Tesla 2014 Annual Report Download - page 12

Table of Contents
Sales and Marketing
Company-Owned Stores and Galleries
We market and sell cars directly to consumers through an international network of company-owned stores and galleries. Our Tesla stores
and galleries are highly visible, premium outlets in major metropolitan markets, some of which combine retail sales and service. We have also
found that opening a service center in a new geographic area can increase demand. As a result, we have complemented our store strategy with
sales facilities and personnel in service centers to more rapidly expand our retail footprint. We refer to these as “Service Plus” locations.
Including our Service Plus locations, we now operate a network of over 80 sales and gallery locations in North America, Europe and Asia.
Including all of our sales and service facilities, we currently operate 116 locations. We intend to grow our sales and service network by
approximately 75% during the year ending December 31, 2014.
We believe that by owning our own sales and service network we can offer a compelling customer experience while achieving operating
efficiencies and capturing sales and service revenues incumbent automobile manufacturers do not enjoy in the traditional franchised distribution
and service model. Our customers deal directly with our own Tesla-employed sales and service staff, creating what we believe is a differentiated
buying experience from the buying experience consumers have with franchised automobile dealers and service centers. We believe we will also
be able to better control costs of inventory, manage warranty service and pricing, maintain and strengthen the Tesla brand, and obtain rapid
customer feedback. Further, we believe that by owning our sales network we will avoid the conflict of interest in the traditional dealership
structure inherent to most incumbent automobile manufacturers where the sale of warranty parts and repairs by a dealer are a key source of
revenue and profit for the dealer but often are an expense for the vehicle manufacturer.
Tesla Supercharger Network
We are building a network of up to 120 kWh fast charging equipment, each called a Tesla Supercharger, throughout North America and
Europe for fast charging of Model S. The Tesla Supercharger is an industrial grade, high speed charger designed to replenish 50% of the battery
pack in as little as 20 minutes. Supercharger stations are strategically placed along well-travelled highways to allow Model S owners to enjoy
long distance travel with convenient, minimal stops. As of February 19, 2014, we have 90 Supercharger stations open in North America and
Europe. In the United States, we have implemented Superchargers across a major transcontinental route, as well as along key routes in the East
and West Coasts. In Europe, Superchargers enable long distance travel along key routes in Norway, the Netherlands, Germany, Switzerland and
Austria. Access to the Supercharger network is currently available free of charge to owners of Model S vehicles with the 85 kWh battery pack
options and when purchased as an upfront option for 60 kWh. We are planning to methodically expand the Supercharger network over the next
few years in the United States, Europe and Asia.
Deposits and Reservations
We typically carry a limited inventory of our Model S vehicles at our Tesla stores. While some customers may purchase their vehicles
from this inventory, most of our customers choose to customize the appearance of their vehicle. We require a refundable $2,500 deposit for these
orders of our Model S vehicles, which is collected once the customer has selected the vehicle specifications and has entered into a purchase
agreement. The refundable deposit becomes nonrefundable after two weeks. We require full payment of the purchase price of the vehicle only
upon delivery of the vehicle to the customer.
For Model X, which is currently not in production, we require an initial refundable reservation payment of at least $5,000. Reservation
payments and deposits are used by us to fund, in part, our working capital requirements and help us to align production with demand.
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