Tesla 2015 Annual Report Download - page 28

Demand in the automobile industry is volatile, which may lead to lower vehicle unit sales and adversely affect our operating results.
Volatility of demand in the automobile industry may materially and adversely affect our business, prospects, operating results and
financial condition. The markets in which we currently compete and plan to compete in the future have been subject to considerable volatility in
demand in recent periods. Demand for automobile sales depends to a large extent on general, economic, political and social conditions in a
given market and the introduction of new vehicles and technologies. As a low volume producer, we have less financial resources than more
established automobile manufacturers to withstand changes in the market and disruptions in demand. As our business grows, economic
conditions and trends in other countries and regions where we currently or will sell our electric vehicles, such as Europe and Asia, will impact
our business, prospects and operating results as well. Demand for our electric vehicles may also be affected by factors directly impacting
automobile price or the cost of purchasing and operating automobiles, such as sales and financing incentives, prices of raw materials and parts
and components, cost of fuel and governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to
lower vehicle unit sales and increased inventory, which may result in further downward price pressure and adversely affect our business,
prospects, financial condition and operating results. These effects may have a more pronounced impact on our business given our relatively
smaller scale and financial resources as compared to many incumbent automobile manufacturers.
If we are unable to establish and maintain confidence in our long-term business prospects among consumers, analysts and within our
industry, then our financial condition, operating results, business prospects and stock price may suffer materially.
Our vehicles are highly technical products that require maintenance and support. If we were to cease or cut back operations, even years
from now, buyers of our vehicles from years earlier might have much more difficulty in maintaining their vehicles and obtaining satisfactory
support. As a result, consumers may be less likely to purchase our vehicles now if they are not convinced that our business will succeed or that
our operations will continue for many years. Similarly, suppliers and other third parties will be less likely to invest time and resources in
developing business relationships with us if they are not convinced that our business will succeed. If we are required to curtail our expansion
plans in the future as we have done in the past, this may result in negative perceptions regarding our long-term business prospects and may lead
to cancellations of Model S or Model X orders and reservations.
Accordingly, in order to build and maintain our business, we must maintain confidence among customers, suppliers, analysts and other
parties in our liquidity and long-term business prospects. In contrast to some more established automakers, we believe that, in our case, the task
of maintaining such confidence may be particularly complicated by factors such as the following:
Many of these factors are largely outside our control, and any negative perceptions about our long-term business prospects, even if
exaggerated or unfounded, would likely harm our business and make it more difficult to raise additional funds when needed.
We have limited experience servicing our vehicles, especially in certain regions outside of the United States, and we are using a different
service model from the one typically used in the industry. If we are unable to address the service requirements of our existing and future
customers, our business will be materially and adversely affected.
If we are unable to successfully address the service requirements of our existing and future customers and meet customer expectations
regarding service, our business and prospects will be materially and adversely affected. We have limited experience servicing our vehicles,
especially in Europe and Asia. Servicing electric vehicles is different than servicing vehicles with internal combustion engines and requires
specialized skills, including high voltage training and servicing techniques. If we are unable to satisfactorily service our customers and the
various service related issues that they are facing and may face in the future, our ability to generate customer loyalty, grow our business and sell
additional vehicles could be impaired.
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our limited operating history;
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unfamiliarity with or uncertainty about Model X and future Tesla vehicles;
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uncertainty about the long
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term marketplace acceptance of alternative fuel vehicles generally, or electric vehicles specifically;
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the perceived prospect that we will need ongoing infusions of external capital to fund our planned operations;
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the size of our expansion plans in comparison to our existing capital base and scope and history of operations; and
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● the prospect or actual emergence of direct, sustained competitive pressure from more established automakers, which may be more
likely if our initial efforts are perceived to be commercially successful.
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