Tesla 2016 Annual Report Download - page 20

Weserviceourvehiclesthroughourcompany-ownedTeslaservicecenters,certainofourstores,andthroughourmobileservicetechniciansknownasthe
TeslaRangers.Wewillneedtoopennewstandaloneservicecentersinlocationsaroundtheworldandhireandtrainsignificantnumbersofnewemployeestostaff
theseservicecentersandactasTeslaRangersinordertosuccessfullymaintainourfleetofdeliveredvehicles.Ifwedonotcontinuetoadequatelyaddressthe
servicerequirementsofourcustomerstotheirsatisfaction,particularlyasthevolumeofvehiclesweareabletodeliverannuallyincreases,ourbusinesswouldbe
harmed.
Our plan to expand our network of Tesla stores, service centers and Superchargers will require significant cash investments and management resources
and may not meet our expectations with respect to additional sales of our electric vehicles. In addition, we may not be able to open stores or service
centers in certain states or Superchargers in desired locations.
OurplantoexpandournetworkofTeslastores,servicecentersandSuperchargerswillrequiresignificantcashinvestmentsandmanagementresourcesand
maynotmeetourexpectationswithrespecttoadditionalsalesofourvehicles.Thisongoingglobalexpansionmaynothavethedesiredeffectofincreasingsales
andexpandingourbrandpresencetothedegreeweareanticipating.Wewillalsoneedtoensureweareincompliancewithanyregulatoryrequirementsapplicable
tothesaleandserviceofourvehiclesinthosejurisdictions,whichcouldtakeconsiderabletimeandexpense.Ifweexperienceanydelaysinexpandingournetwork
ofTeslastores,servicecentersandSuperchargers,thiscouldleadtoadecreaseinsalesofourvehiclesandcouldnegativelyimpactourbusiness,prospects,
financialconditionandoperatingresults.
We face risks associated with our international operations and expansion, including unfavorable regulatory, political, tax and labor conditions and
establishing ourselves in new markets, all of which could harm our business.
Wecurrentlyhaveinternationaloperationsandsubsidiariesinvariouscountriesandjurisdictionsthataresubjecttothelegal,political,regulatoryandsocial
requirementsandeconomicconditionsinthesejurisdictions.Additionally,aspartofourgrowthstrategy,wewillcontinuetoexpandoursales,serviceand
Superchargerlocationsinternationally.Wehavelimitedexperience,however,sellingandservicingourproductsinternationally,aswellaslimitedexperience
installingandoperatingSuperchargersinternationally.Furthermore,internationalexpansionrequiresustomakesignificantexpenditures,includingthe
establishmentoflocaloperatingentities,hiringoflocalemployeesandestablishingfacilitiesinadvanceofgeneratinganyrevenue.
Wearesubjecttoanumberofrisksassociatedwithinternationalbusinessactivitiesthatmayincreaseourcosts,impactourabilitytosellourelectric
vehiclesandrequiresignificantmanagementattention.Theserisksincludeconformingourvehiclestovariousinternationalregulatoryandsafetyrequirements,
difficultyinestablishing,staffingandmanagingforeignoperations,challengesinattractingcustomers,foreigngovernmenttaxes,regulationsandpermit
requirements,ourabilitytoenforceourcontractualrights;traderestrictions,customsregulations,tariffsandpriceorexchangecontrols,andpreferencesofforeign
nationsfordomesticallyproducedvehicles.
Additionally,aswehaveexpandedintonewinternationalmarkets,wehistoricallyfacedchallengeswithensuringthatourchargingequipmentworks
successfullywiththecharginginfrastructureinsuchmarkets,includinginNorwayandChina.Ifcustomersexperienceproblemswiththewayourcharging
equipmentworkswiththelocalcharginginfrastructure,orweareunabletoadaptourequipmenttoresolvesuchproblems,thentheviabilityandacceptanceofour
vehiclesinsuchmarketscouldbemateriallyandadverselyaffected.Ifwefailtosuccessfullyaddresstheserisks,ourbusiness,prospects,operatingresultsand
financialconditioncouldbemateriallyharmed.
The unavailability, reduction or elimination of government and economic incentives in the U.S. and abroad supporting the development and adoption of
electric vehicles could have some impact on demand for our vehicles.
Wecurrentlybenefitfromcertaingovernmentandeconomicincentivessupportingthedevelopmentandadoptionofelectricvehicles.IntheUnitedStates
andabroad,suchincentivesinclude,amongotherthings,taxcreditsorrebatesthatencouragethepurchaseofelectricvehicles.InNorway,forexample,the
purchaseofelectricvehiclesisnotcurrentlysubjecttoimporttaxes,taxesonnon-recurringvehiclefees,the25%valueaddedtaxorthepurchasetaxesthatapply
tothepurchaseofgas-poweredvehicles.Notably,thequantumofincentiveprogramspromotingelectricvehiclesisatinyfractionoftheamountofincentivesthat
areprovidedtogas-poweredvehiclesthroughtheoilandgasindustries,notwithstandingthattheformerpromotessocialgoodwhilethelattercontributesto
significantsocialharm.Nevertheless,eventhelimitedbenefitsfromsuchprogramscouldbereduced,eliminatedorexhausted.Forexample,onJanuary1,2016,a
previouslyavailableincentiveinDenmarkthatfavoredthepurchaseofelectricvehiclesexpiredandwasreplacedwithanewlyphased-inincentivethatisless
generousthantheincentivethatitreplaced.Incertaincircumstances,thereispressurefromtheoilandgaslobbyorrelatedspecialintereststobringaboutsuch
developments,whichcouldhavesomenegativeimpactondemandforourvehicles.
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