Tesla 2015 Annual Report Download - page 32

The operation of our vehicles is different from internal combustion engine vehicles and our customers may experience difficulty
operating them properly, including difficulty transitioning between different methods of braking.
We have designed our vehicles to minimize inconvenience and inadvertent driver damage to the powertrain. In certain instances, these
protections may cause the vehicle to behave in ways that are unfamiliar to drivers of internal combustion vehicles. For example, we employ
regenerative braking to recharge the battery pack in most modes of vehicle operation. Our customers may become accustomed to using this
regenerative braking instead of the wheel brakes to slow the vehicle. However, when the vehicle is at maximum charge, the regenerative braking
is not needed and is not employed by the vehicle. Accordingly, our customers may have difficulty shifting between different methods of braking.
In addition, we use safety mechanisms to limit motor torque when the powertrain system reaches elevated temperatures. In such instances, the
vehicle’s acceleration and speed will decrease. Finally, if the driver permits the battery pack to substantially deplete its charge, the vehicle will
progressively limit motor torque and speed to preserve the charge that remains. The vehicle will lose speed and ultimately coast to a stop.
Despite several warnings about an imminent loss of charge, the ultimate loss of speed may be unexpected.
There can be no assurance that our customers will operate the vehicles properly, especially in these situations. Any accidents resulting
from such failure to operate our vehicles properly could harm our brand and reputation, result in adverse publicity and product liability claims,
and have a material adverse effect on our business, prospects, financial condition and operating results. In addition, if consumers dislike these
features, they may choose not to buy additional cars from us, which could also harm our business and prospects.
If we are unable to keep up with advances in electric vehicle technology, we may suffer a decline in our competitive position.
We may be unable to keep up with changes in electric vehicle technology and, as a result, may suffer a decline in our competitive
position. Any failure to keep up with advances in electric vehicle technology would result in a decline in our competitive position which would
materially and adversely affect our business, prospects, operating results and financial condition. Our research and development efforts may not
be sufficient to adapt to changes in electric vehicle technology. As technologies change, we plan to upgrade or adapt our vehicles and introduce
new models in order to continue to provide vehicles with the latest technology, in particular battery cell technology. However, our vehicles may
not compete effectively with alternative vehicles if we are not able to source and integrate the latest technology into our vehicles. For example,
we do not currently manufacture battery cells, which makes us dependent upon other suppliers of battery cell technology for our battery packs.
If we are unable to attract and/or retain key employees and hire qualified management, technical, vehicle engineering and
manufacturing personnel, our ability to compete could be harmed and our stock price may decline.
The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our vehicles
and services, and negatively impact our business, prospects and operating results as well as cause our stock price to decline. In particular, we are
highly dependent on the services of Elon Musk, our Chief Executive Officer, Product Architect and Chairman of our Board of Directors, and JB
Straubel, our Chief Technical Officer. None of our key employees is bound by an employment agreement for any specific term. There can be no
assurance that we will be able to successfully attract and retain senior leadership necessary to grow our business. Our future success depends
upon our ability to attract and retain our executive officers and other key technology, sales, marketing, engineering, manufacturing and support
personnel and any failure to do so could adversely impact our business, prospects, financial condition and operating results. We have in the past
and may in the future experience difficulty in retaining members of our senior management team as well as technical, vehicle engineering and
manufacturing personnel due to various factors, such as a very competitive labor market for talented individuals with automotive experience. In
addition, we do not have “key person” life insurance policies covering any of our officers or other key employees.
Currently in Northern California, there is increasing competition for talented individuals with the specialized knowledge of electric
vehicles, software engineers, manufacturing engineers and other skilled employees and this competition affects both our ability to retain key
employees and hire new ones. Our continued success depends upon our continued ability to hire new employees in a timely manner and retain
current employees. Additionally, we compete with many mature and prosperous companies in Northern California that have far greater financial
resources than we do and thus can offer current or perspective employees more lucrative incentive packages than we can. Any difficulties in
retaining current employees or recruiting new ones would have an adverse effect on our performance.
We are highly dependent on the services of Elon Musk, our Chief Executive Officer.
We are highly dependent on the services of Elon Musk, our Chief Executive Officer, Product Architect, Chairman of our Board of
Directors and largest stockholder. Although Mr. Musk spends significant time with Tesla and is highly active in our management, he does not
devote his full time and attention to Tesla. Mr. Musk also currently serves as Chief Executive Officer and Chief Technical Officer of Space
Exploration Technologies, a developer and manufacturer of space launch vehicles, and Chairman of SolarCity, a solar equipment installation
company.
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