Tesla has $1.4 billion that seems to have gone astray, potentially raising questions about the company’s controls

Elon Musk’s vision to usher in a utopia powered by Tesla robotaxis and the company’s humanoid robot, Optimus, will likely take significant cash. Tesla spent $6.3 billion in capex during the second half of last year, but the gross value of the company’s relevant assets only increased by $4.9 billion. Those numbers should tally for domestic companies without any major asset sales or impairments, but other factors could be at play for Tesla.

Tesla is making big bets on AI, but investors might have a reason to question where the money is going. If left unexplained, a $1.4 billion discrepancy between the firm’s capital expenditures and the valuation of the assets that cash was spent on, first reported by the Financial Times, could spark concerns about internal controls at Elon Musk’s electric vehicle giant.

Several accounting experts, however, say there are plausible justifications for the variance that might not show up on Tesla’s financial statements. You would expect the relevant numbers to add up for a domestic company with no big asset sales or impairments, said Tim Morrison, an accounting professor at Notre Dame and former audit partner at Ernst & Young. Tesla, of course, sells cars around the world and has factories on three continents. PwC has audited Tesla’s financial statements since 2005.

“If they had the numbers incorrect, then that would be a red flag related to controls,” said Morrison, who worked primarily with multinational manufacturing companies and led internal inspections to assess audit quality at EY.

This isn’t the first time Tesla’s accounting practices have been questioned, noted Garrett Nelson, a vice president and senior equity analyst at CFRA Research.

“We’ll have to see whether PwC or the company provide clarification,” he wrote in an email to Fortune.

Tesla and the Big Four firm did not respond to a request from Fortune for comment.

Tesla shares have lost roughly half their value since their post-election high near the $490 mark in December. The company has shed nearly $750 billion in market cap amid plummeting sales and fears Musk’s work with President Donald Trump’s White House is damaging the brand and distracting him from his role as CEO of Tesla.

The stock rallied Friday, though, after Musk held an emergency all-hands meeting with employees. Bullish investors believe Tesla will be much more than an EV and battery storage company, citing Musk’s vision of using AI to usher in a utopia powered by Tesla robotaxis and the company’s humanoid robot, Optimus.

Executing that plan will presumably require significant investment. On the company’s latest earnings call in January, CFO Vaibhav Taneja said Tesla’s $11.3 billion in annual capex—up $2.4 billion from 2023—should remain flat this year. The company’s cumulative AI-related spend, he noted, had just surpassed the $5 billion mark.

“Capex efficiency is something we are extremely focused on,” Taneja said. “While we have invested in AI-related initiatives, we have done so in a very targeted manner to utilize the spend to get immediate benefits.”

That spending shows up on the annual statement of cash flows as purchases of property, plant, and equipment, or PP&E. In the second half of last year, that amount grew by $6.3 billion, the same value for capex that Tesla reported in its slide deck for investors.

But the gross value of the company’s PP&E, or its worth before accounting for depreciation, only increased $4.9 billion in that span. Again, for a domestic company, you would expect those numbers to tally.

There’s no evidence any PP&E was sold, Morrison confirmed, and the company did not recognize any impairments to its “long-lived assets,” which Tesla expects to use for more than one year.

Foreign currency changes, however, can throw everything off. If the euro weakens relative to the dollar like it did during the period in question, Morrison explained, assets at the company’s facilities in Germany are marked down.

“You’re not going to see [it] anywhere else on the financial statements,” he said.

While the Financial Times said foreign exchange appeared “unlikely to explain the gap,” citing that four-fifths of Tesla’s long-lived assets are in the U.S., Morrison said it could still explain a significant chunk.

“Foreign currency can do lots of weird things,” he said, “and it’s really hard to fully track that.”

Finally, he also noted Tesla could have gotten rid of assets that had reached the end of their useful lives, in which case it would make sense if they are no longer on the books.

“If the fully depreciated asset is disposed of, the asset’s value and accumulated depreciation will be written off from the balance sheet,” according to an explanation from the Corporate Finance Institute.

In short, it may not be time for investors to sound an alarm about Tesla’s capex just yet. As the Financial Times noted, it may seem odd Tesla felt the need to raise $3.9 billion in new debt last year, given the company is sitting on a $36.5 billion cash pile and doesn’t pay a dividend. Still, that sort of behavior may be reasonable for a company banking on future growth, Morrison said.

Despite the stock’s recent decline, Tesla shares still trade at roughly 90 times the company’s projected earnings for the next 12 months, according to S&P Cap IQ estimates. To put it mildly, bulls better believe Musk’s investments will pay off in a big way.

This story was originally featured on Fortune.com

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Greg McKenna

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