Tesla (TSLA -8.78%) reported fourth-quarter earnings last month, and one notable line item on the balance sheet was a sequential increase in the carrying value of its inventory. At the end of 2016, the electric-car maker had nearly $2.1 billion in inventory, a sequential increase from $1.6 billion in the prior quarter.

The breakdown of inventory isn't disclosed until the subsequent 10-Q or 10-K is filed after earnings, and Tesla filed its 10-K earlier this month. Investors can now see the moving parts.

Tesla is now sitting on $1 billion in finished goods

For starters, here's a breakdown of Tesla's inventory for the past two quarters.

Inventory

Q3 2016

Q4 2016

Raw materials

$353.8 million

$680.3 million

Work in process

$330 million

$233.7 million

Finished goods

$791.6 million

$1.02 billion

Service parts

$129.3 million

$136.6 million

Total

$1.6 billion

$2.1 billion

Data source: SEC filings.

It's worth pointing out real quick that the SolarCity acquisition closed during the quarter, combining both companies' balance sheets. SolarCity had about $172.7 million worth of total inventory (consisting primarily of $141 million in raw materials and $31.8 million in work in progress) at the end of the year, which accounts for a portion of the sequential increase.

Tesla vehicles charging

Image source: Tesla.

Since SolarCity does not have a finished goods category for its inventory, we can safely say that the notable increase of about $225 million in finished goods is coming from the automotive side. This is the first time that Tesla's finished goods inventory has surpassed $1 billion.

Cars on boats

This figure includes "vehicles in transit to fulfill customer orders, new vehicles available for immediate sale at our retail and service center locations, pre-owned Tesla vehicles, and energy storage products." Tesla keeps minimal inventory on hand relative to traditional car dealers, and cell production for storage products didn't begin until after the quarter closed.

Tesla building in Amsterdam

Tesla in Amsterdam. Image source: Tesla.

Investors do know that Tesla has been growing its international sales -- total revenue outside the United States grew 34% to $2.8 billion in 2016 -- and those orders take longer to get to their new homes abroad. Reflecting this, vehicles in transit at the end of each quarter rose throughout 2016.

Quarter

Vehicles in Transit at Quarter End

Q1 2016

2,615

Q2 2016 

5,150

Q3 2016 

5,500

Q4 2016 

6,450

Data source: Tesla.

Part of the increase for the fourth quarter was the nearly 1,000 additional vehicles that were probably sitting on a boat in the middle of the ocean, relative to the third quarter. Tesla doesn't disclose average transaction prices, but most third-party estimates peg the average at right around $100,000, which would suggest that approximately $100 million of the increase can be tied to the increase in in-transit vehicles.

The rest of the increase can probably be explained by a modest increase in stores and service locations (14 new locations opened during the quarter) and associated inventory models and loaners, as well as higher inventories of pre-owned vehicles (pre-owned vehicle sales are driving the growth in service and other revenue). Considering Tesla's integrated model and growth, a ballooning inventory balance is just par for the course.