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by bryanlarsen 2947 days ago
No, gross margin doesn't include R&D. That money's spent and gone, so is pretty much irrelevant towards future costs & profitability. Relevant from an academic perspective, but not from a business perspective.

Or at least that's the traditional view; purchasers of Model 3's now expect OTA updates so there is a little bit of R&D cost in the future but it's very minor compared to what's already been spent.

That also doesn't include self-driving R&D, but that's not included in the $35K base model so is also irrelevant.
2 comments
notenoughstuff 2947 days ago
>purchasers of Model 3's now expect OTA updates so there is a little bit of R&D cost in the future but it's very minor compared to what's already been spent.

Toyota spent almost $10 billion on R&D last year. Ford $8 billion. VW spent $15 billion.

Tesla spent $1.5 billion. What is it that makes people think that Tesla's R&D spend is so significant, and that it will diminish drastically in the future? This is an R&D intensive industry.

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bryanlarsen 2947 days ago
Toyota will spend roughly $0 in R&D on the 2017 Camry in 2018.
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dingaling 2947 days ago
Having worked in some Fortune 100s we never counted software development as R&D unless it was true blue-sky work unassociated with a project.

All the routine work was included in Run The Business budgeting just like tangible material purchases.

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drcharris 2946 days ago
On a number of occasions, as a (software) program manager at several very large firms, I was tasked with taking every single piece of work that happened in the previous calendar year and seeing whether we could classify it as 'R&D' in order to qualify for one of the many tax breaks on offer in the various places that we did business.

The criteria for qualification usually boiled down to 'was there an element of unknown quantity in the project?' - which left enormous room for interpretation, as basically anything that wasn't maintenance (RTB) could be justified.

We would regularly, across the firm, get $50m tax benefits a year out of this effort.

I'm not an accountant, but I'd be interested in just how rigorous the notion of 'R&D' is in a company's annual returns. It smells of PR to me.

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