Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q.

Overview

Our mission is to accelerate the world’s transition to sustainable energy. We design, develop, manufacture, lease and sell high-performance fully electric vehicles, solar energy generation systems and energy storage products. We also offer maintenance, installation, operation, financial and other services related to our products. Additionally, we are increasingly focused on products and services based on artificial intelligence, robotics and automation.

In 2023, we produced 920,508 consumer vehicles and delivered 889,015 consumer vehicles through the second quarter. We are currently focused on increasing vehicle production, capacity and delivery capabilities, reducing costs, improving and developing our vehicles and battery technologies, improving and further deploying our FSD capabilities, increasing the affordability and efficiency of our vehicles, bringing new products to market and expanding our global infrastructure.

In 2023, we deployed 7.54 GWh of energy storage products and 133 megawatts of solar energy systems through the second quarter. We are currently focused on ramping production of energy storage products, improving our Solar Roof installation capability and efficiency, and increasing market share of retrofit solar energy systems.

During the three and six months ended June 30, 2023, we recognized total revenues of $24.93 billion and $48.26 billion, respectively, representing increases of $7.99 billion and $12.57 billion, respectively, over the same periods ended June 30, 2022. We continue to ramp production, build new manufacturing capacity, invest in research and development and expand our operations to enable increased deliveries and deployments of our products and further revenue growth.

During the three and six months ended June 30, 2023, our net income attributable to common stockholders was $2.70 billion and $5.22 billion, respectively, representing a favorable change of $444 million and an unfavorable change of $361 million, respectively, over the same periods ended June 30, 2022. We continue to focus on improving our profitability through production and operational efficiencies.

We ended the second quarter of 2023 with $23.08 billion in cash and cash equivalents and investments, representing an increase of $890 million from the end of 2022. Our cash flows provided by operating activities during the six months ended June 30, 2023 and 2022 were $5.58 billion and $6.35 billion, respectively, representing a decrease of $768 million. Capital expenditures amounted to $4.13 billion during the six months ended June 30, 2023, compared to $3.50 billion during the same period ended June 30, 2022. Sustained growth has allowed our business to generally fund itself, and we will continue investing in a number of capital-intensive projects in upcoming periods.

Management Opportunities, Challenges and Uncertainties and 2023 Outlook

Automotive—Production

The following is a summary of the status of production of each of our announced vehicle models in production and under development, as of the date of this Quarterly Report on Form 10-Q:

Production Location		Vehicle Model(s)		Production Status
Fremont Factory		Model S / Model X		Active
		Model 3 / Model Y		Active
Gigafactory Shanghai		Model 3 / Model Y		Active
Gigafactory Berlin-Brandenburg		Model Y		Active
Gigafactory Texas		Model Y		Active
		Cybertruck		Tooling
Gigafactory Nevada		Tesla Semi		Pilot production
Various		Next Generation Platform		In development
TBD		Tesla Roadster		In development

We are focused on growing our manufacturing capacity, which includes capacity for manufacturing new vehicle models such as our Cybertruck and next generation platform, and ramping all of our production vehicles to their installed production capacities as well as increasing production rate and efficiency at our current factories. The next phase of production growth will depend on the ramp at Gigafactory Berlin-Brandenburg and Gigafactory Texas, as well as our ability to add to our available sources of battery cell supply by manufacturing our own cells that we are developing to have high-volume output, lower capital and production costs and longer range. Our goals are to improve vehicle performance, decrease production costs and increase affordability and customer awareness.

These plans are subject to uncertainties inherent in establishing and ramping manufacturing operations, which may be exacerbated by new product and manufacturing technologies we introduce, the number of concurrent international projects, any industry-wide component constraints, labor shortages and any future impact from events outside of our control. Moreover, we have set ambitious technological targets with our plans for battery cells as well as for iterative manufacturing and design improvements for our vehicles with each new factory.

Automotive—Demand, Sales, Deliveries and Infrastructure

Our cost reduction efforts, cost innovation strategies, and additional localized procurement and manufacturing are key to our vehicles’ affordability and have allowed us to competitively price our vehicles. We will also continue to generate demand and brand awareness by improving our vehicles’ performance and functionality, including through products based on artificial intelligence such as Autopilot and FSD, and other software features, and delivering new vehicles, such as our upcoming Cybertruck. Moreover, we expect to continue to benefit from ongoing electrification of the automotive sector and increasing environmental regulations and initiatives.

However, we operate in a cyclical industry that is sensitive to political and regulatory uncertainty, including with respect to trade and the environment, all of which can be compounded by inflationary pressures, rising energy prices, increases in interest rates and the liquidity of enterprise customers. For example, inflationary pressures have increased across the markets in which we operate. In an effort to curb this trend, central banks in developed countries raised interest rates rapidly and substantially, impacting the affordability of vehicle lease and finance arrangements. Further, sales of vehicles in the automotive industry also tend to be cyclical in many markets, which may expose us to increased volatility as we expand and adjust our operations. Moreover, as additional competitors enter the marketplace and help bring the world closer to sustainable transportation, we will have to adjust and continue to execute well to maintain our momentum. These macroeconomic and industry trends have had, and will likely continue to have, an impact on the pricing of, and order rate for our vehicles, and in turn our operating margin. We will continue to adjust accordingly to such developments, and we believe our ongoing cost reduction, including improved production innovation and efficiency at our newest factories and lower logistics costs, and focus on operating leverage will continue to benefit us in relation to our competitors, while our new products will help enable future growth.

As our production increases, we must work constantly to similarly increase vehicle delivery capability so that it does not become a bottleneck on our total deliveries. We are also committed to reducing the percentage of vehicles delivered in the third month of each quarter, which will help to reduce the cost per vehicle. As we expand our manufacturing operations globally, we will also have to continue to increase and staff our delivery, servicing and charging infrastructure accordingly, maintain our vehicle reliability and optimize our Supercharger locations to ensure cost effectiveness and customer satisfaction. In particular, as other automotive manufacturers have announced their adoption of the North American Charging Standard (“NACS”) and agreements with us to utilize our Superchargers, we must correspondingly expand our network in order to ensure adequate availability to meet customer demands. We also remain focused on continued enhancements of the capability and efficiency of our servicing operations.

Energy Generation and Storage Demand, Production and Deployment

The long-term success of this business is dependent upon increasing margins through greater volumes. We continue to increase the production of our energy storage products to meet high levels of demand, including the announcement of a new Megafactory in Shanghai. For Megapack, energy storage deployments can vary meaningfully quarter to quarter depending on the timing of specific project milestones. For Powerwall, better availability and growing concerns over grid stability drive higher customer interest. We remain committed to growing our retrofit solar energy business by offering a low-cost and simplified online ordering experience. In addition, we continue to seek to improve our installation capabilities and price efficiencies for Solar Roof. As these product lines grow, we will have to maintain adequate battery cell supply for our energy storage products and ensure the availability of qualified personnel, particularly skilled electricians, to support the ramp of Solar Roof.

Cash Flow and Capital Expenditure Trends

Our capital expenditures are typically difficult to project beyond the short-term given the number and breadth of our core projects at any given time, and may further be impacted by uncertainties in future global market conditions. We are simultaneously ramping new products, building or ramping manufacturing facilities on three continents, piloting the development and manufacture of new battery cell technologies, expanding our Supercharger network and investing in autonomy and other artificial intelligence enabled training and products, and the pace of our capital spend may vary depending on overall priority among projects, the pace at which we meet milestones, production adjustments to and among our various products, increased capital efficiencies and the addition of new projects. Owing and subject to the foregoing as well as the pipeline of announced projects under development, all other continuing infrastructure growth and varying levels of inflation, we currently expect our capital expenditures to be between $7.00 to $9.00 billion in 2023 and in each of the following two fiscal years.

Our business has recently been consistently generating cash flow from operations in excess of our level of capital spend, and with better working capital management resulting in shorter days sales outstanding than days payable outstanding, our sales growth is also facilitating positive cash generation. We have and will continue to utilize such cash flows, among other things, to do more vertical integration, expand our product roadmap and provide financing options to our customers. At the same time, we are likely to see heightened levels of capital expenditures during certain periods depending on the specific pace of our capital-intensive projects and other potential variables such as rising material prices and increases in supply chain and labor expenses resulting from changes in global trade conditions and labor availability. Overall, we expect our ability to be self-funding to continue as long as macroeconomic factors support current trends in our sales.

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, refer to Part II, Item 7, Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2022.

Recent Accounting Pronouncements

See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Results of Operations

Revenues

		Three Months Ended June 30,								Change								Six Months Ended June 30,								Change
(Dollars in millions)		2023				2022				$				%				2023				2022				$				%
Automotive sales		$	20,419			$	13,670			$	6,749				49	%		$	39,297			$	29,184			$	10,113				35	%
Automotive regulatory credits			282				344				(62	)			(18	)%			803				1,023				(220	)			(22	)%
Automotive leasing			567				588				(21	)			(4	)%			1,131				1,256				(125	)			(10	)%
Total automotive revenues			21,268				14,602				6,666				46	%			41,231				31,463				9,768				31	%
Services and other			2,150				1,466				684				47	%			3,987				2,745				1,242				45	%
Total automotive & services and other segment revenue			23,418				16,068				7,350				46	%			45,218				34,208				11,010				32	%
Energy generation and storage segment revenue			1,509				866				643				74	%			3,038				1,482				1,556				105	%
Total revenues		$	24,927			$	16,934			$	7,993				47	%		$	48,256			$	35,690			$	12,566				35	%

Automotive & Services and Other Segment

Automotive sales revenue increased $6.75 billion, or 49%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, primarily due to increases of 196,382 combined Model 3 and Model Y cash deliveries and 3,395 combined Model S and Model X cash deliveries year over year despite a negative impact from the United States dollar strengthening against other foreign currencies in the three months ended June 30, 2023 compared to the prior period. This was achieved from production ramping of Model Y globally. The increases were partially offset by lower average selling price on our vehicles driven by overall price reductions year over year.

Automotive sales revenue increased $10.11 billion, or 35%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to an increase of 304,760 combined Model 3 and Model Y cash deliveries year over year despite a negative impact from the United States dollar strengthening against other foreign currencies in the six months ended June 30, 2023 as compared to the prior period. This was achieved from production ramping and partially offset by lower average selling price on our vehicles as mentioned above.

Automotive regulatory credits revenue decreased $62 million, or 18%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Automotive regulatory credits revenue decreased $220 million, or 22%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to the recognition of $288 million in revenue in the first quarter of 2022 primarily due to changes in regulation which entitled us to additional consideration for credits sold previously.

Automotive leasing revenue decreased $21 million, or 4%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Automotive leasing revenue decreased $125 million, or 10%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The decreases were primarily due to a decrease in direct sales-type leasing revenue driven by lower deliveries year over year, partially offset by an increase from our growing direct operating lease portfolio.

Services and other revenue increased $684 million, or 47%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Services and other revenue increased $1.24 billion, or 45%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The increases were primarily due to an increase in used vehicle revenue driven by increases in volume, non-warranty maintenance services revenue as our fleet continues to grow, paid Supercharging revenue, insurance services revenue and retail merchandise revenue, partially offset by decreases in average selling price of used Tesla and non-Tesla vehicles.

Energy Generation and Storage Segment

Energy generation and storage revenue increased $643 million, or 74%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Energy generation and storage revenue increased $1.56 billion, or 105%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The increases were primarily due to an increase in deployments of Megapack at a lower average selling price.

Cost of Revenues and Gross Margin

		Three Months Ended June 30,								Change								Six Months Ended June 30,								Change
(Dollars in millions)		2023				2022				$				%				2023				2022				$				%
Cost of revenues
Automotive sales		$	16,841			$	10,153			$	6,688				66	%		$	32,263			$	21,067			$	11,196				53	%
Automotive leasing			338				368				(30	)			(8	)%			671				776				(105	)			(14	)%
Total automotive cost of revenues			17,179				10,521				6,658				63	%			32,934				21,843				11,091				51	%
Services and other			1,984				1,410				574				41	%			3,686				2,696				990				37	%
Total automotive & services and other segment cost of revenues			19,163				11,931				7,232				61	%			36,620				24,539				12,081				49	%
Energy generation and storage segment			1,231				769				462				60	%			2,592				1,457				1,135				78	%
Total cost of revenues		$	20,394			$	12,700			$	7,694				61	%		$	39,212			$	25,996			$	13,216				51	%
Gross profit total automotive		$	4,089			$	4,081											$	8,297			$	9,620
Gross margin total automotive			19.2	%			27.9	%											20.1	%			30.6	%
Gross profit total automotive & services and other segment		$	4,255			$	4,137											$	8,598			$	9,669
Gross margin total automotive & services and other segment			18.2	%			25.7	%											19.0	%			28.3	%
Gross profit energy generation and storage segment		$	278			$	97											$	446			$	25
Gross margin energy generation and storage segment			18.4	%			11.2	%											14.7	%			1.7	%
Total gross profit		$	4,533			$	4,234											$	9,044			$	9,694
Total gross margin			18.2	%			25.0	%											18.7	%			27.2	%

Automotive & Services and Other Segment

Cost of automotive sales revenue increased $6.69 billion, or 66%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Cost of automotive sales revenue increased $11.20 billion, or 53%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. Cost of automotive sales revenue increased in line with the growth in deliveries year over year, as discussed above. The increase was partially offset by a decrease in the average combined cost per unit of our vehicles primarily due to decrease in material costs, lower manufacturing costs from better fixed cost absorption offset by higher outbound freight and duties. Our costs of revenue were also positively impacted by the IRA manufacturing credits earned during the current periods and by the United States dollar strengthening against our foreign currencies as compared to the prior periods.

Cost of automotive leasing revenue decreased $30 million, or 8%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Cost of automotive leasing revenue decreased $105 million, or 14%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The decreases were primarily due to a decrease in direct sales-type leasing cost of revenue driven by lower deliveries year over year.

Cost of services and other revenue increased $574 million, or 41%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Cost of services and other revenue increased $990 million, or 37%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The increases were in line with the changes in services and other revenue as discussed above.

Gross margin for total automotive decreased from 27.9% to 19.2% in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Gross margin for total automotive decreased from 30.6% to 20.1% in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The decreases were primarily due to lower average selling price on our vehicles, margin headwinds from underutilization of new factories, and a decrease in regulatory credits revenue, partially offset by the overall favorable change in our average combined cost per unit of our vehicles as discussed above.

Gross margin for total automotive & services and other segment decreased from 25.7% to 18.2% in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Gross margin for total automotive & services and other segment decreased from 28.3% to 19.0% in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, primarily due to the automotive gross margin decrease discussed above, partially offset by an improvement in our services and other gross margin. Additionally, there was a higher proportion of services and other, which operated at a lower gross margin, within the segment during the first half of 2023 as compared to the prior year.

Energy Generation and Storage Segment

Cost of energy generation and storage revenue increased $462 million, or 60%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Cost of energy generation and storage revenue increased $1.14 billion, or 78%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, in line with the changes in Megapack deployments year over year, as discussed above. These increases were partially offset by improvements in production ramping that drove down the average cost per MWh of Megapack.

Gross margin for energy generation and storage improved from 11.2% to 18.4% in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Gross margin for energy generation and storage improved from 1.7% to 14.7% in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The increases were driven by the changes in Megapack revenue and cost per MWh as described above.

Research and Development Expense

		Three Months Ended June 30,								Change								Six Months Ended June 30,								Change
(Dollars in millions)		2023				2022				$				%				2023				2022				$				%
Research and development		$	943			$	667			$	276				41	%		$	1,714			$	1,532			$	182				12	%
As a percentage of revenues			4	%			4	%											4	%			4	%

Research and development (“R&D”) expenses increased $276 million, or 41%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. R&D expenses increased $182 million, or 12%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The overall increases were primarily driven by additional costs in the current period related to the pre-production phase for Cybertruck, AI and other programs.

R&D expenses as a percentage of revenue stayed consistent at 4% in the three and six months ended June 30, 2023 compared to the same periods in the prior year. Our R&D expenses have increased proportionately with total revenues as we continue to expand our product roadmap and technologies.

Selling, General and Administrative Expense

		Three Months Ended June 30,								Change								Six Months Ended June 30,								Change
(Dollars in millions)		2023				2022				$				%				2023				2022				$				%
Selling, general and administrative		$	1,191			$	961			$	230				24	%		$	2,267			$	1,953			$	314				16	%
As a percentage of revenues			5	%			6	%											5	%			5	%

Selling, general and administrative (“SG&A”) expenses increased $230 million, or 24%, in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. This was driven by a $135 million increase in employee and labor costs primarily from increased headcount, including professional services and an $81 million increase in facilities related expenses.

SG&A expenses increased $314 million, or 16%, in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. This was driven by a $183 million increase in employee and labor costs primarily from increased headcount, including professional services and a $166 million increase in facilities related expenses. The increases were partially offset by a decrease of $52 million in stock-based compensation expense, primarily attributable to the lower stock-based compensation expense on the 2018 CEO Performance Award which was fully expensed as of December 31, 2022.

Restructuring and Other

		Three Months Ended June 30,								Change								Six Months Ended June 30,								Change
(Dollars in millions)		2023				2022				$				%				2023				2022				$				%
Restructuring and other		$	—			$	142			$	(142	)			(100	)%		$	—			$	142			$	(142	)			(100	)%

During the three months ended June 30, 2022, we recorded impairment loss of $170 million as well as realized gains of $64 million in connection with converting our holdings of digital assets into fiat currency. We also recorded other expenses of $36 million related to employee terminations during the three months ended June 30, 2022.

Interest Income

		Three Months Ended June 30,								Change								Six Months Ended June 30,								Change
(Dollars in millions)		2023				2022				$				%				2023				2022				$				%
Interest income		$	238			$	26			$	212				815	%		$	451			$	54			$	397				735	%

Interest income increased $212 million, or 815%, in the three months ended June 30, 2023 and increased $397 million, or 735%, in the six months ended June 30, 2023 as compared to the three and six months ended June 30, 2022, respectively. This increase was primarily due to higher interest earned on our cash and cash equivalents and short-term investments in the three and six months ended June 30, 2023 as compared to the prior periods. This was driven by an increase in our short-term investments balance and rising interest rates.

Other (Expense) Income, Net

		Three Months Ended June 30,								Change								Six Months Ended June 30,								Change
(Dollars in millions)		2023				2022				$				%				2023				2022				$				%
Other income, net		$	328			$	28			$	300				1071	%		$	280			$	84			$	196				233	%

Other income, net, changed favorably by $300 million in the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Other income, net, changed favorably by $196 million in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The favorable changes were primarily due to fluctuations in foreign currency exchange rates on our intercompany balances.

Provision for Income Taxes

		Three Months Ended June 30,								Change								Six Months Ended June 30,								Change
(Dollars in millions)		2023				2022				$				%				2023				2022				$				%
Provision for income taxes		$	323			$	205			$	118				58	%		$	584			$	551			$	33				6	%
Effective tax rate			11	%			8	%											10	%			9	%

Our provision for income taxes increased by $118 million, or 58%, in the three months ended June 30, 2023 and increased by $33 million, or 6%, in the six months ended June 30, 2023 as compared to the three months ended June 30, 2022 and six months ended June 30, 2022, respectively, primarily due to the change in our pre-tax income year over year and changes in mix of jurisdictional earnings.

Our effective tax rate increased from 8% to 11% in the three months ended June 30, 2023 and increased from 9% to 10% in the six months ended June 30, 2023 as compared to the three and six months ended June 30, 2022, respectively, primarily due to changes in mix of jurisdictional earnings.

See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Liquidity and Capital Resources

We expect to continue to generate net positive operating cash flow as we have done in the last four fiscal years. The cash we generate from our core operations enables us to fund ongoing operations and production, our research and development projects for new products and technologies including our proprietary battery cells, additional manufacturing ramps at existing manufacturing facilities such as the Fremont Factory, Gigafactory Nevada, Gigafactory Shanghai and Gigafactory New York, the ramp of Gigafactory Berlin-Brandenburg and Gigafactory Texas, the construction of future factories, and the continued expansion of our retail and service locations, body shops, Mobile Service fleet, Supercharger, including to support NACS, energy product installation capabilities and autonomy and other artificial intelligence enabled products.

In addition, because a large portion of our future expenditures will be to fund our growth, we expect that if needed we will be able to adjust our capital and operating expenditures by operating segment. For example, if our near-term manufacturing operations decrease in scale or ramp more slowly than expected, including due to global economic or business conditions, we may choose to correspondingly slow the pace of our capital expenditures. Finally, we continually evaluate our cash needs and may decide it is best to raise additional capital or seek alternative financing sources to fund the rapid growth of our business, including through drawdowns on existing or new debt facilities or financing funds. Conversely, we may also from time to time determine that it is in our best interests to voluntarily repay certain indebtedness early.

Accordingly, we believe that our current sources of funds will provide us with adequate liquidity during the 12-month period following June 30, 2023, as well as in the long-term.

See the sections below for more details regarding the material requirements for cash in our business and our sources of liquidity to meet such needs.

Material Cash Requirements

From time to time in the ordinary course of business, we enter into agreements with vendors for the purchase of components and raw materials to be used in the manufacture of our products. However, due to contractual terms, variability in the precise growth curves of our development and production ramps, and opportunities to renegotiate pricing, we generally do not have binding and enforceable purchase orders under such contracts beyond the short-term, and the timing and magnitude of purchase orders beyond such period is difficult to accurately project.

As discussed in and subject to the considerations referenced in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations—Management Opportunities, Challenges and Uncertainties and 2023 Outlook—Cash Flow and Capital Expenditure Trends in this Quarterly Report on Form 10-Q, we currently expect our capital expenditures to support our projects globally to be between $7.00 to $9.00 billion in 2023 and in each of the following two fiscal years. We also have certain obligations in connection with our operations at Gigafactory New York and Gigafactory Shanghai, as outlined in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Cash Requirements in our Annual Report on Form 10-K for the year ended December 31, 2022.

As of June 30, 2023, we and our subsidiaries had outstanding $1.53 billion in aggregate principal amount of indebtedness, of which $1.02 billion is scheduled to become due in the succeeding 12 months. For details regarding our indebtedness, refer to Note 7, Debt, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Sources and Conditions of Liquidity

Our sources to fund our material cash requirements are predominantly from our deliveries and servicing of new and used vehicles, sales and installations of our energy storage products and solar energy systems, proceeds from debt facilities and proceeds from equity offerings, when applicable.

As of June 30, 2023, we had $15.30 billion and $7.78 billion of cash and cash equivalents and short-term investments, respectively. Balances held in foreign currencies had a U.S. dollar equivalent of $3.85 billion and consisted primarily of Chinese yuan, euros and Canadian dollar. We had $5.16 billion of unused committed amounts under our credit facilities as of June 30, 2023. Certain of such unused committed amounts are subject to satisfying specified conditions prior to draw-down (such as pledging to leased vehicles and our interests in those leases). For details regarding our indebtedness, refer to Note 7*, Debt*, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

We continue adapting our strategy to meet our liquidity and risk objectives, such as investing in U.S. government and other investments, to do more vertical integration, expand our product roadmap and provide financing options to our customers.

Summary of Cash Flows

		Six Months Ended June 30,
(Dollars in millions)		2023				2022
Net cash provided by operating activities		$	5,578			$	6,346
Net cash used in investing activities		$	(6,018	)		$	(3,051	)
Net cash used in financing activities		$	(561	)		$	(2,320	)

Cash Flows from Operating Activities

Net cash provided by operating activities decreased by $768 million to $5.58 billion during the six months ended June 30, 2023 from $6.35 billion during the six months ended June 30, 2022. This decrease was primarily due to unfavorable changes in net operating assets and liabilities of $683 million and the decrease in net income excluding non-cash expenses, gains and losses of $85 million.

Cash Flows from Investing Activities

Cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $4.13 billion for the six months ended June 30, 2023 and $3.50 billion for the six months ended June 30, 2022, mainly for the expansions of Gigafactory Texas, Gigafactory Berlin-Brandenburg, Gigafactory Shanghai and the Fremont Factory. We also purchased $1.81 billion and $476 million of investments, net of proceeds from maturities and sales, for the six months ended June 30, 2023 and June 30, 2022, respectively.

Cash Flows from Financing Activities

Net cash used in financing activities decreased by $1.76 billion to $561 million during the six months ended June 30, 2023 from $2.32 billion during the six months ended June 30, 2022. The decrease was primarily due to a $1.68 billion decrease in repayments of convertible and other debt. See Note 7, Debt, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details regarding our debt obligations.