Tesla will invest a new US$10 billion (approximately RMB 71.2 billion) this year to consolidate the market, a record high in recent years. After the U.S. stock market closed on Monday, Tesla submitted its annual 10-K filing to the Securities and Exchange Commission, which covers the company's business, financial status, legal proceedings, corporate governance and other related information.


10-K Filings

The most concerning one is Tesla’s arrangement to increase capital expenditures in 2024 to US$10 billion (approximately RMB 71.2 billion).

You know, Tesla's capital expenditure budget for 2019 is only US$2.5 billion (approximately RMB 17.8 billion). Compared with this year's budget, it is equivalent to a fourfold increase in five years.

According to the report, Tesla’s capital expenditure budget in 2024 is expected to exceed US$10 billion (approximately RMB 71.2 billion), an increase of approximately 20% from the 2022 budget. In the next two fiscal years of 2025 and 2026, annual capital expenditures will be between US$8 billion and US$10 billion (approximately RMB 57 billion to 71.2 billion yuan).

This is also Tesla’s largest capital expenditure budget in recent years.


Outlook 2023 – Cash Flow and CapEx Trends

Tesla plans to invest the funds mainly in global factory expansion, vehicle research and development, AI technology and other aspects.

This includes further increasing the production capacity of the Shanghai Gigafactory to better serve the Chinese market, and building a new Gigafactory in Monterrey, Mexico, which will help meet the needs of the U.S. and Latin American markets. At the same time, it also includes arrangements for launching new models and improving the performance and functions of existing models.

In particular, Tesla has performed well in the Chinese market, with revenue reaching US$2.1745 billion (approximately RMB 15.6 billion), second only to the United States. At the same time, China’s long-term assets (long-lived assets purchased for business operations rather than for sale to customers) were US$282 million (approximately RMB 2.02 billion), ranking third.

In addition, Tesla also mentioned that it faces competition in China from local Chinese and other foreign automakers and needs to continuously improve product quality and reduce costs to remain competitive.

In the entire 10-K document, the word "shanghai (Shanghai)" appears 20 times, which shows the importance of the Chinese market to Tesla.

Chinese new energy players have achieved leapfrog development in recent years. Tesla, the former pioneer, is now facing competition from domestic players, and its leading advantage is no longer obvious.

To achieve success in long-term competition, it also needs to rely on absolute leadership in technology. This may be why Tesla chose to expand its R&D investment.

The release of this 10-K document reflects Tesla's overall plan and outlook for 2024, and reflects Tesla's determination to further develop.

Benefit of this article: Tesla has spent 70 billion yuan on research and development this year to further widen the gap with other car companies. Reply to [Che Dongxi 0592] in the dialog box to obtain the original copy of Tesla's annual development plan.

01.

Tesla invests US$10 billion in China market this year

Tesla stated in its 2023 annual report that capital expenditures in 2024 are expected to exceed US$10 billion (approximately RMB 71.2 billion). This budget arrangement is significantly higher than in previous years, and it also means that Tesla will continue to maintain rapid growth.

According to the 10-K filing, Tesla plans to use the US$10 billion (approximately RMB 71.2 billion) for global factory expansion, product roadmap expansion and providing customer financing options.

This shows that Tesla will continue to maintain high-intensity R&D investment in 2024 to maintain its leading position in the fields of electric vehicles and energy solutions.


Interior view of Tesla Shanghai Gigafactory (Source Network)

In Tesla's 2023 annual 10-K filing, the description of the Shanghai factory occupies a significant amount of space, highlighting the importance of the Chinese market to Tesla.

The document first emphasized Tesla's strong performance in the Chinese market and pointed out that producing Model 3 and Model Y in China helps reduce vehicle costs, reduce transportation expenses, and avoid adverse tariff effects, making its products more affordable.

The report shows that Tesla’s revenue in the Chinese market reached US$2.1745 billion (approximately RMB 15.6 billion), ranking second after the United States. At the same time, long-term assets in China were US$282 million (approximately RMB 2.02 billion), ranking third.

These data fully reflect the important position and huge potential of the Chinese market in Tesla's global business.


Revenue and asset information by region

The establishment of Tesla's Shanghai Gigafactory has received strong support from the Shanghai city, including tax incentives, preferential land use rights and other policies. In exchange, Tesla needs to meet certain investment and tax targets, which it has steadily achieved, according to the report.

In 2023, Tesla Shanghai Gigafactory received a 15% preferential corporate income tax rate granted by the Shanghai Municipal Government. This policy is designed to promote Tesla's production and sales in China, while also assisting local economic development. However, starting from 2024, Tesla will no longer enjoy the preferential VAT policy, but will apply the standard tax rate of 25%.

Tesla also signed a land use rights agreement with the Shanghai Municipal Government and obtained the land use rights in the Pudong Lingang area. Tesla plans to invest approximately 1.408 billion yuan to build the Shanghai Gigafactory. The land use right period is 50 years.


Schematic diagram of Tesla’s new Megafactory

In addition, Tesla plans to continue to expand the production capacity of the Shanghai Gigafactory in 2024 to meet the strong demand in the Chinese market. At the same time, Tesla’s battery factory Megafactory will also be established in Shanghai.


Announcement on the transfer of state-owned construction land use rights

Some media reports pointed out that Tesla (Shanghai) Co., Ltd. successfully bid for the K01-06 plot of unit K01 neighborhood of unit 04PD-0303 in the Lingang New Area of ​​the Free Trade Zone on December 21, 2023. This was an important move by Tesla the day before it signed and officially launched the Shanghai Energy Storage Super Factory. This series of actions shows that Tesla is committed to long-term development and expansion in the Chinese market.

According to official information, the transfer area of ​​this industrial land reaches 197,062.70 square meters, the transfer period is 50 years, the floor area ratio is 2.5, and the land transfer purpose is industrial land.


Transaction details

Tesla is the only bidder for the land, and the transferor is the China (Shanghai) Pilot Free Trade Zone Lingang New Area Management Committee. The land is close to the Tesla Automobile Gigafactory and the CATL factory under construction. The investment intensity is not less than 12 million yuan/acre, and the total investment is expected to be not less than 3.547 billion yuan.

Tesla's first Megafactory is located in Stockton, Nevada, USA. Construction began in 2014 and went into production in 2016, becoming one of Tesla's largest battery and power system production bases in the world.


Nevada Megafactory

Panasonic is one of the main battery suppliers of the factory, and Tesla has set up multiple production lines in the factory to produce core components such as battery packs and motors.

Megafactory's annual output has exceeded 1 million batteries and power systems required for electric vehicles. Its main products include 2,174,680 batteries, battery packs and motors.

Through this new battery factory in Shanghai, Tesla will be able to more effectively integrate its supply chain resources, reduce costs and increase efficiency, and speed up product delivery.

These measures not only help meet the rapid changes and growing needs of the Chinese market, but also consolidate Tesla's leadership position in the global new energy vehicle industry.

02.

Mexican factory will start construction to serve the American market

Another major disclosure in this annual report is Tesla’s plan to build a new Gigafactory in Monterrey, Mexico, to serve the U.S. and Latin American markets and improve cost competitiveness.

Currently, Tesla has not announced the specific scale of its investment in Mexico. However, according to media reports, as early as the Tesla Investor Day in 2023, Musk stated that he would spend US$5 billion (approximately RMB 35.6 billion) to build a new super factory in the northern Mexican state of Nuevo Leon.


Monterey Gigafactory (rendering)

He mentioned that the new factory will be located in Santa Catarina, a city with a population of about 300,000 people, which is about a seven-hour drive from Tesla’s headquarters in Austin, Texas. This new factory will become another important production base for Tesla outside the United States, Germany and China. It is expected to produce up to 1 million vehicles per year and create 6,000 local jobs.

However, the road to building the Monterey Gigafactory has not been smooth sailing.

According to media reports, Samuel García, the governor of Nuevo León, Mexico, revealed in July 2023 that the construction permit for the Tesla factory will be issued soon, and construction is expected to start soon.

Tesla initially expected construction work on the facility to take 12 to 15 months and has notified suppliers that it expects the factory to be operational in the first quarter of 2025.

However, by August 2023, preparations for the factory site have just begun, including the construction of an access road to the highway.

Subsequently, in September 2023, Tesla received an environmental impact permit for the project, which set a 26-month deadline for completion, no later than November 2025. By the end of October, the Nuevo León state government confirmed that Tesla had obtained all the necessary permits and could officially start construction of the factory.

It can be said that according to the current progress, it will take a long time for the Monterrey Gigafactory to be put into production. There is still a question mark as to how much the Monterrey Gigafactory in Mexico can help Tesla's short-term efficiency improvement.

03.

Conclusion: Tesla faces new challenges

Despite the recent positive news, Tesla's stock price has rebounded. As of press time, it was US$190.93 (approximately RMB 1,371), an increase of 4%. But there is still a big gap when it comes to Tesla's market value shrinking during this period.

Tesla's increased investment in the new year reflects its determination to stay ahead in the market on the one hand, and its confidence in the market in 2024 on the other.

Let us wait and see how Tesla performs in 2024.