Tesla 2011 Annual Report Download - page 115

Table of Contents
value for each of the deliverables within the multiple element arrangements because we sell each of the vehicles, vehicle accessories and options
separately, outside of any multiple element arrangements. As each of these items has stand alone value to the customer, revenue from sales of
vehicle accessories and options are recognized when those specific items are delivered to the customer. We record revenue for destination
charges billed to our customers. Revenue from destination charges totaled $1.0 million, $1.9 million and $0.1 million for the years ended
December 31, 2010, 2009 and 2008, respectively. The related costs are recorded in cost of automotive sales.
In February 2010, we began offering a leasing program to qualified customers in the United States for the Tesla Roadster. Through our
wholly owned subsidiary, Tesla Motors Leasing, Inc., qualifying customers are permitted to lease the Tesla Roadster for 36 months, after which
time they have the option of either returning the vehicle to us or purchasing it for a pre-determined residual value. We account for these leasing
transactions as operating leases and accordingly, we recognize leasing revenues on a straight-line basis over the term of the individual leases and
record cost of sales equal to the depreciation of the leased vehicles. As of December 31, 2010, we had deferred revenues of $1.1 million of down
payments which will be recognized over the term of the individual leases. Lease revenues are recorded in automotive sales and for the year
ended December 31, 2010, we recognized $0.8 million.
Zero Emission Vehicle Credit Sales
California and certain other states have laws in place requiring vehicle manufacturers to ensure that a portion of the vehicles delivered for
sale in that state during each model year are zero emission vehicles. These laws provide that a manufacturer of zero emission vehicles may earn
credits, referred to as ZEV credits, and may sell excess credits to other manufacturers who apply such credits to comply with these regulatory
requirements. As a manufacturer solely of zero emission vehicles, we have earned ZEV credits on vehicles sold in such states, and we expect to
continue to earn these credits in the future. Since our only commercial vehicle is electric, we do not receive any benefit from the generation of
ZEV credits, and accordingly look to sell them to other vehicle manufacturers. In order to facilitate the sale of these credits, we enter into
contractual agreements with third parties requiring them to purchase our ZEV credits at pre-determined prices. We recognize revenue on the sale
of these credits at the time legal title to the credits is transferred to the purchasing party by the governmental agency issuing the credits. Revenue
from the sale of ZEV credits totaled $2.8 million, $8.2 million and $3.5 million for the years ended December 31, 2010, 2009 and 2008,
respectively.
Extended Service and Battery Replacement Plans
We provide customers with the opportunity to purchase an extended warranty for the period after the end of our initial New Vehicle
Limited Warranty to extend coverage for an additional three years or 36,000 miles, whichever comes first. We refer to this program as our
Extended Service Plan. Amounts collected on these sales are initially recorded in deferred revenues on the consolidated balance sheets and
recognized in automotive sales over the extended warranty period. Through December 31, 2010, we have deferred $1.2 million related to the
Extended Service Plan and have not yet recognized any related revenues.
Additionally, within three months of purchasing a vehicle, we provide customers with a one-time option to replace the battery packs in
their vehicles at any time after the expiration of the New Vehicle Limited Warranty but before the tenth anniversary of the purchase date of their
vehicles. We refer to this program as our Battery Replacement Plan. Amounts collected on these sales are initially recorded in deferred revenues
on the consolidated balance sheets and recognized in automotive sales as we fulfill our obligation to replace the battery packs. Through
December 31, 2010, we have deferred $0.9 million related to the Battery Replacement Plan and have not yet recognized any related revenues.
Development Services Revenue
Revenue from development services arrangements consist of revenue earned from the development of electric vehicle powertrain
components for other automobile manufacturers, including the design and
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