Tesla 2016 Annual Report Download - page 21

Our strategic relationships with third parties, such as Panasonic, are subject to various risks which could adversely affect our business and future
prospects.
Ourstrategicrelationshipswiththirdparties,suchasPanasonicwhichsuppliesuswithbatterycellsforuseinModelSandModelXandwhichisour
strategicpartnerintheGigafactory,posevariousriskstous,includingpotentiallossofaccesstoimportanttechnologyandpartsforproducing,servicingand
supportingourproducts,potentiallossofbusinessandadversepublicity.Moreover,factorsthatmaynotbewithinourpartners’control,suchasmaterialspricing,
mayimpactourabilitytorealizethegoalsofcertainstrategicrelationships,suchascostandgrossmargintargets.Inaddition,thesethirdpartiesmaynotperform
asexpectedunderouragreementswiththem,suchaswithrespecttoqualityofproductionpartsandtimelinessoftheirdeliveries,andwemayhavedisagreements
ordisputeswiththesethirdparties.Theoccurrenceofanyoftheforegoingcouldadverselyaffectourbusiness,prospects,financialconditionandoperatingresults.
If we are unable to attract and/or retain key employees and hire qualified personnel, our ability to compete could be harmed.
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.Inparticular,wearehighlydependentontheservicesofElonMusk,ourChiefExecutiveOfficer,
andJBStraubel,ourChiefTechnicalOfficer.
Noneofourkeyemployeesisboundbyanemploymentagreementforanyspecifictermandwemaynot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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.
KeytalentmayleaveTesladuetovariousfactors,suchasaverycompetitivelabormarketfortalentedindividualswithautomotiveexperience.Currentlyin
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bothmatureandprosperouscompanies
thathavefargreaterfinancialresourcesthanwedoandstart-upsandemergingcompaniesthatpromiseshort-termgrowthopportunities.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provider.
We are subject to various environmental and safety laws and regulations that could impose substantial costs upon us and negatively impact our ability to
operate our manufacturing facilities.
Asanautomobilemanufacturer,wearesubjecttocomplexenvironmental,healthandsafetylawsandregulationsatnumerouslevels,includinglawsrelating
totheuse,handling,storage,disposalandhumanexposuretohazardousmaterials,bothintheUnitedStatesandabroad.Thecostsofcompliance,including
remediatingcontaminationifanyisfoundonourproperties,andofanychangestoouroperationsmandatedbynewlawsoramendmentstoexistinglawsmaybe
significant.Wemayalsofaceunexpecteddelaysinobtainingthenecessarypermitsandapprovalsrequiredbysuchlawsinconnectionwithourmanufacturing
facilities,whichwouldhinderouroperationofthesefacilities.Suchcostsanddelaysmayadverselyimpactourbusinessprospectsandoperatingresults.
Furthermore,anyviolationsoftheselawsmayresultinsubstantialfinesandpenalties,remediationcosts,thirdpartydamages,orasuspensionorcessationofour
operations.
Our business may be adversely affected by any disruptions caused by union activities.
Althoughnoneofouremployeesiscurrentlyrepresentedbyalaborunion,itiscommonforemployeesatautomobilecompaniestobelongtoaunion,which
canresultinhigheremployeecostsandincreasedriskofworkstoppages.Althoughweworkdiligentlytoprovidethebestpossibleworkenvironmentforour
employees,theymaystilldecidetojoinorseekrecognitiontoformalaborunion,orwemayberequiredtobecomeaunionsignatory.Furthermore,wearedirectly
orindirectlydependentuponcompanieswithunionizedworkforces,suchaspartssuppliersandtruckingandfreightcompanies,andworkstoppagesorstrikes
organizedbysuchunionscouldhaveamaterialadverseimpactonourbusiness,financialconditionoroperatingresults.Ifaworkstoppageoccurs,itcoulddelay
themanufactureandsaleofourproductsandhaveamaterialadverseeffectonourbusiness,prospects,operatingresultsorfinancialcondition.
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