Tesla 2016 Annual Report Download - page 24

Any u nauthorized control or manipulation of our vehicles’ systems could result in loss of confidence in us and our vehicles and harm our business.
Ourvehiclescontaincomplexinformationtechnologysystems.Forexample,ourvehiclesaredesignedwithbuilt-indataconnectivitytoacceptandinstall
periodicremoteupdatesfromustoimproveorupdatethefunctionalityofourvehicles.Wehavedesigned,implementedandtestedsecuritymeasuresintendedto
preventunauthorizedaccesstoourinformationtechnologynetworks,ourvehiclesandtheirsystems.However,hackershavereportedlyattempted,andmayattempt
inthefuture,togainunauthorizedaccesstomodify,alterandusesuchnetworks,vehiclesandsystemstogaincontrolof,ortochange,ourvehicles’functionality,
userinterfaceandperformancecharacteristics,ortogainaccesstodatastoredinorgeneratedbythevehicle.Weencouragereportingofpotentialvulnerabilitiesin
thesecurityofourvehiclesviaoursecurityvulnerabilityreportingpolicy,andweaimtoremedyanyreportedandverifiedvulnerabilities.Accordingly,wehave
receivedreportsofpotentialvulnerabilitiesinthepastandhaveattemptedtoremedythem.However,therecanbenoassurancethatvulnerabilitieswillnotbe
identifiedinthefuture,orthatourremediationeffortsareorwillbesuccessful.
Anyunauthorizedaccesstoorcontrolofourvehiclesortheirsystemsoranylossofdatacouldresultinlegalclaimsorproceedings.Inaddition,regardless
oftheirveracity,reportsofunauthorizedaccesstoourvehicles,theirsystemsordata,aswellasotherfactorsthatmayresultintheperceptionthatourvehicles,
theirsystemsordataarecapableofbeing“hacked,”couldnegativelyaffectourbrandandharmourbusiness,prospects,financialconditionandoperatingresults.
If we had a desire or need to raise additional funds and could not do so, our operations and prospects could be negatively affected
Weexpectthatourprincipalsourcesofliquiditywillprovideusadequateliquiditybasedonourcurrentplans.However,ifthecostsfordeveloping,
manufacturinganddeliveringourcurrentorfuturevehiclesexceedourexpectationsorifweincuranysignificantunplannedexpensesorembarkonoraccelerate
newsignificantstrategicinvestments,suchastheGigafactory,wemayneedtoraiseadditionalfunds.Weneedsufficientcapitaltofundourongoingoperations,
continueresearchanddevelopmentprojects,includingthoseforourplannedModel3vehicle,establishsalesandservicecenters,buildanddeploySuperchargers
andtomaketheinvestmentsintoolingandmanufacturingcapitalrequiredtointroducenewvehicles.Ifwecannotraiseadditionalfundsonfavorabletermsoratall
whenweneedthem,ourfinancialcondition,resultsofoperations,businessandprospectscouldbemateriallyadverselyaffected.
We may face regulatory limitations on our ability to sell vehicles directly which could materially and adversely affect our ability to sell our electric
vehicles.
WesellourvehiclesfromourTeslastoresaswellasovertheinternet.Wemaynotbeabletosellourvehiclesthroughthissalesmodelineachstateinthe
UnitedStatesassomestateshavelawsthatmaybeinterpretedtoimposelimitationsonthissalesmodel,includinglawsthatprohibitmanufacturersfromselling
vehiclesdirectlytoconsumerswithouttheuseofanindependentdealershiporwithoutaphysicalpresenceinthestate.Incertainstatesinwhichwearenotableto
obtaindealerlicenses,wehaveworkedwithstateregulatorstoopengalleries,whicharenotfullretaillocations.
Theapplicationofthesestatelawstoouroperationscontinuestobedifficulttopredict.Lawsinsomestateshavelimitedourabilitytoobtaindealerlicenses
fromstatemotorvehicleregulatorsandmaycontinuetodoso.
Inaddition,decisionsbyregulatorspermittingustosellvehiclesmaybesubjecttochallengesastowhethersuchdecisionscomplywithapplicablestate
motorvehicleindustrylaws.Forexample,vehicledealerassociationsinNewYork,Ohio,GeorgiaandMassachusettshavefiledlawsuitstorevokedealerlicenses
issuedtous.Theselawsuitshavebeendismissed,andinonecourtdecision,theSupremeCourtofMassachusettsheldthatstatefranchiselawsliketheonein
Massachusettsdonotrestrictamanufacturer,likeTesla,thatdoesnotusefranchiseddealersfromsellingitsvehiclesdirectlytoconsumers.Suchresultshave
reinforcedourcontinuingbeliefthatstatelawswerenotdesignedtopreventourdistributionmodel.AsimilarlawsuithasbeenfiledinMissouri.Possible
additionalchallengesinotherstates,ifsuccessful,couldrestrictorprohibitourabilitytosellourvehiclestoresidentsinsuchstates.Insomestates,therehavealso
beenregulatoryandlegislativeeffortsbyvehicledealerassociationstoproposebillsandregulationsthat,ifenacted,wouldpreventusfromobtainingdealer
licensesintheirstatesgivenourcurrentsalesmodel.Otherstates,suchasNewJersey,NewYork,OhioandPennsylvania,havepassedlegislationthatclarifiesour
abilitytooperate,butatthesametimelimitsthenumberofdealerlicenseswecanobtainorstoresthatwecanoperate.
Internationally,theremaybelawsinjurisdictionswehavenotyetenteredorlawsweareunawareofinjurisdictionswehaveenteredthatmayrestrictour
salesorotherbusinesspractices.Evenforthosejurisdictionswehaveanalyzed,thelawsinthisareacanbecomplex,difficulttointerpretandmaychangeover
time.
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