A Tesla sale office. Flickr Image.
If you are looking for information about Tesla’s inventory, then this article is for you and you have come to the right place.
That said, this article tracks Tesla’s inventory as disclosed in the company’s balance sheets.
For your information, Tesla’s inventory is disclosed as a short-term or current asset in the balance sheets as it tends to move quickly compared to fixed assets.
As of 1Q 2023, Tesla’s inventory represents roughly 33% of the company’s total current assets, making it the 2nd largest component after cash and cash equivalents.
Tesla’s inventory is huge and has been on the rise.
Investors should pay attention to this asset class as it generates substantial future economic benefits for Tesla.
A bloating inventory will hurt the company but a properly managed one will bring immersed advantages.
In this article, we will look at a couple of inventory-related metrics which include inventory levels, and several ratios of inventory with respect to revenue, current assets, and costs.
For costs, we will calculate Tesla’s inventory turnover ratio or days of inventory which measures how fast Tesla moves its inventory.
So, let’s start with the following topics!
Tesla Inventory Topics
Consolidated Inventory
A1. What Is In The Inventory
A2. Inventory Levels
A3. Inventory YoY Growth Rates
Breakdown Of Inventory
Inventory Ratios
C1. Finished Goods To Total Inventory Ratio
C2. Total Inventory To Current Assets Ratio
C3. Total Inventory To Revenue Ratio
C4. Inventory Turnover Ratio
C5. Days Of Inventory Ratio
C6. Finished Products Days Of Inventory
Summary And Reference
S1. Summary
S2. References and Credits
S3. Disclosure
What Makes Up Tesla’s Inventory
Tesla Inventory Components ($ Millions)
| Fiscal Year | |||||
|---|---|---|---|---|---|
| 2022 | 2021 | 2020 | 2019 | 2018 | |
| Raw Materials | $6,137 | $2,816 | $1,508 | $1,428 | $932 |
| Work In Progress | $2,385 | $1,089 | $493 | $362 | $297 |
| Service Parts | $842 | $575 | $434 | $406 | $303 |
| Finished Goods | $3,475 | $1,277 | $1,666 | $1,356 | $1,582 |
As shown in the table above, Tesla’s inventory consists of the following items:
- 1. Raw materials
- 2. Work in progress
- 3. Finished goods
- 4. Service parts
Among all items, Tesla’s finished goods is usually the largest part, representing more than half of the inventory level.
However, in recent years, we can see that Tesla’s raw materials have grown much faster and exceeded its finished goods inventory at a huge margin, topping more than $6 billion in asset value as of 2022 which was twice the amount of finished goods.
The massive ram materials inventory can be a double-edged sword as it may help or hurt the company.
The advantage of a massive ram materials inventory is that Tesla can use it to hedge against inflation while the disadvantage is that it will hurt the company if it failed to move the inventory quickly enough.
While finished goods inventory was in the second spot in terms of asset value, it almost tripled in 2022 from 2021 and has more than doubled since 2018, illustrating the speed at which Tesla built up its inventory.
Basically, Tesla’s finished goods are made up of the following products:
- 1. Vehicles in transit to fulfill customer orders
- 2. New vehicles available for immediate sale at retail and service centers
- 3. Used Tesla vehicles
- 4. Energy storage and solar roof products
The rest of the inventory components are pretty much self-explanatory.
The service part is a component of the finished goods but Tesla breaks it down to show the value.
Tesla writes down inventory for any excess or obsolete inventories or when the company believes that the net realizable value of inventories is less than the carrying value.
The impact of the inventory write-down will be in the cost of revenues as stated in its financial reports.
Of all inventory components, I would pay particular attention to the “Finished Goods” and “Raw Materials” inventories as these are the largest components, accounting for over 80% of the company’s total inventory values.
Tesla Inventory Levels
Tesla quarterly inventory (click to enlarge)
The plot above shows Tesla’s quarterly inventory levels for the period from fiscal 2015 to 2023.
In terms of inventory numbers, Tesla’s inventory has been on the rise as shown in the chart since 2015, and the rise has been sort of exponential, topping a record high of more than $14 billion as of Q1 2023.
About a year ago, Tesla sat on an inventory that was worth only $6.7 billion as seen in the chart above.
Therefore, Tesla’s total inventory had more than doubled year-over-year as of 1Q 2023.
Tesla’s expanding inventory bodes well not just for the company’s business prospects but also for shareholders as the rising levels are an indication that the company is growing.
This logic can be explained here.
For your information, Tesla’s inventory represents the company’s working capital.
As Tesla’s operations expand, the company tends to expand its working capital.
Working capital expansion comes primarily in the form of cash and inventory for Tesla as these components are critical for the growth of the company.
In short, Tesla does not build out its inventory to such a massive level for no reason.
Tesla’s Inventory YoY Growth Rates
Tesla inventory YoY growth rates (click to enlarge)
In terms of growth rates, Tesla’s inventory grew the most in recent years.
As seen in the chart, the growth rates of Tesla’s inventory had mostly been close to triple digits since 2021, illustrating the soaring inventory levels of the company.
As of 1Q 2023, Tesla’s inventory grew 115% year-on-year, one of the highest growth rates ever recorded.
Tesla’s Inventory Breakdown
Tesla total inventory breakdown (click to enlarge)
Tesla’s inventory consists of 3 parts: (1) raw materials, (2)work in progress, and (3) finished goods.
Of all components, Tesla’s raw materials inventory came in at the largest portion as of fiscal Q1 2023, taking up 44% of total inventory or $6.4 billion USD in terms of asset value.
Tesla’s finished goods inventory which made up about 38% or $5.5 billion of the total inventory took the 3rd spot as one of the largest components in fiscal 1Q 2023.
The work-in-progress inventory was the lowest among all the components and contributed about 17% or $2.5 billion to total inventory as of Q1 2023.
Tesla’s raw materials inventory used to be a much smaller component but had become the largest inventory component as of 1Q 2023.
Since 2021, we can see that Tesla’s raw materials inventory levels have been on the rise and shot through the roof in 2022.
As of 2023, Tesla’s raw materials reached a record high of more than $6 billion USD.
The same goes for Tesla’s finished goods inventory levels.
The combined value of Tesla’s raw materials and finished goods reached a record high of $12 billion or 82% of total inventory levels.
Is Tesla facing an inventory glut and having difficulty clearing its products?
On the other hand, is the management expecting a surge in demand for the company’s products in the future and thus, the massive rise in raw materials and finished goods inventory levels as of 2023?
In short, we need to keep an eye on these inventory components in the coming quarters.
Ratio Of Tesla’s Finished Goods To Total Inventory
Tesla finished goods to total inventory ratio (click to enlarge)
Although Tesla’s finished goods inventory levels have reached record highs as of 2023, the ratio seems to be manageable.
As seen, Tesla’s finished goods to total inventory ratio reached 38% as of Q1 2023, which was still way below its historical high of 60%.
While the ratio still looks fine, it has grown significantly from its record low of 23% reported 1 year ago.
For example, Tesla’s ratio has increased by more than 15 percentage points in just 1 year, possibly the greatest growth ever recorded since 2015.
Ratio Of Tesla’s Total Inventory To Current Assets
Tesla total inventory to current assets ratio (click to enlarge)
From the perspective of current assets, Tesla’s inventory levels also seem to be doing well.
For example, Tesla’s total inventory to current asset ratio reached 33% as of Q1 2023, also a much lower figure compared to historical highs which averaged about 45%.
Just to let you know that this ratio cannot be too high.
A high ratio can mean too much inventory being tied up as working capital and therefore, less liquidity.
Therefore, Tesla’s total inventory to current asset ratio isn’t so bad at 33% as of 1Q 2023 despite having been increasing since 2021.
Ratio Of Tesla’s Total Inventory To Revenue
Tesla total inventory to revenue ratio (click to enlarge)
Similarly, this ratio also looks fine when compared to the historical average.
As seen, Tesla’s inventory-to-revenue ratio totaled 17% as of fiscal 1Q 2023, also a reasonably low ratio with respect to historical highs.
Although the ratio still looks manageable at the current figure, the fact remains that it has grown quite considerably since 2021.
For example, compared to the figure a year ago, Tesla’s latest inventory-to-revenue ratio has increased by 6 percentage points, which was quite a significant growth considering that the ratio had been on a decline prior to 2021.
A note to investors is that the lower the ratio the better the inventory management is for Tesla.
In other words, at a low ratio, Tesla needs only a small amount of inventory to generate the same amount of revenue or sales.
The decline in the inventory-to-revenue ratio is favorable for Tesla as it not only reduces warehouses but also saves working capital.
Therefore, the growth in this ratio is unfavorable for Tesla.
Tesla’s Inventory Turnover Ratio
Tesla inventory turnover ratio (click to enlarge)
Tesla’s inventory turnover ratio is derived from the following equation:
Inventory turnover ratio = TTM Cost of goods sold / Closing inventory
According to the chart above, Tesla’s inventory turnover ratio has been on a decline since 2021 which means the speed at which the company clears its products has been on a decline.
For example, Tesla could deliver 6.8 product cycles in fiscal 2022.
This figure has declined to 4.6X as of fiscal 1Q 2023.
At this ratio, Tesla clears its inventory at a slower pace compared to a year ago.
Although Tesla’s inventory turnover ratio was lower in 2023, the ratio is not so bad compared to the historical average which measures about 4.0X.
Therefore, I am pretty positive that Tesla’s inventory churn rate is still fine at the latest ratio.
Tesla’s Days Of Inventory Ratio
Tesla days of inventory (click to enlarge)
The days of inventory ratio is similar to the inventory turnover ratio in the sense that it’s the inverse of the inventory turnover ratio.
As seen from the chart, the figure is expressed in the number of days.
Consistent with the inventory turnover ratio, Tesla’s days sales in inventory has slightly ticked higher in 2023 compared to a year ago, indicating that the company is having a longer time to clear its products.
For example, Tesla took only 54 days to clear its inventory 1 year ago but it took 79 days as of 2023.
Similarly, Tesla’s days of inventory was still pretty much manageable at the latest figure as it was still reasonably low compared to the historical average.
Tesla’s Finished Products Days Of Inventory
Tesla finished goods inventory days (click to enlarge)
If we look at only Tesla’s finished goods inventory, the company is clearing them at a much faster pace.
For example, in the chart above, Tesla managed to deliver its finished products in only 30 days compared to 79 days for the total inventory.
Similarly, Tesla’s finished product days of inventory also has ticked higher since 2022, topping 30 days in 2023 compared to 13 days a year ago.
The higher ratio is unfavorable for Tesla as it means that the company is taking a longer time to clear its finished goods inventory.
Conclusion
To recap, Tesla’s total inventory has significantly increased in 2023 since 2022.
From the breakdown of inventory, Tesla’s raw materials and finished goods inventory levels have reached record highs as of 1Q 2023.
While the inventory figures have soared to record highs, ratios such as inventory to revenue, inventory to current assets, inventory turnover, and days sales of inventory say otherwise.
From the perspective of these ratios, we saw that the figures were still within manageable levels compared to historical averages.
Therefore, I believe Tesla’s inventory levels were still doing fine as of Q1 2023.
References and Credits
1. All information including financial figures and all data in this article were obtained and referenced from reports, earnings releases, and statements released in Tesla SEC Filings.
2. Featured images in this article are used under creative commons license and sourced from the following websites: 8000vueltas and e-connected.
Disclosure
The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.
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An inventory checklist is always important to an interlining supplier. This checklist will help interlining suppliers understand how many raw materials they need to orders for the interlining products such as woven interlining, non-woven interlining and fusible interlining. However, the level of inventory to be ordered is not the same in each ordering period. You should pay attention to the market change in the interlining industry.