Tesla 2012 Annual Report Download - page 76

Table of Contents
amount of $255.3 million which includes investments in money market funds, short-term marketable securities of $25.1 million, cash of $23.5
million deposited in a dedicated DOE account in accordance with the requirements of our DOE Loan Facility, and $188.8 million available
under the DOE Loan Facility. We expect that these principal sources of liquidity together with our current projections of cash flow from
operating activities will provide us adequate liquidity until we reach profitability in 2013.
Management Opportunities, Challenges and Risks
Our principal focus has continued to be on the disciplined development of Model S so that we can commence deliveries by July 2012. We
have also been focused on the continued sales of the Tesla Roadster and powertrain components, development services activities with our
strategic partners, advanced engineering work on the planned Model X and pursuing new electric powertrain opportunities with automobile
manufacturers.
In January 2012, we concluded the production run of our current generation Tesla Roadster. Through December 31, 2011, we had
delivered approximately 2,150 Roadsters to customers. We plan to sell our remaining Tesla Roadsters during 2012 primarily in Europe and Asia
until our inventory is depleted.
Powertrain component sales in 2011 were driven primarily by our deliveries to supply Daimler AG (Daimler) with battery packs and
chargers for the Daimler Smart fortwo and A-
Class EV programs. We completed both of these production programs as of December 31, 2011. In
July 2011, we entered into a supply and services agreement with Toyota for the production of an electric powertrain system, including a battery
pack, charging system, inverter, motor, gearbox and associated software, which will be integrated into the Toyota RAV4 EV. Additionally, we
will provide Toyota with certain services related to the supply of these components. Pursuant to the agreement, Toyota will pay us approximately
$100 million from 2012 through 2014 based on our delivery of these components for the Toyota RAV4 EV. Due to the wind down of the
Daimler Smart fortwo and A-Class EV production programs at the end of 2011, we expect powertrain component sales to be limited until the
planned start of production of the Toyota RAV4 EV powertrain system in the first half of 2012.
As we have a limited number of the Tesla Roadsters left for sale and as we expect powertrain component sales to decline until the start of
production for the Toyota RAV4 EV program, we anticipate our automotive sales will decline, potentially significantly, just prior to the planned
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 and electric powertrain systems.
We completed all of our planned milestones and deliveries of samples to Toyota during 2011, and we currently expect to complete our
remaining development services milestones and sample deliveries during the first quarter of 2012. As such, we expect that the remaining
development services revenue under the Toyota RAV4 EV program will also be recognized in the first quarter. Since the revenue related to
development services milestones are recognized when achieved while milestone costs must be expensed as incurred, our development services
gross margin will reflect this favorability when we recognize our final Toyota RAV4 EV milestones in 2012. In November 2011, we received a
letter of intent from Daimler for a full electric powertrain program for a vehicle in the Mercedes line and recently, we received a purchase order
to begin the development work. However, we have not yet finalized with Daimler the terms for this program and may never do so. Due to timing
differences that may arise between the recognition of future milestone revenue and the underlying costs of development services, the gross
margin from our development services activities may vary from period to period as we have seen under our previous development services
agreements including that for the Toyota RAV4 EV program.
The build of Model S beta prototypes continues to progress and we will begin building release candidate vehicles in the first quarter of
2012. We continue to work closely with suppliers to design, develop and test components that will meet our anticipated production design
specifications and schedule. Ensuring that our design, engineering, operations and manufacturing engineering teams, and our suppliers, execute
on all
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