Tesla 2014 Annual Report Download - page 41

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Table of Contents
In addition, we expect that our ability to develop, maintain and strengthen the Tesla brand will also depend heavily on the success of our
marketing efforts. To date, we have limited experience with marketing activities as we have relied primarily on the internet, word of mouth and
attendance at industry trade shows to promote our brand. To further promote our brand, we may be required to change our marketing practices,
which could result in substantially increased advertising expenses, including the need to use traditional media such as television, radio and print.
The automobile industry is intensely competitive, and we may not be successful in building, maintaining and strengthening our brand. Many of
our current and potential competitors, particularly automobile manufacturers headquartered in Detroit, Japan and the European Union, have
greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and
maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.
If our vehicle owners customize our vehicles or change the charging infrastructure with aftermarket products, the vehicle may not operate
properly, which could harm our business.
Automobile enthusiasts may seek to “hack” our vehicles to modify its performance which could compromise vehicle safety systems. Also,
we are aware of customers who have customized their vehicles with after-market parts that may compromise driver safety. For example, some
customers have installed seats that elevate the driver such that airbag and other safety systems could be compromised. Other customers have
changed wheels and tires, while others have installed large speaker systems that may impact the electrical systems of the vehicle. We have not
tested, nor do we endorse, such changes or products. In addition, customer use of improper external cabling or unsafe charging outlets can
expose our customers to injury from high voltage electricity. Such unauthorized modifications could reduce the safety of our vehicles and any
injuries resulting from such modifications could result in adverse publicity which would negatively affect our brand and harm our business,
prospects, financial condition and operating results.
Our deposits for Model S and reservations for Model X may be refundable to customers, and significant cancellations could harm our
financial condition and business prospects.
As of December 31, 2013, we had $163.2 million in customer deposits, primarily for Model S and Model X. Model S deposits are
generally subject to cancellation by the customer and fully refundable up until two weeks after placing the order. Model X reservations are fully
refundable until such time when customers begin to configure their vehicles for delivery. We have experienced order cancellations for our
vehicles and have had to refund the related deposits, and cancellations may continue.
Given the lead times that we have historically experienced between customer reservation and delivery on the Tesla Roadster and on Model
S and that we expect to experience on Model X, there is risk that customers who have placed orders or made reservations for our vehicles may
cancel such orders or reservations and not ultimately take delivery on vehicles due to potential changes in customer preferences, competitive
developments and other factors.
Additionally, if we encounter delays in our planned launch and ramp in Asia, or further delays in the introduction of Model X, a significant
number of our customers could similarly cancel their orders or reservations and demand refunds of their deposits. As a result, no assurance can
be made that orders and reservations will not be cancelled and will ultimately result in the final purchase, delivery, and sale of the vehicle.
Our plan to expand our network of Tesla stores, service centers and Superchargers will require significant cash investments and
management resources and may not meet our expectations with respect to additional sales of our electric vehicles. In addition, we may not
be able to open stores or service centers in certain states or Superchargers in desired locations.
Our plan to expand our network of Tesla stores, service centers and Superchargers will require significant cash investments and
management resources and may not meet our expectations with respect to additional sales
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