Tesla 2011 Annual Report Download - page 79

Table of Contents
up to 1,000 battery packs and chargers to support a trial of the Smart fortwo electric drive in at least five European cities. In 2010, we made
significant deliveries of the Smart fortwo battery packs and chargers to Daimler which contributed approximately $21 million to our automotive
sales revenue. Since 2009, Daimler has increased its orders under this program, with the current total order at 1,800 battery packs and chargers.
Production of the battery packs and chargers is expected to continue through mid-2011. During the year, Daimler also engaged us to assist with
the development and production of a battery pack and charger for a pilot fleet of its A-Class electric vehicles to be introduced in Europe during
2011. A formal agreement for this arrangement was entered into with Daimler in May 2010 and upon completion of the A-Class battery pack
and charger in October, we started recognizing revenue from the delivery of production battery packs and chargers for the Daimler A-Class
program, which we expect to continue through the balance of 2011.
In May 2010, we and Toyota Motor Corporation (Toyota) announced our intention to cooperate on the development of electric vehicles,
and for us to receive Toyota’s support with sourcing parts and production and engineering expertise for the Model S. In July 2010, we and
Toyota entered into an early Phase 0 agreement to develop an electric powertrain for the Toyota RAV4. With an aim by Toyota to market the
electric vehicle in the United States in 2012, prototypes would be made by combining the Toyota RAV4 model with a Tesla electric powertrain.
We began developing and delivering prototypes to Toyota for evaluation during the latter half of the year. In connection with this program, in
October 2010, we entered into a Phase 1 contract services agreement with Toyota for the development of a validated powertrain system,
including a battery, power electronics module, motor, gearbox and associated software, which will be integrated into an electric vehicle version
of the Toyota RAV4. Pursuant to our agreements, Toyota will pay us up to $69 million for the anticipated development services to be provided
by us over the expected term of our performance. We expect to achieve our deliverables through late 2011 or early 2012.
As a result of solid sales of the Tesla Roadster, as well as increased powertrain component sales and the commencement of development
services revenues from both Daimler and Toyota, total revenues for 2010 were $116.7 million, an increase over total revenues of $111.9 million
in 2009.
We are designing our second vehicle, the planned Model S, for a significantly broader customer base than the Tesla Roadster and plan to
manufacture the Model S in higher volumes than our current volumes for the Tesla Roadster. Model S development progressed well during
2010, culminating in the completion of our first drivable alpha prototype in December. Expenses related to the Model S alpha prototype build,
increased production and engineering headcount and other important engineering, design and testing work being undertaken at several of our
suppliers to support Model S readiness, contributed to the $73.7 million increase in research and development expenses from 2009 to $93.0
million in 2010.
Alongside Model S engineering and manufacturing engineering development, we also completed the purchase of our Fremont
manufacturing facility in October, which we intend to use for the production of our planned Model S and future vehicles. In May 2010, we
entered into an agreement to purchase an existing automobile production facility in Fremont, California from New United Motor Manufacturing,
Inc. (NUMMI), which is a joint venture between Toyota and Motors Liquidation Company, the owner of selected assets of General Motors. In
October 2010, we completed the purchase and received title to the facility and land. The purchase totals 210 acres, or approximately 55% of the
land at the site, and includes all of the manufacturing facilities located thereon. In October 2010, we and NUMMI amended the facility purchase
agreement to include the transfer to us of certain operating permits for additional consideration. The aggregate purchase price that we paid to
NUMMI was $48.5 million, including the operating permits.
In August 2010, we entered into an additional purchase agreement with NUMMI for the purchase of certain manufacturing equipment and
spare parts located at the Fremont facility. This purchase agreement was subsequently amended to include additional manufacturing equipment
and spare parts and in October 2010, we completed this purchase concurrent with the completion of the facility purchase. The aggregate
purchase price that we paid for these assets was $16.7 million. The purchase of the Fremont manufacturing facility and assets,
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