Tesla 2014 Annual Report Download - page 38

Table of Contents
our electric vehicles, such as Europe and Asia, will impact our business, prospects and operating results as well. Demand for our electric vehicles
may also be affected by factors directly impacting automobile price or the cost of purchasing and operating automobiles, such as sales and
financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import
regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales and increased inventory, which may result in further
downward price pressure and adversely affect our business, prospects, financial condition and operating results. These effects may have a more
pronounced impact on our business given our relatively smaller scale and financial resources as compared to many incumbent automobile
manufacturers.
Our financial results may vary significantly from period-to-period due to the seasonality of our business, fluctuations in our operating
costs and other factors.
Our operating results may vary significantly from period-to-period due to many factors, including seasonal factors that may have an effect
on the demand for our electric vehicles. Demand for new cars in the automobile industry typically declines over the winter season, while sales
are generally higher during the spring and summer months. Sales of the Tesla Roadster fluctuated on a seasonal basis with increased sales during
the spring and summer months in our second and third fiscal quarters relative to our fourth and first fiscal quarters. We note that, in general,
automotive sales tend to decline over the winter season and we anticipate that our sales of Model S and future models may have similar
seasonality. However, our limited operating history makes it difficult for us to judge the exact nature or extent of the seasonality of our business.
Also, any unusually severe weather conditions in some markets may impact demand for our vehicles. Our operating results could also suffer if
we do not achieve revenue consistent with our expectations for this seasonal demand because many of our expenses are based on anticipated
levels of annual revenue.
In addition, we expect our period-to-period operating results to vary based on our operating costs which we anticipate will increase
significantly in future periods as we, among other things, design, develop and manufacture Model X and future products, increase the production
capacity at our manufacturing facilities to produce vehicles at higher volumes, develop the Tesla Gigafactory, open new Tesla service centers
with maintenance and repair capabilities, open new Supercharger locations, increase our sales and marketing activities, and increase our general
and administrative functions to support our growing operations. As a result of these factors, we believe that quarter-to-quarter comparisons of
our operating results, especially in the short-term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators
of future performance. Moreover, our operating results may not meet expectations of equity research analysts or investors. If any of this occurs,
the trading price of our common stock could fall substantially, either suddenly or over time.
If we are unable to establish and maintain confidence in our long-term business prospects among consumers, analysts and within our
industry, then our financial condition, operating results, business prospects and stock price may suffer materially.
Our vehicles are highly technical products that require maintenance and support. If we were to cease or cut back operations, even years
from now, buyers of our vehicles from years earlier might have much more difficulty in maintaining their vehicles and obtaining satisfactory
support. As a result, consumers may be less likely to purchase our vehicles now if they are not convinced that our business will succeed or that
our operations will continue for many years. Similarly, suppliers and other third parties will be less likely to invest time and resources in
developing business relationships with us if they are not convinced that our business will succeed. If we are required to curtail our expansion
plans in the future as we have done in the past, this may result in negative perceptions regarding our long-term business prospects and may lead
to cancellations of Model S or Model X orders and reservations.
Accordingly, in order to build and maintain our business, we must maintain confidence among customers, suppliers, analysts and other
parties in our liquidity and long-term business prospects. In contrast to some more
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