Tesla 2011 Annual Report Download - page 34

Table of Contents
If one or more of the foregoing assumptions turns out to be incorrect, our ability to successfully launch the Model S on time and on budget
if at all, and our business prospects, operating results and financial condition may be materially and adversely impacted.
We have no experience to date in high volume manufacturing of our electric vehicles. We do not know whether we will be able to develop
efficient, automated, low-cost manufacturing capability and processes, and reliable sources of component supply that will enable us to meet the
quality, price, engineering, design and production standards, as well as the production volumes required to successfully mass market the
Model S. Even if we are successful in developing our high volume manufacturing capability and processes and reliable sources of component
supply, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of
factors beyond our control such as problems with suppliers and vendors, or in time to meet our vehicle commercialization schedules or to satisfy
the requirements of customers. To date, we have experienced minor cost increases from our suppliers in order to meet our quality targets and
development timelines. Any failure to develop such manufacturing processes and capabilities within our projected costs and timelines could have
a material adverse effect on our business, prospects, operating results and financial condition.
We may experience significant delays in the design, manufacture, launch and financing of the Model S, including in the build out of our
Model S manufacturing facility, which could harm our business and prospects.
Any delay in the financing, design, manufacture and launch of the Model S, including in the build out of our planned Model S
manufacturing facility in Fremont, California, could materially damage our brand, business, prospects, financial condition and operating results.
Automobile manufacturers often experience delays in the design, manufacture and commercial release of new vehicle models. We experienced
significant delays in launching the Tesla Roadster. We initially announced that we would begin delivering the Tesla Roadster in June 2007, but
due to various design and production delays, we did not physically deliver our first Tesla Roadster until February 2008, and we only achieved
higher production of this vehicle in the fourth quarter of 2008. These delays resulted in additional costs and adverse publicity for our business.
We may experience similar delays in launching the Model S, and any such delays could be significant.
In addition, final designs for the Model S and plans for the build out of the manufacturing facility are still in process, and various aspects of
the Model S component procurement and manufacturing plans have not yet been determined. We are currently evaluating, qualifying and
selecting our suppliers for the planned production of the Model S. However, we may not be able to engage suppliers for the remaining
components in a timely manner, at an acceptable price or in the necessary quantities. In addition, we will also need to do extensive testing to
ensure that the Model S is in compliance with applicable National Highway Traffic Safety Administration (NHTSA) safety regulations and
United States Environmental Protection Agency (EPA) regulations prior to beginning mass production and delivery of the vehicles. Our plan to
begin production of the Model S in mid-2012 is dependent upon the timely availability of funds, upon our finalizing the related design,
engineering, component procurement, testing, build out and manufacturing plans in a timely manner and upon our ability to execute these plans
within the current timeline.
We completed the purchase of our planned manufacturing facility in Fremont, California in October 2010 and selected it in part because it
was recently used for automobile manufacturing, was located within 20 miles of
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that we will be able to attract, recruit, hire and train skilled employees, including employees on the production line, to operate our
planned Model S manufacturing facility in Fremont, California;
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that we will be able to maintain high quality controls as we transition to an in
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house manufacturing process; and
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that we will not experience any significant delays or disruptions in our supply chain.