A Journalist Thought That Tesla Was Missing $1.4 Billion From Its Balance Sheet. It Was Then Found by the Magic of Accounting

Elon Musk’s electric vehicle company has been facing financial turmoil, with its stock plummeting for weeks. Now, Dan McCrum—the journalist who exposed the Wirecard scandal—has uncovered a possible $1.4 billion gap in Tesla’s accounts. The revelation has rattled investors already shaken by the crisis surrounding Musk’s political decisions as head of the Department of Government Efficiency.

This potential discrepancy has raised concerns about Tesla’s financial transparency. If the company doesn’t promptly clarify this accounting issue, it could affect its reputation and the confidence of the investors in Musk’s leadership.

The $1.4 billion black hole. McCrum published an analysis in the Financial Times, highlighting a $1.4 billion gap in Tesla’s cash flow. According to him, Tesla has gone all-in on AI development and plans to invest $11 billion annually in infrastructure.

As a result, its cash reserves are higher than usual. In its financial statements, Tesla reported spending $6.3 billion on “purchases of property and equipment excluding finance leases, net of sales” in the third and fourth quarters of 2024. However, its balance sheet shows the gross value of property, plant, and equipment increased by only $4.9 billion to $51 billion during that period. That leaves a $1.4 billion discrepancy between expenses and assets.

Audited books and expert opinions. Like most large corporations, Tesla’s financial statements are audited by external firms. Several accounting experts told Fortune that there are plausible explanations for the discrepancy.

Tim Morrison, an accounting professor at the University of Notre Dame and a former EY audit partner, told Fortune that the numbers should align for a company experiencing revenue declines but no significant asset issues. PwC has audited Tesla’s financials since 2005.

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“If they had the numbers incorrect, then that would be a red flag related to controls,” Morrison said, urging caution. “We’ll have to see whether PwC or the company provide clarification,” Garrett Nelson, vice president and equity analyst at CFRA Research, added.

Tesla’s past accounting controversies. This isn’t the first time Tesla and Musk have faced scrutiny over financial reporting. Questions have previously been raised about how the company presents its results and growth projections.

The situation has drawn comparisons to Enron, the energy giant that collapsed in 2001 after revelations of massive accounting fraud. As Asana CEO Dustin Moskovitz pointed out in Fortune, “Tesla could be the next Enron” if Musk has misled customers and investors.

Explaining the discrepancy. Although the $1.4 billion gap initially raised red flags, McCrum later issued a correction in the Financial Times, clarifying that much of the discrepancy resulted from deferred accounting entries.

According to his revised analysis, two main factors reduce the gap:

1. Liability payments: Tesla paid $689 million in liabilities related to property, plant, and equipment purchases, bringing the gap down to $733 million.
2. Asset sales: The company sold depreciated assets valued at $270 million, further reducing the discrepancy to $463 million.

The remaining amount can be attributed to various accounting factors, including currency fluctuations (Tesla operates globally, making its balance sheet sensitive to exchange rate changes), intangible asset write-offs, and equipment sales.

Image | Dylan Calluy (Unsplash) | Gage Skidmore

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