Tesla 2012 Annual Report Download - page 29

Table of Contents
Although we are significantly dependent upon revenue generated from the sale of the Tesla Roadster and our powertrain activities with
other OEMs in the near term, our future success will be dependent upon our ability to design and achieve market acceptance of new
vehicle models, specifically Model S and Model X.
We currently generate a significant percentage of our revenues from the sale of our Tesla Roadsters. We ended the production run of the
Tesla Roadster at 2,500 vehicles in January 2012 and sales of new Tesla Roadsters are now limited to any vehicles available from our remaining
inventory.
Our second planned vehicle, our Model S, will not be in production until mid-2012, requires significant investment prior to commercial
introduction, and may never be successfully developed or commercially successful. Additionally, there can be no assurance that we will be able
to design future electric vehicles that will meet the expectations of our customers or that our future models, including Model S and Model X, will
become commercially viable. To the extent that we are not able to build the production Model S and Model X to the expectations created by the
early prototypes and our announced specifications, customers may cancel their reservations, our future sales could be harmed and investors may
lose confidence in us. Furthermore, historically, automobile customers have come to expect new and improved vehicle models to be introduced
frequently. In order to meet these expectations, we may in the future be required to introduce on a regular basis new vehicle models as well as
enhanced versions of existing vehicle models. As technologies change in the future for automobiles in general and performance electric vehicles
specifically, we will be expected to upgrade or adapt our vehicles and introduce new models in order to continue to provide vehicles with the
latest technology. To date, we have limited experience simultaneously designing, testing, manufacturing, upgrading, adapting and selling our
electric vehicles.
We anticipate that we will experience a significant increase in losses and will experience a significant decrease in revenues prior to the
launch of Model S.
Prior to the launch of our Model S, we anticipate our revenues will decline significantly as we have a limited supply of Tesla Roadsters
remaining to be sold. As a result, we anticipate that we will generate limited revenues from selling electric vehicles in 2012 until the launch of
our Model S. The launch of our Model S could be delayed for a number of reasons and any such delays may be significant and would extend the
period in which we would generate limited revenues from sales of our electric vehicles. Furthermore, although we recently received a letter of
intent and a purchase order from Daimler for a full electric powertrain program for a vehicle in the Mercedes line, we have not yet finalized with
Daimler the terms for this program. In addition to the limited number of the Tesla Roadsters left for sale, we also expect powertrain component
sales to be limited until the start of production for the Toyota RAV4 EV program during the first half of 2012. The potential decrease in sales
revenue prior to the launch of Model S due to declines in both Roadster and powertrain component sales could materially and adversely affect
our business, prospects, operating results and financial condition and our ability to fund operating losses could seriously constrain our growth.
Our production model for the non-powertrain portion of Model S is unproven, still evolving and is very different from the non-powertrain
portion of the production model for the Tesla Roadster.
Our future business depends in large part on our ability to execute on our plans to develop, manufacture, market and sell our Model S. To
date, our revenues have been principally derived from the sales of our Tesla Roadster. The Tesla Roadster has only been produced in low volume
quantities and the body was assembled by Lotus Cars Limited (Lotus) in the United Kingdom, with the final assembly by us at our facility in
Menlo Park, California for sales destined in the United States. We plan to manufacture Model S in higher volumes at our Tesla Factory. As a
result, the non-powertrain portion of the production model for Model S will be substantially different and significantly more complex than the
non-powertrain portion of the production model for the Tesla Roadster. In addition, for Model S we plan to introduce a number of new
manufacturing technologies and techniques, such as aluminum spot welding systems, which have not been widely adopted in the automotive
industry, and the vehicle will have a number of new and unique design features, such as a 17 inch display screen, newly designed retractable
exterior door handles and a panoramic roof. Our Model S production model will
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