tesla, inc. · 12/31/2020 · part iii. item 10. directors, executive officers and corporate...
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UNITEDSTATESSECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549
FORM10-K
(MarkOne)☒ ANNUALREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934
ForthefiscalyearendedDecember31,2020OR
☐ TRANSITIONREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934Forthetransitionperiodfromto
CommissionFileNumber:001-34756
Tesla,Inc.(Exactnameofregistrantasspecifiedinitscharter)
Delaware 91-2197729(Stateorotherjurisdictionofincorporationororganization)
(I.R.S.EmployerIdentificationNo.)
3500DeerCreekRoadPaloAlto,California 94304
(Addressofprincipalexecutiveoffices) (ZipCode)(650)681-5000
(Registrant’stelephonenumber,includingareacode)SecuritiesregisteredpursuanttoSection12(b)oftheAct:
Titleofeachclass TradingSymbol(s) NameofeachexchangeonwhichregisteredCommonstock TSLA TheNasdaqGlobalSelectMarket
SecuritiesregisteredpursuanttoSection12(g)oftheAct:None
Indicatebycheckmarkwhethertheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.Yes☒No☐IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13or15(d)oftheAct.Yes☐No☒Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934(“ExchangeAct”)duringthepreceding12months
(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.Yes☒No☐IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyeveryInteractiveDataFilerequiredtobesubmittedpursuanttoRule405ofRegulationS-T(§232.405ofthischapter)during
thepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitsuchfiles).Yes☒No☐Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,asmallerreportingcompanyoranemerginggrowthcompany.Seethedefinitionsof
“largeacceleratedfiler,”“acceleratedfiler,”“smallerreportingcompany”and“emerginggrowthcompany”inRule12b-2oftheExchangeAct:
Largeacceleratedfiler ☒ Acceleratedfiler ☐
Non-acceleratedfiler ☐ Smallerreportingcompany ☐
Emerginggrowthcompany ☐ Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplyingwithanyneworrevisedfinancialaccountingstandards
providedpursuanttoSection13(a)oftheExchangeAct.☐IndicatebycheckmarkwhethertheRegistranthasfiledareportonandattestationtoitsmanagement’sassessmentoftheeffectivenessofitsinternalcontroloverfinancialreportingunderSection
404(b)oftheSarbanes-OxleyAct(15U.S.C.7262(b))bytheregisteredpublicaccountingfirmthatpreparedorissueditsauditreport.☒Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).Yes☐No☒Theaggregatemarketvalueofvotingstockheldbynon-affiliatesoftheregistrant,asofJune30,2020,thelastdayoftheregistrant’smostrecentlycompletedsecondfiscalquarter,was$160.57billion
(basedontheclosingpriceforsharesoftheregistrant’sCommonStockasreportedbytheNASDAQGlobalSelectMarketonJune30,2020).SharesofCommonStockheldbyeachexecutiveofficer,director,andholderof5%ormoreoftheoutstandingCommonStockhavebeenexcludedinthatsuchpersonsmaybedeemedtobeaffiliates.Thisdeterminationofaffiliatestatusisnotnecessarilyaconclusivedeterminationforotherpurposes.
AsofFebruary1,2021,therewere959,853,504sharesoftheregistrant’sCommonStockoutstanding.DOCUMENTSINCORPORATEDBYREFERENCE
Portionsoftheregistrant’sProxyStatementforthe2021AnnualMeetingofStockholdersareincorporatedhereinbyreferenceinPartIIIofthisAnnualReportonForm10-Ktotheextentstatedherein.SuchproxystatementwillbefiledwiththeSecuritiesandExchangeCommissionwithin120daysoftheregistrant’sfiscalyearendedDecember31,2020.
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TESLA,INC.
ANNUALREPORTONFORM10-KFORTHEYEARENDEDDECEMBER31,2020
INDEX PagePARTI.
Item1. Business 4Item1A. RiskFactors 14Item1B. UnresolvedStaffComments 27Item2. Properties 27Item3. LegalProceedings 28Item4. MineSafetyDisclosures 28
PARTII.
Item5. MarketforRegistrant’sCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecurities 29Item6. SelectedConsolidatedFinancialData 30Item7. Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations 31Item7A. QuantitativeandQualitativeDisclosuresAboutMarketRisk 49Item8. FinancialStatementsandSupplementaryData 50Item9. ChangesinandDisagreementswithAccountantsonAccountingandFinancialDisclosure 107Item9A. ControlsandProcedures 107Item9B. OtherInformation 107
PARTIII.
Item10. Directors,ExecutiveOfficersandCorporateGovernance 108Item11. ExecutiveCompensation 108Item12. SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters 108Item13. CertainRelationshipsandRelatedTransactions,andDirectorIndependence 108Item14. PrincipalAccountantFeesandServices 108
PARTIV.
Item15. ExhibitsandFinancialStatementSchedules 108Item16. Summary 125
Signatures 126
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Forward-LookingStatementsThediscussionsinthisAnnualReportonForm10-Kcontainforward-lookingstatementsreflectingourcurrentexpectationsthatinvolverisksanduncertainties.Theseforward-lookingstatementsinclude,butarenotlimitedto,statementsconcerninganypotentialfutureimpactofthecoronavirusdisease(“COVID-19”)pandemiconourbusiness,ourstrategy,futureoperations,futurefinancialposition,futurerevenues,projectedcosts,profitability,expectedcostreductions,capitaladequacy,expectationsregardingdemandandacceptanceforourtechnologies,growthopportunitiesandtrendsinthemarketinwhichweoperate,prospectsandplansandobjectivesofmanagement.Thewords“anticipates,”“believes,”“could,”“estimates,”“expects,”“intends,”“may,”“plans,”“projects,”“will,”“would”andsimilarexpressionsareintendedtoidentifyforward-lookingstatements,althoughnotallforward-lookingstatementscontaintheseidentifyingwords.Wemaynotactuallyachievetheplans,intentionsorexpectationsdisclosedinourforward-lookingstatementsandyoushouldnotplaceunduerelianceonourforward-lookingstatements.Actualresultsoreventscoulddiffermateriallyfromtheplans,intentionsandexpectationsdisclosedintheforward-lookingstatementsthatwemake.Theseforward-lookingstatementsinvolverisksanduncertaintiesthatcouldcauseouractualresultstodiffermateriallyfromthoseintheforward-lookingstatements,including,withoutlimitation,theriskssetforthinPartI,Item1A,“RiskFactors”inthisAnnualReportonForm10-KandinourotherfilingswiththeSecuritiesandExchangeCommission.Wedonotassumeanyobligationtoupdateanyforward-lookingstatements.
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PARTI
ITEM1. BUSINESSOverview
Wedesign,develop,manufacture,sellandleasehigh-performancefullyelectricvehiclesandenergygenerationandstoragesystems,andofferservicesrelatedtooursustainableenergyproducts.Wegenerallysellourproductsdirectlytocustomers,includingthroughourwebsiteandretaillocations.Wealsocontinuetogrowourcustomer-facinginfrastructurethroughaglobalnetworkofvehicleservicecenters,MobileServicetechnicians,bodyshops,SuperchargerstationsandDestinationChargerstoacceleratethewidespreadadoptionofourproducts.Weemphasizeperformance,attractivestylingandthesafetyofourusersandworkforceinthedesignandmanufactureofourproductsandarecontinuingtodevelopfullself-drivingtechnologyforimprovedsafety.Wealsostrivetolowerthecostofownershipforourcustomersthroughcontinuouseffortstoreducemanufacturingcostsandbyofferingfinancialservicestailoredtoourproducts.Ourmissiontoacceleratetheworld’stransitiontosustainableenergy,engineeringexpertise,verticallyintegratedbusinessmodelandfocusonuserexperiencedifferentiateusfromothercompanies.
SegmentInformationWeoperateastworeportablesegments:(i)automotiveand(ii)energygenerationandstorage.
Theautomotivesegmentincludesthedesign,development,manufacturing,salesandleasingofelectricvehiclesaswellassalesofautomotiveregulatorycredits.Additionally,theautomotivesegmentisalsocomprisedofservicesandother,whichincludesnon-warrantyafter-salesvehicleservices,salesofusedvehicles,retailmerchandise,salesbyouracquiredsubsidiariestothirdpartycustomersandvehicleinsurancerevenue.Theenergygenerationandstoragesegmentincludesthedesign,manufacture,installation,salesandleasingofsolarenergygenerationandenergystorageproductsandrelatedservicesandsalesofsolarenergysystemsincentives.
OurProductsandServicesAutomotive
Model3Model3isafour-doormid-sizesedanthatwedesignedformanufacturabilitywithabasepriceformass-marketappeal,whichwebegandeliveringin
July2017.WecurrentlymanufactureModel3attheFremontFactoryandatGigafactoryShanghai.
ModelYModelYisacompactsportutilityvehicle(“SUV”)builtontheModel3platformwithseatingforuptosevenadults,whichwebegandeliveringinMarch
2020.WecurrentlymanufactureModelYattheFremontFactoryandatGigafactoryShanghai.
ModelSandModelXModelSisafour-doorfull-sizesedanthatwebegandeliveringinJune2012.ModelXisamid-sizeSUVwithseatingforuptosevenadults,whichwe
begandeliveringinSeptember2015.ModelSandModelXfeaturethehighestperformancecharacteristicsandlongestrangesthatweofferinasedanandSUV,respectively,andwemanufacturebothmodelsattheFremontFactory.
FutureConsumerandCommercialElectricVehiclesWehavealsoannouncedseveralplannedelectricvehiclestoaddressadditionalvehiclemarkets,includingspecializedconsumerelectricvehiclesin
CybertruckandthenewTeslaRoadsterandacommercialelectricvehicleinTeslaSemi.Wealsoplantointroduceinthefuturealower-costvehicletoleveragedevelopmentsinourproprietaryFullSelf-Driving(“FSD”),batterycellandothertechnologies.
EnergyGenerationandStorageEnergyStorageProductsWebegandeliveriesofthemostrecentgenerationsofPowerwall,PowerpackandMegapack,whichareourlithium-ionbatteryenergystorageproducts
integratedwithinvertersandcontroltechnology,in2016,2017and2019,respectively.Powerwallisdesignedtostoreenergyatahomeorsmallcommercialfacility.MegapackandPowerpackareenergystoragesolutionsforcommercial,industrial,utilityandenergygenerationcustomers,whichmaybegroupedtogethertoformlargerinstallationscapableofreachinggigawatthours(“GWh”)orgreater.Wealsoofferintegratedsystemscombiningenergygenerationandstorage.OurenergystorageproductsarecurrentlyassembledatGigafactoryNevada.
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Wehavealsodevelopedsoftwarecapabilitiesforremotelycontrollinganddispatchingourenergystoragesystemsacrossawiderangeofmarketsandapplications,includingthroughourreal-timeenergytradingplatform.
SolarEnergyOfferingsWesellretrofitsolarenergysystemstocustomersandchannelpartnersandalsomakethemavailablethroughleaseandpowerpurchaseagreement
(“PPA”)arrangementsandasubscription-basedsaleofsolarpower,whichiscurrentlyavailableinlimitedU.S.markets.Wepurchasemostofthecomponentsforourretrofitsolarenergysystemsfrommultiplesourcestoensurecompetitivepricingandadequatesupply.Wealsodesignandmanufacturecertaincomponentsforoursolarenergyproducts.
In2019,wecommenceddirectcustomerandchannelpartnersalesofthethirdgenerationofourSolarRoof,whichcombinespremiumglassrooftileswithenergygeneration.WearerampingthevolumeproductionofSolarRoofatGigafactoryNewYork,andweareimprovingourinstallationcapabilityandefficiency.
TechnologyAutomotive
BatteryandPowertrainOurcorevehicletechnologycompetenciesincludepowertrainengineeringandmanufacturingandourabilitytodesignvehiclesthatutilizetheunique
advantagesofanelectricpowertrain.Wehavedesignedourproprietarypowertrainsystemstobeadaptable,efficient,reliableandcost-effectivewhilewithstandingtherigorsofanautomotiveenvironment.Weofferdualmotorpowertrainvehicles,whichusetwoelectricmotorstomaximizetractionandperformanceinanall-wheeldriveconfiguration,andareintroducingvehiclepowertraintechnologyfeaturingthreeelectricmotorsforfurtherincreasedperformance.
Amongotherthings,wemaintainextensivetestingandR&Dcapabilitiesforbatterycells,packsandsystems,andhavebuiltanexpansivebodyofknowledgeonlithium-ioncellchemistrytypesandperformancecharacteristics.Inordertoenableagreatersupplyofcellsforourproductswithhigherenergydensityatlowercosts,wearecurrentlyusingourexpertisetodevelopanewproprietarylithium-ionbatterycellandimprovedmanufacturingprocesses.
VehicleControlandInfotainmentSoftwareTheperformanceandsafetysystemsofourvehiclesandtheirbatterypacksrequiresophisticatedcontrolsoftware.Controlsystemsinourvehicles
optimizeperformance,customizevehiclebehavior,managechargingandcontrolallinfotainmentfunctions.Wedevelopalmostallofthissoftware,includingmostoftheuserinterfaces,internallyandupdateourvehicles’softwareregularlythroughover-the-airupdates.
Self-DrivingDevelopmentWehaveexpertiseindevelopingtechnologies,systemsandsoftwaretoenableself-drivingvehiclesusingprimarilyvisionandradar-basedsensors.Our
FSDComputerrunsourneuralnetworksinourvehicles,andwearealsodevelopingadditionalcomputerhardwaretobetterenablethemassiveamountsoffielddatacapturedbyourvehiclestocontinuallytrainandimprovetheseneuralnetworksforreal-worldperformance.
Currently,weofferinourvehiclescertainadvanceddriverassistsystemsunderourAutopilotandFSDoptions.Althoughatpresentthedriverisultimatelyresponsibleforcontrollingthevehicle,oursystemsprovidesafetyandconveniencefunctionalitythatrelievesdriversofthemosttediousandpotentiallydangerousaspectsofroadtravelmuchlikethesystemthatairplanepilotsuse,whenconditionspermit.Aswithothervehiclesystems,weimprovethesefunctionsinourvehiclesovertimethroughover-the-airupdates.
WeintendtoestablishinthefutureanautonomousTeslaride-hailingnetwork,whichweexpectwouldalsoallowustoaccessanewcustomerbaseevenasmodesoftransportationevolve.
EnergyGenerationandStorageEnergyStorageProductsWeleveragemanyofthecomponent-leveltechnologiesfromourvehiclesinourenergystorageproducts.Bytakingamodularapproachtothedesignof
batterysystems,wecanoptimizemanufacturingcapacityamongourenergystorageproducts.Additionally,ourexpertiseinpowerelectronicsenablesustointerconnectourbatterysystemsseamlesslywithglobalelectricitygridswhileprovidingfast-actingsystemsforpowerinjectionandabsorption.Wehavealsodevelopedthesoftwaretoremotelycontrolanddispatchourenergystoragesystemsusingourreal-timeenergytradingplatform.
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SolarEnergySystemsWehaveengineeredSolarRoofovernumerousiterationstocombineaestheticappealanddurabilitywithpowergeneration.Theefficiencyofoursolar
energyproductsisaidedbyourownsolarinverter,whichalsoincorporatesourpowerelectronicstechnologies.WedesignedbothproductstointegratewithPowerwall.
DesignandEngineeringAutomotive
Wehaveestablishedsignificantin-housecapabilitiesinthedesignandtestengineeringofelectricvehiclesandtheircomponentsandsystems.Ourteamhascorecompetenciesincomputeraideddesignaswellasdurability,strengthandcrashtestsimulations,whichreducestheproductdevelopmenttimeofnewmodels.Additionally,ourteamhasexpertiseinselectingandworkingwitharangeofmaterialsforourvehiclestobalanceperformance,costanddurabilityinwaysthatarebestsuitedforourvehicles’targetdemographicsandutility.Wehavealsousedourcapabilitiestoachievecomplexengineeringfeatsinstamping,castingandthermalsystems,andarecurrentlydevelopingdesignsthatintegratebatteriesdirectlywithvehiclebodystructureswithoutseparatebatterypackstooptimizemanufacturability,weight,rangeandcostcharacteristics.
Wearealsoexpandingourmanufacturingoperationsgloballywhileexploringwaystolocalizeourvehicledesignsandproductionforparticularmarkets,includingcountry-specificmarketdemandsandfactoryoptimizationsforlocalworkforces.Asweincreaseourcapabilities,particularlyintheareasofautomation,die-makingandline-building,wearealsomakingstridesinthesimulationsmodelingthesecapabilitiespriortoconstruction.
EnergyGenerationandStorageOurexpertiseinelectrical,mechanical,civilandsoftwareengineeringallowsustodesignandmanufactureourenergygenerationandstorageproducts
andcomponents.Wealsoemployourdesignandengineeringexpertisetocustomizesolutionsincludingourenergystorageproducts,solarenergysystemsand/orSolarRoofforcustomerstomeettheirspecificneeds.Wehavedevelopedsoftwarethatsimplifiesandexpeditesthedesignprocessandmaximizestheenergyproductionofeachsolarenergysystem,aswellasmountinghardwarethatfacilitatessolarpanelinstallation.
SalesandMarketingHistorically,wehavebeenabletogeneratesignificantmediacoverageofourcompanyandourproducts,andwebelievewewillcontinuetodoso.Such
mediacoverageandwordofmoutharethecurrentprimarydriversofoursalesleadsandhavehelpedusachievesaleswithouttraditionaladvertisingandatrelativelylowmarketingcosts.
AutomotiveDirectSalesOurvehiclesaleschannelscurrentlyincludeourwebsiteandaninternationalnetworkofcompany-ownedstores.Insomejurisdictions,wealsohave
galleriestoeducateandinformcustomersaboutourproducts,butsuchlocationsdonotactuallytransactinthesaleofvehicles.Webelievethisinfrastructureenablesustobettercontrolcostsofinventory,managewarrantyserviceandpricing,educateconsumersaboutelectricvehicles,maintainandstrengthentheTeslabrandandobtainrapidcustomerfeedback.
Wereevaluateoursalesstrategybothgloballyandatalocation-by-locationlevelfromtimetotimetooptimizeourcurrentsaleschannels.Salesofvehiclesintheautomobileindustrytendtobecyclicalinmanymarkets,whichmayexposeustovolatilityfromtimetotime.
UsedVehicleSalesOurusedvehiclebusinesssupportsnewvehiclesalesbyintegratingthetrade-inofacustomer’sexistingTeslaornon-Teslavehiclewiththesaleofa
neworusedTeslavehicle.TheTeslaandnon-Teslavehiclesweacquireastrade-insaresubsequentlyremarketed,eitherdirectlybyusorthroughthirdparties.WealsoremarketusedTeslavehiclesacquiredfromothersourcesincludingleasereturns.
PublicChargingWehaveagrowingglobalnetworkofTeslaSuperchargers,whichareourindustrialgrade,high-speedvehiclechargers.Wherepossible,weco-locate
Superchargerswithoursolarandenergystoragesystemstoreducecostsandpromoterenewablepower.Superchargerstationsaretypicallyplacedalongwell-traveledroutesandinandarounddensecitycenterstoallowTeslavehicleownerstheabilitytoenjoyquick,reliableandubiquitouschargingwithconvenient,minimalstops.UseoftheSuperchargernetworkeitherrequirespaymentofafeeorisfreeundercertainsalesprograms.
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Wealsoworkwithawidevarietyofhospitality,retailandpublicdestinations,aswellasbusinesseswithcommutingemployees,toofferadditionalchargingoptionsforourcustomers.TheseDestinationChargingandworkplacelocationsdeployTeslaWallConnectorstoprovidechargingtoTeslavehicleownerswhopatronizeorareemployedattheirbusinesses.Wealsoworkwithsingle-familyhomeownersandmulti-familyresidentialentitiestodeployhomechargingsolutions.
In-AppUpgradesAsourvehiclesarecapableofbeingupdatedremotelyover-the-air,ourcustomersmaypurchaseadditionalpaidoptionsandfeaturesthroughtheTesla
app.Weexpectthatthisfunctionalitywillalsoallowustooffercertainoptionsandfeaturesonasubscriptionbasisinthefuture.
EnergyGenerationandStorageWemarketandselloursolarandenergystorageproductstoresidential,commercialandindustrialcustomersandutilitiesthroughavarietyofchannels.
Weemphasizesimplicity,standardizationandaccessibilitytomakeiteasyandcost-effectiveforcustomerstoadoptcleanenergy,whilereducingourcustomeracquisitioncosts.
IntheU.S.,weofferresidentialsolarandenergystorageproductsdirectlythroughourwebsite,storesandgalleries,aswellasthroughournetworkofchannelpartners.OutsideoftheU.S.,weuseourinternationalsalesorganizationandanetworkofchannelpartnerstomarketandselltheseproductsfortheresidentialmarket.WealsosellPowerwalldirectlytoutilities.Inthecaseofproductssoldtoutilitiesorchannelpartners,suchpartnerstypicallyselltheproductandmanagetheinstallationincustomerhomes.
Wesellourcommercialandutility-scaleenergystoragesystemstocustomersthroughourU.S.andinternationalsalesorganizationandourchannelpartnernetwork.Incertainjurisdictions,wealsosellinstalledsolarenergysystems(withorwithoutenergystorage)tocommercialcustomersthroughcash,leaseandPPAtransactions.
ServiceandWarrantyAutomotive
ServiceWeprovideserviceforourelectricvehiclesatourcompany-ownedservicelocationsandthroughTeslaMobileServicetechnicianswhoperformwork
remotelyatcustomers’homesorotherlocations.Performingvehicleserviceourselvesprovidesuswiththecapabilitytoidentifyproblemsandimplementsolutionsandimprovementsfaster,andoptimizelogisticsandinventorybetter,thantraditionalautomobilemanufacturersandtheirdealernetworks.Theconnectivityofourvehiclesalsoallowsustodiagnoseandremedymanyproblemsremotelyandproactively.
VehicleLimitedWarrantiesandExtendedServicePlansWeprovideamanufacturer’slimitedwarrantyonallnewandusedTeslavehicleswesell,whichmayincludeseparatelimitedwarrantiesoncertain
components,specifictypesofdamageorbatterycapacityretention.Wealsocurrentlyofferextendedserviceplansthatprovidecoveragebeyondthenewvehiclelimitedwarrantiesforcertainmodelsinspecifiedregions.
EnergyGenerationandStorageWeprovideserviceandrepairstoourenergyproductcustomers,includingunderwarrantywhereapplicable.
EnergyStorageSystemsWegenerallyprovidemanufacturer’slimitedwarrantieswitheverynewenergystorageproductandoffercertainextendedlimitedwarrantiesthatare
availableatthetimeofpurchaseofthesystem.Ifweinstallasystem,wealsoprovidecertainlimitedwarrantiesonourinstallationworkmanship.Aspartofourenergystoragesystemcontracts,wemayprovidethecustomerwithperformanceguaranteesthatwarrantthattheunderlyingsystemwillmeetorexceedtheminimumenergyperformancerequirementsspecifiedinthecontract.
SolarEnergySystemsForretrofitsolarenergysystems,weprovideseparatelimitedwarrantiesforworkmanshipandagainstroofleaks,andforSolarRoof,weprovidelimited
warrantiesfordefectsandweatherization.Forcomponentsnotmanufacturedbyus,wegenerallypass-throughtheapplicablemanufacturers’warranties.Aspartofoursolarenergysystemcontracts,wemayprovidethecustomerwithperformanceguaranteesthatwarrantthattheunderlyingsystemwillmeetorexceedtheminimumenergygenerationrequirementsspecifiedinthecontract.
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FinancialServicesAutomotive
PurchaseFinancingandLeasesWeofferleasingand/orloanfinancingarrangementsforourvehiclesincertainjurisdictionsinNorthAmerica,EuropeandAsiathroughvariousfinancial
institutions.Undercertainofsuchprograms,wehaveprovidedresalevalueguaranteesorbuybackguaranteesthatmayobligateustorepurchasethesubjectvehiclesatpre-determinedvalues.Wealsooffervehiclefinancingarrangementsincertainmarketsforspecifiedvehiclemodelsdirectlythroughourlocalsubsidiaries.
InsuranceInAugust2019,welaunchedaninsuranceproductdesignedforourcustomers,whichoffersratesthatareoftenbetterthanotheralternatives.This
productiscurrentlyavailableinCalifornia,andweplantoexpandboththemarketsinwhichweofferinsuranceproductsandourabilitytooffersuchproducts,aspartofourongoingefforttodecreasethetotalcostofownershipforourcustomers.
EnergyGenerationandStorageEnergyStorageSystemsWecurrentlyoffercertainloan,leaseand/orPPAoptionstoresidentialorcommercialcustomerswhopairenergystoragesystemswithsolarenergy
systems.Weintendtointroducefinancialservicesofferingsforcustomerswhopurchasestandaloneenergystorageproductsinthefuture.
SolarEnergySystemsWeoffervariousfinancingoptionstooursolarcustomers.Oursolarloanoffersthird-partyfinancingtoenablethecustomertopurchaseandownasolar
energysystem.Wearenotapartytotheloanagreement,andthethird-partylenderhasnorecourseagainstuswithrespecttotheloan.Oursolarleaseofferscustomersafixedmonthlyfeeatratesthattypicallytranslateintolowermonthlyutilitybillsandanelectricityproductionguarantee.OursolarPPAchargescustomersafeeperkilowatt-hourbasedontheamountofelectricityproducedbyoursolarenergysystems.WemonetizethecustomerpaymentswereceivefromourleasesandPPAsthroughfundswehaveformedwithinvestors.WealsointendtointroducefinancialservicesofferingsforourSolarRoofcustomersinthefuture.
Manufacturing
ManufacturingFacilitiesintheBayArea,CaliforniaWemanufactureandtestourvehiclesatourmanufacturingfacilitiesintheBayAreainCalifornia,includingtheFremontFactoryandotherlocal
manufacturingfacilities.Wealsomanufactureanddevelopcertainpartsandcomponentsthatarecriticaltoourintellectualpropertyandqualitystandards,suchasModelSandModelXbatterypacksandourproprietarylithium-ionbatterycells,attheselocations.
GigafactoryNevadanearReno,NevadaWehaveintegratedbatterymaterial,cell,moduleandbatterypackproductionforModel3,ModelYandourenergyproductsinonelocationat
GigafactoryNevada.Inaddition,wemanufacturevehicledriveunitsandourenergystorageproductsthere.GigafactoryNevadaallowsustoaccesshighvolumesoflithium-ionbatterycellsmanufacturedbyourpartnerPanasonictherewhileachievingasignificantreductioninthecostofourbatterypacks.WecontinuetoinvestinGigafactoryNevadatoachieveadditionaloutputthere,includingthroughouragreementwithPanasonic.
GigafactoryNewYorkinBuffalo,NewYorkWeuseGigafactoryNewYorkforthedevelopmentandproductionofourSolarRoofandothersolarproductsandcomponents,energystorage
componentsandSuperchargercomponents,andforotherlessor-approvedfunctions.
GigafactoryShanghaiinChinaWeestablishedGigafactoryShanghaitoincreasetheaffordabilityofourvehiclesforcustomersinlocalmarketsbyreducingtransportationand
manufacturingcostsandeliminatingtheimpactofunfavorabletariffs.Wecontinuetoincreasethedegreeoflocalizedprocurementandmanufacturingthere.GigafactoryShanghaiisrepresentativeofourplantoiterativelyimproveourmanufacturingoperationsasweestablishnewfactories,asweimplementedthelearningsfromourModel3rampattheFremontFactorytocommenceandrampourproductiontherequicklyandcost-effectively.
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OtherManufacturingGenerally,wecontinuetoexpandproductioncapacityatourexistingfacilities.Wealsointendtofurtherincreasecost-competitivenessinoursignificant
marketsbystrategicallyaddinglocalmanufacturing,includingatGigafactoryBerlininGermanyandGigafactoryTexasinAustin,Texas,whichareunderconstruction.
SupplyChainOurproductsusethousandsofpurchasedpartsthataresourcedfromhundredsofsuppliersacrosstheworld.Wehavedevelopedcloserelationships
withvendorsofkeypartssuchasbatterycells,electronicsandcomplexvehicleassemblies.Certaincomponentspurchasedfromthesesuppliersaresharedoraresimilaracrossmanyproductlines,allowingustotakeadvantageofpricingefficienciesfromeconomiesofscale.
Asisthecaseformostautomotivecompanies,mostofourprocuredcomponentsandsystemsaresourcedfromsinglesuppliers.Wheremultiplesourcesareavailableforcertainkeycomponents,weworktoqualifymultiplesuppliersforthemwhereitissensibletodosoinordertominimizeproductionrisksowingtodisruptionsintheirsupply.Wealsomitigateriskbymaintainingsafetystockforkeypartsandassembliesanddiebanksforcomponentswithlengthyprocurementleadtimes.
Ourproductsusevariousrawmaterialsincludingaluminum,steel,cobalt,lithium,nickelandcopper.Pricingforthesematerialsisgovernedbymarketconditionsandmayfluctuateduetovariousfactorsoutsideofourcontrol,suchassupplyanddemandandmarketspeculation.Westrivetoexecutelong-termsupplycontractsforsuchmaterialsatcompetitivepricingwhenfeasible,andwecurrentlybelievethatwehaveadequateaccesstorawmaterialssuppliesinordertomeettheneedsofouroperations.
GovernmentalPrograms,IncentivesandRegulationsGlobally,boththeoperationofourbusinessbyusandtheownershipofourproductsbyourcustomersareimpactedbyvariousgovernmentprograms,
incentivesandotherarrangements.Ourbusinessandproductsarealsosubjecttonumerousgovernmentalregulationsthatvaryamongjurisdictions.
ProgramsandIncentivesCaliforniaAlternativeEnergyandAdvancedTransportationFinancingAuthorityTaxIncentivesWehaveagreementswiththeCaliforniaAlternativeEnergyandAdvancedTransportationFinancingAuthoritythatprovidemulti-yearsalestax
exclusionsonpurchasesofmanufacturingequipmentthatwillbeusedforspecificpurposes,includingtheexpansionandongoingdevelopmentofelectricvehiclesandpowertrainproductioninCalifornia.
GigafactoryNevada—NevadaTaxIncentivesInconnectionwiththeconstructionofGigafactoryNevada,weenteredintoagreementswiththeStateofNevadaandStoreyCountyinNevadathat
provideabatementsforspecifiedtaxes,discountstothebasetariffenergyratesandtransferabletaxcreditsinconsiderationofcapitalinvestmentandhiringtargetsthatweremetatGigafactoryNevada.TheseincentivesareavailableuntilJune2024orJune2034,dependingontheincentive.
GigafactoryNewYork—NewYorkStateInvestmentandLeaseWehavealeasethroughtheResearchFoundationfortheStateUniversityofNewYork(the“SUNYFoundation”)withrespecttoGigafactoryNewYork.
Undertheleaseandarelatedresearchanddevelopmentagreement,wearecontinuingtodesignatefurtherbuildoutsatthefacility.Wearerequiredtocomplywithcertaincovenants,includinghiringandcumulativeinvestmenttargets.
AswetemporarilysuspendedmostofourmanufacturingoperationsatGigafactoryNewYorkpursuanttoaNewYorkStateexecutiveorderissuedinMarch2020asaresultoftheCOVID-19pandemic,weweregrantedaone-yeardeferralofourobligationtobecompliantwithourapplicabletargetsundersuchagreementonApril30,2020,whichwasmemorializedinanamendmenttoouragreementwiththeSUNYFoundationinJuly2020.
GigafactoryShanghai—LandUseRightsandEconomicBenefitsWehaveanagreementwiththelocalgovernmentofShanghaiforlanduserightsatGigafactoryShanghai.Underthetermsofthearrangement,weare
requiredtomeetacumulativecapitalexpendituretargetandanannualtaxrevenuetargetstartingattheendof2023.Inaddition,theShanghaigovernmenthasgrantedtoourGigafactoryShanghaisubsidiaryin2019and2020certainincentivestobeusedinconnectionwitheligiblecapitalinvestmentsatGigafactoryShanghai.Finally,theShanghaigovernmentgrantedabeneficialcorporateincometaxrateof15%tocertaineligibleenterprises,whichislowerthanthe25%statutorycorporateincometaxrateinChina.OurGigafactoryShanghaisubsidiarywasgrantedthislowerratefor2019through2023.
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GigafactoryBerlin–PendingGrantWehaveappliedforagrantwiththeGermangovernmenttoimprovethedesign,chemistry,manufacturingtechnologyandrecyclingoflithium-ion
batterycellsforGigafactoryBerlin.ThegrantwasapprovedbytheEuropeanCommissioninJanuary2021anditsimplementationwillbesubjecttoagrantagreementwiththeGermangovernment.
GigafactoryTexas–TaxIncentivesInconnectionwiththeconstructionofGigafactoryTexas,weenteredintoa20-yearagreementwithTravisCountyinTexaspursuanttowhichwewould
receivegrantfundingequalto70-80%ofpropertytaxespaidbyustoTravisCountyandaseparate10-yearagreementwiththeDelValleIndependentSchoolDistrictinTexaspursuanttowhichaportionofthetaxablevalueofourpropertywouldbecappedataspecifiedamount,ineachcasesubjecttoourmeetingcertainminimumeconomicdevelopmentmetricsthroughourconstructionandoperationsatGigafactoryTexas.
RegulatoryCreditsWeearntradablecreditsintheoperationofourbusinessundervariousregulationsrelatedtozero-emissionvehicles(“ZEVs”),greenhousegas,fuel
economy,renewableenergyandcleanfuel.Wesellthesecreditstootherregulatedentitieswhocanusethecreditstocomplywithemissionstandards,renewableenergyprocurementstandardsandotherregulatoryrequirements.
EnergyStorageSystemIncentivesandPoliciesWhiletheregulatoryregimeforenergystorageprojectsisstillunderdevelopment,therearevariouspolicies,incentivesandfinancialmechanismsatthe
federal,stateandlocallevelsthatsupporttheadoptionofenergystorage.
Forexample,energystoragesystemsthatarechargedusingsolarenergymaybeeligibleforthesolarenergy-relatedU.S.federaltaxcreditsdescribedbelow.TheFederalEnergyRegulatoryCommission(“FERC”)hasalsotakenstepstoenabletheparticipationofenergystorageinwholesaleenergymarkets.Inaddition,Californiaandanumberofotherstateshaveadoptedprocurementtargetsforenergystorage,andbehind-the-meterenergystoragesystemsqualifyforfundingundertheCaliforniaSelfGenerationIncentiveProgram.
SolarEnergySystemIncentivesandPoliciesU.S.federal,stateandlocalgovernmentshaveestablishedvariouspolicies,incentivesandfinancialmechanismstoreducethecostofsolarenergyand
toacceleratetheadoptionofsolarenergy.Theseincentivesincludetaxcredits,cashgrants,taxabatementsandrebates.
Inparticular,Sections48and25DoftheU.S.InternalRevenueCodecurrentlyprovideataxcreditof26%ofqualifiedcommercialorresidentialexpendituresforsolarenergysystems,whichmaybeclaimedbyourcustomersforsystemstheypurchase,orbyusforarrangementswhereweownthesystems.Thesetaxcreditsarecurrentlyscheduledtodeclineand/orexpirein2023andbeyond.
RegulationsVehicleSafetyandTestingIntheU.S.,ourvehiclesaresubjecttoregulationbytheNationalHighwayTrafficSafetyAdministration(“NHTSA”),includingallapplicableFederal
MotorVehicleSafetyStandards(“FMVSS”)andtheNHTSAbumperstandard.NumerousFMVSSapplytoourvehicles,suchascrash-worthinessrequirements,crashavoidancerequirementsandelectricvehiclerequirements.WhileourcurrentvehiclesfullycomplyandweexpectthatourvehiclesinthefuturewillfullycomplywithallapplicableFMVSSwithlimitedornoexemptions,FMVSSaresubjecttochangefromtimetotime.Asamanufacturer,wemustself-certifythatourvehiclesmeetallapplicableFMVSSandtheNHTSAbumperstandard,orotherwiseareexempt,beforethevehiclesmaybeimportedorsoldintheU.S.
WearealsorequiredtocomplywithotherfederallawsadministeredbyNHTSA,includingtheCAFEstandards,TheftPreventionActrequirements,consumerinformationlabelingrequirements,EarlyWarningReportingrequirementsregardingwarrantyclaims,fieldreports,deathandinjuryreportsandforeignrecalls,owner’smanualrequirementsandadditionalrequirementsforcooperatingwithsafetyinvestigationsanddefectandrecallreporting.TheU.S.AutomobileInformationandDisclosureActalsorequiresmanufacturersofmotorvehiclestodisclosecertaininformationregardingthemanufacturer’ssuggestedretailprice,optionalequipmentandpricing.Inaddition,federallawrequiresinclusionoffueleconomyratings,asdeterminedbytheU.S.DepartmentofTransportationandtheEnvironmentalProtectionAgency(the“EPA”),and5-starsafetyratingsasdeterminedbyNHTSA,ifavailable.
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OurvehiclessoldoutsideoftheU.S.aresubjecttosimilarforeignsafety,environmentalandotherregulations.ManyofthoseregulationsaredifferentfromthoseapplicableintheU.S.andmayrequireredesignand/orretesting.Someofthoseregulationsimpactorpreventtherolloutofnewvehiclefeatures.Additionally,theEuropeanUnionhasestablishednewrulesregardingadditionalcomplianceoversightthatcommencedin2020,andthereisalsoregulatoryuncertaintyrelatedtotheUnitedKingdom’swithdrawalfromtheEuropeanUnion.
Self-DrivingVehiclesGenerally,lawspertainingtoself-drivingvehiclesareevolvingglobally,andinsomecasesmaycreaterestrictionsonself-drivingfeaturesthatwe
develop.WhiletherearecurrentlynofederalU.S.regulationsspecificallypertainingtoself-drivingvehiclesorself-drivingequipment,NHTSAhaspublishedrecommendedguidelinesonself-drivingvehicles,andretainstheauthoritytoinvestigateand/ortakeactiononthesafetyofanyvehicle,equipmentorfeaturesoperatingonpublicroads.CertainU.S.stateshavelegalrestrictionsontheoperation,registrationorlicensureofself-drivingvehicles,andmanyotherstatesareconsideringthem.Thisregulatorypatchworkincreasesthelegalcomplexitywithrespecttoself-drivingvehiclesintheU.S.
InmarketsthatfollowtheregulationsoftheUnitedNationsEconomicCommissionforEurope,somerequirementsrestrictthedesignofadvanceddriver-assistanceorself-drivingfeatures,whichcancompromiseorpreventtheiruseentirely.Otherapplicablelaws,bothcurrentandproposed,mayhinderthepathandtimelinetointroducingself-drivingvehiclesforsaleanduseinthemarketswheretheyapply.
Otherkeymarkets,includingChina,continuetoconsiderself-drivingregulation.AnyimplementedregulationsmaydiffermateriallyfromthoseintheU.S.andEurope,whichmayfurtherincreasethelegalcomplexityofself-drivingvehiclesandlimitorpreventcertainfeatures.
AutomobileManufacturerandDealerRegulationIntheU.S.,statelawsregulatethemanufacture,distribution,saleandserviceofautomobiles,andgenerallyrequiremotorvehiclemanufacturersand
dealerstobelicensedinordertosellvehiclesdirectlytoresidents.Certainstateshaveassertedthatthelawsinsuchstatesdonotpermitautomobilemanufacturerstobelicensedasdealersortoactinthecapacityofadealer,orthattheyotherwiserestrictamanufacturer’sabilitytodeliverorservicevehicles.Tosellvehiclestoresidentsofstateswherewearenotlicensedasadealer,wegenerallyconductthetransferoftitleoutofthestate.Incertainsuchstates,wehaveopened“galleries”thatserveaneducationalpurposeandwherethetitletransfermaynotoccur.
Someautomobiledealertradeassociationshavebothchallengedthelegalityofouroperationsincourtandusedadministrativeandlegislativeprocessestoattempttoprohibitorlimitourabilitytooperateexistingstoresorexpandtonewlocations.Certaindealerassociationshavealsoactivelylobbiedstatelicensingagenciesandlegislatorstointerpretexistinglawsorenactnewlawsinwaysnotfavorabletoourownershipandoperationofourownretailandservicelocations.Weexpectsuchchallengestocontinue,andweintendtoactivelyfightanysuchefforts.
BatterySafetyandTestingOurbatterypacksaresubjecttovariousU.S.andinternationalregulationsthatgoverntransportof“dangerousgoods,”definedtoincludelithium-ion
batteries,whichmaypresentariskintransportation.Weconducttestingtodemonstrateourcompliancewithsuchregulations.
Weuselithium-ioncellsinourhighvoltagebatterypacksinourvehiclesandenergystorageproducts.Theuse,storageanddisposalofourbatterypacksareregulatedunderexistinglawsandarethesubjectofongoingregulatorychangesthatmayaddadditionalrequirementsinthefuture.Wehaveagreementswiththirdpartybatteryrecyclingcompaniestorecycleourbatterypacksandwearealsopilotingourownrecyclingtechnology.
SolarEnergy—GeneralWearenota“regulatedutility”intheU.S.,althoughwearesubjecttocertainstateandfederalregulationsapplicabletosolarandbatterystorage
providers.Tooperateoursystems,weenterintostandardinterconnectionagreementswithapplicableutilities.Salesofelectricityandnon-saleequipmentleasesbythirdparties,suchasourleases,PPAsandsubscriptionagreements,havefacedregulatorychallengesinsomestatesandjurisdictions.
SolarEnergy—NetMeteringMoststatesintheU.S.makenetenergymetering,ornetmetering,availabletosolarcustomers.Netmeteringtypicallyallowssolarcustomersto
interconnecttheirsolarenergysystemstotheutilitygridandoffsettheirutilityelectricitypurchasesbyreceivingabillcreditforexcessenergygeneratedbytheirsolarenergysystemthatisexportedtothegrid.Incertainjurisdictions,regulatorsorutilitieshavereducedoreliminatedthebenefitavailableundernetmeteringorhaveproposedtodoso.
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CompetitionAutomotive
Theworldwideautomotivemarketishighlycompetitiveandweexpectitwillbecomeevenmorecompetitiveinthefutureasweintroduceadditionalvehiclesinabroadercross-sectionofthepassengerandcommercialvehiclemarketandexpandourvehicles’capabilities.
Webelievethatourvehiclescompeteinthemarketbothbasedontheirtraditionalsegmentclassificationaswellasbasedontheirpropulsiontechnology.Forexample,ModelSandModelXcompeteprimarilywithpremiumsedansandpremiumSUVsandModel3andModelYcompetewithsmalltomedium-sizedsedansandcompactSUVs,whichareextremelycompetitivemarkets.Competingproductstypicallyincludeinternalcombustionvehiclesfrommoreestablishedautomobilemanufacturers;however,manyestablishedandnewautomobilemanufacturershaveenteredorhaveannouncedplanstoenterthemarketforelectricandotheralternativefuelvehicles.Overall,webelievetheseannouncementsandvehicleintroductionspromotethedevelopmentoftheelectricvehiclemarketbyhighlightingtheattractivenessofelectricvehiclesrelativetotheinternalcombustionvehicle.ManymajorautomobilemanufacturershaveelectricvehiclesavailabletodayinmajormarketsincludingtheU.S.,ChinaandEurope,andothercurrentandprospectiveautomobilemanufacturersarealsodevelopingelectricvehicles.Inaddition,severalmanufacturersofferhybridvehicles,includingplug-inversions.
Wealsobelievethatthereisincreasingcompetitionforourvehicleofferingsasaplatformfordeliveringself-drivingtechnologies,chargingsolutionsandotherfeaturesandservices,andweexpecttocompeteinthisdevelopingmarketthroughcontinuedprogressonourAutopilot,FSDandneuralnetworkcapabilities,Superchargernetworkandourinfotainmentofferings.
EnergyGenerationandStorageEnergyStorageSystemsThemarketforenergystorageproductsisalsohighlycompetitive,andbothestablishedandemergingcompanieshaveintroducedproductsthatare
similartoourproductportfolioorthatarealternativestotheelementsofoursystems.Wecompetewiththesecompaniesbasedonprice,energydensityandefficiency.Webelievethatthespecificationsandfeaturesofourproducts,ourstrongbrandandthemodular,scalablenatureofourenergystorageproductsgiveusacompetitiveadvantageinourmarkets.
SolarEnergySystemsTheprimarycompetitorstooursolarenergybusinessarethetraditionallocalutilitycompaniesthatsupplyenergytoourpotentialcustomers.We
competewiththesetraditionalutilitycompaniesprimarilybasedonpriceandtheeasebywhichcustomerscanswitchtoelectricitygeneratedbyoursolarenergysystems.Wealsocompetewithsolarenergycompaniesthatprovideproductsandservicessimilartoours.Manysolarenergycompaniesonlyinstallsolarenergysystems,whileothersonlyprovidefinancingfortheseinstallations.Webelievewehaveasignificantexpansionopportunitywithourofferingsandthattheregulatoryenvironmentisincreasinglyconducivetotheadoptionofrenewableenergysystems.
IntellectualPropertyWeplaceastrongemphasisonourinnovativeapproachandproprietarydesignswhichbringintrinsicvalueanduniquenesstoourproductportfolio.As
partofourbusiness,weseektoprotecttheunderlyingintellectualpropertyrightsoftheseinnovationsanddesignssuchaswithrespecttopatents,trademarks,copyrights,tradesecretsandothermeasures,includingthroughemployeeandthird-partynondisclosureagreementsandothercontractualarrangements.Forexample,weplaceahighpriorityonobtainingpatentstoprovidethebroadestandstrongestpossibleprotectiontoenableourfreedomtooperateourinnovationsanddesignswithinourproductsandtechnologiesintheelectricvehiclemarketaswellastoprotectanddefendourproductportfolio.Wehavealsoadoptedapatentpolicyinwhichweirrevocablypledgedthatwewillnotinitiatealawsuitagainstanypartyforinfringingourpatentsthroughactivityrelatingtoelectricvehiclesorrelatedequipmentforsolongassuchpartyisactingingoodfaith.Wemadethispledgeinordertoencouragetheadvancementofacommon,rapidly-evolvingplatformforelectricvehicles,therebybenefitingourselves,othercompaniesmakingelectricvehiclesandtheworld.
HumanCapitalResourcesAsofDecember31,2020,ourfull-timecountforourandoursubsidiaries’employeesworldwidewas70,757.Todate,wehavenotexperiencedanywork
stoppagesasaresultoflabordisputes,andweconsiderourrelationshipwithouremployeestobegood.Ourkeyhumancapitalobjectivesinmanagingourbusinessincludeattracting,developingandretainingtoptalentwhileintegratingdiversity,equityandinclusionprinciplesandpracticesintoourcorevalues.
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Wewanttoattractapoolofdiverseandexceptionalcandidatesandsupporttheircareergrowthoncetheybecomeemployees.Oureffortsbeginattheentrylevelwithdevelopment,apprenticeshipandinternshipprogramsinlocalhighschools,communitycollegesandfour-yearcolleges.Inaddition,weseektohirebasedontalentratherthansolelyoneducationalpedigree,andhaveprovidedthousandsofjobopenings,includinginourlocalcommunities,forcapableworkersfromvariousbackgroundstolearnvaluableskillsincriticaloperationssuchasinmanufacturing,vehicleserviceandenergyproductinstallation.Wealsoemphasizeinourevaluationandcareerdevelopmenteffortsinternalmobilityopportunitiesforemployeestodriveprofessionaldevelopment.Ourgoalisalong-term,upward-boundcareeratTeslaforeveryemployee,whichwebelievealsodrivesourretentionefforts.
Wealsobelievethatourabilitytoretainourworkforceisdependentonourabilitytofosteranenvironmentthatissustainablysafe,respectful,fairandinclusiveofeveryoneandpromotesdiversity,equityandinclusioninsideandoutsideofourbusiness.FromouroutreachtoHistoricallyBlackCollegesandUniversitiesandHispanicServingInstitutionstosponsoringemployeeresourcegroupsacrossnumerouslocations,includingAsianPacificIslandersatTesla,BlackatTesla,Intersectionality,LatinosatTesla,LGBTQatTesla,VeteransatTeslaandWomeninTesla,weengagethesenetworksaskeybusinessresourcesandsourcesofactionablefeedback.Wearealsoworkingondiversityeffortsinoursupplychaintoexpandouroutreachandsupporttosmall-andlarge-scalesuppliersfromunderrepresentedcommunitiestoemphasizethisculturewithourownemployees.
AvailableInformationWefileorfurnishperiodicreportsandamendmentsthereto,includingourAnnualReportsonForm10-K,ourQuarterlyReportsonForm10-Qand
CurrentReportsonForm8-K,proxystatementsandotherinformationwiththeSecuritiesandExchangeCommission(“SEC”).Inaddition,theSECmaintainsawebsite(www.sec.gov)thatcontainsreports,proxyandinformationstatements,andotherinformationregardingissuersthatfileelectronically.Ourwebsiteislocatedatwww.tesla.com,andourreports,amendmentsthereto,proxystatementsandotherinformationarealsomadeavailable,freeofcharge,onourinvestorrelationswebsiteatir.tesla.comassoonasreasonablypracticableafterweelectronicallyfileorfurnishsuchinformationwiththeSEC.TheinformationpostedonourwebsiteisnotincorporatedbyreferenceintothisAnnualReportonForm10-K.
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ITEM1A.RISKFACTORS
Youshouldcarefullyconsidertherisksdescribedbelowtogetherwiththeotherinformationsetforthinthisreport,whichcouldmateriallyaffectourbusiness,financialconditionandfutureresults.Therisksdescribedbelowarenottheonlyrisksfacingourcompany.Risksanduncertaintiesnotcurrentlyknowntousorthatwecurrentlydeemtobeimmaterialalsomaymateriallyadverselyaffectourbusiness,financialconditionandoperatingresults.
RisksRelatedtoOurAbilitytoGrowOurBusinessWemaybeimpactedbymacroeconomicconditionsresultingfromtheglobalCOVID-19pandemic.Sincethefirstquarterof2020,therehasbeenaworldwideimpactfromtheCOVID-19pandemic.Governmentregulationsandshiftingsocialbehaviors
havelimitedorclosednon-essentialtransportation,governmentfunctions,businessactivitiesandperson-to-personinteractions.Insomecases,therelaxationofsuchtrendshasrecentlybeenfollowedbyactualorcontemplatedreturnstostringentrestrictionsongatheringsorcommerce,includinginpartsoftheU.S.andanumberofareasinEurope.
Wetemporarilysuspendedoperationsateachofourmanufacturingfacilitiesworldwideforapartofthefirsthalfof2020.Someofoursuppliersandpartnersalsoexperiencedtemporarysuspensionsbeforeresuming,includingPanasonic,whichmanufacturesbatterycellsforourproductsatourGigafactoryNevada.WealsoinstitutedtemporaryemployeefurloughsandcompensationreductionswhileourU.S.operationswerescaledback.Reducedoperationsorclosuresatmotorvehicledepartments,vehicleauctionhousesandmunicipalandutilitycompanyinspectorshaveresultedinchallengesinorpostponementsforournewvehicledeliveries,usedvehiclesalesandenergyproductdeployments.Globaltradeconditionsandconsumertrendsmayfurtheradverselyimpactusandourindustries.Forexample,pandemic-relatedissueshaveexacerbatedportcongestionandintermittentsuppliershutdownsanddelays,resultinginadditionalexpensestoexpeditedeliveryofcriticalparts.Similarly,increaseddemandforpersonalelectronicshascreatedashortfallofmicrochipsupply,anditisyetunknownhowwemaybeimpacted.Sustainingourproductiontrajectorywillrequirethereadinessandsolvencyofoursuppliersandvendors,astableandmotivatedproductionworkforceandongoinggovernmentcooperation,includingfortravelandvisaallowances.ThecontingenciesinherentintheconstructionofandrampatnewfacilitiessuchasGigafactoryShanghai,GigafactoryBerlinandGigafactoryTexasmaybeexacerbatedbythesechallenges.
Wecannotpredictthedurationordirectionofcurrentglobaltrends,thesustainedimpactofwhichislargelyunknown,israpidlyevolvingandhasvariedacrossgeographicregions.Ultimately,wecontinuetomonitormacroeconomicconditionstoremainflexibleandtooptimizeandevolveourbusinessasappropriate,andwewillhavetoaccuratelyprojectdemandandinfrastructurerequirementsgloballyanddeployourproduction,workforceandotherresourcesaccordingly.Ifcurrentglobalmarketconditionscontinueorworsen,orifwecannotordonotmaintainoperationsatascopethatiscommensuratewithsuchconditionsorarelaterrequiredtoorchoosetosuspendsuchoperationsagain,ourbusiness,prospects,financialconditionandoperatingresultsmaybeharmed.
Wemayexperiencedelaysinlaunchingandrampingtheproductionofourproductsandfeatures,orwemaybeunabletocontrolourmanufacturingcosts.Wehavepreviouslyexperiencedandmayinthefutureexperiencelaunchandproductionrampdelaysfornewproductsandfeatures.Forexample,we
encounteredunanticipatedsupplierissuesthatledtodelaysduringtherampofModelXandexperiencedchallengeswithasupplierandwithrampingfullautomationforcertainofourinitialModel3manufacturingprocesses.Inaddition,wemayintroduceinthefutureneworuniquemanufacturingprocessesanddesignfeaturesforourproducts.Thereisnoguaranteethatwewillbeabletosuccessfullyandtimelyintroduceandscalesuchprocessesorfeatures.
Inparticular,ourfuturebusinessdependsinlargepartonincreasingtheproductionofmass-marketvehiclesincludingModel3andModelY,whichweareplanningtoachievethroughmultiplefactoriesworldwide.WehaverelativelylimitedexperiencetodateinmanufacturingModel3andModelYathighvolumesandevenlessexperiencebuildingandrampingvehicleproductionlinesacrossmultiplefactoriesindifferentgeographies.Inordertobesuccessful,wewillneedtoimplement,maintainandrampefficientandcost-effectivemanufacturingcapabilities,processesandsupplychainsandachievethedesigntolerances,highqualityandoutputrateswehaveplannedatourmanufacturingfacilitiesinCalifornia,Nevada,Texas,ChinaandGermany.Wewillalsoneedtohire,trainandcompensateskilledemployeestooperatethesefacilities.Bottlenecksandotherunexpectedchallengessuchasthoseweexperiencedinthepastmayariseduringourproductionramps,andwemustaddressthempromptlywhilecontinuingtoimprovemanufacturingprocessesandreducingcosts.Ifwearenotsuccessfulinachievingthesegoals,wecouldfacedelaysinestablishingand/orsustainingourModel3andModelYrampsorbeunabletomeetourrelatedcostandprofitabilitytargets.
Wemayalsoexperiencesimilarfuturedelaysinlaunchingand/orrampingproductionofourenergystorageproductsandSolarRoof;newproductversionsorvariants;newvehiclessuchasTeslaSemi,CybertruckandthenewTeslaRoadster;andfuturefeaturesandservicessuchasnewAutopilotorFSDfeaturesandtheautonomousTeslaride-hailingnetwork.Likewise,wemayencounterdelayswiththedesign,constructionandregulatoryorotherapprovalsnecessarytobuildandbringonlinefuturemanufacturingfacilitiesandproducts.
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Anydelayorothercomplicationinrampingtheproductionofourcurrentproductsorthedevelopment,manufacture,launchandproductionrampofourfutureproducts,featuresandservices,orindoingsocost-effectivelyandwithhighquality,mayharmourbrand,business,prospects,financialconditionandoperatingresults.
Wemaybeunabletogrowourglobalproductsales,deliveryandinstallationcapabilitiesandourservicingandvehiclechargingnetworks,orwemaybeunabletoaccuratelyprojectandeffectivelymanageourgrowth.Oursuccesswilldependonourabilitytocontinuetoexpandoursalescapabilities.Wealsofrequentlyadjustourretailoperationsandproductofferings
inordertooptimizeourreach,costs,productline-upandmodeldifferentiationandcustomerexperience.However,thereisnoguaranteethatsuchstepswillbeacceptedbyconsumersaccustomedtotraditionalsalesstrategies.Forexample,marketingmethodssuchastouchlesstestdrivesthatwehavepioneeredincertainmarketshavenotbeenprovenatscale.WearetargetingwithModel3andModelYaglobalmassdemographicwithabroadrangeofpotentialcustomers,inwhichwehaverelativelylimitedexperienceprojectingdemandandpricingourproducts.Wecurrentlyproducenumerousinternationalvariantsatalimitednumberoffactories,andifourspecificdemandexpectationsforthesevariantsproveinaccurate,wemaynotbeabletotimelygeneratedeliveriesmatchedtothevehiclesthatweproduceinthesametimeframeorthatarecommensuratewiththesizeofouroperationsinagivenregion.Likewise,aswedevelopandgrowourenergyproductsandservicesworldwide,oursuccesswilldependonourabilitytocorrectlyforecastdemandinvariousmarkets.
Becausewedonothaveindependentdealernetworks,weareresponsiblefordeliveringallofourvehiclestoourcustomers.Whilewehaveimprovedourdeliverylogistics,wemayfacedifficultieswithdeliveriesatincreasingvolumes,particularlyininternationalmarketsrequiringsignificanttransittimes.Forexample,wesawchallengesinrampingourlogisticschannelsinChinaandEuropetoinitiallydeliverModel3thereinthefirstquarterof2019.Wehavedeployedanumberofdeliverymodels,suchasdeliveriestocustomers’homesandworkplacesandtouchlessdeliveries,butthereisnoguaranteethatsuchmodelswillbescalableorbeacceptedglobally.Likewise,aswerampSolarRoof,weareworkingtosubstantiallyincreaseinstallationpersonnelanddecreaseinstallationtimes.Ifwearenotsuccessfulinmatchingsuchcapabilitieswithactualproduction,orifweexperienceunforeseenproductiondelaysorinaccuratelyforecastdemandfortheSolarRoof,ourbusiness,financialconditionandoperatingresultsmaybeharmed.
Moreover,becauseofouruniqueexpertisewithourvehicles,werecommendthatourvehiclesbeservicedbyusorbycertainauthorizedprofessionals.Ifweexperiencedelaysinaddingsuchservicingcapacityorservicingourvehiclesefficiently,orexperienceunforeseenissueswiththereliabilityofourvehicles,particularlyhigher-volumeandneweradditionstoourfleetsuchasModel3andModelY,itcouldoverburdenourservicingcapabilitiesandpartsinventory.Similarly,theincreasingnumberofTeslavehiclesalsorequiresustocontinuetorapidlyincreasethenumberofourSuperchargerstationsandconnectorsthroughouttheworld.
Thereisnoassurancethatwewillbeabletorampourbusinesstomeetoursales,delivery,installation,servicingandvehiclechargingtargetsglobally,thatourprojectionsonwhichsuchtargetsarebasedwillproveaccurateorthatthepaceofgrowthorcoverageofourcustomerinfrastructurenetworkwillmeetcustomerexpectations.Theseplansrequiresignificantcashinvestmentsandmanagementresourcesandthereisnoguaranteethattheywillgenerateadditionalsalesorinstallationsofourproducts,orthatwewillbeabletoavoidcostoverrunsorbeabletohireadditionalpersonneltosupportthem.Asweexpand,wewillalsoneedtoensureourcompliancewithregulatoryrequirementsinvariousjurisdictionsapplicabletothesale,installationandservicingofourproducts,thesaleordispatchofelectricityrelatedtoourenergyproductsandtheoperationofSuperchargers.Ifwefailtomanageourgrowtheffectively,itmayharmourbrand,business,prospects,financialconditionandoperatingresults.
Ourfuturegrowthandsuccessaredependentuponconsumers’demandforelectricvehiclesandspecificallyourvehiclesinanautomotiveindustrythatisgenerallycompetitive,cyclicalandvolatile.IfthemarketforelectricvehiclesingeneralandTeslavehiclesinparticulardoesnotdevelopasweexpect,developsmoreslowlythanweexpect,orif
demandforourvehiclesdecreasesinourmarketsorourvehiclescompetewitheachother,ourbusiness,prospects,financialconditionandoperatingresultsmaybeharmed.
Wearestillatanearlierstageandhavelimitedresourcesandproductionrelativetoestablishedcompetitorsthatofferinternalcombustionenginevehicles.Inaddition,electricvehiclesstillcompriseasmallpercentageofoverallvehiclesales.Asaresult,themarketforourvehiclescouldbenegativelyaffectedbynumerousfactors,suchas: • perceptionsaboutelectricvehiclefeatures,quality,safety,performanceandcost; • perceptionsaboutthelimitedrangeoverwhichelectricvehiclesmaybedrivenonasinglebatterycharge,andaccesstochargingfacilities; • competition,includingfromothertypesofalternativefuelvehicles,plug-inhybridelectricvehiclesandhighfuel-economyinternalcombustion
enginevehicles; • volatilityinthecostofoilandgasoline,suchaswidefluctuationsincrudeoilpricesduring2020;
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• governmentregulationsandeconomicincentives;and • concernsaboutourfutureviability.
Finally,thetargetdemographicsforourvehicles,particularlyModel3andModelY,arehighlycompetitive.Salesofvehiclesintheautomotiveindustrytendtobecyclicalinmanymarkets,whichmayexposeustofurthervolatilityasweexpandandadjustouroperationsandretailstrategies.Moreover,theCOVID-19pandemicmaynegativelyimpactthetransportationandautomotiveindustrieslong-term.Itisuncertainastohowsuchmacroeconomicfactorswillimpactusasacompanythathasbeenexperiencinggrowthandincreasingmarketshareinanindustrythathasgloballybeenexperiencingarecentdeclineinsales.
Oursuppliersmayfailtodelivercomponentsaccordingtoschedules,prices,qualityandvolumesthatareacceptabletous,orwemaybeunabletomanagethesecomponentseffectively.Ourproductscontainthousandsofpartsthatwepurchasegloballyfromhundredsofmostlysingle-sourcedirectsuppliers,generallywithoutlong-term
supplyagreements.Thisexposesustomultiplepotentialsourcesofcomponentshortages,suchasthosethatweexperiencedin2012and2016withourModelSandModelXramps.Unexpectedchangesinbusinessconditions,materialspricing,laborissues,wars,governmentalchanges,tariffs,naturaldisasterssuchastheMarch2011earthquakesinJapan,healthepidemicssuchastheglobalCOVID-19pandemic,tradeandshippingdisruptionsandotherfactorsbeyondouroroursuppliers’controlcouldalsoaffectthesesuppliers’abilitytodelivercomponentstousortoremainsolventandoperational.Forexample,aglobalshortageofmicrochipshasbeenreportedsinceearly2021,andtheimpacttousisyetunknown.Theunavailabilityofanycomponentorsuppliercouldresultinproductiondelays,idlemanufacturingfacilities,productdesignchangesandlossofaccesstoimportanttechnologyandtoolsforproducingandsupportingourproducts.Moreover,significantincreasesinourproduction,suchasforModel3andModelY,orproductdesignchangesbyushaverequiredandmayinthefuturerequireustoprocureadditionalcomponentsinashortamountoftime.Oursuppliersmaynotbewillingorabletosustainablymeetourtimelinesorourcost,qualityandvolumeneeds,ortodosomaycostusmore,whichmayrequireustoreplacethemwithothersources.Finally,wehavelimitedvehiclemanufacturingexperienceoutsideoftheFremontFactoryandwemayexperienceissuesincreasingtheleveloflocalizedprocurementatourGigafactoryShanghaiandatfuturefactoriessuchasGigafactoryBerlinandGigafactoryTexas.Whilewebelievethatwewillbeabletosecureadditionaloralternatesourcesordevelopourownreplacementsformostofourcomponents,thereisnoassurancethatwewillbeabletodosoquicklyoratall.Additionally,wemaybeunsuccessfulinourcontinuouseffortstonegotiatewithexistingsupplierstoobtaincostreductionsandavoidunfavorablechangestoterms,sourcelessexpensivesuppliersforcertainpartsandredesigncertainpartstomakethemlessexpensivetoproduce.Anyoftheseoccurrencesmayharmourbusiness,prospects,financialconditionandoperatingresults.
Asthescaleofourvehicleproductionincreases,wewillalsoneedtoaccuratelyforecast,purchase,warehouseandtransportcomponentsathighvolumestoourmanufacturingfacilitiesandservicinglocationsinternationally.Ifweareunabletoaccuratelymatchthetimingandquantitiesofcomponentpurchasestoouractualneedsorsuccessfullyimplementautomation,inventorymanagementandothersystemstoaccommodatetheincreasedcomplexityinoursupplychainandpartsmanagement,wemayincurunexpectedproductiondisruption,storage,transportationandwrite-offcosts,whichmayharmourbusinessandoperatingresults.
Wemaybeunabletomeetourprojectedconstructiontimelines,costsandproductionrampsatnewfactories,orwemayexperiencedifficultiesingeneratingandmaintainingdemandforproductsmanufacturedthere.Ourabilitytoincreaseproductionofourvehiclesonasustainedbasis,makethemaffordablegloballybyaccessinglocalsupplychainsandworkforces
andstreamlinedeliverylogisticsisdependentontheconstructionandrampofGigafactoryShanghai,GigafactoryBerlinandGigafactoryTexas.Theconstructionofandcommencementandrampofproductionatthesefactoriesaresubjecttoanumberofuncertaintiesinherentinallnewmanufacturingoperations,includingongoingcompliancewithregulatoryrequirements,procurementandmaintenanceofconstruction,environmentalandoperationallicensesandapprovalsforadditionalexpansion,potentialsupplychainconstraints,hiring,trainingandretentionofqualifiedemployeesandthepaceofbringingproductionequipmentandprocessesonlinewiththecapabilitytomanufacturehigh-qualityunitsatscale.Forexample,wearecurrentlyconstructingGigafactoryBerlinunderconditionalpermits.Moreover,weintendtoincorporatesequentialdesignandmanufacturingchangesintovehiclesmanufacturedateachnewfactory.WehavelimitedexperiencetodatewithdevelopingandimplementingvehiclemanufacturinginnovationsoutsideoftheFremontFactory,asweonlyrecentlybeganproductionatGigafactoryShanghai.Inparticular,themajorityofourdesignandengineeringresourcesarecurrentlylocatedinCalifornia.Inordertomeetourexpectationsforournewfactories,wemustexpandandmanagelocalizeddesignandengineeringtalentandresources.Ifweexperienceanyissuesordelaysinmeetingourprojectedtimelines,costs,capitalefficiencyandproductioncapacityforournewfactories,expandingandmanagingteamstoimplementiterativedesignandproductionchangesthere,maintainingandcomplyingwiththetermsofanydebtfinancingthatweobtaintofundthemorgeneratingandmaintainingdemandforthevehicleswemanufacturethere,ourbusiness,prospects,operatingresultsandfinancialconditionmaybeharmed.
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Wewillneedtomaintainandsignificantlygrowouraccesstobatterycells,includingthroughthedevelopmentandmanufactureofourowncells,andcontrolourrelatedcosts.Wearedependentonthecontinuedsupplyoflithium-ionbatterycellsforourvehiclesandenergystorageproducts,andwewillrequiresubstantially
morecellstogrowourbusinessaccordingtoourplans.Currently,werelyonsupplierssuchasPanasonicforthesecells.However,wehavetodatefullyqualifiedonlyaverylimitednumberofsuchsuppliersandhavelimitedflexibilityinchangingsuppliers.Anydisruptioninthesupplyofbatterycellsfromoursupplierscouldlimitproductionofourvehiclesandenergystorageproducts.Inthelongterm,weintendtosupplementcellsfromoursupplierswithcellsmanufacturedbyus,whichwebelievewillbemoreefficient,manufacturableatgreatervolumesandcost-effectivethancurrentlyavailablecells.However,oureffortstodevelopandmanufacturesuchbatterycellshaverequiredandmayrequiresignificantinvestments,andtherecanbenoassurancethatwewillbeabletoachievethesetargetsinthetimeframesthatwehaveplannedoratall.Ifweareunabletodoso,wemayhavetocurtailourplannedvehicleandenergystorageproductproductionorprocureadditionalcellsfromsuppliersatpotentiallygreatercosts,eitherofwhichmayharmourbusinessandoperatingresults.
Inaddition,thecostofbatterycells,whethermanufacturedbyoursuppliersorbyus,dependsinpartuponthepricesandavailabilityofrawmaterialssuchaslithium,nickel,cobaltand/orothermetals.Thepricesforthesematerialsfluctuateandtheiravailablesupplymaybeunstable,dependingonmarketconditionsandglobaldemandforthesematerials,includingasaresultofincreasedglobalproductionofelectricvehiclesandenergystorageproducts.Anyreducedavailabilityofthesematerialsmayimpactouraccesstocellsandanyincreasesintheirpricesmayreduceourprofitabilityifwecannotrecouptheincreasedcoststhroughincreasedvehicleprices.Moreover,anysuchattemptstoincreaseproductpricesmayharmourbrand,prospectsandoperatingresults.
Wefacestrongcompetitionforourproductsandservicesfromagrowinglistofestablishedandnewcompetitors.Theworldwideautomotivemarketishighlycompetitivetodayandweexpectitwillbecomeevenmoresointhefuture.Forexample,Model3andModel
Yfacecompetitionfromexistingandfutureautomobilemanufacturersintheextremelycompetitiveentry-levelpremiumsedanandcompactSUVmarkets.Asignificantandgrowingnumberofestablishedandnewautomobilemanufacturers,aswellasothercompanies,haveenteredorarereportedtohaveplanstoenterthemarketforelectricandotheralternativefuelvehicles,includinghybrid,plug-inhybridandfullyelectricvehicles,aswellasthemarketforself-drivingtechnologyandothervehicleapplicationsandsoftwareplatforms.Insomecases,ourcompetitorsofferorwillofferelectricvehiclesinimportantmarketssuchasChinaandEurope,and/orhaveannouncedanintentiontoproduceelectricvehiclesexclusivelyatsomepointinthefuture.Manyofourcompetitorshavesignificantlygreaterorbetter-establishedresourcesthanwedotodevotetothedesign,development,manufacturing,distribution,promotion,saleandsupportoftheirproducts.Increasedcompetitioncouldresultinourlowervehicleunitsales,pricereductions,revenueshortfalls,lossofcustomersandlossofmarketshare,whichmayharmourbusiness,financialconditionandoperatingresults.
Wealsofacecompetitioninourenergygenerationandstoragebusinessfromothermanufacturers,developers,installersandserviceprovidersofcompetingenergysystems,aswellasfromlargeutilities.Decreasesintheretailorwholesalepricesofelectricityfromutilitiesorotherrenewableenergysourcescouldmakeourproductslessattractivetocustomersandleadtoanincreasedrateofresidentialcustomerdefaultsunderourexistinglong-termleasesandPPAs.RisksRelatedtoOurOperations
Wemayexperienceissueswithlithium-ioncellsorothercomponentsmanufacturedatGigafactoryNevada,whichmayharmtheproductionandprofitabilityofourvehicleandenergystorageproducts.Ourplantogrowthevolumeandprofitabilityofourvehiclesandenergystorageproductsdependsonsignificantlithium-ionbatterycellproductionby
ourpartnerPanasonicatGigafactoryNevada.AlthoughPanasonichasalongtrackrecordofproducinghigh-qualitycellsatsignificantvolumeatitsfactoriesinJapan,ithasrelativelylimitedexperiencewithcellproductionatGigafactoryNevada,whichbeganin2017.Moreover,althoughPanasonicisco-locatedwithusatGigafactoryNevada,itisfreetomakeitsownoperationaldecisions,suchasitsdeterminationtotemporarilysuspenditsmanufacturingthereinresponsetotheCOVID-19pandemic.Inaddition,weproduceseveralvehiclecomponents,suchasbatterymodulesandpacksincorporatingthecellsproducedbyPanasonicforModel3andModelYanddriveunits(includingtosupportGigafactoryShanghaiproduction),atGigafactoryNevada,andwealsomanufactureenergystorageproductsthere.Inthepast,someofthemanufacturinglinesforcertainproductcomponentstooklongerthananticipatedtoramptotheirfullcapacity,andadditionalbottlenecksmayariseinthefutureaswecontinuetoincreasetheproductionrateandintroducenewlines.IfweorPanasonicareunabletoorotherwisedonotmaintainandgrowourrespectiveoperationsatGigafactoryNevadaproduction,orifweareunabletodosocost-effectivelyorhireandretainhighly-skilledpersonnelthere,ourabilitytomanufactureourproductsprofitablywouldbelimited,whichmayharmourbusinessandoperatingresults.
Finally,thehighvolumesoflithium-ioncellsandbatterymodulesandpacksmanufacturedatGigafactoryNevadaarestoredandrecycledatourvariousfacilities.Anymishandlingofbatterycellsmaycausedisruptiontotheoperationofsuchfacilities.While
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wehaveimplementedsafetyproceduresrelatedtothehandlingofthecells,therecanbenoassurancethatasafetyissueorfirerelatedtothecellswouldnotdisruptouroperations.Anysuchdisruptionsorissuesmayharmourbrandandbusiness.
Wefacerisksassociatedwithmaintainingandexpandingourinternationaloperations,includingunfavorableanduncertainregulatory,political,economic,taxandlaborconditions.Wearesubjecttolegalandregulatoryrequirements,politicaluncertaintyandsocial,environmentalandeconomicconditionsinnumerousjurisdictions,
overwhichwehavelittlecontrolandwhichareinherentlyunpredictable.Ouroperationsinsuchjurisdictions,particularlyasacompanybasedintheU.S.,createrisksrelatingtoconformingourproductstoregulatoryandsafetyrequirementsandchargingandotherelectricinfrastructures;organizinglocaloperatingentities;establishing,staffingandmanagingforeignbusinesslocations;attractinglocalcustomers;navigatingforeigngovernmenttaxes,regulationsandpermitrequirements;enforceabilityofourcontractualrights;traderestrictions,customsregulations,tariffsandpriceorexchangecontrols;andpreferencesinforeignnationsfordomesticallymanufacturedproducts.Suchconditionsmayincreaseourcosts,impactourabilitytosellourproductsandrequiresignificantmanagementattention,andmayharmourbusinessifweunabletomanagethemeffectively.
Ourbusinessmaysufferifourproductsorfeaturescontaindefects,failtoperformasexpectedortakelongerthanexpectedtobecomefullyfunctional.Ifourproductscontaindesignormanufacturingdefectsthatcausethemnottoperformasexpectedorthatrequirerepair,orcertainfeaturesofour
vehiclessuchasnewAutopilotorFSDfeaturestakelongerthanexpectedtobecomeenabled,arelegallyrestrictedorbecomesubjecttoonerousregulation,ourabilitytodevelop,marketandsellourproductsandservicesmaybeharmed,andwemayexperiencedeliverydelays,productrecalls,productliability,breachofwarrantyandconsumerprotectionclaimsandsignificantwarrantyandotherexpenses.Inparticular,ourproductsarehighlydependentonsoftware,whichisinherentlycomplexandmaycontainlatentdefectsorerrorsorbesubjecttoexternalattacks.IssuesexperiencedbyourcustomershaveincludedthoserelatedtotheModelSandModelX17-inchdisplayscreen,thepanoramicroofandthe12-voltbatteryintheModelS,theseatsanddoorsintheModelXandtheoperationofsolarpanelsinstalledbyus.Althoughweattempttoremedyanyissuesweobserveinourproductsaseffectivelyandrapidlyaspossible,sucheffortsmaynotbetimely,mayhamperproductionormaynotcompletelysatisfyourcustomers.Whilewehaveperformedextensiveinternaltestingonourproductsandfeatures,wecurrentlyhavealimitedframeofreferencebywhichtoevaluatetheirlong-termquality,reliability,durabilityandperformancecharacteristics.Therecanbenoassurancethatwewillbeabletodetectandfixanydefectsinourproductspriortotheirsaletoorinstallationforcustomers.
Wemayberequiredtodefendorinsureagainstproductliabilityclaims.Theautomobileindustrygenerallyexperiencessignificantproductliabilityclaims,andassuchwefacetheriskofsuchclaimsintheeventourvehicles
donotperformorareclaimedtonothaveperformedasexpected.Asistrueforotherautomakers,ourvehicleshavebeeninvolvedandweexpectinthefuturewillbeinvolvedinaccidentsresultingindeathorpersonalinjury,andsuchaccidentswhereAutopilotorFSDfeaturesareengagedarethesubjectofsignificantpublicattention.Wehaveexperiencedandweexpecttocontinuetofaceclaimsarisingfromorrelatedtomisuseorclaimedfailuresofsuchnewtechnologiesthatwearepioneering.Inaddition,thebatterypacksthatweproducemakeuseoflithium-ioncells.Onrareoccasions,lithium-ioncellscanrapidlyreleasetheenergytheycontainbyventingsmokeandflamesinamannerthatcanignitenearbymaterialsaswellasotherlithium-ioncells.Whilewehavedesignedourbatterypackstopassivelycontainanysinglecell’sreleaseofenergywithoutspreadingtoneighboringcells,therecanbenoassurancethatafieldortestingfailureofourvehiclesorotherbatterypacksthatweproducewillnotoccur,inparticularduetoahigh-speedcrash.Likewise,asoursolarenergysystemsandenergystorageproductsgenerateandstoreelectricity,theyhavethepotentialtofailorcauseinjurytopeopleorproperty.Anyproductliabilityclaimmaysubjectustolawsuitsandsubstantialmonetarydamages,productrecallsorredesignefforts,andevenameritlessclaimmayrequireustodefendit,allofwhichmaygeneratenegativepublicityandbeexpensiveandtime-consuming.Inmostjurisdictions,wegenerallyself-insureagainsttheriskofproductliabilityclaimsforvehicleexposure,meaningthatanyproductliabilityclaimswilllikelyhavetobepaidfromcompanyfundsandnotbyinsurance.
Wewillneedtomaintainpubliccredibilityandconfidenceinourlong-termbusinessprospectsinordertosucceed.Inordertomaintainandgrowourbusiness,wemustmaintaincredibilityandconfidenceamongcustomers,suppliers,analysts,investors,ratings
agenciesandotherpartiesinourlong-termfinancialviabilityandbusinessprospects.Maintainingsuchconfidencemaybechallengingduetoourlimitedoperatinghistoryrelativetoestablishedcompetitors;customerunfamiliaritywithourproducts;anydelayswemayexperienceinscalingmanufacturing,deliveryandserviceoperationstomeetdemand;competitionanduncertaintyregardingthefutureofelectricvehiclesorourotherproductsandservices;ourquarterlyproductionandsalesperformancecomparedwithmarketexpectations;andotherfactorsincludingthoseoverwhichwehavenocontrol.Inparticular,Tesla’sproducts,business,resultsofoperations,statementsandactionsarewell-publicizedbyarangeofthirdparties.Suchattentionincludesfrequentcriticism,whichisoftenexaggeratedorunfounded,suchasspeculationregardingthesufficiencyorstabilityofourmanagementteam.Anysuchnegativeperceptions,whethercausedbyusornot,mayharmourbusinessandmakeitmoredifficulttoraiseadditionalfundsifneeded.
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Wemaybeunabletoeffectivelygrow,ormanagethecompliance,residualvalue,financingandcreditrisksrelatedto,ourvariousfinancingprograms.WeofferfinancingarrangementsforourvehiclesinNorthAmerica,EuropeandAsiaprimarilythroughvariousfinancialinstitutions.Wealsocurrently
offervehiclefinancingarrangementsdirectlythroughourlocalsubsidiariesincertainmarkets.Dependingonthecountry,sucharrangementsareavailableforspecifiedmodelsandmayincludeoperatingleasesdirectlywithusunderwhichwetypicallyreceiveonlyaverysmallportionofthetotalvehiclepurchasepriceatthetimeoflease,followedbyastreamofpaymentsoverthetermofthelease.Wehavealsoofferedvariousarrangementsforcustomersofoursolarenergysystemswherebytheypayusafixedpaymenttoleaseorfinancethepurchaseofsuchsystemsorpurchaseelectricitygeneratedbythem.Ifwedonotsuccessfullymonitorandcomplywithapplicablenational,stateand/orlocalfinancialregulationsandconsumerprotectionlawsgoverningthesetransactions,wemaybecomesubjecttoenforcementactionsorpenalties.
Theprofitabilityofanydirectly-leasedvehiclesreturnedtousattheendoftheirleasesdependsonourabilitytoaccuratelyprojectourvehicles’residualvaluesattheoutsetoftheleases,andsuchvaluesmayfluctuatepriortotheendoftheirtermsdependingonvariousfactorssuchassupplyanddemandofourusedvehicles,economiccyclesandthepricingofnewvehicles.Wehavemadeinthepastandmaymakeinthefuturecertainadjustmentstoourpricesfromtimetotimeintheordinarycourseofbusiness,whichmayimpacttheresidualvaluesofourvehiclesandreducetheprofitabilityofourvehicleleasingprogram.Thefundingandgrowthofthisprogramalsoreliesonourabilitytosecureadequatefinancingand/orbusinesspartners.Ifweareunabletoadequatelyfundourleasingprogramthroughinternalfunds,partnersorotherfinancingsources,andcompellingalternativefinancingprogramsarenotavailableforourcustomerswhomayexpectorneedsuchoptions,wemaybeunabletogrowourvehicledeliveries.Furthermore,ifourvehicleleasingbusinessgrowssubstantially,ourbusinessmaysufferifwecannoteffectivelymanagetheresultinggreaterlevelsofresidualrisk.
Similarly,wehaveprovidedresalevalueguaranteestovehiclecustomersandpartnersforcertainfinancingprograms,underwhichsuchcounterpartiesmayselltheirvehiclesbacktousatcertainpointsintimeatpre-determinedamounts.However,actualresalevaluesaresubjecttofluctuationsoverthetermofthefinancingarrangements,suchasfromthevehiclepricingchangesdiscussedabove.Iftheactualresalevaluesofanyvehiclesresoldorreturnedtouspursuanttotheseprogramsaremateriallylowerthanthepre-determinedamountswehaveoffered,ourfinancialconditionandoperatingresultsmaybeharmed.
Finally,ourvehicleandsolarenergysystemfinancingprogramsandourenergystoragesalesprogramsalsoexposeustocustomercreditrisk.Intheeventofawidespreadeconomicdownturnorothercatastrophicevent,ourcustomersmaybeunableorunwillingtosatisfytheirpaymentobligationstousonatimelybasisoratall.Ifasignificantnumberofourcustomersdefault,wemayincursubstantialcreditlossesand/orimpairmentchargeswithrespecttotheunderlyingassets.
WemustmanageongoingobligationsunderouragreementwiththeResearchFoundationfortheStateUniversityofNewYorkrelatingtoourGigafactoryNewYork.WearepartytoanoperatingleaseandaresearchanddevelopmentagreementthroughtheSUNYFoundation.Theseagreementsprovideforthe
constructionanduseofourGigafactoryNewYork,whichwehaveprimarilyusedforthedevelopmentandproductionofourSolarRoofandothersolarproductsandcomponents,energystoragecomponentsandSuperchargercomponents,andforotherlessor-approvedfunctions.Underthisagreement,weareobligatedto,amongotherthings,meetemploymenttargetsaswellasspecifiedminimumnumbersofpersonnelintheStateofNewYorkandinBuffalo,NewYorkandspendorincur$5.00billionincombinedcapital,operationalexpenses,costsofgoodssoldandothercostsintheStateofNewYorkduringthe10-yearperiodbeginningApril30,2018.AswetemporarilysuspendedmostofourmanufacturingoperationsatGigafactoryNewYorkpursuanttoaNewYorkStateexecutiveorderissuedinMarch2020asaresultoftheCOVID-19pandemic,weweregrantedaone-yeardeferralofourobligationtobecompliantwithourapplicabletargetsundersuchagreementonApril30,2020,whichwasmemorializedinanamendmenttoouragreementwiththeSUNYFoundationinJuly2020.WhileweexpecttohaveandgrowsignificantoperationsatGigafactoryNewYorkandthesurroundingBuffaloarea,anyfailurebyusinanyyearoverthecourseofthetermoftheagreementtomeetallapplicablefutureobligationsmayresultinourobligationtopaya“programpayment”of$41milliontotheSUNYFoundationforsuchyear,theterminationofourleaseatGigafactoryNewYorkwhichmayrequireustopayadditionalpenaltiesand/ortheneedtoadjustcertainofouroperations,inparticularourproductionrampoftheSolarRooforothercomponents.Anyoftheforegoingeventsmayharmourbusiness,financialconditionandoperatingresults.
Ifweareunabletoattract,hireandretainkeyemployeesandqualifiedpersonnel,ourabilitytocompetemaybeharmed.Thelossoftheservicesofanyofourkeyemployeesoranysignificantportionofourworkforcecoulddisruptouroperationsordelaythedevelopment,
introductionandrampofourproductsandservices.Inparticular,wearehighlydependentontheservicesofElonMusk,ourChiefExecutiveOfficer.Noneofourkeyemployeesisboundbyanemploymentagreementforanyspecifictermandwemaynotbeabletosuccessfullyattractandretainseniorleadershipnecessarytogrowourbusiness.Ourfuturesuccessalsodependsuponourabilitytoattract,hireandretainalargenumberofengineering,manufacturing,marketing,salesanddelivery,service,installation,technologyandsupportpersonnel,especiallytosupportourplannedhigh-volumeproductsales,marketandgeographical
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expansionandtechnologicalinnovations.Recruitingefforts,particularlyforsenioremployees,maybetime-consuming,whichmaydelaytheexecutionofourplans.Ifwearenotsuccessfulinmanagingtheserisks,ourbusiness,financialconditionandoperatingresultsmaybeharmed.
EmployeesmayleaveTeslaorchooseotheremployersoverTesladuetovariousfactors,suchasaverycompetitivelabormarketfortalentedindividualswithautomotiveortechnologyexperience,oranynegativepublicityrelatedtous.InCalifornia,Nevadaandotherregionswherewehaveoperations,thereisincreasingcompetitionforindividualswithskillsetsneededforourbusiness,includingspecializedknowledgeofelectricvehicles,softwareengineering,manufacturingengineeringandelectricalandbuildingconstructionexpertise.Moreover,wemaybeimpactedbyperceptionsrelatingtoreductionsinforcethatwehaveconductedinthepastinordertooptimizeourorganizationalstructureandreducecostsandthedepartureofcertainseniorpersonnelforvariousreasons.Likewise,asaresultofourtemporarysuspensionofvariousU.S.manufacturingoperationsinthefirsthalfof2020,inApril2020wetemporarilyfurloughedcertainhourlyemployeesandreducedmostsalariedemployees’basesalaries.Wealsocompetewithbothmatureandprosperouscompaniesthathavefargreaterfinancialresourcesthanwedoandstart-upsandemergingcompaniesthatpromiseshort-termgrowthopportunities.
Finally,ourcompensationphilosophyforallofourpersonnelreflectsourstartuporigins,withanemphasisonequity-basedawardsandbenefitsinordertocloselyaligntheirincentiveswiththelong-terminterestsofourstockholders.Weperiodicallyseekandobtainapprovalfromourstockholdersforfutureincreasestothenumberofawardsavailableunderourequityincentiveandemployeestockpurchaseplans.Ifweareunabletoobtaintherequisitestockholderapprovalsforsuchfutureincreases,wemayhavetoexpendadditionalcashtocompensateouremployeesandourabilitytoretainandhirequalifiedpersonnelmaybeharmed.
WearehighlydependentontheservicesofElonMusk,ourChiefExecutiveOfficer.WearehighlydependentontheservicesofElonMusk,ourChiefExecutiveOfficerandlargeststockholder.AlthoughMr.Muskspendssignificanttime
withTeslaandishighlyactiveinourmanagement,hedoesnotdevotehisfulltimeandattentiontoTesla.Mr.MuskalsocurrentlyservesasChiefExecutiveOfficerandChiefTechnicalOfficerofSpaceExplorationTechnologiesCorp.,adeveloperandmanufacturerofspacelaunchvehicles,andisinvolvedinotheremergingtechnologyventures.
Wemustmanagerisksrelatingtoourinformationtechnologysystemsandthethreatofintellectualpropertytheft,databreachesandcyber-attacks.Wemustcontinuetoexpandandimproveourinformationtechnologysystemsasouroperationsgrow,suchasproductdatamanagement,procurement,
inventorymanagement,productionplanningandexecution,sales,serviceandlogistics,dealermanagement,financial,taxandregulatorycompliancesystems.ThisincludestheimplementationofnewinternallydevelopedsystemsandthedeploymentofsuchsystemsintheU.S.andabroad.Wemustalsocontinuetomaintaininformationtechnologymeasuresdesignedtoprotectusagainstintellectualpropertytheft,databreaches,sabotageandotherexternalorinternalcyber-attacksormisappropriation.However,theimplementation,maintenance,segregationandimprovementofthesesystemsrequiresignificantmanagementtime,supportandcost,andthereareinherentrisksassociatedwithdeveloping,improvingandexpandingourcoresystemsaswellasimplementingnewsystemsandupdatingcurrentsystems,includingdisruptionstotherelatedareasofbusinessoperation.Theserisksmayaffectourabilitytomanageourdataandinventory,procurepartsorsuppliesormanufacture,sell,deliverandserviceproducts,adequatelyprotectourintellectualpropertyorachieveandmaintaincompliancewith,orrealizeavailablebenefitsunder,taxlawsandotherapplicableregulations.
Moreover,ifwedonotsuccessfullyimplement,maintainorexpandthesesystemsasplanned,ouroperationsmaybedisrupted,ourabilitytoaccuratelyand/ortimelyreportourfinancialresultscouldbeimpairedanddeficienciesmayariseinourinternalcontroloverfinancialreporting,whichmayimpactourabilitytocertifyourfinancialresults.Moreover,ourproprietaryinformationorintellectualpropertycouldbecompromisedormisappropriatedandourreputationmaybeadverselyaffected.Ifthesesystemsortheirfunctionalitydonotoperateasweexpectthemto,wemayberequiredtoexpendsignificantresourcestomakecorrectionsorfindalternativesourcesforperformingthesefunctions.
Anyunauthorizedcontrolormanipulationofourproducts’systemscouldresultinlossofconfidenceinusandourproducts.Ourproductscontaincomplexinformationtechnologysystems.Forexample,ourvehiclesandenergystorageproductsaredesignedwithbuilt-indata
connectivitytoacceptandinstallperiodicremoteupdatesfromustoimproveorupdatetheirfunctionality.Whilewehaveimplementedsecuritymeasuresintendedtopreventunauthorizedaccesstoourinformationtechnologynetworks,ourproductsandtheirsystems,maliciousentitieshavereportedlyattempted,andmayattemptinthefuture,togainunauthorizedaccesstomodify,alterandusesuchnetworks,productsandsystemstogaincontrolof,ortochange,ourproducts’functionality,userinterfaceandperformancecharacteristicsortogainaccesstodatastoredinorgeneratedbyourproducts.Weencouragereportingofpotentialvulnerabilitiesinthesecurityofourproductsthroughoursecurityvulnerabilityreportingpolicy,andweaimtoremedyanyreportedandverifiedvulnerability.However,therecanbenoassurancethatanyvulnerabilitieswillnotbeexploitedbeforetheycanbeidentified,orthatourremediationeffortsareorwillbesuccessful.
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Anyunauthorizedaccesstoorcontrolofourproductsortheirsystemsoranylossofdatacouldresultinlegalclaimsorgovernmentinvestigations.Inaddition,regardlessoftheirveracity,reportsofunauthorizedaccesstoourproducts,theirsystemsordata,aswellasotherfactorsthatmayresultintheperceptionthatourproducts,theirsystemsordataarecapableofbeinghacked,mayharmourbrand,prospectsandoperatingresults.Wehavebeenthesubjectofsuchreportsinthepast.
Ourbusinessmaybeadverselyaffectedbyanydisruptionscausedbyunionactivities.Itisnotuncommonforemployeesofcertaintradesatcompaniessuchasustobelongtoaunion,whichcanresultinhigheremployeecostsand
increasedriskofworkstoppages.Moreover,regulationsinsomejurisdictionsoutsideoftheU.S.mandateemployeeparticipationinindustrialcollectivebargainingagreementsandworkcouncilswithcertainconsultationrightswithrespecttotherelevantcompanies’operations.Althoughweworkdiligentlytoprovidethebestpossibleworkenvironmentforouremployees,theymaystilldecidetojoinorseekrecognitiontoformalaborunion,orwemayberequiredtobecomeaunionsignatory.Fromtimetotime,laborunionshaveengagedincampaignstoorganizecertainofouroperations,aspartofwhichsuchunionshavefiledunfairlaborpracticechargesagainstuswiththeNationalLaborRelationsBoard,andtheymaydosointhefuture.InSeptember2019,anadministrativelawjudgeissuedarecommendeddecisionforTeslaoncertainissuesandagainstusoncertainothers.TheNationalLaborRelationsBoardhasnotyetadoptedtherecommendationandwehaveappealedcertainaspectsoftherecommendeddecision.AnyunfavorableultimateoutcomeforTeslamayhaveanegativeimpactontheperceptionofTesla’streatmentofouremployees.Furthermore,wearedirectlyorindirectlydependentuponcompanieswithunionizedworkforces,suchassuppliersandtruckingandfreightcompanies.Anyworkstoppagesorstrikesorganizedbysuchunionscoulddelaythemanufactureandsaleofourproductsandmayharmourbusinessandoperatingresults.
Wemaychoosetoorbecompelledtoundertakeproductrecallsortakeothersimilaractions.Asamanufacturingcompany,wemustmanagetheriskofproductrecallswithrespecttoourproducts.Recallsforourvehicleshaveresultedfrom,for
example,industry-wideissueswithairbagsfromaparticularsupplier,concernsofcorrosioninModelSandModelXpowersteeringassistmotorbolts,certainsuspensionfailuresinModelSandModelXandissueswithModelSandModelXmediacontrolunits.Inadditiontorecallsinitiatedbyusforvariouscauses,testingoforinvestigationsintoourproductsbygovernmentregulatorsorindustrygroupsmaycompelustoinitiateproductrecallsormayresultinnegativepublicperceptionsaboutthesafetyofourproducts,evenifwedisagreewiththedefectdeterminationorhavedatathatshowstheactualsafetyrisktobenon-existent.Inthefuture,wemayvoluntarilyorinvoluntarilyinitiaterecallsifanyofourproductsaredeterminedbyusoraregulatortocontainasafetydefectorbenoncompliantwithapplicablelawsandregulations,suchasU.S.federalmotorvehiclesafetystandards.Suchrecalls,whethervoluntaryorinvoluntaryorcausedbysystemsorcomponentsengineeredormanufacturedbyusoroursuppliers,couldresultinsignificantexpense,supplychaincomplicationsandserviceburdens,andmayharmourbrand,business,prospects,financialconditionandoperatingresults.
Ourcurrentandfuturewarrantyreservesmaybeinsufficienttocoverfuturewarrantyclaims.Weprovideamanufacturer’swarrantyonallnewandusedTeslavehicleswesell.Wealsoprovidecertainwarrantieswithrespecttotheenergy
generationandstoragesystemswesell,includingontheirinstallationandmaintenance,andforcomponentsnotmanufacturedbyus,wegenerallypassthroughtoourcustomerstheapplicablemanufacturers’warranties.Aspartofourenergygenerationandstoragesystemcontracts,wemayprovidethecustomerwithperformanceguaranteesthatwarrantthattheunderlyingsystemwillmeetorexceedtheminimumenergygenerationorotherenergyperformancerequirementsspecifiedinthecontract.Undertheseperformanceguarantees,webeartheriskofelectricityproductionorotherperformanceshortfalls,eveniftheyresultfromfailuresincomponentsfromthirdpartymanufacturers.Theserisksareexacerbatedintheeventsuchmanufacturersceaseoperationsorfailtohonortheirwarranties.
Ifourwarrantyreservesareinadequatetocoverfuturewarrantyclaimsonourproducts,ourfinancialconditionandoperatingresultsmaybeharmed.Warrantyreservesincludeourmanagement’sbestestimatesoftheprojectedcoststorepairortoreplaceitemsunderwarranty,whicharebasedonactualclaimsincurredtodateandanestimateofthenature,frequencyandcostsoffutureclaims.Suchestimatesareinherentlyuncertainandchangestoourhistoricalorprojectedexperience,especiallywithrespecttoproductssuchasModel3,ModelYandSolarRoofthatwehaverecentlyintroducedand/orthatweexpecttoproduceatsignificantlygreatervolumesthanourpastproducts,maycausematerialchangestoourwarrantyreservesinthefuture.
Ourinsurancecoveragestrategymaynotbeadequatetoprotectusfromallbusinessrisks.Wemaybesubject,intheordinarycourseofbusiness,tolossesresultingfromproductsliability,accidents,actsofGodandotherclaimsagainstus,for
whichwemayhavenoinsurancecoverage.Asageneralmatter,wedonotmaintainasmuchinsurancecoverageasmanyothercompaniesdo,andinsomecases,wedonotmaintainanyatall.Additionally,thepoliciesthatwedohavemayincludesignificantdeductiblesorself-insuredretentions,policylimitationsandexclusions,andwecannotbecertainthatourinsurancecoveragewillbesufficienttocoverallfuturelossesorclaimsagainstus.Alossthatisuninsuredorwhichexceedspolicylimitsmayrequireustopaysubstantialamounts,whichmayharmourfinancialconditionandoperatingresults.
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Thereisnoguaranteethatwewillhavesufficientcashflowfromourbusinesstopayoursubstantialindebtednessorthatwewillnotincuradditionalindebtedness.AsofDecember31,2020,weandoursubsidiarieshadoutstanding$10.57billioninaggregateprincipalamountofindebtednes