeaminimalportionoftotalcapitalspendingduring2016.During2016,thisinvestmentwillgrowour
Superchargernetworkbyabout50%.WeallocateSuperchargerrelatedexpensestocostofautomotiverevenuesandselling,general,andadministrativeexpenses.
Thesecostswereimmaterialforallperiodspresented.
CustomerFinancingOptions
WeofferloansandleasesinNorthAmerica,EuropeandAsiaprimarilythroughvariousfinancialinstitutions.Weofferaresalevalueguaranteein
connectionwithcertainloansofferedbyfinancialinstitutionsandasofDecember31,2015hadapproximately18,400vehiclesunderthisprogram.Weexpanded
thisprogramtoselectedEuropeanandAsianmarketsduringthefirsthalfof2015.Resalevalueguaranteesavailableforexercisewithinthenext12monthstotal
$136.8millioninvalueandrelateto3,017vehicles.
Vehicledeliverieswiththeresalevalueguaranteedonotimpactournear-termcashflowsandliquidity,sincewereceivethefullamountofcashforthe
vehiclesalespriceatdelivery.However,thisprogramrequiresthedeferralofrevenuesandcostsintofutureperiodsastheyareconsideredleasesforaccounting
purposes.
Whilewedonotassumeanycreditriskrelatedtothecustomer,ifacustomerexercisestheoptiontoreturnthevehicletous,weareexposedtoliquidityrisk
thattheresalevalueofvehiclesundertheseprogramsmaybelowerthanourguarantee,orthevolumeofvehiclesreturnedtousmaybehigherthanourestimates,
orwemaybeunabletoreselltheusedcarsinatimelymanner,allofwhichcouldadverselyimpactourcashflows.Alternatively,incaseswherecustomersretain
theirvehiclespasttheexpirationoftheguaranteeperiod,theremainingdeferredrevenuesandcostswillberecognizedatnogrossprofit.
Basedoncurrentmarketdemandforourcars,weestimatetheresalepricesforourvehicleswillcontinuetobeaboveourresalevalueguarantee
amounts.Shouldmarketvaluesofourvehiclesorcustomerdemanddecrease,theseestimatesmaybeimpactedmaterially.
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