Tesla 2016 Annual Report Download - page 14

I TEM 1A. RISK FACTORS
Youshouldcarefullyconsidertherisksdescribedbelowtogetherwiththeotherinformationsetforthinthisreport,whichcouldmateriallyaffectour
business,financialconditionandfutureresults.Therisksdescribedbelowarenottheonlyrisksfacingourcompany.Risksanduncertaintiesnotcurrentlyknown
tousorthatwecurrentlydeemtobeimmaterialalsomaymateriallyadverselyaffectourbusiness,financialconditionandoperatingresults.
Risks Related to Our Business and Industry
We may experience significant delays or other complications in the design, manufacture, launch and production ramp of new vehicles such as Model X
and future vehicles such as Model 3, which could harm our brand, business, prospects, financial condition and operating results.
Wemayexperiencesignificantdelaysorothercomplicationsinbringingtomarketandrampingproductionofnewvehicles,suchasModelX.Whilewe
commencedModelXdeliverieslateinthethirdquarterof2015,wehaveonlyrecentlybegunmanufacturingModelXvehicles,andvariousfactorscouldresultin
delaysinitsproductionramp,includingthecapacityofoursupplierstodeliveruscomponentsatthetimingandvolumeswerequireandproductionlimitationsthat
areneededtomaintainourqualityproductionstandards.Inaddition,sinceModelXsharescertainproductionfacilitieswiththeModelS,thevolumeorefficiency
ofModelSproductionmaybeimpactediftherampofModelXisnotasefficientasweplan.
Wehaveexperienceddelaysorothercomplicationsinconnectionwithnewvehiclemodelsinthepast,suchasproductionrampdelaysforModelSin2012
andtheAll-WheelDriveDualMotorModelS,andthelaunchofModelX.AnysignificantadditionaldelayorothercomplicationintherampofModelXorthe
development,manufacture,launchandproductionrampofourfuturevehicles,includingcomplicationsassociatedwithexpandingourproductioncapacity,supply
chainorregulatoryapprovals,couldmateriallydamageourbrand,business,prospects,financialconditionandoperatingresults.
The complexity in our business continues to grow as we introduce new products and variants.
Wehavelimitedexperiencesimultaneouslydesigning,testing,manufacturing,upgrading,adaptingandsellingourelectricvehiclesaswellaslimited
experienceallocatingouravailableresourcesamongthedesignandproductionofmultiplevehicles,suchasModelS,ModelXandModel3,andthevariants
thereof.Inthepast,whenwehaveaddedcomplexitytoourproductionline,wehaveoccasionallyexperiencedunexpecteddelays.Similarproblemsmayoccurin
thefutureaswesimultaneouslyproduceModelXandModelSvehicles,aswellasfuturevehiclesandTeslaEnergyproducts.
We may be unable to meet our production and delivery plans for Model S and Model X, both of which could harm our business and prospects.
Wehavesignificantlyincreasedvehicleproductionanddeliveries,andourplanscallforsignificantincreasesinvehicleproductionanddeliveriesgoing
forward.Ourabilitytofurtherincreasevehicleproduction,includingtherampofModelXproduction,willdependuponanumberoffactors,includingourability
tousenewmanufacturingprocessesasplannedwhilemaintainingourdesiredqualitylevels,oursuppliers’abilitytodeliversufficientvolumesofqualitypartsto
usinatimelymanner,andcarefullybutefficientlymakingdesignandproductionchangestoensureconsistentlyhighquality.Certainsuppliershavehistorically
experienceddelaysinmeetingourdemandorhavesoughttorenegotiatethetermsofthesupplyarrangements,andwecontinuetofocusonsuppliercapabilities
andconstraints.Whileourplanscallforustosignificantlyincreasevehicleproductionanddeliveriesinashortamountoftime,wemaybeunabletodoso.Any
delaysordisruptioninourproductionofModelSandModelXinlinewithourplanscouldmateriallydamageourbrand,business,prospects,financialcondition
andoperatingresults.
Inaddition,wehaveintroducedanumberofnewmanufacturingtechnologiesandtechniquesforourvehicles,suchasaluminumspotweldingsystemsand
high-speedblowformingofcertaindifficulttostampvehicleparts.Ourvehiclesalsohaveuniquedesignfeatures,suchasa17inchdisplayscreen,retractable
exteriordoorhandles,andall-newdualmotorandautopilothardwareintroducedinModelSandfalcon-wingdoorsandotheruniquefeaturesintroducedinModel
X,eachofwhichposesdifferentmanufacturingchallenges.
Concurrentwiththesignificantincreaseinourplannedvehicleproductionlevels,wewillalsoneedtocontinuetosignificantlyincreasedeliveriesofour
vehicles.Wehavelimitedexperienceindeliveringahighvolumeofvehicles,andwemayfacedifficultiesmeetingourdeliveryandgrowthplansintobothexisting
marketsaswellasnewmarketsintowhichweexpand.Ifweareunabletorampuptomeetourdeliverygoalsglobally,thiscouldhaveamaterialadverseeffecton
ourbusiness,prospects,financialconditionandoperatingresults.
Finally,detailedlong-termtestingofquality,reliabilityanddurabilityofourvehiclesisongoing,andinthecaseofModelXvehicleshasonlyrecently
commenced,andanynegativeresultsfromsuchtestingcouldcauseproductionordeliverydelaysorcostincreases.
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