Tesla 2011 Annual Report Download - page 45

Table of Contents
Difficult economic conditions may affect consumer purchases of luxury items, such as our performance electric vehicles.
Over the last few years, the deterioration in the global financial markets and continued challenging condition of the macroeconomic
environment has negatively impacted consumer spending and we believe has adversely affected the sales of our Tesla Roadster. The automobile
industry in particular was severely impacted by the poor economic conditions and several vehicle manufacturing companies, including General
Motors and Chrysler, were forced to file for bankruptcy. Sales of new automobiles generally have dropped during this recessionary period. Sales
of high-
end and luxury consumer products, such as our performance electric vehicles, depend in part on discretionary consumer spending and are
even more exposed to adverse changes in general economic conditions. Difficult economic conditions could therefore temporarily reduce the
market for vehicles in our price range. Discretionary consumer spending also is affected by other factors, including changes in tax rates and tax
credits, interest rates and the availability and terms of consumer credit.
If the current difficult economic conditions continue or worsen, we may experience a decline in the demand for our Tesla Roadster or
reservations for our Model S, either of which could materially harm our business, prospects, financial condition and operating results.
Accordingly, any events that have a negative effect on the United States economy or on foreign economies or that negatively affect consumer
confidence in the economy, including disruptions in credit and stock markets, and actual or perceived economic slowdowns, may harm our
business, prospects, financial condition and operating results.
Our financial results may vary significantly from period-to-period due to the seasonality of our business and fluctuations in our operating
costs.
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 in general, and for high-performance sports vehicles
such as the Tesla Roadster in particular, typically decline over the winter season, while sales are generally higher as compared to the winter
season during the spring and summer months. We expect sales of the Tesla Roadster to fluctuate 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 the Model S and other models we introduce 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.
We also 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 our planned Model S and electric powertrain components, build
and equip new manufacturing facilities to produce the Model S and electric powertrain components, open new Tesla stores with maintenance and
repair capabilities, incur costs for warranty repairs or product recalls, if any, 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 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 this occurs, the trading price of our common stock could fall substantially either suddenly or over time.
Marketplace confidence in our long-term business prospects is important for building and maintaining our business.
If we are unable to establish and maintain confidence about our business prospects among consumers and within our industry, then our
financial condition, operating results and business prospects may suffer materially.
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