Tesla 2015 Annual Report Download - page 23

We may fail to meet our publicly announced guidance or other expectations about our business, which would cause our stock price to
decline.
We occasionally provide guidance regarding our expected financial and business performance, such as projections regarding the number
of vehicles we hope to sell, produce or deliver in future periods and anticipated future revenues, gross margins, profitability and cash flows.
Correctly identifying the key factors affecting business conditions and predicting future events is inherently an uncertain process. Our guidance
is based in part on assumptions which include, but are not limited to, assumptions regarding:
Such guidance may not always be accurate or may vary from actual results due to our inability to meet our assumptions and the impact on
our financial performance that could occur as a result of the various risks and uncertainties to our business as set forth in these risk factors, or
because of the way that applicable accounting rules require us to treat new product and service offerings that we may offer. We offer no
assurance that such guidance will ultimately be accurate, and investors should treat any such guidance with appropriate caution. If we fail to
meet our guidance or if we find it necessary to revise such guidance, even if such failure or revision is seemingly insignificant, investors and
analysts may lose confidence in us and the market value of our common stock could be materially and adversely affected.
Our vehicles make use of lithium-
ion battery cells, which have been observed to catch fire or vent smoke and flame, and such events have
raised concerns, and future events may lead to additional concerns, about the batteries used in automotive applications.
The battery pack in our vehicles and the battery packs that we sell to Toyota and Daimler make use of lithium-ion cells. On rare
occasions, lithium-
ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials
as well as other lithium-ion cells. Extremely rare incidents of laptop computers, cell phones and electric vehicle battery packs catching fire have
focused consumer attention on the safety of these cells.
These events have raised concerns about the batteries used in automotive applications. To address these questions and concerns, a number
of cell manufacturers are pursuing alternative lithium-ion battery cell chemistries to improve safety. We have designed the battery pack to
passively contain any single cell’s release of energy without spreading to neighboring cells. However, we have delivered only a limited number
of our vehicles to customers and have limited field experience with them. We have also only delivered a limited number of battery packs to
Toyota and Daimler. Accordingly, there can be no assurance that a field or testing failure of our vehicles or other battery packs that we produce
will not occur, which could damage the vehicle or lead to personal injury or death and may subject us to lawsuits. We may have to recall our
vehicles or participate in a recall of a vehicle that contains our battery packs, and redesign our battery packs, which would be time consuming
and expensive. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications or any future incident
involving lithium-ion cells such as a vehicle or other fire, even if such incident does not involve us, could seriously harm our business.
In addition, we store a significant number of lithium-ion cells at our manufacturing facility. Any mishandling of battery cells may cause
disruption to the operation of our facilities. While we have implemented safety procedures related to the handling of the cells, there can be no
assurance that a safety issue or fire related to the cells would not disrupt our operations. Such damage or injury would likely lead to adverse
publicity and potentially a safety recall. Moreover, any failure of a competitor’s electric vehicle, especially those that use a high volume of
commodity cells similar to Tesla’s vehicles, may cause indirect adverse publicity for us and our electric vehicles. Such adverse publicity would
negatively affect our brand and harm our business, prospects, financial condition and operating results.
We have a history of losses and have to deliver significant cost reductions to achieve sustained, long-term profitability and long-term
commercial success.
We have had net losses on a GAAP basis in each quarter since our inception, except for the first quarter of 2013. Even if we are able to
continue to increase Model S production and sales and begin to produce and sell Model X and future vehicles, there can be no assurance that we
will be profitable. In order to achieve profitability as well as long-term commercial success, we must continue to achieve our planned cost
reductions, control our operational costs while producing quality vehicles, increase our production rate, maintain strong demand in North
America, and grow demand abroad in Europe and Asia. Failure to do one or more of these things could prevent us from achieving sustained,
long-term profitability.
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our ability to achieve anticipated production and sales volumes and projected average sales prices for Model S and Model X in North
America, Europe and Asia;
1
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supplier and commodity
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related costs; and
1
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planned cost reductions.
1