Tesla 2014 Annual Report Download - page 42

Table of Contents
of our electric vehicles. This ongoing global expansion may not have the desired effect of increasing sales and expanding our brand presence to
the degree we are anticipating. Furthermore, there can be no assurances that we will be able to expand on the budget or timeline we have
established. We will also need to ensure we are in compliance with any regulatory requirements applicable to the sale and service of our vehicles
in those jurisdictions, which could take considerable time and expense. If we experience any delays in expanding our network of Tesla stores,
service centers and Superchargers, this could lead to a decrease in sales of our vehicles and could negatively impact our business, prospects,
financial condition and operating results. We have opened Tesla stores and service centers in major metropolitan areas throughout North
America, Europe and Asia, and we plan to open additional stores and service centers worldwide to support our ongoing worldwide Model S
rollout. We have also rapidly expanded our Supercharger network in the U.S .and Europe. However, we may not be able to expand at a sufficient
rate and our planned expansion will require significant cash investment and management resources, as well as efficiency in the execution of
establishing these locations and in hiring and training the necessary employees to effectively sell and service our vehicles.
Furthermore, certain states and foreign jurisdictions may have permit requirements, franchise dealer laws or similar laws or regulations that
may preclude or restrict our ability to open stores or sell vehicles out of such states and jurisdictions. Any such prohibition or restriction may
lead to decreased sales in such jurisdictions, which could harm our business, prospects and operating results. See Risk Factor “ We may face
regulatory limitations on our ability to sell vehicles directly or over the internet which could materially and adversely affect our ability to sell
our electric vehicles.” Additionally, we may face potential difficulties in finding suitable Supercharger sites in desired locations, negotiating
leases or obtaining required permits for such locations.
We face risks associated with our international operations, including unfavorable regulatory, political, tax and labor conditions and
establishing ourselves in new markets, all of which could harm our business.
We face various risks associated with our international operations. We currently have international operations and subsidiaries in various
countries and jurisdictions in Europe and Asia that are subject to the legal, political, regulatory and social requirements and economic conditions
in these jurisdictions. Additionally, as part of our growth strategy, we will continue to expand our sales, maintenance, repair and Supercharger
services internationally, particularly in China. However, we have limited experience to date selling and servicing our vehicles internationally and
such expansion requires us to make significant expenditures, including the establishment of local operating entities, hiring of local employees
and establishing facilities, in advance of generating any revenue. We are subject to a number of risks associated with international business
activities that may increase our costs, impact our ability to sell our electric vehicles and require significant management attention. These risks
include:
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conforming our vehicles to various international regulatory and safety requirements where our vehicles are sold, or homologation;
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difficulty in establishing, staffing and managing foreign operations;
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difficulties attracting customers in new jurisdictions;
• foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset against
taxes imposed upon us in the United States, and foreign tax and other laws limiting our ability to repatriate funds to the United
States;
• fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging
activities we undertake;
• our ability to enforce our contractual and intellectual property rights, especially in those foreign countries that do not respect and
protect intellectual property rights to the same extent as do the United States, Japan and European countries, which increases the risk
of unauthorized, and uncompensated, use of our technology;
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United States and foreign government trade restrictions, customs regulations, tariffs and price or exchange controls;