Investors should always peruse the annual filings of the companies in their portfolios. They contain details that may be left out of earnings releases and conference calls.
Monday, Tesla filed its annual report on a form 10-K with the Securities and Exchange Commission. It offers analysts and investors another chance to look under the hood and check the health of the world’s most valuable car company.
Here are a few noteworthy items — including how much Tesla really spends on marketing — along with a little history.
Recalls Don’t Tell Investors Much
Tesla spent about $1.2 billion on warranty repairs in 2023, up from about $800 million in 2022. That 50% increase isn’t alarming. After all, Tesla is growing with more cars on the roads.
Tesla’s 2023 warranty expense works out to $250 per car still covered in the five-year warranty, the same cost per car as in 2022. The cost stands at about 1.5% of total automotive sales, in line with the industry.
The warranty-spending data helps illustrate why recall notices from the National Highway Traffic Safety Administration don’t matter much for the stock prices. Tesla recalled 3.8 million vehicles in 2022, and 2.6 million vehicles in 2023. The dip in recalls had no impact on warranty spending or the amount spent per vehicle.
$10 Billion in Capital Expenditures
Tesla plans to spend $10 billion on new plants and equipment. It’s the first time in a calendar year the company will spend 11 figures. It’s a milestone, but Tesla is growing. That works out to about 8.9% of 2024 sales estimated by Wall Street, according to FactSet. In 2023, Tesla spent 9.2% of sales on new plants and equipment.
The level of spending isn’t surprising, but it does show that growth is harder to come by these days. Tesla spent, or plans to spend, about 9% of sales on capital expenditures in 2023 and 2024. Sales grew about 19% in 2023, and Wall Street projects sales growth of 15% for 2024.
Still no Advertising
Tesla didn’t disclose a marketing expense, saying only that “we have been able to achieve sales without traditional advertising and at relatively low marketing costs.”
That’s true, but as any marketing professor will tell you, price is one of the three “P’s” of marketing, along with product and promotion. If pricing is part of marketing, then Tesla spent billions of dollars on it in 2023.
The average price for a Tesla in 2024 — measured by automotive sales divided by unit deliveries — came in at about $44,500, down about $8,500 year over year. That $8,500 multiplied by the 1.8 million cars sold works out to about $15 billion.
That $15 billion figure is why some investors and analysts believe that some marketing is a good idea. There could be a combination of price cutting and advertising that resulted in 1.8 million units sold for far less than $15 billion.
That’s only theoretical. The marketing debate will surely carry on into 2024 and beyond.
Tesla stock was up 1% in premarket trading at $185.09, while S&P 500 and Nasdaq Composite futures were up 0.1% and 0.3%, respectively. Coming into Monday trading, Tesla shares were down about 26% so far in January.