Tesla 2011 Annual Report Download - page 57

Table of Contents
our electric powertrain revenues. Even if we do develop such relationships, there is no assurance that we can adequately pursue such
opportunities simultaneously with the execution of our plans for our vehicles.
Our relationship with Daimler is subject to various risks which could adversely affect our business and future prospects.
Daimler has agreed to purchase components of our electric powertrain to support a trial of the Smart fortwo electric drive in at least five
European cities and a pilot fleet of its A-Class electric vehicles to be introduced in Europe. In addition, we are negotiating agreements for
Daimler to provide us with access to various parts, automotive support and engineering for the Model S and regarding various other areas of
strategic cooperation with Daimler although there are no assurances that we will be able to enter into any such agreements. However, our
relationship with Daimler poses various risks to us including:
The occurrence of any of the foregoing could adversely affect our business, prospects, financial condition and operating results.
In addition, our exclusivity and intellectual property agreement, or EIP Agreement, with Daimler North America Corporation (DNAC), an
affiliate of Daimler provides that, if a Daimler competitor offers to enter into a competitive strategic transaction with us, we are required to give
DNAC notice of such offer and DNAC will have a specified period of time in which to notify us whether it wishes to enter into such transaction
with us on the same terms as offered by the third party. Because we will be able to enter into such a transaction with a third party only if DNAC
declines to do so, this may decrease the likelihood that we will receive offers from third parties to enter into strategic arrangements in the future.
Our relationship with Toyota is subject to various risks which could adversely affect our business and future prospects.
In October 2010, we and Toyota entered into an agreement to develop a validated electric powertrain for the Toyota RAV4. We have also
previously announced our intention for Tesla to receive Toyota’s support with sourcing parts and production and engineering expertise for the
Model S. However, we have not entered into any agreements with Toyota for any such assistance or for any commercial supply, and we may
never do so. There are no assurances we will be able to enter into any further agreements with Toyota for a long-term supply of electric
powertrains for the Toyota RAV4, or any other vehicles.
We may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.
Strategic business relationships will be an important factor in the growth and success of our business. For example, our strategic
relationship with Daimler has provided us with various benefits and we have recently entered into an agreement to develop a validated electric
powertrain for the Toyota RAV4 with Toyota. However, there are no assurances that we will be able to identify or secure suitable business
relationship opportunities in the future or our competitors may capitalize on such opportunities before we do. Our strategic relationship with
Daimler involved Blackstar, an affiliate of Daimler, making a significant equity investment in us as well as a representative from Daimler,
Dr. Herbert Kohler, joining our Board. In addition, Toyota made a significant equity investment in us concurrent with the closing of our IPO in
July 2010. We may not be able to
56
•
potential delays in launching the Model S if we lose Daimler
’
s automotive support and are unable to find an alternative in a timely
manner;
•
potential loss of access to various parts that we are incorporating into our Model S design; and
•
potential loss of business and adverse publicity to our brand image if there are defects or other problems discovered with our electric
powertrain components that Daimler has incorporated into their vehicles.