tesla, inc....2020/06/30 · tesla, inc. consolidated statements of comprehensive income (loss) (in...

UNITEDSTATESSECURITIESANDEXCHANGECOMMISSION

Washington,D.C.20549

FORM10-Q(MarkOne)☒ QUARTERLYREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF

1934ForthequarterlyperiodendedJune30,2020

OR

☐ TRANSITIONREPORTPURSUANTTOSECTION13OR15(d)OFTHESECURITIESEXCHANGEACTOF1934

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

Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934(“ExchangeAct”)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.Yes☒No☐

IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyeveryInteractiveDataFilerequiredtobesubmittedpursuanttoRule405ofRegulationS-T(§232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtosubmitsuchfiles).Yes☒No☐

Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfiler,asmallerreportingcompany,oranemerginggrowthcompany.Seethedefinitionsof“largeacceleratedfiler,”“acceleratedfiler,”“smallerreportingcompany”,and“emerginggrowthcompany”inRule12b-2oftheExchangeAct:

Largeacceleratedfiler ☒ Acceleratedfiler ☐

Non-acceleratedfiler ☐ Smallerreportingcompany ☐

Emerginggrowthcompany ☐

Ifanemerginggrowthcompany,indicatebycheckmarkiftheregistranthaselectednottousetheextendedtransitionperiodforcomplyingwithanyneworrevisedfinancialaccountingstandardsprovidedpursuanttoSection13(a)oftheExchangeAct.☐

Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).Yes☐No☒AsofJuly20,2020,therewere186,361,726sharesoftheregistrant’scommonstockoutstanding.

TESLA,INC.

FORM10-QFORTHEQUARTERENDEDJUNE30,2020

INDEX PagePARTI.FINANCIALINFORMATION

Item1. FinancialStatements(Unaudited) 4 ConsolidatedBalanceSheets 4 ConsolidatedStatementsofOperations 5 ConsolidatedStatementsofComprehensiveIncome(Loss) 6 ConsolidatedStatementsofRedeemableNoncontrollingInterestsandEquity 7 ConsolidatedStatementsofCashFlow 9 NotestoConsolidatedFinancialStatements 10Item2. Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations 36Item3. QuantitativeandQualitativeDisclosuresAboutMarketRisk 52Item4 ControlandProcedures 52

PARTII.OTHERINFORMATION

Item1. LegalProceeding 54Item1A. RiskFactors 55Item2 UnregisteredSalesofEquitySecuritiesandUseofProceeds 75Item3 DefaultsUponSeniorSecurities 75Item4. MineSafetyDisclosures 75Item5. OtherInformation 75Item6. Exhibits 77

SIGNATURES 79

i

Forward-LookingStatementsThediscussionsinthisQuarterlyReportonForm10-Qcontainforward-lookingstatementsreflectingourcurrentexpectationsthatinvolverisksanduncertainties.Theseforward-lookingstatementsinclude,butarenotlimitedto,statementsconcerningourstrategy,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,theriskssetforthinPartII,Item1A,“RiskFactors”inthisQuarterlyReportonForm10-QandinourotherfilingswiththeSecuritiesandExchangeCommission.Wedonotassumeanyobligationtoupdateanyforward-lookingstatements.

PARTI.FINANCIALINFORMATIONITEM1.FINANCIALSTATEMENTS

Tesla,Inc.ConsolidatedBalanceSheets

(inmillions,exceptpersharedata)(unaudited)

June30, December31, 2020 2019

Assets Currentassets Cashandcashequivalents $ 8,615 $ 6,268Accountsreceivable,net 1,485 1,324Inventory 4,018 3,552Prepaidexpensesandothercurrentassets 1,218 959Totalcurrentassets 15,336 12,103

Operatingleasevehicles,net 2,524 2,447Solarenergysystems,net 6,069 6,138Property,plantandequipment,net 11,009 10,396Operatingleaseright-of-useassets 1,274 1,218Intangibleassets,net 312 339Goodwill 196 198Othernon-currentassets 1,415 1,470

Totalassets $ 38,135 $ 34,309Liabilities Currentliabilities Accountspayable $ 3,638 $ 3,771Accruedliabilitiesandother 3,110 3,222Deferredrevenue 1,130 1,163Customerdeposits 713 726Currentportionofdebtandfinanceleases 3,679 1,785Totalcurrentliabilities 12,270 10,667

Debtandfinanceleases,netofcurrentportion 10,416 11,634Deferredrevenue,netofcurrentportion 1,198 1,207Otherlong-termliabilities 2,870 2,691

Totalliabilities 26,754 26,199Commitmentsandcontingencies(Note12) Redeemablenoncontrollinginterestsinsubsidiaries 613 643Convertibleseniornotes(Note10) 44 —Equity Stockholders'equity Preferredstock;$0.001parvalue;100sharesauthorized;nosharesissuedandoutstanding — —Commonstock;$0.001parvalue;2,000sharesauthorized;186and181sharesissuedandoutstandingasofJune30,2020andDecember31,2019,respectively 0 0Additionalpaid-incapital 15,895 12,737Accumulatedothercomprehensiveloss (40) (36)Accumulateddeficit (6,000) (6,083)Totalstockholders'equity 9,855 6,618

Noncontrollinginterestsinsubsidiaries 869 849Totalliabilitiesandequity $ 38,135 $ 34,309

Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.

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Tesla,Inc.

ConsolidatedStatementsofOperations(inmillions,exceptpersharedata)

(unaudited) ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Revenues Automotivesales $ 4,911 $ 5,168 $ 9,804 $ 8,677Automotiveleasing 268 208 507 423Totalautomotiverevenues 5,179 5,376 10,311 9,100

Energygenerationandstorage 370 369 663 693Servicesandother 487 605 1,047 1,098Totalrevenues 6,036 6,350 12,021 10,891

Costofrevenues Automotivesales 3,714 4,254 7,413 7,110Automotiveleasing 148 106 270 223Totalautomotivecostofrevenues 3,862 4,360 7,683 7,333

Energygenerationandstorage 349 326 631 642Servicesandother 558 743 1,206 1,429Totalcostofrevenues 4,769 5,429 9,520 9,404

Grossprofit 1,267 921 2,501 1,487Operatingexpenses Researchanddevelopment 279 324 603 664Selling,generalandadministrative 661 647 1,288 1,351Restructuringandother — 117 — 161Totaloperatingexpenses 940 1,088 1,891 2,176

Income(loss)fromoperations 327 (167) 610 (689)Interestincome 8 10 18 19Interestexpense (170) (172) (339) (330)Otherexpense,net (15) (41) (69) (15)Income(loss)beforeincometaxes 150 (370) 220 (1,015)Provisionforincometaxes 21 19 23 42Netincome(loss) 129 (389) 197 (1,057)Netincomeattributabletononcontrollinginterestsandredeemablenoncontrollinginterestsinsubsidiaries 25 19 77 53Netincome(loss)attributabletocommonstockholders

$ 104 $ (408) $ 120 $ (1,110)Netincome(loss)pershareofcommonstockattributabletocommonstockholders

Basic $ 0.56 $ (2.31) 0.65 $ (6.40)Diluted $ 0.50 $ (2.31) 0.59 $ (6.40)

Weightedaveragesharesusedincomputingnetincome(loss)pershareofcommonstock

Basic 186 177 184 175Diluted 207 177 203 175


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Tesla,Inc.

ConsolidatedStatementsofComprehensiveIncome(Loss)(inmillions)(unaudited)

ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Netincome(loss) $ 129 $ (389) $ 197 $ (1,057)Othercomprehensiveincome(loss): Foreigncurrencytranslationadjustment 73 29 (4) 2

Comprehensiveincome(loss) 202 (360) 193 (1,055)Less:Comprehensiveincomeattributabletononcontrollinginterestsandredeemablenoncontrollinginterestsinsubsidiaries 25 19 77 53Comprehensiveincome(loss)attributabletocommonstockholders $ 177 $ (379) $ 116 $ (1,108)


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Tesla,Inc.

ConsolidatedStatementsofRedeemableNoncontrollingInterestsandEquity(inmillions,exceptpersharedata)

(unaudited)

Accumulated Redeemable Additional Other Total Noncontrolling Noncontrolling CommonStock Paid-In Accumulated Comprehensive Stockholders' Interestsin Total

ThreeMonthsEndedJune30,2019 Interests Shares Amount Capital Deficit Loss Equity Subsidiaries Equity BalanceasofMarch31,2019 $ 570 174 $ 0 $ 10,564 $ (5,923) $ (35) $ 4,606 $ 862 $ 5,468ConversionfeatureofConvertibleSeniorNotesduein2024 — — — 491 — — 491 — 491Purchaseofconvertiblenotehedges — — — (476) — — (476) — (476)Salesofwarrants — — — 174 — — 174 — 174Issuanceofcommonstockforequityincentiveawardsandacquisitions,netoftransactioncosts — 2 0 222 — — 222 — 222IssuanceofcommonstockinMay2019publicofferingat$243.00pershare,netofissuancecostsof$15 — 3 0 848 — — 848 — 848Stock-basedcompensation — — — 226 — — 226 — 226Contributionsfromnoncontrollinginterests 10 — — — — — — 32 32Distributionstononcontrollinginterests (26) — — — — — — (33) (33)Other — — — 3 — — 3 — 3Netincome(loss) 26 — — — (408) — (408) (7) (415)Othercomprehensiveincome — — — — — 29 29 — 29BalanceasofJune30,2019 $ 580 179 $ 0 $ 12,052 $ (6,331) $ (6) $ 5,715 $ 854 $ 6,569

Redeemable Additional Other Total Noncontrolling Noncontrolling CommonStock Paid-In Accumulated Comprehensive Stockholders' Interestsin Total

SixMonthsEndedJune30,2019 Interests Shares Amount Capital Deficit Loss Equity Subsidiaries Equity BalanceasofDecember31,2018 $ 556 173 $ 0 $ 10,249 $ (5,318) $ (8) $ 4,923 $ 834 $ 5,757AdjustmentsforpriorperiodsfromadoptingASC842 — — — — 97 — 97 — 97ConversionfeatureofConvertibleSeniorNotesduein2024 — — — 491 — — 491 — 491Purchaseofconvertiblenotehedges — — — (476) — — (476) — (476)Salesofwarrants — — — 174 — — 174 — 174Issuanceofcommonstockforequityincentiveawardsandacquisitions,netoftransactioncosts — 3 0 315 — — 315 — 315IssuanceofcommonstockinMay2019publicofferingat$243.00pershare,netofissuancecostsof$15 — 3 0 848 — — 848 — 848Stock-basedcompensation — — — 456 — — 456 — 456Contributionsfromnoncontrollinginterests 41 — — — — — — 48 48Distributionstononcontrollinginterests (37) — — — — — — (61) (61)Buy-outsofnoncontrollinginterests — — — (8) — — (8) — (8)Other — — — 3 — — 3 — 3Netincome(loss) 20 — — — (1,110) — (1,110) 33 (1,077)Othercomprehensiveincome — — — — — 2 2 — 2BalanceasofJune30,2019 $ 580 179 $ 0 $ 12,052 $ (6,331) $ (6) $ 5,715 $ 854 $ 6,569

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ThreeMonthsEndedJune30,2020 Interests Shares Amount Capital Deficit Loss Equity Subsidiaries Equity BalanceasofMarch31,2020 $ 632 185 $ 0 $ 15,390 $ (6,104) $ (113) $ 9,173 $ 867 $ 10,040Reclassificationfrommezzanineequitytoequityfor1.25%ConvertibleSeniorNotesduein2021 — — — 16 — — 16 — 16Exercisesofconversionfeatureofconvertibleseniornotes — 0 0 65 — — 65 — 65Issuanceofcommonstockforequityincentiveawards — 1 0 57 — — 57 — 57Stock-basedcompensation — — — 367 — — 367 — 367Distributionstononcontrollinginterests (13) — — — — — — (27) (27)Other (2) — — — — — — — —Netincome (4) — — — 104 — 104 29 133Othercomprehensiveincome — — — — — 73 73 — 73BalanceasofJune30,2020 $ 613 186 $ 0 $ 15,895 $ (6,000) $ (40) $ 9,855 $ 869 $ 10,724


SixMonthsEndedJune30,2020 Interests Shares Amount Capital Deficit Income Equity Subsidiaries Equity BalanceasofDecember31,2019 $ 643 181 $ 0 $ 12,737 $ (6,083) $ (36) $ 6,618 $ 849 $ 7,467AdjustmentsforpriorperiodsfromadoptingASU2016-13 — — — — (37) — (37) — (37)Reclassificationfromequitytomezzanineequityfor1.25%ConvertibleSeniorNotesduein2021 — — — (44) — — (44) — (44)Exercisesofconversionfeatureofconvertibleseniornotes — — — 65 — — 65 — 65Issuanceofcommonstockforequityincentiveawards — 2 0 217 — — 217 — 217IssuanceofcommonstockinFebruary2020publicofferingat$767.00pershare,netofissuancecostsof$28 — 3 0 2,309 — — 2,309 — 2,309Stock-basedcompensation — — — 611 — — 611 — 611Contributionsfromnoncontrollinginterests 2 — — — — — — 17 17Distributionstononcontrollinginterests (27) — — — — — — (77) (77)Other (2) — — — — — — — —Netincome (3) — — — 120 — 120 80 200Othercomprehensiveloss — — — — — (4) (4) — (4)BalanceasofJune30,2020 $ 613 186 $ 0 $ 15,895 $ (6,000) $ (40) $ 9,855 $ 869 $ 10,724


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Tesla,Inc.

ConsolidatedStatementsofCashFlows(inmillions)(unaudited)

SixMonthsEndedJune30, 2020 2019 CashFlowsfromOperatingActivities Netincome(loss) $ 197 $ (1,057)Adjustmentstoreconcilenetincome(loss)tonetcashprovidedbyoperatingactivities:

Depreciation,amortizationandimpairment 1,120 1,047Stock-basedcompensation 558 418Amortizationofdebtdiscountsandissuancecosts 94 82Inventoryandpurchasecommitmentswrite-downs 88 116Lossondisposalsoffixedassets 12 48Foreigncurrencytransactionnetloss(gain) 38 (11)Non-cashinterestandotheroperatingactivities 110 157Operatingcashflowrelatedtorepaymentofdiscountedconvertiblenotes — (188)Changesinoperatingassetsandliabilities,netofeffectofbusinesscombinations: Accountsreceivable (236) (168)Inventory (535) (352)Operatingleasevehicles (330) (176)Prepaidexpensesandothercurrentassets (301) (139)Othernon-currentassets (16) 42Accountspayableandaccruedliabilities (372) 87Deferredrevenue (20) 476Customerdeposits 5 (160)Otherlong-termliabilities 112 2Netcashprovidedbyoperatingactivities 524 224

CashFlowsfromInvestingActivities Purchasesofpropertyandequipmentexcludingfinanceleases,netofsales (1,001) (530)Purchasesofsolarenergysystems,netofsales (46) (43)Receiptofgovernmentgrants 1 —Purchaseofintangibleassets — (5)Businesscombinations,netofcashacquired — 31

Netcashusedininvestingactivities (1,046) (547)CashFlowsfromFinancingActivities Proceedsfromissuancesofcommonstockinpublicofferings,netofissuancecosts 2,309 848Proceedsfromissuancesofconvertibleandotherdebt 4,946 5,008Repaymentsofconvertibleandotherdebt (4,226) (3,700)Collateralizedleaserepayments (168) (219)Proceedsfromexercisesofstockoptionsandotherstockissuances 217 96Principalpaymentsonfinanceleases (154) (143)Debtissuancecosts — (30)Purchaseofconvertiblenotehedges — (476)Proceedsfromissuanceofwarrants — 174Proceedsfrominvestmentsbynoncontrollinginterestsinsubsidiaries 19 89Distributionspaidtononcontrollinginterestsinsubsidiaries (110) (149)Paymentsforbuy-outsofnoncontrollinginterestsinsubsidiaries (2) (8)

Netcashprovidedbyfinancingactivities 2,831 1,490Effectofexchangeratechangesoncashandcashequivalentsandrestrictedcash 14 5Netincreaseincashandcashequivalentsandrestrictedcash 2,323 1,172Cashandcashequivalentsandrestrictedcash,beginningofperiod 6,783 4,277Cashandcashequivalentsandrestrictedcash,endofperiod $ 9,106 $ 5,449SupplementalNon-CashInvestingandFinancingActivities Equityissuedinconnectionwithbusinesscombination $ — $ 207Acquisitionsofpropertyandequipmentincludedinliabilities $ 668 $ 287Leasedassetsobtainedinexchangeforfinanceleaseliabilities $ 54 $ 469Leasedassetsobtainedinexchangeforoperatingleaseliabilities $ 187 $ 119


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Tesla,Inc.

NotestoConsolidatedFinancialStatements(unaudited)

Note1–Overview

Tesla,Inc.(“Tesla”,the“Company”,“we”,“us”or“our”)wasincorporatedintheStateofDelawareonJuly1,2003.Wedesign,develop,manufactureandsellhigh-performancefullyelectricvehiclesanddesign,manufacture,installandsellsolarenergygenerationandenergystorageproducts.OurChiefExecutiveOfficer,asthechiefoperatingdecisionmaker(“CODM”),organizesourcompany,managesresourceallocationsandmeasuresperformanceamongtwooperatingandreportablesegments:(i)automotiveand(ii)energygenerationandstorage.

AsofandfollowingJune30,2020,therehascontinuedtobewidespreadimpacttotheglobaleconomyfromthecoronavirusdisease(“COVID-19”)pandemic.Wehadtemporarilysuspendedoperationsateachofourmanufacturingfacilitiesworldwideatsomepointduringthefirsthalfof2020asaresultofgovernmentrequirementsortoaccommodaterelatedchallengesforouremployees,theirfamiliesandoursuppliers.Certainofoursuppliersandpartners,includingPanasonic,ourpartnerthatmanufactureslithium-ionbatterycellsforourproductsatourGigafactoryNevada,alsoexperiencedsuchtemporarysuspensions.Wehadalsoinstitutedtemporarylaborcostreductionmeasuresbyfurloughingcertainofourhourlyemployees,reducingmostsalariedemployees’basesalariesgloballyandreducingourbonusandcommissionstructureswhileourU.S.operationswerescaledback.Exitingthesecondquarterof2020,however,wehaveresumedoperationsatallofourmanufacturingfacilities,continuetoincreaseouroutputandaddadditionalcapacity,andareworkingwitheachofoursuppliersandgovernmentagenciesonmeeting,rampingandsustainingourproduction.Ontheotherhand,certaingovernmentregulationsandpublicadvisories,aswellasshiftingsocialbehaviors,thathavetemporarilyorsporadicallylimitedorclosednon-essentialtransportation,governmentfunctions,businessactivitiesandperson-to-personinteractionsremaininplace.Insomecases,therelaxationofsuchtrendshasbeenfollowedbyareturntostringentrestrictions.Wecannotpredictthedurationordirectionofsuchtrends,whichhavealsoadverselyaffectedandmayinthefutureaffectouroperations.Note2–SummaryofSignificantAccountingPoliciesUnauditedInterimFinancialStatements

TheconsolidatedbalancesheetasofJune30,2020,theconsolidatedstatementsofoperations,theconsolidatedstatementsofcomprehensiveincome(loss),theconsolidatedstatementsofredeemablenoncontrollinginterestsandequityforthethreeandsixmonthsendedJune30,2020and2019andtheconsolidatedstatementsofcashflowsforthesixmonthsendedJune30,2020and2019,aswellasotherinformationdisclosedintheaccompanyingnotes,areunaudited.TheconsolidatedbalancesheetasofDecember31,2019wasderivedfromtheauditedconsolidatedfinancialstatementsasofthatdate.TheinterimconsolidatedfinancialstatementsandtheaccompanyingnotesshouldbereadinconjunctionwiththeannualconsolidatedfinancialstatementsandtheaccompanyingnotescontainedinourAnnualReportonForm10-KfortheyearendedDecember31,2019.

Theinterimconsolidatedfinancialstatementsandtheaccompanyingnoteshavebeenpreparedonthesamebasisastheannualconsolidatedfinancialstatementsand,intheopinionofmanagement,reflectalladjustments,whichincludeonlynormalrecurringadjustments,necessaryforafairstatementoftheresultsofoperationsfortheperiodspresented.Theconsolidatedresultsofoperationsforanyinterimperiodarenotnecessarilyindicativeoftheresultstobeexpectedforthefullyearorforanyotherfutureyearsorinterimperiods.

UseofEstimatesThepreparationoffinancialstatementsinconformitywithU.S.generallyacceptedaccountingprinciples(“GAAP”)requiresmanagementtomake

estimatesandassumptionsthataffectthereportedamountsofassets,liabilities,revenues,costsandexpensesandrelateddisclosuresintheaccompanyingnotes.

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DuetotheCOVID-19pandemic,therehasbeenuncertaintyanddisruptionintheglobaleconomyandfinancialmarkets.Theestimatesusedfor,butnotlimitedto,determiningsignificanteconomicincentiveforresidualvalueguaranteearrangements,salesreturnreserves,thecollectabilityofaccountsreceivable,inventoryvaluation,fairvalueoflong-livedassets,goodwill,fairvalueoffinancialinstruments,fairvalueandresidualvalueofoperatingleasevehiclesandsolarenergysystemssubjecttoleasescouldbeimpacted.WehaveassessedtheimpactandarenotawareofanyspecificeventsorcircumstancesthatrequiredanupdatetoourestimatesandassumptionsormateriallyaffectedthecarryingvalueofourassetsorliabilitiesasofthedateofissuanceofthisQuarterlyReportonForm10-Q.Theseestimatesmaychangeasneweventsoccurandadditionalinformationisobtained.Actualresultscoulddiffermateriallyfromtheseestimatesunderdifferentassumptionsorconditions.

ReclassificationsCertainpriorperiodbalanceshavebeenreclassifiedtoconformtothecurrentperiodpresentationintheconsolidatedfinancialstatementsand

theaccompanyingnotes.RestrictedcashandMyPowercustomernotesreceivablehavebeenreclassifiedtootherassetsandresalevalueguaranteeshasbeenreclassifiedtootherliabilities.

RevenueRecognitionRevenuebysourceThefollowingtabledisaggregatesourrevenuebymajorsource(inmillions):

ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Automotivesaleswithoutresalevalueguarantee $ 4,423 $ 4,919 $ 8,790 $ 8,602Automotivesaleswithresalevalueguarantee(1) 60 138 232 (252)Automotiveregulatorycredits 428 111 782 327Energygenerationandstoragesales 225 226 398 438Servicesandother 487 605 1,047 1,098Totalrevenuesfromsalesandservices 5,623 5,999 11,249 10,213

Automotiveleasing 268 208 507 423Energygenerationandstorageleasing 145 143 265 255Totalrevenues $ 6,036 $ 6,350 $ 12,021 $ 10,891

(1) Duetopricingadjustmentswemadetoourvehicleofferingsinthefirsthalfof2019andinthesecondquarterof2020,weestimatedthatthere

wasagreaterlikelihoodthatcustomerswouldexercisetheirbuybackoptionsandadjustedoursalesreturnreserveonvehiclespreviouslysoldunderourbuybackoptionsprogram,whichresultedinareductionofautomotivesaleswithresalevalueguarantee.ForthethreeandsixmonthsendedJune30,2020,priceadjustmentsresultedinareductionofautomotivesaleswithresalevalueguaranteeof$60million.ForthethreeandsixmonthsendedJune30,2019,priceadjustmentsresultedinareductionofautomotivesaleswithresalevalueguaranteeof$64millionand$565million,respectively.Theamountspresentedrepresentautomotivesaleswithresalevalueguaranteenetofsuchpricingadjustments’impact.

AutomotiveSalesRevenueAutomotiveSaleswithandwithoutResaleValueGuaranteeDeferredrevenuerelatedtotheaccesstoourSuperchargernetwork,internetconnectivityandFullSelfDriving(“FSD”)featuresandover-the-

airsoftwareupdatesonautomotivesaleswithandwithoutresalevalueguaranteeamountedto$1.61billionand$1.47billionasofJune30,2020andDecember31,2019,respectively.Deferredrevenueisequivalenttothetotaltransactionpriceallocatedtotheperformanceobligationsthatareunsatisfied,orpartiallyunsatisfied,asofthebalancesheetdate.RevenuerecognizedfromthedeferredrevenuebalanceasofDecember31,2019and2018was$149millionand$114millionforthesixmonthsendedJune30,2020and2019,respectively.Ofthetotaldeferredrevenueonautomotivesaleswithandwithoutresalevalueguarantees,weexpecttorecognize$876millionofrevenueinthenext12months.Theremainingbalancewillberecognizedoverthevariousperformanceperiodsoftheobligations,whichisuptotheeight-yearlifeofthevehicle.

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Atthetimeofrevenuerecognition,wereducethetransactionpriceandrecordasalesreturnreserveagainstrevenueforestimatedvariable

considerationrelatedtofutureproductreturns.Suchestimatesarebasedonhistoricalexperience.Onaquarterlybasis,weassesstheestimatedmarketvaluesofvehiclesunderourbuybackoptionsprogramtodeterminewhethertherewillbechangestofutureproductreturns.Asweaccumulatemoredatarelatedtothebuybackvaluesofourvehiclesorasmarketconditionschange,theremaybematerialchangestotheirestimatedvalues.DuetopriceadjustmentswemadetoourvehicleofferingsduringthethreemonthsendedJune30,2020,weestimatedthatthereisagreaterlikelihoodthatcustomerswillexercisetheirbuybackoptionsthatwereprovidedpriortosuchadjustments.Asaresult,alongwiththeestimatedvariableconsiderationrelatedtonormalfutureproductreturnsforvehiclessoldunderthebuybackoptionsprograminthesecondquarter,weadjustedoursalesreturnreserveonvehiclespreviouslysoldunderourbuybackoptionsprogramresultinginareductionofautomotivesalesrevenuesof$60millionforthethreemonthsendedJune30,2020.Ifcustomerselecttoexercisethebuybackoption,weexpecttobeabletosubsequentlyresellthereturnedvehicles,whichresultedinacorrespondingreductioninautomotivecostofsalesof$37millionforthethreemonthsendedJune30,2020.Thenetimpactwas$23millionreductioningrossprofitforthethreemonthsendedJune30,2020.

WiththeexceptionoftwoprogramswhicharediscussedwithintheAutomotiveLeasingRevenuesection,werecognizerevenuewhencontroltransfersupondeliverytocustomersasasalewitharightofreturnaswedonotbelievethecustomerhasasignificanteconomicincentivetoexercisetheresalevalueguaranteeprovidedtothem.Thetotalsalesreturnreserveonvehiclespreviouslysoldunderourbuybackoptionsprogramwas$650millionand$639millionasofJune30,2020andDecember31,2019,respectively,ofwhich$124millionand$93millionwasshortterm,respectively.

AutomotiveRegulatoryCredits

Inconnectionwiththeproductionanddeliveryofourzeroemissionvehiclesinglobalmarkets,wehaveearnedandwillcontinuetoearnvarioustradableautomotiveregulatorycredits.Wehavesoldthesecredits,andwillcontinuetosellfuturecredits,toautomotivecompaniesandotherregulatedentitieswhocanusethecreditstocomplywithemissionstandardsandotherregulatoryrequirements.Forexample,underCalifornia’sZeroEmissionVehicleRegulationandthoseofstatesthathaveadoptedCalifornia’sstandard,vehiclemanufacturersarerequiredtoearnorpurchasecredits,referredtoasZEVcredits,forcompliancewiththeirannualregulatoryrequirements.Theselawsprovidethatautomakersmaybankorselltootherregulatedpartiestheirexcesscreditsiftheyearnmorecreditsthantheminimumquantityrequiredbythoselaws.WealsoearnothertypesofsaleableregulatorycreditsintheUnitedStatesandabroad,includinggreenhousegas,fueleconomyandcleanfuelscredits.Paymentsforregulatorycreditsaretypicallyreceivedatthepointcontroltransferstothecustomer,orinaccordancewithpaymenttermscustomarytothebusiness.

Werecognizerevenueonthesaleofautomotiveregulatorycreditsatthetimecontroloftheregulatorycreditsistransferredtothepurchasingpartyasautomotiverevenueintheconsolidatedstatementsofoperations.Deferredrevenuerelatedtosalesofautomotiveregulatorycreditswas$0millionand$140millionasofJune30,2020andDecember31,2019,respectively.RevenuerecognizedfromthedeferredrevenuebalanceasofDecember31,2019was$140millionforthesixmonthsendedJune30,2020.

AutomotiveLeasingRevenueAutomotiveleasingrevenueincludesrevenuerecognizedunderleaseaccountingguidanceforourdirectleasingprogramsaswellasthetwo

programswithresalevalueguaranteesdescribedbelow.

VehicleSalestoLeasingPartnerswithaResaleValueGuaranteeandaBuybackOptionThemaximumamountwecouldberequiredtopayunderourcollateralizedleaseborrowingprogram,shouldwedecidetorepurchaseall

vehicles,was$98millionand$214millionasofJune30,2020andDecember31,2019,respectively,including$61millionwithina12-monthperiodfromJune30,2020.AsofJune30,2020andDecember31,2019,wehad$106millionand$238million,respectively,ofcollateralizedleaseborrowingsrecordedinaccruedliabilitiesandotherandotherlong-termliabilities,and$16millionand$29million,respectively,recordedindeferredrevenueliability.ForthethreeandsixmonthsendedJune30,2020,werecognized$19millionand$52million,respectively,ofleasingrevenuerelatedtothisprogram,and$50millionand$103million,respectively,forthesameperiodsin2019.Thenetcarryingamountofoperatingleasevehiclesunderthisprogramwas$88millionand$190millionasofJune30,2020andDecember31,2019,respectively.

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VehicleSalestoCustomerswithaResaleValueGuaranteewhereExerciseisProbableAsofJune30,2020,wehadanimmaterialamountofresalevalueguaranteeswhereexerciseisprobablerecordedinaccruedliabilitiesand

other.AsofDecember31,2019,wehad$115millionofresalevalueguaranteeswhereexerciseisprobablerecordedinaccruedliabilitiesandother.ForthethreeandsixmonthsendedJune30,2020,werecognized$66millionand$101million,respectively,ofleasingrevenuerelatedtothisprogram,and$37millionand$85million,respectively,forthesameperiodsin2019.ThenetcarryingamountofoperatingleasevehiclesunderthisprogramwasimmaterialasofJune30,2020and$83millionasofDecember31,2019.Thisportfoliowillwinddowncompletelyinthethirdquarterof2020.

EnergyGenerationandStorageSalesAsofJune30,2020andDecember31,2019,deferredrevenuerelatedtonon-refundablecustomerprepayments,remotemonitoringservice,and

operationsandmaintenanceserviceamountedto$172millionand$156million,respectively.RevenuerecognizedfromthedeferredrevenuebalanceasofDecember31,2019and2018was$28millionand$22millionforthesixmonthsendedJune30,2020and2019,respectively.AsofJune30,2020,totaltransactionpriceallocatedtoperformanceobligationsthatwereunsatisfiedorpartiallyunsatisfiedforcontractswithanoriginalexpectedlengthofmorethanoneyearwas$105million.Ofthisamount,weexpecttorecognize$5millioninthenext12monthsandtheremainingoveraperiodofupto28years.IncomeTaxes

Therearetransactionsthatoccurduringtheordinarycourseofbusinessforwhichtheultimatetaxdeterminationisuncertain.AsofJune30,2020andDecember31,2019,theaggregatebalancesofourgrossunrecognizedtaxbenefitswere$276millionand$273million,respectively,ofwhich$250millionand$247million,respectively,wouldnotgiverisetochangesinoureffectivetaxratesincethesetaxbenefitswouldincreaseadeferredtaxassetthatiscurrentlyfullyoffsetbyavaluationallowance.

NetIncome(Loss)perShareofCommonStockAttributabletoCommonStockholdersBasicnetincome(loss)pershareofcommonstockattributabletocommonstockholdersiscalculatedbydividingnetincome(loss)attributable

tocommonstockholdersbytheweighted-averagesharesofcommonstockoutstandingfortheperiod.DuringthesixmonthsendedJune30,2019,weincreasednetlossattributabletocommonstockholdersby$8milliontoarriveatthenumeratorusedtocalculatenetlosspershare.Thisadjustmentrepresentsthedifferencebetweenthecashwepaidtothefinancingfundinvestorfortheirnoncontrollinginterestinoneofoursubsidiariesandthecarryingamountofthenoncontrollinginterestonourconsolidatedbalancesheet,inaccordancewithASC260,EarningsperShare.Potentiallydilutiveshares,whicharebasedontheweighted-averagesharesofcommonstockunderlyingoutstandingstock-basedawards,warrantsandconvertibleseniornotesusingthetreasurystockmethodortheif-convertedmethod,asapplicable,areincludedwhencalculatingdilutednetincome(loss)pershareofcommonstockattributabletocommonstockholderswhentheireffectisdilutive.Sinceweintendtosettleorhavesettledincashtheprincipaloutstandingunderour0.25%ConvertibleSeniorNotesduein2019,1.25%ConvertibleSeniorNotesduein2021,2.375%ConvertibleSeniorNotesduein2022,2.00%ConvertibleSeniorNotesduein2024andoursubsidiary’s5.50%ConvertibleSeniorNotesduein2022,weusethetreasurystockmethodappliedusingouraveragesharepriceduringtheperiodwhencalculatingtheirpotentialdilutiveeffect,ifany.Furthermore,inconnectionwiththeofferingsofournotes,weenteredintoconvertiblenotehedgesandwarrants(seeNote10,Debt).However,ourconvertiblenotehedgesarenotincludedwhencalculatingpotentiallydilutivesharessincetheireffectisalwaysanti-dilutive.Warrantswhichhaveastrikepriceaboveouraveragesharepriceduringtheperiodwereoutofthemoneyandwerenotincludedinthetablesbelow.

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Thefollowingtablepresentsthecomputationofbasicanddilutednetincome(loss)pershareofcommonstockattributabletocommon

stockholders(inmillions,exceptpersharedata):

ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Netincome(loss)pershareofcommonstockattributabletocommonstockholders,basic Netincome(loss)attributabletocommonstockholders $ 104 $ (408) $ 120 $ (1,110)Less:Buy-outofnoncontrollinginterest — — — 8Netincome(loss)usedincomputingnetincome(loss)pershareofcommonstock,basic 104 (408) 120 (1,118)Weightedaveragesharesusedincomputingnetincome(loss)pershareofcommonstock,basic 186 177 184 175Netincome(loss)pershareofcommonstockattributabletocommonstockholders,basic $ 0.56 $ (2.31) $ 0.65 $ (6.40) Netincome(loss)pershareofcommonstockattributabletocommonstockholders,diluted Netincome(loss)attributabletocommonstockholders $ 104 $ (408) $ 120 $ (1,110)Less:Buy-outofnoncontrollinginterest — — 8Netincome(loss)usedincomputingnetincome(loss)pershareofcommonstock,diluted 104 (408) 120 (1,118)Weightedaveragesharesusedincomputingnetincome(loss)pershareofcommonstock,basic 186 177 184 175Add: Stock-basedawards 10 — 10 —Convertibleseniornotes 8 — 7 —Warrants 3 — 2 —Weightedaveragesharesusedincomputingnetincome(loss)pershareofcommonstock,diluted 207 177 203 175Netincome(loss)pershareofcommonstockattributabletocommonstockholders,diluted $ 0.50 $ (2.31) $ 0.59 $ (6.40)

Thefollowingtablepresentsthepotentiallydilutivesharesthatwereexcludedfromthecomputationofdilutednetincome(loss)pershareof

commonstockattributabletocommonstockholders,becausetheireffectwasanti-dilutive(inmillions):

ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Stock-basedawards 0 13 0 12Convertibleseniornotes 0 1 0 1

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AccountsReceivableandAllowanceforDoubtfulAccounts

Accountsreceivableprimarilyincludeamountsrelatedtoreceivablesfromfinancialinstitutionsandleasingcompaniesofferingvariousfinancingproductstoourcustomers,salesofenergygenerationandstorageproducts,salesofregulatorycreditstootherautomotivemanufacturers,governmentrebatesandmaintenanceservicesonvehiclesownedbyleasingcompanies.Weprovideanallowanceagainstaccountsreceivablefortheamountweexpecttobeuncollectible.Wewrite-offaccountsreceivableagainsttheallowancewhentheyaredeemeduncollectible.

Dependingonthedayoftheweekonwhichtheendofafiscalquarterfalls,ouraccountsreceivablebalancemayfluctuateaswearewaitingforcertaincustomerpaymentstoclearthroughourbankinginstitutionsandreceiptsofpaymentsfromourfinancingpartners,whichcantakeuptoapproximatelytwoweeksbasedonthecontractualpaymenttermswithsuchpartners.Ouraccountsreceivablebalancesassociatedwithoursalesofregulatorycredits,whicharetypicallytransferredtoothermanufacturersduringthelastfewdaysofthequarter,isdependentoncontractualpaymentterms.Additionally,governmentrebates,dependinguponthespecificjurisdictionsissuingthem,cantakemorethansixmonthstobecollected.Thesevariousfactorsmayhaveasignificantimpactonouraccountsreceivablebalancefromperiodtoperiod.RestrictedCash

Wemaintaincertaincashbalancesrestrictedastowithdrawaloruse.Ourrestrictedcashiscomprisedprimarilyofcashascollateralforoursalestoleasepartnerswitharesalevalueguarantee,lettersofcredit,realestateleases,insurancepolicies,creditcardborrowingfacilitiesandcertainoperatingleases.Inaddition,restrictedcashincludescashreceivedfromcertainfundinvestorsthathavenotbeenreleasedforusebyusandcashheldtoservicecertainpaymentsundervarioussecureddebtfacilities.Thefairvalueofourrestrictedcashinvestedincommercialpaperequalsthecarryingvalueusingquotedpricesinactivemarkets(LevelI).Werecordrestrictedcashasotherassetsintheconsolidatedbalancesheetsanddeterminecurrentornon-currentclassificationbasedontheexpecteddurationoftherestriction.

Ourtotalcashandcashequivalentsandrestrictedcash,aspresentedintheconsolidatedstatementsofcashflows,wasasfollows(inmillions):

June30, December31, June30, December31, 2020 2019 2019 2018 Cashandcashequivalents $ 8,615 $ 6,268 $ 4,955 $ 3,686Restrictedcashincludedinprepaidexpensesandothercurrentassets

203 246 128 193

Restrictedcashincludedinothernon-currentassets 288 269 366 398Totalaspresentedintheconsolidatedstatementsofcashflows $ 9,106 $ 6,783 $ 5,449 $ 4,277

MyPowerCustomerNotesReceivable

WehavecustomernotesreceivableunderthelegacyMyPowerloanprogram.MyPowerwasofferedbyoneofoursubsidiariestoprovideresidentialcustomerswiththeoptiontofinancethepurchaseofasolarenergysystemthrougha30-yearloan.Theoutstandingbalances,netofanyallowanceforcreditlosses,arepresentedontheconsolidatedbalancesheetasacomponentofprepaidexpensesandothercurrentassetsforthecurrentportionandasothernon-currentassetsforthelong-termportion.WeadoptedASUNo.2016-13,MeasurementofCreditLossesonFinancialInstruments(“ASC326”)onJanuary1,2020onamodifiedretrospectivebasis.UnderASC326,expectedcreditlossforcustomernotesreceivablearemeasuredonacollectivebasisandaredeterminedasthedifferencebetweentheamortizedcostbasisandthepresentvalueofcashflowsexpectedtobecollected.Indeterminingexpectedcreditlosses,weconsiderourhistoricallevelofcreditlosses,currenteconomictrends,andreasonableandsupportableforecaststhataffectthecollectabilityofthefuturecashflows.Wewrite-offcustomernotesreceivablewhentheyaredeemeduncollectibleandtheamountofpotentiallyuncollectibleamountshasbeeninsignificant.Usingamodifiedretrospectiveapproachfortheimpactuponadoption,werecordedanincreasetotheallowanceforcreditlossesof$37milliononJanuary1,2020,withanoffsettoaccumulateddeficit.AsofJune30,2020andDecember31,2019,thetotaloutstandingbalanceofMyPowercustomernotesreceivable,netofallowance

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forcreditlosses,was$351millionand$402million,respectively,ofwhich$10millionand$9millionwasdueinthenext12monthsasofJune30,2020andDecember31,2019,respectively.AsofJune30,2020,theallowanceforcreditlosseswas$45million.Inaddition,therewerenomaterialnon-accrualorpastduecustomernotesreceivableasofJune30,2020.

ConcentrationofRiskCreditRiskFinancialinstrumentsthatpotentiallysubjectustoaconcentrationofcreditriskconsistofcashandcashequivalents,restrictedcash,accounts

receivable,convertiblenotehedges,andinterestrateswaps.OurcashbalancesareprimarilyinvestedinmoneymarketfundsorondepositathighcreditqualityfinancialinstitutionsintheU.S.Thesedepositsaretypicallyinexcessofinsuredlimits.AsofJune30,2020,oneentityrepresented10%ormoreofourtotalaccountsreceivablebalance,whichwasrelatedtosalesofregulatorycredits.AsofDecember31,2019,noentityrepresented10%ofourtotalaccountsreceivablebalance.Theriskofconcentrationforourinterestrateswapsismitigatedbytransactingwithseveralhighly-ratedmultinationalbanks.

SupplyRiskWearedependentonoursuppliers,themajorityofwhicharesinglesourcesuppliers,andtheinabilityofthesesupplierstodelivernecessary

componentsofourproductsinatimelymanneratprices,qualitylevelsandvolumesacceptabletous,orourinabilitytoefficientlymanagethesecomponentsfromthesesuppliers,couldhaveamaterialadverseeffectonourbusiness,prospects,financialconditionandoperatingresults.

Althoughwehaveresumedoperationsatallofourmanufacturingfacilities,continuetoincreaseouroutputandaddadditionalcapacity,andareworkingwitheachofoursuppliersandgovernmentagenciesonmeeting,rampingandsustainingourproduction,ourabilitytosustainthistrajectorydepends,amongotherthings,onthereadinessandsolvencyofoursuppliersandvendorsthroughanymacroeconomicfactorsresultingfromtheCOVID-19pandemic.

OperatingLeaseVehiclesThegrosscostofoperatingleasevehiclesasofJune30,2020andDecember31,2019was$2.93billionand$2.85billion,respectively.

Operatingleasevehiclesontheconsolidatedbalancesheetsarepresentednetofaccumulateddepreciationof$408millionand$406million,asofJune30,2020andDecember31,2019,respectively.

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WarrantiesWeprovideamanufacturer’swarrantyonallnewandusedvehiclesandproductionpowertraincomponentsandsystemswesell.Inaddition,we

alsoprovideawarrantyontheinstallationandcomponentsoftheenergygenerationandstoragesystemswesellforperiodstypicallybetween10to25years.Weaccrueawarrantyreservefortheproductssoldbyus,whichincludesourbestestimateoftheprojectedcoststorepairorreplaceitemsunderwarrantiesandrecallswhenidentified.Theseestimatesarebasedonactualclaimsincurredtodateandanestimateofthenature,frequencyandcostsoffutureclaims.Theseestimatesareinherentlyuncertaingivenourrelativelyshorthistoryofsales,andchangestoourhistoricalorprojectedwarrantyexperiencemaycausematerialchangestothewarrantyreserveinthefuture.ThewarrantyreservedoesnotincludeprojectedwarrantycostsassociatedwithourvehiclessubjecttoleaseaccountingandoursolarenergysystemsunderleasecontractsorPowerPurchaseAgreements(“PPAs”),asthecoststorepairthesewarrantyclaimsareexpensedasincurred.Theportionofthewarrantyreserveexpectedtobeincurredwithinthenext12monthsisincludedwithinaccruedliabilitiesandother,whiletheremainingbalanceisincludedwithinotherlong-termliabilitiesontheconsolidatedbalancesheets.Warrantyexpenseisrecordedasacomponentofcostofrevenuesintheconsolidatedstatementsofoperations.Duetothemagnitudeofourautomotivebusiness,accruedwarrantybalancewasprimarilyrelatedtoourautomotivesegment.Accruedwarrantyactivityconsistedofthefollowing(inmillions): ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Accruedwarranty—beginningofperiod $ 1,130 $ 844 $ 1,089 $ 748Warrantycostsincurred (62) (61) (143) (115)Netchangesinliabilityforpre-existingwarranties,includingexpirationsandforeignexchangeimpact 9 5 12 42Provisionforwarranty 120 153 239 266Accruedwarranty—endofperiod $ 1,197 $ 941 $ 1,197 $ 941RecentAccountingPronouncements

RecentlyissuedaccountingpronouncementsnotyetadoptedInDecember2019,theFASBissuedASUNo.2019-12,SimplifyingtheAccountingforIncomeTaxes,aspartofitsinitiativetoreduce

complexityinaccountingstandards.TheamendmentsintheASUincluderemovingexceptionstoincrementalintraperiodtaxallocationoflossesandgainsfromdifferentfinancialstatementcomponents,exceptionstothemethodofrecognizingincometaxesoninterimperiodlosses,andexceptionstodeferredtaxliabilityrecognitionrelatedtoforeignsubsidiaryinvestments.Inaddition,theASUrequiresthatentitiesrecognizefranchisetaxbasedonanincrementalmethodandrequiresanentitytoevaluatetheaccountingforstep-upsinthetaxbasisofgoodwillasinsideoroutsideofabusinesscombination.TheamendmentsintheASUareeffectiveforfiscalyearsbeginningafterDecember15,2020,includinginterimperiodstherein.Earlyadoptionofthestandardispermitted,includingadoptionininterimorannualperiodsforwhichfinancialstatementshavenotyetbeenissued.WehavenotearlyadoptedthisASUasofJune30,2020.TheASUiscurrentlynotexpectedtohaveamaterialimpactonourconsolidatedfinancialstatements.

InMarch2020,theFASBissuedASUNo.2020-04,FacilitationoftheEffectsofReferenceRateReformonFinancialReporting(Topic848).TheASUprovidesoptionalexpedientsandexceptionsforapplyingGAAPtotransactionsaffectedbyreferencerate(e.g.,LIBOR)reformifcertaincriteriaaremet,foralimitedperiodoftimetoeasethepotentialburdeninaccountingfor(orrecognizingtheeffectsof)referenceratereformonfinancialreporting.TheASUiseffectiveasofMarch12,2020throughDecember31,2022.Wewillevaluatetransactionsorcontractmodificationsoccurringasaresultofreferenceratereformanddeterminewhethertoapplytheoptionalguidanceonanongoingbasis.TheASUiscurrentlynotexpectedtohaveamaterialimpactonourconsolidatedfinancialstatements.

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RecentlyadoptedaccountingpronouncementsInJune2016,theFASBissuedASUNo.2016-13,MeasurementofCreditLossesonFinancialInstruments,torequirefinancialassetscarriedat

amortizedcosttobepresentedatthenetamountexpectedtobecollectedbasedonhistoricalexperience,currentconditionsandforecasts.Subsequently,theFASBissuedASUNo.2018-19,CodificationImprovementstoTopic326,toclarifythatreceivablesarisingfromoperatingleasesarewithinthescopeofleaseaccountingstandards.Further,theFASBissuedASUNo.2019-04,ASUNo.2019-05,ASU2019-10,ASU2019-11,ASU2020-02andASU2020-03toprovideadditionalguidanceonthecreditlossesstandard.TheASUsareeffectiveforinterimandannualperiodsbeginningafterDecember15,2019.AdoptionoftheASUsisonamodifiedretrospectivebasis.WeadoptedtheASUsonJanuary1,2020.TheASUsdidnothaveamaterialimpactonourconsolidatedfinancialstatements.ThisASUappliestoallfinancialassetsincludingloans,tradereceivablesandanyotherfinancialassetsnotexcludedfromthescopethathavethecontractualrighttoreceivecash.TheadoptionofthisASUdidnothaveanyimpactexceptonMyPowercustomernotesreceivable.RefertoMyPowerCustomerNotesReceivableaboveforfurtherdetails.

InJanuary2017,theFASBissuedASUNo.2017-04,SimplifyingtheTestforGoodwillImpairment,tosimplifythetestforgoodwillimpairmentbyremovingStep2.Anentitywill,therefore,performthegoodwillimpairmenttestbycomparingthefairvalueofareportingunitwithitscarryingamountandrecognizinganimpairmentchargefortheamountbywhichthecarryingamountexceedsthefairvalue,nottoexceedthetotalamountofgoodwillallocatedtothereportingunit.Anentitystillhastheoptiontoperformaqualitativeassessmenttodetermineifthequantitativeimpairmenttestisnecessary.TheASUiseffectiveforinterimandannualperiodsbeginningafterDecember15,2019.AdoptionoftheASUisprospective.WeadoptedtheASUprospectivelyonJanuary1,2020.TheASUdidnothaveamaterialimpactonourconsolidatedfinancialstatements.

InAugust2018,theFASBissuedASUNo.2018-15,Customer’sAccountingforImplementationCostsIncurredinaCloudComputingArrangementthatIsaServiceContract.TheASUalignstherequirementsforcapitalizingimplementationcostsincurredinahostingarrangementthatisaservicecontractwiththerequirementsforcapitalizingimplementationcostsincurredtodeveloporobtaininternal-usesoftware(andhostingarrangementsthatincludeaninternal-usesoftwarelicense).TheASUiseffectiveforinterimandannualperiodsbeginningafterDecember15,2019.AdoptionoftheASUiseitherretrospectiveorprospective.WeadoptedtheASUprospectivelyonJanuary1,2020.TheASUdidnothaveamaterialimpactonourconsolidatedfinancialstatements.

Note3–IntangibleAssetsInformationregardingourintangibleassetsincludingassetsrecognizedfromouracquisitionswasasfollows(inmillions):

June30,2020 December31,2019

GrossCarrying

Amount AccumulatedAmortization Other

NetCarryingAmount

GrossCarryingAmount

AccumulatedAmortization Other

NetCarryingAmount

Finite-livedintangibleassets: Developedtechnology $ 291 $ (92) $ — $ 199 $ 291 $ (72) $ 1 $ 220Tradenames 3 (1) — 2 3 (1) 1 3Favorablecontractsandleases,net 113 (28) — 85 113 (24) — 89Other 38 (17) — 21 38 (16) — 22Totalfinite-livedintangibleassets 445 (138) — 307 445 (113) 2 334

Indefinite-livedintangibleassets: GigafactoryNevadawaterrights 5 — — 5 5 — — 5Totalintangibleassets $ 450 $ (138) $ — $ 312 $ 450 $ (113) $ 2 $ 339

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Totalfutureamortizationexpenseforfinite-livedintangibleassetswasestimatedasfollows(inmillions):

SixmonthsendingDecember31,2020 $ 252021 492022 482023 422024 27Thereafter 116Total $ 307

Note4–FairValueofFinancialInstruments

ASC820,FairValueMeasurements,statesthatfairvalueisanexitprice,representingtheamountthatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipants.Assuch,fairvalueisamarket-basedmeasurementthatshouldbedeterminedbasedonassumptionsthatmarketparticipantswoulduseinpricinganassetoraliability.Thethree-tieredfairvaluehierarchy,whichprioritizeswhichinputsshouldbeusedinmeasuringfairvalue,iscomprisedof:(LevelI)observableinputssuchasquotedpricesinactivemarkets;(LevelII)inputsotherthanquotedpricesinactivemarketsthatareobservableeitherdirectlyorindirectlyand(LevelIII)unobservableinputsforwhichthereislittleornomarketdata.Thefairvaluehierarchyrequirestheuseofobservablemarketdatawhenavailableindeterminingfairvalue.Ourassetsandliabilitiesthatweremeasuredatfairvalueonarecurringbasiswereasfollows(inmillions):

June30,2020 December31,2019 FairValue LevelI LevelII LevelIII FairValue LevelI LevelII LevelIII Moneymarketfunds(cashandcashequivalents) $ 4,071 $ 4,071 $ — $ — $ 1,632 $ 1,632 $ — $ —Interestrateswapassets — — — — 1 — 1 —Interestrateswapliabilities (69) — (69) — (27) — (27) —Total $ 4,002 $ 4,071 $ (69) $ — $ 1,606 $ 1,632 $ (26) $ —

AllofourmoneymarketfundswereclassifiedwithinLevelIofthefairvaluehierarchybecausetheywerevaluedusingquotedpricesinactivemarkets.OurinterestrateswapswereclassifiedwithinLevelIIofthefairvaluehierarchybecausetheywerevaluedusingalternativepricingsourcesormodelsthatutilizedmarketobservableinputs,includingcurrentandforwardinterestrates.

InterestRateSwapsWeenterintofixed-for-floatinginterestrateswapagreementstoswapvariableinterestpaymentsoncertaindebtforfixedinterestpayments,as

requiredbycertainofourlenders.Wedonotdesignateourinterestrateswapsashedginginstruments.Accordingly,ourinterestrateswapsarerecordedatfairvalueontheconsolidatedbalancesheetswithinothernon-currentassetsorotherlong-termliabilities,withanychangesintheirfairvaluesrecognizedasotherexpense,net,intheconsolidatedstatementsofoperationsandwithanycashflowsrecognizedasoperatingactivitiesintheconsolidatedstatementsofcashflows.Ourinterestrateswapsoutstandingwereasfollows(inmillions):

June30,2020 December31,2019

AggregateNotional

Amount GrossAssetatFairValue

GrossLiabilityatFairValue

AggregateNotionalAmount

GrossAssetatFairValue

GrossLiabilityatFairValue

Interestrateswaps $ 839 $ — $ 69 $ 821 $ 1 $ 27

Ourinterestrateswapsactivitywasasfollows(inmillions):

ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Grosslosses $ 3 $ 19 $ 42 $ 38

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DisclosureofFairValues

Ourfinancialinstrumentsthatarenotre-measuredatfairvalueincludeaccountsreceivable,MyPowercustomernotesreceivable,accountspayable,accruedliabilities,customerdepositsanddebt.Thecarryingvaluesofthesefinancialinstrumentsotherthanour1.25%ConvertibleSeniorNotesduein2021,2.375%ConvertibleSeniorNotesduein2022,2.00%ConvertibleSeniorNotesduein2024,oursubsidiary’sZero-CouponConvertibleSeniorNotesduein2020andoursubsidiary’s5.50%ConvertibleSeniorNotesduein2022(collectivelyreferredtoas“ConvertibleSeniorNotes”below),5.30%SeniorNotesduein2025,solarasset-backednotesandsolarloan-backednotesapproximatetheirfairvalues.

WeestimatethefairvalueoftheConvertibleSeniorNotesandthe5.30%SeniorNotesduein2025usingcommonlyacceptedvaluationmethodologiesandmarket-basedriskmeasurementsthatareindirectlyobservable,suchascreditrisk(LevelII).Inaddition,weestimatethefairvaluesofoursolarasset-backednotesandsolarloan-backednotesbasedonratescurrentlyofferedforinstrumentswithsimilarmaturitiesandterms(LevelIII).Thefollowingtablepresentstheestimatedfairvaluesandthecarryingvalues(inmillions):

June30,2020 December31,2019 CarryingValue FairValue CarryingValue FairValue

ConvertibleSeniorNotes $ 3,758 $ 14,098 $ 3,729 $ 6,1105.30%SeniorNotesduein2025 $ 1,784 $ 1,814 $ 1,782 $ 1,748Solarasset-backednotes $ 1,135 $ 1,122 $ 1,155 $ 1,211Solarloan-backednotes $ 161 $ 166 $ 175 $ 189

Note5–Inventory

Ourinventoryconsistedofthefollowing(inmillions):

June30, December31, 2020 2019 Rawmaterials $ 1,842 $ 1,428Workinprocess 420 362Finishedgoods(1) 1,379 1,356Serviceparts 377 406Total $ 4,018 $ 3,552

(1) Finishedgoodsinventoryincludesvehiclesintransittofulfillcustomerorders,newvehiclesavailableforsale,usedvehicles,energystorage

productsandSolarRoofproductsavailableforsale.

Forsolarenergysystems,wecommencetransferringcomponentpartsfrominventorytoconstructioninprogress,acomponentofsolarenergysystems,oncealeaseorPPAcontractwithacustomerhasbeenexecutedandinstallationhasbeeninitiated.Additionalcostsincurredontheleasedsolarenergysystems,includinglaborandoverhead,arerecordedwithinsolarenergysystemsunderconstruction.

Wewrite-downinventoryforanyexcessorobsoleteinventoriesorwhenwebelievethatthenetrealizablevalueofinventoriesislessthanthecarryingvalue.DuringthethreeandsixmonthsendedJune30,2020,werecordedwrite-downsof$37millionand$82million,respectively,incostofrevenues.DuringthethreeandsixmonthsendedJune30,2019,werecordedwrite-downsof$25millionand$89million,respectively,incostofrevenues.

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Note6–SolarEnergySystems,Net

Solarenergysystems,net,consistedofthefollowing(inmillions):

June30, December31, 2020 2019 Solarenergysystemsinservice $ 6,722 $ 6,682Initialdirectcostsrelatedtocustomersolarenergysystemleaseacquisitioncosts 103 102 6,825 6,784Less:accumulateddepreciationandamortization (839) (723) 5,986 6,061Solarenergysystemsunderconstruction 28 18Solarenergysystemspendinginterconnection 55 59Solarenergysystems,net(1) $ 6,069 $ 6,138

(1) AsofJune30,2020andDecember31,2019,solarenergysystems,net,included$36millionofgrossfinanceleasedassetswithaccumulated

depreciationandamortizationof$6million.

Note7–Property,PlantandEquipment,NetOurproperty,plantandequipment,net,consistedofthefollowing(inmillions):

June30, December31,

2020 2019 Machinery,equipment,vehiclesandofficefurniture $ 7,687 $ 7,167Tooling 1,711 1,493Leaseholdimprovements 1,157 1,087Landandbuildings 3,172 3,024Computerequipment,hardwareandsoftware 700 595Constructioninprogress 1,012 764 15,439 14,130Less:Accumulateddepreciation (4,430) (3,734)Total $ 11,009 $ 10,396

Constructioninprogressisprimarilycomprisedofequipmentandtoolingrelatedtothemanufacturingofourproducts,GigafactoryShanghai

expansionandGigafactoryBerlinconstruction.Completedassetsaretransferredtotheirrespectiveassetclasses,anddepreciationbeginswhenanassetisreadyforitsintendeduse.Interestonoutstandingdebtiscapitalizedduringperiodsofsignificantcapitalassetconstructionandamortizedovertheusefullivesoftherelatedassets.DuringthethreeandsixmonthsendedJune30,2020,wecapitalized$10millionand$20million,respectively,ofinterest.DuringthethreeandsixmonthsendedJune30,2019,wecapitalized$7millionand$15million,respectively,ofinterest.

DepreciationexpenseduringthethreeandsixmonthsendedJune30,2020was$356millionand$727million,respectively.DepreciationexpenseduringthethreeandsixmonthsendedJune30,2019was$335millionand$634million,respectively.GrosspropertyplantandequipmentunderfinanceleasesasofJune30,2020andDecember31,2019was$2.12billionand$2.08billion,respectively,withaccumulateddepreciationof$617millionand$483million,respectively.

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PanasonichaspartneredwithusonGigafactoryNevadawithinvestmentsintheproductionequipmentthatitusestomanufactureandsupplyuswithbatterycells.UnderourarrangementwithPanasonic,weplantopurchasethefulloutputfromtheirproductionequipmentatnegotiatedprices.AsthetermsofthearrangementconveyafinanceleaseunderASC842,Leases,weaccountfortheirproductionequipmentasleasedassetswhenproductioncommences.Weaccountforeachleaseandanynon-leasecomponentsassociatedwiththatleaseasasingleleasecomponentforallassetclasses,exceptproductionequipmentclassesembeddedinsupplyagreements.Thisresultsinusrecordingthecostoftheirproductionequipmentwithinproperty,plantandequipment,net,ontheconsolidatedbalancesheetswithacorrespondingliabilityrecordedtodebtandfinanceleases.DepreciationonPanasonicproductionequipmentiscomputedusingtheunits-of-productionmethodwherebycapitalizedcostsareamortizedoverthetotalestimatedproductivelifeoftherespectiveassets.AsofJune30,2020andDecember31,2019,wehadcumulativelycapitalizedcostsof$1.75billionand$1.73billion,respectively,ontheconsolidatedbalancesheetsinrelationtotheproductionequipmentunderourPanasonicarrangement.

InJuly2020,weenteredintoaPurchaseandSaleAgreementtopurchaseapropertylocatednearAustin,Texas.

Note8–AccruedLiabilitiesandOther

AsofJune30,2020andDecember31,2019,accruedliabilitiesandothercurrentliabilitiesconsistedofthefollowing(inmillions):

June30, December31, 2020 2019 Accruedpurchases(1) $ 782 $ 638Payrollandrelatedcosts 495 466Taxespayable 484 611Accruedinterest 91 86Financingobligation,currentportion 47 57Accruedwarrantyreserve,currentportion 384 344Salesreturnreserve,currentportion 345 272Resalevalueguarantees,currentportion 70 317Operatingleaseliabilities,currentportion 233 228Othercurrentliabilities 179 203Total $ 3,110 $ 3,222

(1) Accruedpurchasesprimarilyreflectsreceiptsofgoodsandservicesthatwehadnotbeeninvoicedyet.Asweareinvoicedforthesegoodsand

services,thisbalancewillreduceandaccountspayablewillincrease.

Note9–OtherLong-TermLiabilitiesAsofJune30,2020andDecember31,2019,otherlong-termliabilitiesconsistedofthefollowing(inmillions):

June30, December31, 2020 2019 Accruedwarrantyreserve $ 812 $ 745Financingobligation 42 37Salesreturnreserve 529 545Resalevalueguarantees 36 36Operatingleaseliabilities 1,016 956Othernon-currentliabilities 435 372Totalotherlong-termliabilities $ 2,870 $ 2,691

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Note10–Debt

ThefollowingisasummaryofourdebtandfinanceleasesasofJune30,2020(inmillions):

Unpaid Unused

NetCarryingValue Principal Committed Contractual Contractual Current Long-Term Balance Amount(1) InterestRates MaturityDate

Recoursedebt: 1.25%ConvertibleSeniorNotesduein2021("2021Notes") $ 1,336 $ — $ 1,380 $ —

1.25%

March2021

2.375%ConvertibleSeniorNotesduein2022("2022Notes") — 918 977 —

2.375%

March2022

2.00%ConvertibleSeniorNotesduein2024("2024Notes") — 1,425 1,839 —

2.00%

May2024

5.30%SeniorNotesduein2025("2025Notes") — 1,784 1,800 —

5.30%

August2025

CreditAgreement — 1,550 1,550 575 1.2%-3.3% July2023Zero-CouponConvertibleSeniorNotesduein2020 35 — 36 —

0.0%

December2020

SolarBondsandotherLoans 5 53 60 — 3.6%-5.8% July2020-January2031Totalrecoursedebt 1,376 5,730 7,642 575 Non-recoursedebt: AutomotiveAsset-backedNotes 650 667 1,323 — 2.0%-7.9% December2020-May2023SolarAsset-backedNotes 37 1,098 1,162 — 3.1%-7.7% September2024-February2048ChinaLoanAgreements 945 517 1,462 1,388 3.5%-4.0% September2020-December2024CashEquityDebt 13 423 448 — 5.3%-5.8% July2033-January2035SolarLoan-backedNotes 12 149 167 — 4.8%-7.5% September2048-September2049WarehouseAgreements 92 589 681 419 1.6%-2.2% September2021SolarTermLoans 158 — 158 — 4.5% January2021CanadaCreditFacility 18 7 25 — 4.2%-5.8% November2022SolarRenewableEnergyCreditandotherLoans 16 67 83 —

3.5%-6.6%

July2020-June2022

Totalnon-recoursedebt 1,941 3,517 5,509 1,807 Totaldebt 3,317 9,247 $ 13,151 $ 2,382 Financeleases 362 1,169 Totaldebtandfinanceleases $ 3,679 $ 10,416

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ThefollowingisasummaryofourdebtandfinanceleasesasofDecember31,2019(inmillions):

Unpaid Unused

NetCarryingValue Principal Committed Contractual Contractual Current Long-Term Balance Amount(1) InterestRates MaturityDate

Recoursedebt: 2021Notes $ — $ 1,304 $ 1,380 $ — 1.25% March20212022Notes — 902 978 — 2.375% March20222024Notes — 1,383 1,840 — 2.00% May20242025Notes — 1,782 1,800 — 5.30% August2025CreditAgreement 141 1,586 1,727 499 2.7%-4.8% June2020-July2023Zero-CouponConvertibleSeniorNotesduein2020 97 — 103 —

0.0%

December2020

SolarBondsandotherLoans 15 53 70 — 3.6%-5.8% March2020-January2031Totalrecoursedebt 253 7,010 7,898 499 Non-recoursedebt: AutomotiveAsset-backedNotes 573 997 1,577 — 2.0%-7.9% February2020-May2023SolarAsset-backedNotes 32 1,123 1,183 — 4.0%-7.7% September2024-February2048ChinaLoanAgreements 444 297 741 1,542 3.7%-4.0% September2020-December2024CashEquityDebt 10 430 454 — 5.3%-5.8% July2033-January2035SolarLoan-backedNotes 11 164 182 — 4.8%-7.5% September2048-September2049WarehouseAgreements 21 146 167 933 3.1%-3.6% September2021SolarTermLoans 8 152 161 — 5.4% January2021CanadaCreditFacility 24 16 40 — 4.2%-5.9% November2022SolarRenewableEnergyCreditandotherLoans 23 67 89 6

4.5%-7.4%

March2020-June2022

Totalnon-recoursedebt 1,146 3,392 4,594 2,481 Totaldebt 1,399 10,402 $ 12,492 $ 2,980 Financeleases 386 1,232 Totaldebtandfinanceleases $ 1,785 $ 11,634 (1) Therearenorestrictionsondraw-downoruseforgeneralcorporatepurposeswithrespecttoanyavailablecommittedfundsunderour

creditfacilitiesandfinancingfunds,exceptasmaybedescribedinthenotestotheconsolidatedfinancialstatementsincludedinourreportsonForm10-KandForm10-QfiledsubsequenttoDecember31,2019(suchasspecifiedconditionspriortodraw-down,includingpledgingtoourlenderssufficientamountsofqualifiedreceivables,inventories,leasedvehiclesandourinterestsinthoseleases,solarenergysystemsandtheassociatedcustomercontracts,ourinterestsinfinancingfundsorvariousotherassets).

Recoursedebtreferstodebtthatisrecoursetoourgeneralassets.Non-recoursedebtreferstodebtthatisrecoursetoonlyassetsofoursubsidiaries.Thedifferencesbetweentheunpaidprincipalbalancesandthenetcarryingvaluesareduetoconvertibleseniornoteconversionfeatures,debtdiscountsordeferredfinancingcosts.AsofJune30,2020,wewereinmaterialcompliancewithallfinancialdebtcovenants,whichincludeminimumliquidityandexpense-coveragebalancesandratios.

2021Notes,2022Notesand2024NotesDuringthefirstquarterof2020,weclassifiedthecarryingvalueofour2021Notesascurrentliabilitiesasthematuritydateofthe2021Notes

isMarch2021.Duringthefirsttwoquartersof2020,theclosingpriceofourcommonstockexceeded130%oftheapplicableconversionpriceofeachofour2021Notes,2022Notesand2024Notesonatleast20ofthelast30consecutivetradingdaysofthequarter;causingthe2021Notes,2022Notesand2024Notestobeconvertiblebytheirholdersduringthesecondandthirdquartersof2020.Asthesettlementofconversionofthe2021Noteswouldbeincashfortheprincipalamountand,ifapplicable,cashand/orsharesofourcommonstockforanyconversionpremiumatourelection,wereclassified$44million,representingthedifferencebetweentheaggregateprincipalofour2021NotesandthecarryingvalueasofJune30,2020,asmezzanineequityfrompermanentequityonourconsolidatedbalancesheetasofJune30,2020.Asthesettlementofconversionofthe2022Notesand2024Noteswouldbeincash,sharesofourcommonstockoracombinationthereofisatourelection,theliabilityisclassifiedasnon-current.Shouldtheclosingpriceconditionsbemetinafuturequarterforanyofthesenotes,suchnoteswillbeconvertibleattheirholders’optionduringtheimmediatelyfollowingquarter.

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CreditAgreementInMarch2020,weupsizedourseniorasset-basedrevolvingcreditagreement(the“CreditAgreement”)by$100million,whichmaturesJuly

2023,to$2.525billion.InJune2020,$197millionofcommitmentundertheCreditAgreementexpiredinaccordancewithitstermsandthetotalcommitmentdecreasedto$2.328billion.

Zero-CouponConvertibleSeniorNotesduein2020Duringthesecondquarterof2020,$67millioninaggregateprincipalamountoftheZero-CouponConvertibleSeniorNotesduein2020were

converted,pursuanttowhichweissued223,320sharesofourcommonstocktotheholdersofsuchnotes.

ChinaLoanAgreementsInMay2020,oneofoursubsidiariesenteredintoanadditionalWorkingCapitalLoanContract(the“2020ChinaWorkingCapitalFacility”)with

alenderinChinaforanunsecuredrevolvingfacilityofuptoRMB4.00billion(ortheequivalentamountdrawninU.S.dollars),tobeusedforexpendituresrelatedtoproductionatourGigafactoryShanghai.Borrowedfundsbearinterestatanannualrateof:(i)forRMB-denominatedloans,themarketquotedinterestratepublishedbyanauthoritydesignatedbythePeople’sBankofChinaminus0.35%,(ii)forU.S.dollar-denominatedloans,thesumofone-yearLIBORplus0.8%.The2020ChinaWorkingCapitalFacilityisnon-recoursetoourassetsandwillmatureinJune2021,thefirstanniversaryofthefirstborrowingundertheloan.

InterestExpenseThefollowingtablepresentstheinterestexpenserelatedtothecontractualinterestcoupon,theamortizationofdebtissuancecostsandthe

amortizationofdebtdiscountsonourconvertibleseniornoteswithcashconversionfeatures,whichincludesthe0.25%ConvertibleSeniorNotesduein2019(maturedinMarch2019),the2021Notes,the2022Notesandthe2024Notes(inmillions):

ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Contractualinterestcoupon $ 19 $ 16 $ 39 $ 26Amortizationofdebtissuancecosts 2 1 4 3Amortizationofdebtdiscounts 44 33 88 61Total $ 65 $ 50 $ 131 $ 90

Note11–EquityIncentivePlansInJune2019,weadoptedthe2019EquityIncentivePlan(the“2019Plan”).The2019Planprovidesforthegrantingofstockoptions,restricted

stock,RSUs,stockappreciationrights,performanceunitsandperformancesharestoouremployees,directorsandconsultants.Stockoptionsgrantedunderthe2019Planmaybeeitherincentivestockoptionsornonstatutorystockoptions.Incentivestockoptionsmayonlybegrantedtoouremployees.Nonstatutorystockoptionsmaybegrantedtoouremployees,directorsandconsultants.Generally,ourstockoptionsandRSUsvestoverfouryearsandourstockoptionsareexercisableoveramaximumperiodof10yearsfromtheirgrantdates.Vestingtypicallyterminateswhentheemploymentorconsultingrelationshipends.

AsofJune30,2020,11millionshareswerereservedandavailableforissuanceunderthe2019Plan.

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2018CEOPerformanceAwardInMarch2018,ourstockholdersapprovedtheBoardofDirectors’grantof20,264,042stockoptionawardstoourCEO(the“2018CEO

PerformanceAward”).The2018CEOPerformanceAwardconsistsof12vestingtrancheswithavestingschedulebasedentirelyontheattainmentofbothoperationalmilestones(performanceconditions)andmarketconditions,assumingcontinuedemploymenteitherastheCEOorasbothExecutiveChairmanandChiefProductOfficerandservicethrougheachvestingdate.Eachofthe12vestingtranchesofthe2018CEOPerformanceAwardwillvestuponcertificationbytheBoardofDirectorsthatboth(i)themarketcapitalizationmilestoneforsuchtranche,whichbeginsat$100.0billionforthefirsttrancheandincreasesbyincrementsof$50.0billionthereafter(basedonbothasixcalendarmonthtrailingaverageanda30calendardaytrailingaverage,countingonlytradingdays),hasbeenmet,and(ii)anyoneofthefollowingeightoperationalmilestonesfocusedontotalrevenueoreightoperationalmilestonesfocusedonAdjustedEBITDAhavebeenmetforthepreviousfourconsecutivefiscalquartersonanannualizedbasis.AdjustedEBITDAisdefinedasnetincome(loss)attributabletocommonstockholdersbeforeinterestexpense,provision(benefit)forincometaxes,depreciationandamortizationandstock-basedcompensation.Uponvestingandexercise,includingthepaymentoftheexercisepriceof$350.02pershare,ourCEOmustholdsharesthatheacquiresforfiveyearspost-exercise,otherthanacashlessexercisewheresharesaresimultaneouslysoldtopayfortheexercisepriceandanyrequiredtaxwithholding.

TheachievementstatusoftheoperationalmilestonesasofJune30,2020wasasfollows:

TotalAnnualizedRevenue AnnualizedAdjustedEBITDAMilestone(inbillions) AchievementStatus

Milestone(inbillions) AchievementStatus

$ 20.0 Achievedandcertified $ 1.5 Achieved$ 35.0 Probable $ 3.0 Achieved$ 55.0 - $ 4.5 Probable$ 75.0 - $ 6.0 -$ 100.0 - $ 8.0 -$ 125.0 - $ 10.0 -$ 150.0 - $ 12.0 -$ 175.0 - $ 14.0 -

Stock-basedcompensationexpenseassociatedwitheachtrancheunderthe2018CEOPerformanceAwardisrecognizedoverthelongerof(i)theexpectedachievementperiodfortheoperationalmilestoneforsuchtrancheand(ii)theexpectedachievementperiodfortherelatedmarketcapitalizationmilestonedeterminedonthegrantdate,beginningatthepointintimewhentherelevantoperationalmilestoneisconsideredprobableofbeingmet.Ifsuchoperationalmilestonebecomesprobableanytimeafterthegrantdate,wewillrecognizeacumulativecatch-upexpensefromthegrantdatetothatpointintime.Iftherelatedmarketcapitalizationmilestoneisachievedearlierthanitsexpectedachievementperiodandtheachievementoftherelatedoperationalmilestone,thenthestock-basedcompensationexpensewillberecognizedovertheexpectedachievementperiodfortheoperationalmilestone,whichmayacceleratetherateatwhichsuchexpenseisrecognized.ThemarketcapitalizationmilestoneperiodandthevaluationofeachtrancheweredeterminedusingaMonteCarlosimulationandisusedasthebasisfordeterminingtheexpectedachievementperiod.Theprobabilityofmeetinganoperationalmilestoneisbasedonasubjectiveassessmentofourfuturefinancialprojections.Uponvestingofatranche,allunamortizedexpenseforthetranchewillberecognizedimmediately.Additionally,stock-basedcompensationunderthe2018CEOPerformanceAwardrepresentsanon-cashexpenseandisrecordedasaselling,general,andadministrativeoperatingexpenseinourconsolidatedstatementofoperations.

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DuringthethreemonthsendedJune30,2020,thefirsttrancheofthe2018CEOPerformanceAwardvesteduponcertificationbytheBoardofDirectorsthatthefirstmarketcapitalizationmilestoneof$100.0billionandtheoperationalmilestoneof$20.0billionannualizedrevenuehadbeenmet.Additionally,onJuly24,2020,thesecondtrancheofthe2018CEOPerformanceAwardvesteduponcertificationbytheBoardofDirectorsthatthesecondmarketcapitalizationmilestoneof$150.0billionandtheoperationalmilestoneof$1.5billionAdjustedEBITDAhadbeenmet.Therefore,theremainingunamortizedexpenseof$95millionassociatedwithsuchtranche,whichwaspreviouslyexpectedtoberecognizedratablyinfuturequartersthroughthefirstquarterof2022asdeterminedonthegrantdate,willbeacceleratedintothethirdquarterof2020.IfthevalueofTesla’sclosingstockpricecontinuesnearorhigherthanthelevelsseeninlateJuly2020,thethirdmarketcapitalizationmilestoneof$200.0billionisexpectedtobemetduringthethirdquarterof2020.Insuchevent,subjecttocertificationbyourBoardofDirectors,thethirdtrancheunderthe2018CEOPerformanceAwardwouldvest.Ifthethirdtrancheofthe2018CEOPerformanceAwardvestsduringthethirdquarterof2020,theremainingunamortizedexpenseof$118millionforthattranche,whichwasexpectedtoberecognizedratablyinfuturequartersthroughthefirstquarterof2023asdeterminedonthegrantdate,wouldbeacceleratedintothethirdquarterof2020.

AsofJune30,2020,wehad$502millionoftotalunrecognizedstock-basedcompensationexpensefortheoperationalmilestonesthatwereconsideredprobableofachievementandachievedbutnotyetvested,whichwillberecognizedoveraweighted-averageperiodof2.9years.AsofJune30,2020,wehadunrecognizedstock-basedcompensationexpenseof$1.08billionfortheoperationalmilestonesthatwereconsiderednotprobableofachievement.ForthethreeandsixmonthsendedJune30,2020,werecordedstock-basedcompensationexpenseof$167millionand$233million,respectively,relatedtothe2018CEOPerformanceAward,and$56millionand$111million,respectively,forthesameperiodsin2019.

2014Performance-BasedStockOptionAwardsIn2014,tocreateincentivesforcontinuedlong-termsuccessbeyondtheModelSprogramandtocloselyalignexecutivepaywithour

stockholders’interestsintheachievementofsignificantmilestonesbyus,theCompensationCommitteeofourBoardofDirectorsgrantedstockoptionawardstocertainemployees(excludingourCEO)topurchaseanaggregateof1,073,000sharesofourcommonstock.Eachawardconsistedofthefollowingfourvestingtrancheswiththevestingschedulebasedentirelyontheattainmentofthefutureperformancemilestones,assumingcontinuedemploymentandservicethrougheachvestingdate: • 1/4thofeachawardvestsuponcompletionofthefirstModelXproductionvehicle; • 1/4thofeachawardvestsuponachievingaggregateproductionof100,000vehiclesinatrailing12-monthperiod; • 1/4thofeachawardvestsuponcompletionofthefirstModel3productionvehicle;and • 1/4thofeachawardvestsuponachievinganannualizedgrossmarginofgreaterthan30%foranythree-yearperiod.

AsofJune30,2020,thefollowingperformancemilestoneshadbeenachieved: • CompletionofthefirstModelXproductionvehicle; • CompletionofthefirstModel3productionvehicle;and • Aggregateproductionof100,000vehiclesinatrailing12-monthperiod.

Webeginrecognizingstock-basedcompensationexpenseaseachperformancemilestonebecomesprobableofachievement.AsofJune30,2020,wehadunrecognizedstock-basedcompensationexpenseof$4millionfortheperformancemilestonethatwasconsiderednotprobableofachievement.ForthethreeandsixmonthsendedJune30,2020,andforthesameperiodsin2019,wedidnotrecordanyadditionalstock-basedcompensationrelatedtotheseawards.

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2012CEOPerformanceAwardInAugust2012,ourBoardofDirectorsgranted5,274,901stockoptionawardstoourCEO(the“2012CEOPerformanceAward”).The2012

CEOPerformanceAwardconsistsof10vestingtrancheswithavestingschedulebasedentirelyontheattainmentofbothperformanceconditionsandmarketconditions,assumingcontinuedemploymentandservicethrougheachvestingdate.Eachvestingtrancherequiresacombinationofapre-determinedperformancemilestoneandanincrementalincreaseinourmarketcapitalizationof$4.00billion,ascomparedtoourinitialmarketcapitalizationof$3.20billionatthetimeofgrant.AsofJune30,2020,themarketcapitalizationconditionsforallofthevestingtranchesandthefollowingperformancemilestoneshadbeenachieved: • SuccessfulcompletionoftheModelXalphaprototype; • SuccessfulcompletionoftheModelXbetaprototype; • CompletionofthefirstModelXproductionvehicle; • Aggregateproductionof100,000vehicles; • SuccessfulcompletionoftheModel3alphaprototype; • SuccessfulcompletionoftheModel3betaprototype; • CompletionofthefirstModel3productionvehicle; • Aggregateproductionof200,000vehicles;and • Aggregateproductionof300,000vehicles.

Webeginrecognizingstock-basedcompensationexpenseaseachmilestonebecomesprobableofachievement.AsofJune30,2020,wehadunrecognizedstock-basedcompensationexpenseof$6millionfortheperformancemilestonethatwasconsiderednotprobableofachievement.ForthethreeandsixmonthsendedJune30,2020,andforthesameperiodsin2019,wedidnotrecordanyadditionalstock-basedcompensationexpenserelatedtothe2012CEOPerformanceAward.

OurCEOhistoricallyearnedabasesalarythatreflectedtheapplicableminimumwagerequirementsunderCalifornialaw,andhewassubjecttoincometaxesbasedonsuchbasesalary.However,hehasneveracceptedhissalary.CommencinginMay2019atourCEO’srequest,weeliminatedaltogethertheearningandaccrualofhisbasesalary.

SummaryStock-BasedCompensationInformationThefollowingtablesummarizesourstock-basedcompensationexpensebylineitemintheconsolidatedstatementsofoperations(inmillions):

ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Costofrevenues $ 52 $ 35 $ 85 $ 62Researchanddevelopment 73 71 138 143Selling,generalandadministrative 222 103 335 210Restructuringandother — 1 — 3Total $ 347 $ 210 $ 558 $ 418

Werealizednoincometaxbenefitfromstockoptionexercisesineachoftheperiodspresentedduetocumulativelossesandvaluation

allowances.AsofJune30,2020,wehad$1.66billionoftotalunrecognizedstock-basedcompensationexpenserelatedtonon-performanceawards,whichwillberecognizedoveraweighted-averageperiodof2.7years.

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Note12–CommitmentsandContingenciesOperatingLeaseArrangementinBuffalo,NewYork

WehaveanoperatingleasethroughtheResearchFoundationfortheStateUniversityofNewYork(the“SUNYFoundation”)foramanufacturingfacilityconstructedonbehalfoftheSUNYFoundation,whichwascompletedinApril2018.Weusethisfacility,referredtoasGigafactoryNewYork,primarilyforthedevelopmentandproductionofourSolarRoofandothersolarproductsandcomponents,energystoragecomponents,andSuperchargercomponents,andforotherlessor-approvedfunctions.Undertheleaseandarelatedresearchanddevelopmentagreement,onbehalfoftheSUNYFoundation,wehaveandwillcontinuetoinstallcertainutilitiesandotherimprovementsandacquirecertainequipmentdesignatedbyustobeusedinthemanufacturingfacility.

Underthetermsoftheoperatingleasearrangement,asamended,wearerequiredtoachievespecificoperationalmilestonesduringtheinitialleaseterm,whichincludeminimumin-statepersonnelrequirementsandarequirementtospendorincur$5.00billionincombinedcapital,operationalexpensesandothercostsintheStateofNewYork,asmeasuredduringthe10-yearperiodbeginningApril30,2018.Onanannualbasisduringtheinitialleaseterm,asmeasuredoneachanniversaryofsuchdate,ifwefailtomeetthesespecifiedinvestmentandjobcreationrequirements,thenwewouldbeobligatedtopaya$41million“programpayment”totheSUNYFoundationforeachyearthatwefailtomeettheserequirements.Furthermore,ifthearrangementisterminatedduetoamaterialbreachbyus,thenadditionalamountsmightbecomepayablebyus.

InApril2020,thegovernmentagencyoverseeingouragreementwiththeSUNYFoundationfortheconstructionanduseofGigafactoryNewYorkissuedguidancethatallobligationsrelatingtoinvestmentandemploymenttargetsundercertainofitsprojects,includingourobligationtobecompliantwithourapplicabletargetsundersuchagreementonApril30,2020,maybedeferredforaone-yearperioduponsuchagency’sapprovalofanapplicationforreliefbytheobligor.AswetemporarilysuspendedmostofourmanufacturingoperationsatGigafactoryNewYorkpursuanttoaNewYorkStateexecutiveorderissuedinMarch2020asaresultoftheCOVID-19pandemic,weweregrantedsuchdeferral,whichwasmemorializedinanamendmenttoouragreementwiththeSUNYFoundationinJuly2020.Moreover,aswehadexceededourinvestmentandemploymentobligationsunderthisagreementpriortosuchmandatedreductionofoperations,wedonotcurrentlyexpectanyissuesmeetingallapplicablefutureobligationsunderthisagreement.However,ifourexpectationsastothecostsandtimelinesofourinvestmentandoperationsatBuffaloorourproductionrampoftheSolarRoofproveincorrect,wemayincuradditionalexpensesorsubstantialpaymentstotheSUNYFoundation.

OperatingLeaseArrangementinShanghai,ChinaWehaveanoperatingleasearrangementforaninitialtermof50yearswiththelocalgovernmentofShanghaiforlanduserightswhereweare

constructingGigafactoryShanghai.Underthetermsofthearrangement,wearerequiredtospendRMB14.08billionincapitalexpenditures,andtogenerateRMB2.23billionofannualtaxrevenuesstartingattheendof2023.Ifweareunwillingorunabletomeetsuchtargetorobtainperiodicprojectapprovals,inaccordancewiththeChinesegovernment’sstandardtermsforsucharrangements,wewouldberequiredtorevertthesitetothelocalgovernmentandreceivecompensationfortheremainingvalueofthelandlease,buildingsandfixtures.Webelievethecapitalexpenditurerequirementandthetaxrevenuetargetwillbeattainableevenifouractualvehicleproductionwasfarlowerthanthevolumesweareforecasting.

LegalProceedingsSecuritiesLitigationRelatingtotheSolarCityAcquisition

BetweenSeptember1,2016andOctober5,2016,sevenlawsuitswerefiledintheDelawareCourtofChancerybypurportedstockholdersofTeslachallengingouracquisitionofSolarCity.Followingconsolidation,thelawsuitnamesasdefendantsthemembersofTesla’sboardofdirectorsasthenconstitutedandalleges,amongotherthings,thatboardmembersbreachedtheirfiduciarydutiesinconnectionwiththeacquisition.Thecomplaintassertsbothderivativeclaimsanddirectclaimsonbehalfofapurportedclassandseeks,amongotherrelief,unspecifiedmonetarydamages,attorneys’fees,andcosts.OnJanuary27,2017,defendantsfiledamotiontodismisstheoperativecomplaint.Ratherthanrespondtothedefendants’motion,theplaintiffsfiledanamendedcomplaint.OnMarch17,2017,defendantsfiledamotiontodismisstheamendedcomplaint.OnDecember13,2017,theCourtheardoralargumentonthemotion.OnMarch28,2018,theCourtdenieddefendants’motiontodismiss.Defendantsfiledarequestforinterlocutoryappeal,andtheDelawareSupremeCourtdeniedthatrequestwithoutrulingonthemeritsbutelectingnottohearanappealat

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thisearlystageofthecase.DefendantsfiledtheiransweronMay18,2018,andmediationswereheldonJune10,2019.PlaintiffsanddefendantsfiledrespectivemotionsforsummaryjudgmentonAugust25,2019,andfurthermediationswereheldonOctober3,2019.TheCourtheldahearingonthemotionsforsummaryjudgmentonNovember4,2019.OnJanuary22,2020,allofthedirectordefendantsexceptElonMuskreachedasettlementtoresolvethelawsuitagainstthemforanamountthatwouldbepaidentirelyundertheapplicableinsurancepolicy.Thesettlement,whichdoesnotinvolveanadmissionofanywrongdoingbyanyparty,issubjecttoapprovalbytheCourt,andafairnesshearingissetforAugust27,2020.Teslawillreceivesuchamount,whichwouldberecognizedasagaininitsfinancialstatements,ifthesettlementisapprovedbytheCourt.OnFebruary4,2020,theCourtissuedarulingthatdeniedplaintiffs’previously-filedmotionandgrantedinpartanddeniedinpartdefendants’previously-filedmotion.Factandexpertdiscoveryiscomplete,andthecasewassetfortrialinMarch2020untilitwaspostponedbytheCourtduetosafetyprecautionsconcerningCOVID-19.ThecurrenttentativedatesforthetrialarefromMarch29toApril12,2021,subjecttochangebasedonanyfurthersafetymeasuresimplementedbytheCourt.

TheseplaintiffsandothersfiledparallelactionsintheU.S.DistrictCourtfortheDistrictofDelawareonoraboutApril21,2017.TheyincludeclaimsforviolationsofthefederalsecuritieslawsandbreachoffiduciarydutiesbyTesla’sboardofdirectors.Thoseactionshavebeenconsolidatedandstayedpendingtheabove-referencedChanceryCourtlitigation.

WebelievethatclaimschallengingtheSolarCityacquisitionarewithoutmeritandintendtodefendagainstthemvigorously.Weareunabletoestimatethepossiblelossorrangeofloss,ifany,associatedwiththeseclaims.

SecuritiesLitigationRelatingtoProductionofModel3VehiclesOnOctober10,2017,apurportedstockholderclassactionwasfiledintheU.S.DistrictCourtfortheNorthernDistrictofCaliforniaagainst

Tesla,twoofitscurrentofficers,andaformerofficer.ThecomplaintallegesviolationsoffederalsecuritieslawsandseeksunspecifiedcompensatorydamagesandotherreliefonbehalfofapurportedclassofpurchasersofTeslasecuritiesfromMay4,2016toOctober6,2017.ThelawsuitclaimsthatTeslasupposedlymademateriallyfalseandmisleadingstatementsregardingTesla’spreparednesstoproduceModel3vehicles.PlaintiffsfiledanamendedcomplaintonMarch23,2018,anddefendantsfiledamotiontodismissonMay25,2018.Thecourtgranteddefendants’motiontodismisswithleavetoamend.PlaintiffsfiledtheiramendedcomplaintonSeptember28,2018,anddefendantsfiledamotiontodismisstheamendedcomplaintonFebruary15,2019.ThehearingonthemotiontodismisswasheldonMarch22,2019,andonMarch25,2019,theCourtruledinfavorofdefendantsanddismissedthecomplaintwithprejudice.OnApril8,2019,plaintiffsfiledanoticeofappealandonJuly17,2019filedtheiropeningbrief.WefiledouroppositiononSeptember16,2019.AhearingontheappealbeforetheU.S.CourtofAppealsfortheNinthCircuit(“NinthCircuit”)washeldonApril30,2020,andthepartiesawaitaruling.Wecontinuetobelievethattheclaimsarewithoutmeritandintendtodefendagainstthislawsuitvigorously.Weareunabletoestimatethepossiblelossorrangeofloss,ifany,associatedwiththislawsuit.

OnOctober26,2018,inasimilaraction,apurportedstockholderclassactionwasfiledintheSuperiorCourtofCaliforniainSantaClaraCountyagainstTesla,ElonMusk,andseveninitialpurchasersinanofferingofdebtsecuritiesbyTeslainAugust2017.ThecomplaintallegesmisrepresentationsmadebyTeslaregardingthenumberofModel3vehiclesTeslaexpectedtoproducebytheendof2017inconnectionwithsuchofferingandseeksunspecifiedcompensatorydamagesandotherreliefonbehalfofapurportedclassofpurchasersofTeslasecuritiesinsuchoffering.Teslathereafterremovedthecasetofederalcourt.OnJanuary22,2019,plaintiffabandoneditsefforttoproceedinstatecourt,insteadfilinganamendedcomplaintagainstTesla,ElonMuskandseveninitialpurchasersinthedebtofferingbeforethesamejudgeintheU.S.DistrictCourtfortheNorthernDistrictofCaliforniawhoishearingtheabove-referencedearlierfiledfederalcase.OnFebruary5,2019,theCourtstayedthisnewcasependingarulingonthemotiontodismissthecomplaintinsuchearlierfiledfederalcase.Aftersuchearlierfiledfederalcasewasdismissed,defendantsfiledamotiononJuly2,2019todismissthiscaseaswell.Thiscaseisnowstayedpendingarulingfromtheappellatecourtonsuchearlierfiledfederalcasewithanagreementthatifdefendantsprevailonappealinsuchcase,thiscasewillbedismissed.Webelievethattheclaimsarewithoutmeritandintendtodefendagainstthislawsuitvigorously.Weareunabletoestimatethepossiblelossorrangeofloss,ifany,associatedwiththislawsuit.

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LitigationRelatingto2018CEOPerformanceAwardOnJune4,2018,apurportedTeslastockholderfiledaputativeclassandderivativeactionintheDelawareCourtofChanceryagainstElonMusk

andthemembersofTesla’sboardofdirectorsasthenconstituted,allegingcorporatewaste,unjustenrichment,andthatsuchboardmembersbreachedtheirfiduciarydutiesbyapprovingthestock-basedcompensationplan.Thecomplaintseeks,amongotherthings,monetarydamagesandrescissionorreformationofthestock-basedcompensationplan.OnAugust31,2018,defendantsfiledamotiontodismissthecomplaint;plaintifffileditsoppositionbriefonNovember1,2018anddefendantsfiledareplybriefonDecember13,2018.ThehearingonthemotiontodismisswasheldonMay9,2019.OnSeptember20,2019,theCourtgrantedthemotiontodismissastothecorporatewasteclaimbutdeniedthemotionastothebreachoffiduciarydutyandunjustenrichmentclaims.OuranswerwasfiledonDecember3,2019,andtrialissetforOctober2021.Webelievetheclaimsassertedinthislawsuitarewithoutmeritandintendtodefendagainstthemvigorously.Weareunabletoestimatethepossiblelossorrangeofloss,ifany,associatedwiththislawsuit.LitigationRelatedtoDirectors’Compensation

OnJune17,2020,apurportedTeslastockholderfiledaderivativeactionintheDelawareCourtofChancery,purportedlyonbehalfofTesla,againstcertainofTesla’scurrentandformerdirectorsregardingcompensationawardsgrantedtoTesla’sdirectors,otherthanElonMusk,between2017and2020.Thesuitassertsclaimsforbreachoffiduciarydutyandunjustenrichmentandseeksdeclaratoryandinjunctiverelief,unspecifieddamages,andotherrelief.Defendants’responseisdueSeptember3,2020.Webelievethattheclaimsarewithoutmeritandintendtodefendagainstthislawsuitvigorously.Weareunabletoestimatethepossiblelossorrangeofloss,ifany,associatedwiththislawsuit.

SecuritiesLitigationRelatingtoPotentialGoingPrivateTransactionBetweenAugust10,2018andSeptember6,2018,ninepurportedstockholderclassactionswerefiledagainstTeslaandElonMuskin

connectionwithMr.Musk’sAugust7,2018TwitterpostthathewasconsideringtakingTeslaprivate.AllofthesuitsarenowpendingintheU.S.DistrictCourtfortheNorthernDistrictofCalifornia.Althoughthecomplaintsvaryincertainrespects,theyeachpurporttoassertclaimsforviolationsoffederalsecuritieslawsrelatedtoMr.Musk’sstatementandseekunspecifiedcompensatorydamagesandotherreliefonbehalfofapurportedclassofpurchasersofTesla’ssecurities.PlaintiffsfiledtheirconsolidatedcomplaintonJanuary16,2019andaddedasdefendantsthemembersofTesla’sboardofdirectors.Thenow-consolidatedpurportedstockholderclassactionwasstayedwhiletheissueofselectionofleadcounselwasbriefedandarguedbeforetheNinthCircuit.TheNinthCircuitruledregardingleadcounsel.DefendantsfiledamotiontodismissthecomplaintonNovember22,2019.ThehearingonthemotionwasheldonMarch6,2020.OnApril15,2020,theCourtdenieddefendants’motiontodismiss.TrialissetforMarch2022.Webelievethattheclaimshavenomeritandintendtodefendagainstthemvigorously.Weareunabletoestimatethepotentialloss,orrangeofloss,associatedwiththeseclaims.

BetweenOctober17,2018andNovember9,2018,fivederivativelawsuitswerefiledintheDelawareCourtofChanceryagainstMr.MuskandthemembersofTesla’sboardofdirectorsasthenconstitutedinrelationtostatementsmadeandactionsconnectedtoapotentialgoingprivatetransaction.Inadditiontothesecases,onOctober25,2018,anotherderivativelawsuitwasfiledintheU.S.DistrictCourtfortheDistrictofDelawareagainstMr.MuskandthemembersoftheTeslaboardofdirectorsasthenconstituted.TheCourtsinboththeDelawarefederalcourtandDelawareCourtofChanceryactionshaveconsolidatedtheirrespectiveactionsandstayedeachconsolidatedactionpendingresolutionoftheabove-referencedconsolidatedpurportedstockholderclassaction.Webelievethattheclaimshavenomeritandintendtodefendagainstthemvigorously.Weareunabletoestimatethepotentiallossorrangeofloss,ifany,associatedwiththeselawsuits.

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BeginningonMarch7,2019,variousstockholdersfiledderivativesuitsintheDelawareCourtofChancery,purportedlyonbehalfofTesla,namingMr.MuskandTesla’sboardofdirectorsasthenconstituted,alsorelatedtoMr.Musk’sAugust7,2018Twitterpostthatisthebasisoftheabove-referencedconsolidatedpurportedstockholderclassaction,aswellastoMr.Musk’sFebruary19,2019TwitterpostregardingTesla’svehicleproduction.Thesuitassertsclaimsforbreachoffiduciarydutyandseeksdeclaratoryandinjunctiverelief,unspecifieddamages,andotherrelief.Plaintiffsagreedtoastipulationthatthesederivativecaseswouldbestayedpendingtheoutcomeoftheabove-referencedconsolidatedpurportedstockholderclassaction.InMarch2019,plaintiffsinoneofthesederivativesuitsmovedtoliftthestayandforanexpeditedtrial.BriefswerefiledonMarch13,2019,andthehearingwasheldonMarch18,2019.Defendantsprevailed,withtheCourtdenyingtheplaintiffs’requestforanexpeditedtrialandgrantingdefendants’requesttocontinuetostaythissuitpendingtheoutcomeoftheabove-referencedconsolidatedpurportedstockholderclassaction.OnMay4,2020,thesameplaintiffsagainfiledamotionrequestingtoliftthestayandforanexpeditedtrial.BriefswerefiledonMay13,2020andMay15,2020andahearingwasheldonMay19,2020.Defendantsagainprevailed,withtheCourtdenyingplaintiffs’requesttoliftthestayandforanexpeditedtrial.Theplaintiffsalsosoughtleavetofileanamendedcomplaint,whichwasgranted.TheCourtenteredanorderimplementingitsrulingonMay21,2020.TheamendedcomplaintassertsadditionalallegationsofbreachoffiduciarydutyrelatedtotwoadditionalTwitterpostsbyMr.Musk,datedJuly29,2019andMay1,2020,andseeksunspecifieddamagesanddeclaratoryandinjunctiverelief.Webelievethattheclaimshavenomeritandintendtodefendagainstthemvigorously.Weareunabletoestimatethepotentiallossorrangeofloss,ifany,associatedwiththeselawsuits.

CertainInvestigationsandOtherMattersWereceiverequestsforinformationfromregulatorsandgovernmentalauthorities,suchastheNationalHighwayTrafficSafetyAdministration,

theNationalTransportationSafetyBoard,theSEC,theDepartmentofJustice(“DOJ”)andvariousstate,federal,andinternationalagencies.Weroutinelycooperatewithsuchregulatoryandgovernmentalrequests.

Inparticular,theSEChadissuedsubpoenastoTeslainconnectionwith(a)ElonMusk’spriorstatementthathewasconsideringtakingTeslaprivateand(b)certainprojectionsthatwemadeforModel3productionratesduring2017andotherpublicstatementsrelatingtoModel3production.Thetake-privateinvestigationwasresolvedandclosedwithasettlemententeredintowiththeSECinSeptember2018andasfurtherclarifiedinApril2019inanamendment.OnDecember4,2019,theSEC(i)closedtheinvestigationintotheprojectionsandotherpublicstatementsregardingModel3productionratesand(ii)issuedasubpoenaseekinginformationconcerningcertainfinancialdataandcontractsincludingTesla’sregularfinancingarrangements.Separately,theDOJhadalsoaskedustovoluntarilyprovideitwithinformationabouttheabovemattersrelatedtotakingTeslaprivateandModel3productionrates.

Asidefromthesettlement,asamended,withtheSECrelatingtoMr.Musk’sstatementthathewasconsideringtakingTeslaprivate,therehavenotbeenanydevelopmentsinthesemattersthatwedeemtobematerial,andtoourknowledgenogovernmentagencyinanyongoinginvestigationhasconcludedthatanywrongdoingoccurred.Asisournormalpractice,wehavebeencooperatingandwillcontinuetocooperatewithgovernmentauthorities.Wecannotpredicttheoutcomeorimpactofanyongoingmatters.Shouldthegovernmentdecidetopursueanenforcementaction,thereexiststhepossibilityofamaterialadverseimpactonourbusiness,resultsofoperation,prospects,cashflows,andfinancialposition.

Wearealsosubjecttovariousotherlegalproceedingsandclaimsthatarisefromthenormalcourseofbusinessactivities.Ifanunfavorablerulingordevelopmentweretooccur,thereexiststhepossibilityofamaterialadverseimpactonourbusiness,resultsofoperations,prospects,cashflows,financialposition,andbrand.

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IndemnificationandGuaranteedReturnsWearecontractuallyobligatedtocompensatecertainfundinvestorsforanylossesthattheymaysufferincertainlimitedcircumstances

resultingfromreductionsinU.S.Treasurygrantsorinvestmenttaxcredits(“ITC”s).Generally,suchobligationswouldariseasaresultofreductionstothevalueoftheunderlyingsolarenergysystemsasassessedbytheU.S.TreasuryDepartmentforpurposesofclaimingU.S.TreasurygrantsorasassessedbytheIRSforpurposesofclaimingITCsorU.S.Treasurygrants.Foreachbalancesheetdate,weassessandrecognize,whenapplicable,adistributionpayableforthepotentialexposurefromthisobligationbasedonalltheinformationavailableatthattime,includinganyguidelinesissuedbytheU.S.TreasuryDepartmentonsolarenergysystemvaluationsforpurposesofclaimingU.S.TreasurygrantsandanyauditsundertakenbytheIRS.Webelievethatanypaymentstothefundinvestorsinexcessoftheamountsalreadyrecognizedbyusforthisobligationarenotprobableormaterialbasedonthefactsknownatthefilingdate.

ThemaximumpotentialfuturepaymentsthatwecouldhavetomakeunderthisobligationwoulddependonthedifferencebetweenthefairvaluesofthesolarenergysystemssoldortransferredtothefundsasdeterminedbyusandthevaluesthattheU.S.TreasuryDepartmentwoulddetermineasfairvalueforthesystemsforpurposesofclaimingU.S.TreasurygrantsorthevaluestheIRSwoulddetermineasthefairvalueforthesystemsforpurposesofclaimingITCsorU.S.Treasurygrants.WeclaimU.S.TreasurygrantsbasedonguidelinesprovidedbytheU.S.TreasurydepartmentandthestatutoryregulationsfromtheIRS.Weusefairvaluesdeterminedwiththeassistanceofindependentthird-partyappraisalscommissionedbyusasthebasisfordeterminingtheITCsthatarepassed-throughtoandclaimedbythefundinvestors.SincewecannotdeterminefuturerevisionstoU.S.TreasuryDepartmentguidelinesgoverningsolarenergysystemvaluesorhowtheIRSwillevaluatesystemvaluesusedinclaimingITCsorU.S.Treasurygrants,weareunabletoreliablyestimatethemaximumpotentialfuturepaymentsthatitcouldhavetomakeunderthisobligationasofeachbalancesheetdate.

Weareeligibletoreceivecertainstateandlocalincentivesthatareassociatedwithrenewableenergygeneration.Theamountofincentivesthatcanbeclaimedisbasedontheprojectedoractualsolarenergysystemsizeand/ortheamountofsolarenergyproduced.Wealsocurrentlyparticipateinonestate’sincentiveprogramthatisbasedoneitherthefairmarketvalueorthetaxbasisofsolarenergysystemsplacedinservice.Stateandlocalincentivesreceivedareallocatedbetweenusandfundinvestorsinaccordancewiththecontractualprovisionsofeachfund.Wearenotcontractuallyobligatedtoindemnifyanyfundinvestorforanylossestheymayincurduetoashortfallintheamountofstateorlocalincentivesactuallyreceived.

Ourleasepass-throughfinancingfundshaveaone-timeleasepaymentresetmechanismthatoccursaftertheinstallationofallsolarenergysystemsinafund.Asaresultofthismechanism,wemayberequiredtorefundmasterleaseprepaymentspreviouslyreceivedfrominvestors.Anyrefundsofmasterleaseprepaymentswouldreducetheleasepass-throughfinancingobligation.

LettersofCreditAsofJune30,2020,wehad$273millionofunusedlettersofcreditoutstanding.

Note13–VariableInterestEntityArrangementsWehaveenteredintovariousarrangementswithinvestorstofacilitatethefundingandmonetizationofoursolarenergysystemsandvehicles.

Inparticular,ourwhollyownedsubsidiariesandfundinvestorshaveformedandcontributedcashandassetsintovariousfinancingfundsandenteredintorelatedagreements.Wehavedeterminedthatthefundsarevariableinterestentities(“VIEs”)andwearetheprimarybeneficiaryoftheseVIEsbyreferencetothepowerandbenefitscriterionunderASC810,Consolidation.Wehaveconsideredtheprovisionswithintheagreements,whichgrantusthepowertomanageandmakedecisionsthataffecttheoperationoftheseVIEs,includingdeterminingthesolarenergysystemsorvehiclesandtheassociatedcustomercontractstobesoldorcontributedtotheseVIEs,redeployingsolarenergysystemsorvehiclesandmanagingcustomerreceivables.Weconsiderthattherightsgrantedtothefundinvestorsundertheagreementsaremoreprotectiveinnatureratherthanparticipating.

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AstheprimarybeneficiaryoftheseVIEs,weconsolidateinthefinancialstatementsthefinancialposition,resultsofoperationsandcashflowsoftheseVIEs,andallintercompanybalancesandtransactionsbetweenusandtheseVIEsareeliminatedintheconsolidatedfinancialstatements.Cashdistributionsofincomeandotherreceiptsbyafund,netofagreeduponexpenses,estimatedexpenses,taxbenefitsanddetrimentsofincomeandlossandtaxcredits,areallocatedtothefundinvestorandoursubsidiaryasspecifiedintheagreements.

Generally,oursubsidiaryhastheoptiontoacquirethefundinvestor’sinterestinthefundforanamountbasedonthemarketvalueofthefundortheformulaspecifiedintheagreements.

Uponthesaleorliquidationofafund,distributionswouldoccurintheorderandpriorityspecifiedintheagreements.

Pursuanttomanagementservices,maintenanceandwarrantyarrangements,wehavebeencontractedtoprovideservicestothefunds,suchasoperationsandmaintenancesupport,accounting,leaseservicingandperformancereporting.Insomeinstances,wehaveguaranteedpaymentstothefundinvestorsasspecifiedintheagreements.Afund’screditorshavenorecoursetoourgeneralcreditortothatofotherfunds.Noneoftheassetsofthefundshadbeenpledgedascollateralfortheirobligations.

TheaggregatecarryingvaluesoftheVIEs’assetsandliabilities,aftereliminationofanyintercompanytransactionsandbalances,intheconsolidatedbalancesheetswereasfollows(inmillions):

June30, December31, 2020 2019 Assets Currentassets Cashandcashequivalents $ 72 $ 106Accountsreceivable,net 56 27Prepaidexpensesandothercurrentassets 91 100Totalcurrentassets 219 233

Operatingleasevehicles,net 1,102 1,183Solarenergysystems,net 4,894 5,030Othernon-currentassets 170 156

Totalassets $ 6,385 $ 6,602Liabilities Currentliabilities Accruedliabilitiesandother $ 73 $ 80Deferredrevenue 73 78Customerdeposits 13 9Currentportionofdebtandfinanceleases 713 608Totalcurrentliabilities 872 775

Deferredrevenue,netofcurrentportion 230 264Debtandfinanceleases,netofcurrentportion 1,322 1,516Otherlong-termliabilities 23 22

Totalliabilities $ 2,447 $ 2,577Note14–RelatedPartyTransactions

InFebruary2020,ourCEOandamemberofourBoardofDirectorspurchasedfromus13,037and1,250shares,respectively,ofourcommonstockinapublicofferingatthepublicofferingpriceforanaggregate$10millionand$1million,respectively.

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InJune2020,ourCEOenteredintoanindemnificationagreementwithus,foraninterimtermof90days.Duringtheinterimterm,weareresumingourannualevaluationofallavailableoptionsforprovidingdirectors’andofficers’indemnitycoverage,whichwehadsuspendedduringtheheightofshelter-in-placerequirementsrelatedtotheCOVID-19pandemic.Aspartofsuchprocess,weintendtoobtainabindingmarketquoteforadirectors’andofficers’liabilityinsurancepolicywithanaggregatecoveragelimitof$100million,whichwewillweighinselectinganindemnitycoverageoptionforacustomarytermfollowingtheendoftheinterimperiod.

TheindemnificationagreementprovidesthatourCEOwillprovide,fromhispersonalfunds,directors’andofficers’indemnitycoveragetousduringtheinterimtermintheeventsuchcoverageisnotindemnifiablebyus,uptoatotalof$100million.Inreturn,wewillpayourCEOaone-timefeeof$972,361.Wewillalsoexercisereasonablebesteffortstoobtainthemarketquotedescribedabove,andwillpayanadditionalamounttoourCEOtoreconciletheone-timefeetobeequaltothemarket-basedpremiumforsuchmarketquoteasproratedfor90daysandfurtherdiscountedby50%,ifthelatteramountisgreater.Note15–SegmentReportingandInformationaboutGeographicAreas

Wehavetwooperatingandreportablesegments:(i)automotiveand(ii)energygenerationandstorage.Theautomotivesegmentincludesthedesign,development,manufacturing,sales,andleasingofelectricvehiclesaswellassalesofautomotiveregulatorycredits.Additionally,theautomotivesegmentisalsocomprisedofservicesandother,whichincludesnon-warrantyafter-salesvehicleservices,salesofusedvehicles,retailmerchandise,salesbyouracquiredsubsidiariestothirdpartycustomers,andvehicleinsurancerevenue.Theenergygenerationandstoragesegmentincludesthedesign,manufacture,installation,sales,andleasingofsolarenergygenerationandenergystorageproductsandrelatedservicesandsalesofsolarenergysystemsincentives.OurCODMdoesnotevaluateoperatingsegmentsusingassetorliabilityinformation.Thefollowingtablepresentsrevenuesandgrossprofitbyreportablesegment(inmillions):

ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 Automotivesegment Revenues $ 5,666 $ 5,981 $ 11,358 $ 10,198Grossprofit $ 1,246 $ 878 $ 2,469 $ 1,436

Energygenerationandstoragesegment Revenues $ 370 $ 369 $ 663 $ 693Grossprofit $ 21 $ 43 $ 32 $ 51

Thefollowingtablepresentsrevenuesbygeographicareabasedonthesaleslocationofourproducts(inmillions):

ThreeMonthsEndedJune30, SixMonthsEndedJune30, 2020 2019 2020 2019 UnitedStates $ 3,090 $ 3,480 $ 5,858 $ 5,810China 1,400 690 2,300 1,469Other 1,546 2,180 3,863 3,612Total $ 6,036 $ 6,350 $ 12,021 $ 10,891

Therevenuesincertaingeographicareaswereimpactedbythepriceadjustmentswemadetoourvehicleofferingsduringthesecondquarter

of2020andthefirsthalfof2019.RefertoNote2,SummaryofSignificantAccountingPolicies,fordetails.Thefollowingtablepresentslong-livedassetsbygeographicarea(inmillions):

June30, December31, 2020 2019 UnitedStates $ 15,541 $ 15,644International 1,537 890Total $ 17,078 $ 16,534

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ITEM2. MANAGEMENT’SDISCUSSIONANDANALYSISOFFINANCIALCONDITIONANDRESULTSOFOPERATIONS

ThefollowingdiscussionandanalysisshouldbereadinconjunctionwiththeconsolidatedfinancialstatementsandtherelatednotesincludedelsewhereinthisQuarterlyReportonForm10-Q.

OverviewOurmissionistoacceleratetheworld’stransitiontosustainableenergy.Wedesign,develop,manufacture,leaseandsellhigh-performancefully

electricvehicles,solarenergygenerationsystemsandenergystorageproducts.Wealsooffermaintenance,installation,operation,financialandotherservicesrelatedtoourproducts.

AutomotiveInthefirsthalfof2020,weproduced184,944vehiclesanddelivered179,387vehicles,includingouronemillionthcumulativelydelivered

vehicleinthesecondquarter.Weremainfocusedonrampingourexistingproducts,includingModelY,andconstructingadditionalanddiversifiedmanufacturingcapabilitieswhileincrementallyimprovingourprocessesandreducingcosts.

EnergyGenerationandStorageInthefirsthalfof2020,wedeployed679MWhofenergystorageproducts,drivenbyourPowerwallsystemandtheongoingrolloutofour

popularMegapacksystem,and62MWofsolarenergysystems.Inthesecondquarterof2020,wefurtherstreamlinedourretrofitsolarprocessestoallowustoofferabetterproductatimprovedpricing.WecontinuetofocusonincreasingourSolarRoofdeploymentsandinstallationcapabilities.

ManagementOpportunities,ChallengesandRisksImpactofCurrentMacroeconomicFactors

Weachievedastrongsecondquarterof2020inspiteofthecontinuingwidespreadworldwideimpactfromtheCOVID-19pandemic.Wehadtemporarilysuspendedoperationsateachofourmanufacturingfacilitiesworldwideatsomepointduringthefirsthalfof2020asaresultofgovernmentrequirementsortoaccommodaterelatedchallengesforouremployees,theirfamiliesandoursuppliers.Certainofoursuppliersandpartners,includingPanasonic,ourpartnerthatmanufactureslithium-ionbatterycellsforourproductsatourGigafactoryNevada,alsoexperiencedsuchtemporarysuspensions.Wehadalsoinstitutedtemporarylaborcostreductionmeasuresbyfurloughingcertainofourhourlyemployees,reducingmostsalariedemployees’basesalariesgloballyandreducingourbonusandcommissionstructureswhileourU.S.operationswerescaledback.Exitingthesecondquarterof2020,however,wehaveresumedoperationsatallofourmanufacturingfacilities,continuetoincreaseouroutputandaddadditionalcapacity,andareworkingwitheachofoursuppliersandgovernmentagenciesonmeeting,rampingandsustainingourproduction.Ourabilitytomanufacture,deliverandinstallourproducts,increaseourinfrastructure,andplanandinvestinourfutureroadmapduringdifficultexternalcircumstanceshasbeentested,andthusfarwehavemetthechallenge.

Ontheotherhand,certaingovernmentregulationsandpublicadvisories,aswellasshiftingsocialbehaviors,thathavetemporarilyorsporadicallylimitedorclosednon-essentialtransportation,governmentfunctions,businessactivitiesandperson-to-personinteractionsremaininplace.Insomecases,therelaxationofsuchtrendshasbeenfollowedbyareturntostringentrestrictions.Wecannotpredictthedurationordirectionofsuchtrends,whichhavealsoadverselyaffectedandmayinthefutureaffectouroperations.Forexample,reducedoperationsorclosuresatmotorvehicledepartments,vehicleauctionhousesandmunicipalandutilitycompanyinspectorsresultedincertainchallengesinorpostponementsforournewvehicledeliveries,usedvehiclesales,andenergyproductdeploymentsinthefirsthalfof2020.Wemayalsobeaffectedbyglobalmacroeconomicconditionsandchanginglevelsofconsumercomfortandspendinthefuture,whichcouldfurtherimpactdemandintheworldwidetransportationandautomotiveindustriesandforconstructionprojectssuchastheadditionofsolarenergysystems.Likewise,ourabilitytosustainourproductiontrajectorydependsontheongoingstatusofvariousgovernmentregulationsregardingmanufacturingoperations,thereadinessandsolvencyofoursuppliersandvendors,andastableandmotivatedproductionworkforce.Government-imposedtravelorvisarestrictionsmayalsopreventpersonnelemployedbyusorourvendorsfromtravelingtooursitestoworkonkeyprojects,whichmaydelaytheirprogress.

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Ultimately,wehavealwaysmonitoredmacroeconomicconditionstoremainflexibleandoptimizeandevolveourbusinessasappropriate,andwewillcontinuetodosoaswedidinthefirsthalfof2020.Becausetheimpactofcurrentconditionsonasustainedbasisisyetlargelyunknown,israpidlyevolving,andhasbeenvariedacrossgeographicregions,thisongoingassessmentwillbeparticularlycriticaltoallowustoaccuratelyprojectdemandandinfrastructurerequirementsgloballyanddeployourproduction,workforce,andotherresourcesaccordingly.

Automotive—Production

WecontinuedtherampofModelYattheFremontFactoryduringthesecondquarterof2020,andafteronlyfourcumulativemonthsofproductioninthefirsthalfoftheyearprimarilyduetomanufacturingsuspensions,weexitedthequarterataweeklyproductionratecomparabletothatofModel3morethanninemonthsintoitsramp.WeintendtoaddadditionalmanufacturingcapacityforModel3andModelYattheFremontFactoryinthesecondhalfof2020aspreviouslyplanned.

AtGigafactoryShanghai,wehavecontinuedtorampourinstalledModel3capacity,andconstructionofthenextphasetoaddModelYmanufacturingcapacityremainsontrack.WearealsocontinuingtheconstructionofGigafactoryBerlin,wherealocalizedversionofModelYwillbethefirstvehicleweproduce.Finally,werecentlypurchasedasitenearAustin,TexasforourGigafactoryTexas,whereweexpecttomanufactureModelYandCybertruck.Wehaveseentheearlybenefitsofdiversifyingandlocalizingmanufacturingfacilities,includingduringthecurrentCOVID-19pandemic,andourgoalistofurtherimproveourmanufacturingresilience,efficiency,costsandtechnologywiththedevelopmentofeachnewfactory.However,theconstructionofandrampatthesefactoriesaresubjecttoanumberofuncertaintiesinherentinallnewmanufacturingoperations,includingongoingcompliancewithregulatoryrequirements,maintenanceofoperationallicensesandapprovalsforadditionalexpansion,potentialsupplychainconstraints,hiring,trainingandretentionofqualifiedemployees,andthepaceofbringingproductionequipmentandprocessesonlinewiththecapabilitytomanufacturehigh-qualityunitsatscale,anditisnotyetcertainwhetherandtowhatextenttheCOVID-19pandemicmayfurtheraffectsuchuncertaintiesandourprojectedtimelinesforcompletion.

Automotive—DemandandSales

Inthesecondquarterof2020,thematurityandadaptabilityofourbusinessmodel,togetherwiththeadvancedtechnologyinourvehiclesthatenabledoptionsfortouchlesstestdrivesanddeliveries,continuedtoallowustomarketanddelivervehiclesnotwithstandingchallengesimpactingtheautomotiveindustryasawhole.WeareaddingtothisadvantageaswerampandexpandnewofferingssuchasModelY,andcontinuouslyupdateandimproveourvehicles’functionalityandfeaturesbasedonuserfeedback.Recently,wefurtherimprovedourstopsignandtrafficlightrecognitionsystemforapplicableFSD-optionedusersandincreasedtheEPA-testedmaximumrangeofModelSto402miles.Wealsoexpectourinternationalmanufacturingexpansiontocontinuetodrivedemand.Forexample,Model3wasthebest-sellingelectricvehicleduringthesecondquarterof2020inChina,whereGigafactoryShanghaiallowsustoofferlocally-producedModel3vehicleswithindustry-leadingstandardequipmentatalowerpricepointthancompetingmid-sizedpremiumsedansevenbeforetheimpactofgovernmentortaxincentives.Moreover,GermanyisnowamongourlargestEuropeanvehiclemarkets,whichwebelievebodeswellforfuturemanufacturingatGigafactoryBerlin.Whilewecannotpredictthemagnitudeordurationofcurrentmacroeconomicconditions,webelievethatwehaveactuallygainedkeyadvantageswiththeflexibilityandmomentumwehaveshowninthefirsthalfof2020,andwearealsohopefulthatthedemonstrablypositiveenvironmentalimpactfromtherecentworldwidereductioninthetransportation-relatedconsumptionoffossilfuelswillfacilitategreaterawarenessfortheimportanceofsustainableenergyandrelatedproducts.

Asisinherentintheautomotiveindustry,wemaybeimpactedbytradeandenvironmentalpolicies,politicaluncertaintyandeconomiccyclesinvolvinggeographicregionswherewehavesignificantoperations,whichareinherentlyunpredictable.Wemayalsomakecertainadjustmentstoourpricesfromtimetotimeintheordinarycourseofbusiness,includingasweintroducenewvehiclesandvariantsandoptimizethepricingamongthemandforaffordability,andwemadesuchadjustmentsinthesecondquarterof2020andmorerecentlyforModelY.Suchpricingchangesmayimpactourvehicles’resalevalues,andinturnouroperatingresults.

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Automotive—DeliveriesandCustomerInfrastructure

Wecontinuetooptimizeourvehiclemanufacturingandlogisticspatternstodeliverourvehiclesefficientlyworldwide.UnusuallogisticalchallengessuchasthoserelatedtotheCOVID-19pandemicmaystrainsuchdeliverypatterns,whichinthesecondquarterof2020resultedinaheavyvolumeofdeliveriestowardstheendofthequarter.Whilewehavehistoricallyexperiencedplanningandlogisticschallengesrelatedtoconcentratedproduction,GigafactoryShanghaiisbecominganincreasinglylargercontributortoouroverallproductionandweexpecttoultimatelyalleviatesuchchallengesthroughincreasedlocalproduction,includingatGigafactoryBerlinandatGigafactoryTexas.

Wealsocontinuetoexpandandinvestinourservicingandcharginglocationsandcapabilitiestokeeppacewithourcustomervehiclefleetandensureaconvenientandefficientcustomerexperience,markedbyourexpansionoftheSuperchargernetworktoover2,000stationsattheendofthesecondquarterof2020.However,ifourcustomervehicles,particularlyintherapidlygrowingModel3fleetandnewlylaunchedModelYfleet,experienceunexpectedreliabilityissues,itcouldoutpaceandoverburdenourservicingcapabilitiesandpartsinventory.

EnergyGenerationandStorageDemand,ProductionandDeployment

Inthesecondquarterof2020,wefurtherincreasedthevaluepropositionofourretrofitsolarsystemsbyimprovingtheefficiencyofourpanels,additionallystreamliningourorderingandcontractingprocessesandpassingonthesavingstoourcustomers,backedbylowest-priceandmoney-backguarantees.WehavealsocontinuedtoexpandourSolarRoofdeploymentsandincreaseourinstallationcapacity.Megapack,ourupto3MWhenergystoragesystemforcommercial,industrialandutilityandenergygenerationcustomers,remainsapopularofferingasweexpanditsproductionandrollout.TogetherwiththeinternationalexpansionofAutobidder,ourproprietaryreal-timeenergytradingplatformforourcustomers’utility-scalesystems,andthecontinuingexpansionofourothersystemssuchasPowerwall,webelieveourenergystoragebusinessiswell-positionedforfurthergrowth.

InApril2020,thegovernmentagencyoverseeingouragreementwiththeSUNYFoundationfortheconstructionanduseofGigafactoryNewYorkissuedguidancethatallobligationsrelatingtoinvestmentandemploymenttargetsundercertainofitsprojects,includingourobligationtobecompliantwithourapplicabletargetsundersuchagreementonApril30,2020,maybedeferredforaone-yearperioduponsuchagency’sapprovalofanapplicationforreliefbytheobligor.Aswetemporarilysuspendedmostofourmanufacturingoperations(includingofSolarRoof)atGigafactoryNewYorkpursuanttoaNewYorkStateexecutiveorderissuedinMarch2020asaresultoftheCOVID-19pandemic,weweregrantedsuchdeferral,whichwasmemorializedinanamendmenttoouragreementwiththeSUNYFoundationinJuly2020.Moreover,aswehadexceededourinvestmentandemploymentobligationsunderthisagreementpriortosuchmandatedreductionofoperations,wedonotcurrentlyexpectanyissuesmeetingallapplicablefutureobligationsunderthisagreement.However,ifourexpectationssetforthaboveorastothecostsandtimelinesofourinvestmentandoperationsatBuffaloorourproductionrampoftheSolarRoofproveincorrect,wemayincuradditionalexpensesorsubstantialpaymentstotheSUNYFoundation.

TrendsinCashFlow,CapitalExpendituresandOperatingExpensesOurcapitalexpendituresaretypicallydifficulttoprojectbeyondtheshorttermgiventhenumberandbreadthofourcoreprojectsatanygiven

time,anduncertaintiesinfutureglobalmarketconditionsresultingfromtheCOVID-19pandemiccurrentlymakesprojectionsmorechallenging.Forexample,thecurveofanynewproductramp,suchasforModelYandtheSolarRoof,ortheconstructionofnewlarge-scaleoperations,suchasGigafactoryBerlinandGigafactoryTexas,isinherentlysubjecttouncertaintyoftiming,andifweareabletomeetvariousmilestonesmorequicklythanexpected,ourrelatedcapitalexpendituresmaybeaccelerated.Wealsocontinuouslyevaluateandmayadjustourcapitalexpendituresbasedon,amongotherthings:ourmanufacturingplansforourvariousproducts,whichwemayrebalancefromtimetotimebasedonthemixofdemandamongthemandothercontingentfactors;thepaceandprioritizationofcurrentprojectsunderdevelopment;andtheadditionofanynewprojects.Moreover,wearegenerallyincreasingthecapitalefficiencyofourprojectswithexperience,andwemayfindthatouractualcapitalexpendituresonnewprojectsaredifferentthanpreviouslyexpected.

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Subjecttotheabove,consideringtheexpectedpaceofthemanufacturingrampsforourproducts,constructionandexpansionofourfactories,andpipelineofannouncedprojectsunderdevelopment,andconsistentwithourcurrentstrategyofusingpartnerstomanufacturebatterycells,aswellasconsideringallotherinfrastructuregrowth,wecurrentlyexpectouraverageannualcapitalexpendituresin2020andthetwosucceedingfiscalyearstobe$2.5billionto$3.5billion.

InMarch2018,ourstockholdersapprovedthe2018CEOPerformanceAward,withvestingcontingentonourBoardofDirectors’certificationoftheachievementofspecifiedmarketcapitalizationandoperationalmilestones.Wewillincursignificantnon-cashstock-basedcompensationexpenseforeachtrancheunderthisawardaftertherelatedoperationalmilestoneinitiallybecomesprobableofbeingmet,andiflaterthanthegrantdate,wewillalsohavetorecordacumulativecatch-upexpenseatsuchtime.Suchcatch-upexpensemaybematerialdependingonthelengthoftimeelapsedfromthegrantdate.Moreover,astheexpenseforatrancheisrecordedoverthelongerof(i)theexpectedachievementperiodoftherelevantoperationalmilestoneand(ii)onlyiftherelatedmarketcapitalizationmilestonehasnotbeenachieved,itsexpectedachievementperiod,theachievementofamarketcapitalizationmilestoneearlierthanexpectedmayacceleratetherateatwhichsuchexpenseisrecognized.Uponvestingofatranche,allremainingassociatedexpensewillberecognizedimmediately.Asofthedateofthisfiling,threeoperationalmilestonesandtwomarketcapitalizationmilestoneshavebeenachieved,ofwhichtwooperationalmilestonesandtwomarketcapitalizationmilestoneshavealsobeencertifiedbyourBoardofDirectors.Consequently,twoofthe12tranchesunderthisawardhavevestedandbecomeexercisable,subjecttoourCEO’spaymentoftheexercisepriceof$350.02pershareandtheminimumfive-yearholdingperiodgenerallyapplicabletoanysharesheacquiresuponexercise.

Duringthesecondquarterof2020,anoperationalmilestoneunderthe2018CEOPerformanceAwardofAdjustedEBITDAof$4.5billionbecameprobableofbeingmetandconsequently,werecognizedacatch-upexpenseof$79millioninsuchquarter.Duringthethirdquarterof2020,thesecondtranchevestedandthereforetheremainingunamortizedexpenseof$95millionassociatedwithsuchtranche,whichwaspreviouslyexpectedtoberecognizedratablyinfuturequartersthroughthefirstquarterof2022asdeterminedonthegrantdate,willbeacceleratedintothethirdquarterof2020.Inaddition,ifthevalueofTesla’sclosingstockpricecontinuesnearorhigherthanthelevelsseeninlateJuly2020,thethirdmarketcapitalizationmilestoneof$200.0billionisexpectedtobemetduringthethirdquarterof2020,meaningthatthethirdtrancheunderthe2018CEOPerformanceAwardwouldvestuponcertificationbyourBoardofDirectors.Insuchcase,theremainingunamortizedexpenseof$118millionforthattranche,whichiscurrentlyexpectedtoberecognizedratablyinfuturequartersthroughthefirstquarterof2023asdeterminedonthegrantdate,wouldbeacceleratedintothethirdquarterof2020.SeeNote11,EquityIncentivePlans—2018CEOPerformanceAward,totheconsolidatedfinancialstatementsincludedelsewhereinthisQuarterlyReportonForm10-Qforfurtherdetailsregardingthestock-basedcompensationrelatingtothe2018CEOPerformanceAward.

Excludingtheimpactofnon-cashstockcompensationexpensefromadditionaloperationalmilestonesand/ortranchesunderthe2018CEOPerformanceAwardbecoming,asapplicable,probableofbeingmetorvestedearlierthanexpected,andaslongasmacroeconomicfactorsfacilitateincreasesinoverallrevenuesfromexpandingsales,weexpectoperatingexpensesasapercentageofrevenuetocontinuetodecreaseinthefutureaswefocusonincreasingoperationalefficiencyandprocessautomation.CriticalAccountingPoliciesandEstimates

TheconsolidatedfinancialstatementsarepreparedinaccordancewithaccountingprinciplesgenerallyacceptedintheU.S.(“GAAP”).Thepreparationoftheconsolidatedfinancialstatementsrequiresustomakeestimatesandassumptionsthataffectthereportedamountsofassets,liabilities,revenues,costsandexpensesandrelateddisclosures.Webaseourestimatesonhistoricalexperience,asappropriate,andonvariousotherassumptionsthatwebelievetobereasonableunderthecircumstances.Changesintheaccountingestimatesarereasonablylikelytooccurfromperiodtoperiod.Accordingly,actualresultscoulddiffersignificantlyfromtheestimatesmadebyourmanagement.Weevaluateourestimatesandassumptionsonanongoingbasis.Totheextentthattherearematerialdifferencesbetweentheseestimatesandactualresults,ourfuturefinancialstatementpresentation,financialcondition,resultsofoperationsandcashflowsmaybeaffected.

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DuetotheCOVID-19pandemic,therehasbeenuncertaintyanddisruptionintheglobaleconomyandfinancialmarkets.Theestimatesusedfor,butnotlimitedto,determiningsignificanteconomicincentiveforresidualvalueguaranteearrangements,salesreturnreserves,thecollectabilityofaccountsreceivable,inventoryvaluation,fairvalueoflong-livedassets,goodwill,fairvalueoffinancialinstruments,fairvalueandresidualvalueofoperatingleasevehiclesandsolarenergysystemssubjecttoleasescouldbeimpacted.WehaveassessedtheimpactandarenotawareofanyspecificeventsorcircumstancesthatrequiredanupdatetoourestimatesandassumptionsormateriallyaffectedthecarryingvalueofourassetsorliabilitiesasofthedateofissuanceofthisQuarterlyReportonForm10-Q.Theseestimatesmaychangeasneweventsoccurandadditionalinformationisobtained.Actualresultscoulddiffermateriallyfromtheseestimatesunderdifferentassumptionsorconditions.

Foradescriptionofourcriticalaccountingpoliciesandestimates,refertoPartII,Item7,CriticalAccountingPoliciesandEstimatesinourAnnualReportonForm10-KfortheyearendedDecember31,2019.TherehavebeennomaterialchangestoourcriticalaccountingpoliciesandestimatessinceourAnnualReportonForm10-KfortheyearendedDecember31,2019.

RecentAccountingPronouncementsSeeNote2,SummaryofSignificantAccountingPolicies,totheconsolidatedfinancialstatementsincludedelsewhereinthisQuarterlyReporton

Form10-Q.

ResultsofOperationsEffectsofCOVID-19

TheCOVID-19pandemicimpactedourbusinessandfinancialresultsinthefirsthalfof2020.

ThetemporarysuspensionofproductionatourfactoriesduringthesixmonthsendedJune30,2020hadcausedproductionlimitationsthatnegativelyimpactedourdeliveriesforthefirsthalfof2020.Whilewehaveresumedoperationsatallofourfactoriesworldwide,ourtemporarysuspensionatourfactoriesresultedinidlecapacitychargesaswestillincurredfixedcostssuchasdepreciation,certainpayrollrelatedexpenses,andpropertytaxes.AspartofourresponsestrategytothebusinessdisruptionsanduncertaintyaroundmacroeconomicconditionscausedbytheCOVID-19pandemic,wehadinstitutedcostreductioninitiativesacrossourbusinessgloballytobecommensuratetothescopeofouroperationswhiletheywerescaledback.Thisincludedtemporarylaborcostreductionmeasuressuchasfurloughingcertainofourhourlyemployees,reducingmostsalariesemployees’basesalaries,andreducingourbonusandcommissionstructures.Additionally,wesuspendednon-criticaloperatingspendandopportunisticallyrenegotiatedsupplierandvendorarrangements.Aspartofvariousgovernmentalresponsestothepandemicgrantedtocompaniesglobally,wereceivedcertainpayrollrelatedbenefitswhichhelpedtoreducetheimpactoftheCOVID-19pandemiconourfinancialresults.Suchpayrollrelatedbenefitsrelatedtoourdirectheadcounthavebeenprimarilynettedagainstouridlecapacitychargesdisclosedaswellasmarginallyreducedouroperatingexpenses.Theimpactoftheidlecapacitychargesincurredinthecurrentperiodwerealmostentirelyoffsetbyourcostsavingsinitiativesandpayrollrelatedbenefits.

Revenues ThreeMonthsEndedJune30, Change SixMonthsEndedJune30, Change (Dollarsinmillions) 2020 2019 $ % 2020 2019 $ % Automotivesales $ 4,911 $ 5,168 $ (257) -5%$ 9,804 $ 8,677 $ 1,127 13%Automotiveleasing 268 208 60 29% 507 423 84 20%Totalautomotiverevenues 5,179 5,376 (197) -4% 10,311 9,100 1,211 13%

Servicesandother 487 605 (118) -20% 1,047 1,098 (51) -5%Totalautomotive&servicesandothersegmentrevenue 5,666 5,981 (315) -5% 11,358 10,198 1,160 11%

Energygenerationandstoragesegmentrevenue 370 369 1 0% 663 693 (30) -4%Totalrevenues $ 6,036 $ 6,350 $ (314) -5%$ 12,021 $ 10,891 $ 1,130 10%

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Automotive&ServicesandOtherSegment

AutomotivesalesrevenueincludesrevenuesrelatedtocashdeliveriesofnewModelS,ModelX,Model3andModelYvehicles,includingaccesstoourSuperchargernetwork,internetconnectivity,FSDfeaturesandover-the-airsoftwareupdates,aswellassalesofregulatorycreditstootherautomotivemanufacturers.Cashdeliveriesarevehiclesthatarenotsubjecttoleaseaccounting.Ourrevenuefromregulatorycreditsfluctuatesbyquarterdependingonwhenacontractisexecutedwithabuyerandwhenthecreditsaredelivered.Forexample,ourrevenuefromregulatorycreditsalesinthethreemonthsendedJune30,2019was$111millionwhileitwas$428millioninthethreemonthsendedJune30,2020.

AutomotiveleasingrevenueincludestheamortizationofrevenueforModelS,ModelXandModel3vehiclesunderdirectleaseagreementsaswellasthosesoldwithresalevalueguaranteesaccountedforasoperatingleasesunderleaseaccounting.WebeganofferingdirectleasingforModel3vehiclesinthesecondquarterof2019andwebeganofferingdirectleasingforModelYvehiclesinthethirdquarterof2020.

Servicesandotherrevenueconsistsofnon-warrantyafter-salesvehicleservices,salesofusedvehicles,retailmerchandise,salesbyouracquiredsubsidiariestothirdpartycustomers,andvehicleinsurancerevenue.

Automotivesalesrevenuedecreased$257million,or5%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019,primarilyduetoadecreaseof6,807ModelSandModelXcashdeliveriesandadecreaseintheaveragesellingpriceofModel3fromahighersalesmixoflowerendtrimsinthethreemonthsendedJune30,2020comparedtothesameperiodintheprioryearaswebegandeliveringStandardRangevariantsinternationallyinJune2019.Thesedecreaseswerepartiallyoffsetbyanincreaseof$317millionfromadditionalsalesofregulatorycreditsto$428millioninthethreemonthsendedJune30,2020andanincreaseof3,691Model3andModelYcashdeliveriesdespiteproductionlimitationsasaresultoftemporarysuspensionofproductionattheFremontFactoryduringthefirsthalfof2020.WewereabletoincreasedeliveriesyearoveryearfromadditionalModel3productioncapacityatGigafactoryShanghai.

Automotivesalesrevenueincreased$1.13billion,or13%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019,primarilyduetoanincreaseof24,865Model3andModelYcashdeliveriesdespiteproductionlimitationsasaresultoftemporarysuspensionofproductionattheFremontFactoryduringthefirsthalfof2020.WewereabletoincreasedeliveriesyearoveryearfromadditionalModel3productioncapacityatGigafactoryShanghai.Additionally,duetopricingadjustmentswemadetoourvehicleofferingsinthesixmonthsendedJune30,2019,weestimatedthattherewasagreaterlikelihoodthatcustomerswouldexercisetheirbuybackoptionsandadjustedoursalesreturnreserveonvehiclespreviouslysoldunderourbuybackoptionsprogramwhichresultedinareductionofautomotivesalesrevenueof$565million.DuringthesixmonthsendedJune30,2020,wemadefurtherpricingadjustmentsthatsimilarlyresultedinareductionofautomotivesalesrevenueof$60million.Therewasalsoanincreaseof$455millionfromadditionalsalesofregulatorycreditsto$782millioninthesixmonthsendedJune30,2020.TheincreasesinautomotivesalesrevenuewerepartiallyoffsetbyadecreaseintheaveragesellingpriceofModel3fromahighersalesmixoflowerendtrimsaswebegandeliveringStandardRangevariantsinternationallyinJune2019andadecreaseof7,245ModelSandModelXcashdeliveriesinthesixmonthsendedJune30,2020comparedtothesameperiodintheprioryear.

Automotiveleasingrevenueincreased$60million,or29%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Automotiveleasingrevenueincreased$84million,or20%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.TheincreasesinthethreeandsixmonthsendedJune30,2020comparedtothesameperiodsintheprioryearwereprimarilyduetoanincreaseincumulativevehiclesunderourdirectvehicleleasingprogramandanincreaseinthenumberofvehiclesunderleasingprogramswhereourcounterpartyhasretainedownershipofthevehicleduringorattheendoftheguaranteeperiod.Whenourcounterpartyretainsownership,anyremainingdeferredrevenueandresalevalueguaranteeliabilitiesarereleasedtoautomotiveleasingrevenue.Theseincreaseswerepartiallyoffsetbyadecreaseincumulativevehiclesunderourresalevalueguaranteeleasingprogramswhichareaccountedforasoperatingleases.

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Servicesandotherrevenuedecreased$118million,or20%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Servicesandotherrevenuedecreased$51million,or5%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.Thesedecreaseswereprimarilyduetoadecreaseinthevolumeofusedvehiclesales,offsetbyanincreaseinaveragesellingpricesfortraded-inTeslavehicles.Additionally,therewasanincreaseinnon-warrantymaintenanceservicesrevenueasourfleetcontinuestogrowandanincreaseinsalesbyouracquiredsubsidiariestothirdpartycustomers.

EnergyGenerationandStorageSegmentEnergygenerationandstoragerevenueincludessalesandleasingofsolarenergygenerationandenergystorageproducts,servicesrelatedto

suchproducts,andsalesofsolarenergysystemsincentives.

Energygenerationandstoragerevenueincreasedby$1million,or0%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Energygenerationandstoragerevenuedecreasedby$30million,or4%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019,primarilyduetoadecreaseindeploymentsofsolarcashandloanjobs.

CostofRevenuesandGrossMargin ThreeMonthsEndedJune30, Change SixMonthsEndedJune30, Change (Dollarsinmillions) 2020 2019 $ % 2020 2019 $ % Costofrevenues Automotivesales $ 3,714 $ 4,254 $ (540) -13% $ 7,413 $ 7,110 $ 303 4%Automotiveleasing 148 106 42 40% 270 223 47 21%Totalautomotivecostofrevenues 3,862 4,360 (498) -11% 7,683 7,333 350 5%

Servicesandother 558 743 (185) -25% 1,206 1,429 (223) -16%Totalautomotive&servicesandothersegmentcostofrevenues

4,420

5,103

(683)

-13%

8,889

8,762 127

1%Energygenerationandstoragesegment 349 326 23 7% 631 642 (11) -2%Totalcostofrevenues $ 4,769 $ 5,429 $ (660) -12% $ 9,520 $ 9,404 $ 116 1%

Grossprofittotalautomotive $ 1,317 $ 1,016 $ 2,628 $ 1,767 Grossmargintotalautomotive 25% 19% 25% 19% Grossprofittotalautomotive&servicesandothersegment $ 1,246 $ 878 $ 2,469 $ 1,436 Grossmargintotalautomotive&servicesandothersegment 22% 15% 22% 14% Grossprofitenergygenerationandstoragesegment $ 21 $ 43 $ 32 $ 51 Grossmarginenergygenerationandstoragesegment 6% 12% 5% 7% Totalgrossprofit

$ 1,267 $ 921 $ 2,501 $ 1,487 Totalgrossmargin 21% 15% 21% 14%

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Automotive&ServicesandOtherSegment

Costofautomotivesalesrevenueincludesdirectparts,materialandlaborcosts,manufacturingoverhead,includingdepreciationcostsoftoolingandmachinery,shippingandlogisticcosts,vehicleconnectivitycosts,allocationsofelectricityandinfrastructurecostsrelatedtoourSuperchargernetwork,andreservesforestimatedwarrantyexpenses.Costofautomotivesalesrevenuesalsoincludesadjustmentstowarrantyexpenseandchargestowritedownthecarryingvalueofourinventorywhenitexceedsitsestimatednetrealizablevalueandtoprovideforobsoleteandon-handinventoryinexcessofforecasteddemand.

Costofautomotiveleasingrevenueincludestheamortizationofoperatingleasevehiclesovertheleaseterm,aswellaswarrantyexpensesrecognizedasincurred.CostofautomotiveleasingrevenuealsoincludesvehicleconnectivitycostsandallocationsofelectricityandinfrastructurecostsrelatedtoourSuperchargernetworkforvehiclesunderourleasingprograms.

Costsofservicesandotherrevenueincludescostsassociatedwithprovidingnon-warrantyafter-salesservices,coststoacquireandcertifyusedvehicles,costsforretailmerchandise,andcoststoprovidevehicleinsurance.Costofservicesandotherrevenuealsoincludesdirectparts,materialandlaborcosts,manufacturingoverheadassociatedwiththesalesbyouracquiredsubsidiariestothirdpartycustomers.

Costofautomotivesalesrevenuedecreased$540million,or13%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019,primarilyduetoadecreaseof6,807ModelSandModelXcashdeliveriesandadecreaseinaverageModel3costsperunitduetoahighersalesmixoflowerendtrims,lowerfreightanddutycostsfromlocalproductioninChina,andadditionalmanufacturingefficienciesintheproductionofModel3inourFremontFactory.Thedecreaseincostofautomotivesalesrevenuewaspartiallyoffsetbyidlecapacitychargesof$189millionasaresultoftemporarysuspensionofproductionattheFremontFactoryandGigafactoryNevadaduringthethreemonthsendedJune30,2020andanincreaseof3,691Model3andModelYcashdeliveries.

Costofautomotivesalesrevenueincreased$303million,or4%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019,primarilyduetoadecreaseinaverageModel3costsperunitduetoahighersalesmixoflowerendtrims,lowerfreightanddutycostsfromlocalproductioninChina,andadditionalmanufacturingefficienciesintheproductionofModel3inourFremontFactory.Therewasalsoadecreaseof7,245ModelSandModelXcashdeliveriesinthesixmonthsendedJune30,2020comparedtothesameperiodintheprioryearatlowercostsperunitduetolowerfreightanddutiesfromregionalsalesmix.Thedecreasesincostofautomotivesalesrevenuewerepartiallyoffsetbyanincreaseof24,865Model3andModelYcashdeliveries.DuetopricingadjustmentswemadetoourvehicleofferingsinthesixmonthsendedJune30,2019,weestimatedthattherewasagreaterlikelihoodthatcustomerswouldexercisetheirbuybackoptionsandifcustomerselecttoexercisethebuybackoption,weexpecttobeabletosubsequentlyresellthereturnedvehicles,whichresultedinareductionofcostofautomotivesalesrevenueof$458million.DuringthesixmonthsendedJune30,2020,wemadefurtherpricingadjustmentsthatsimilarlyresultedinareductionofcostofautomotivesalesrevenueof$37million.Additionally,therewasanincreasetocostofautomotivesalesrevenuefromidlecapacitychargesof$213millionasaresultoftemporarysuspensionofproductionattheFremontFactoryandGigafactoryNevadaduringthesixmonthsendedJune30,2020.

Costofautomotiveleasingrevenueincreased$42million,or40%,inthethreemonthsendedJune30,2020comparedtothethreemonthsendedJune30,2019.Costofautomotiveleasingrevenueincreased$47million,or21%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.TheincreasesinthethreeandsixmonthsendedJune30,2020comparedtothesameperiodsintheprioryearwereprimarilyduetoanincreaseincumulativevehiclesunderourdirectvehicleleasingprogramandanincreaseinthenumberofvehiclesunderleasingprogramswhereourcounterpartyhasretainedownershipofthevehicleduringorattheendoftheguaranteeperiod.Whenourcounterpartyretainsownership,thenetbookvalueoftheleasedvehicleoftheleasevehicleisexpensedtocostofautomotiveleasingrevenue.Theseincreaseswerepartiallyoffsetbyadecreaseincumulativevehiclesunderourresalevalueguaranteeleasingprogramswhichareaccountedforasoperatingleases.

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Costofservicesandotherrevenuedecreased$185million,or25%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Costofservicesandotherrevenuedecreased$223million,or16%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.Thedecreaseswereprimarilyduetodecreasedcostsofusedvehiclesalesfromlowersalesvolumeanddecreasedcostsofnon-warrantymaintenanceservicesasaresultofadditionaloperationalefficiencies.Thesedecreaseswerepartiallyoffsetbyanincreaseincostofsalesbyouracquiredsubsidiariestothirdpartycustomersinlinewiththeincreaseinrevenue.

Grossmarginfortotalautomotiveincreasedfrom19%to25%inthethreeandsixmonthsendedJune30,2020ascomparedtothethreeandsixmonthsendedJune30,2019,primarilydueanincreaseof$317millionand$455million,respectively,insalesofregulatorycreditsandanimprovementofModel3grossmarginprimarilyfromlowerfreightanddutycostsfromlocalproductioninChinaandadditionalmanufacturingefficienciesintheproductionofModel3inourFremontFactory.Additionally,improvementofModelSandModelXgrossmarginfromlowerfreightanddutiesfromregionalsalesmixhelpedcontributetohighertotalautomotivegrossmargin.Theincreaseswerepartiallyoffsetbyidlecapacitychargesof$189millionand$213millionasaresultoftemporarysuspensionofproductionattheFremontFactoryduringthethreeandsixmonthsendedJune30,2020,respectively.

Grossmarginfortotalautomotive&servicesandothersegmentincreasedfrom15%to22%inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Grossmarginfortotalautomotive&servicesandothersegmentincreasedfrom14%to22%inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.TheincreasestogrossmargininthethreeandsixmonthsendedJune30,2020comparedtothesameperiodsintheprioryearwereprimarilyduetotheautomotivegrossmarginimpactsdiscussedaboveandimprovedservicesandothergrossmarginfromincreasedoperationalefficienciesinournon-warrantymaintenanceservicesbusinessandimprovedusedvehiclesalesmargins.Additionally,therewasanincreaseduetoalowerproportionofservicesandotherwithinthesegmentinthethreeandsixmonthsendedJune30,2020,whichoperatesatalowergrossmarginthanourautomotivebusiness.

EnergyGenerationandStorageSegmentCostofenergygenerationandstoragerevenueincludesdirectandindirectmaterialandlaborcosts,warehouserent,freight,warrantyexpense,

otheroverheadcostsandamortizationofcertainacquiredintangibleassets.Inaddition,wherearrangementsareaccountedforasoperatingleases,thecostofrevenueisprimarilycomprisedofdepreciationofthecostofleasedsolarenergysystems,maintenancecostsassociatedwiththosesystemsandamortizationofanyinitialdirectcosts.

Costofenergygenerationandstoragerevenueincreasedby$23million,or7%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019,primarilyduetohighercostsfromtemporarymanufacturingutilizationofourSolarRooframpandidlecapacitychargesof$20millionasaresultoftemporarysuspensionofproductionatGigafactoryNewYorkduringthethreemonthsendedJune30,2020,partiallyoffsetbyadecreaseindeploymentsofsolarcashandloanjobs.

Costofenergygenerationandstoragerevenuedecreasedby$11million,or37%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019,primarilyduetoadecreaseindeploymentsofsolarcashandloanjobsandlowermaterialcostsperunitforstorageproducts,offsetbyhighercostsfromtemporarymanufacturingutilizationofourSolarRooframpandidlecapacitychargesof$20millionasaresultoftemporarysuspensionofproductionatGigafactoryNewYorkduringthesixmonthsendedJune30,2020.

Grossmarginforenergygenerationandstoragedecreasedfrom12%to6%inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019,primarilyduetoidlecapacitychargesof$20millionasaresultoftemporarysuspensionofproductionatGigafactoryNewYorkduringthethreemonthsendedJune30,2020.

Grossmarginforenergygenerationandstoragedecreasedfrom7%to5%inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019,primarilyduetoidlecapacitychargesof$20millionasaresultoftemporarysuspensionofproductionatGigafactoryNewYorkduringthesixmonthsendedJune30,2020.Thisdecreaseispartiallyoffsetbyanimprovementinourenergystoragegrossmarginasaresultoflowermaterialscosts.

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ResearchandDevelopmentExpense ThreeMonthsEndedJune30, Change SixMonthsEndedJune30, Change (Dollarsinmillions) 2020 2019 $ % 2020 2019 $ % Researchanddevelopment $ 279 $ 324 $ (45) -14% $ 603 $ 664 $ (61) -9%Asapercentageofrevenues 5% 5% 5% 6%

Researchanddevelopment(“R&D”)expensesconsistprimarilyofpersonnelcostsforourteamsinengineeringandresearch,manufacturingengineeringandmanufacturingtestorganizations,prototypingexpense,contractandprofessionalservicesandamortizedequipmentexpense.

R&Dexpensesdecreased$45million,or14%,inthethreemonthsendedJune30,2020comparedtothethreemonthsendedJune30,2019.Thedecreasewasprimarilyduetoa$27milliondecreaseinemployeeandlaborrelatedexpenses,an$11milliondecreaseinprofessionalandoutsideserviceexpensesanda$4milliondecreaseinexpensedmaterials.ThedecreasesobservedweredrivenbyourcontinuedfocusonincreasingoperationalefficiencyandprocessautomationandfromourcostsavingsinitiativesaspartofourCOVID-19responsestrategyasdiscussedabove.

R&Dexpensesasapercentageofrevenuedecreasedfrom5.1%to4.6%inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.ThedecreaseisprimarilyfromadecreaseinourR&Dexpensesasdetailedabove,offsetbyadecreaseintotalrevenuesasaresultoftemporarysuspensionofourfactoriesduringthefirsthalfof2020.

R&Dexpensesdecreased$61million,or9%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.Thedecreasewasprimarilyduetoa$49milliondecreaseinemployeeandlaborrelatedexpensesanda$9milliondecreaseinprofessionalandoutsideserviceexpenses,partiallyoffsetbyan$8millionincreaseinfacilities,freightanddepreciationexpenses.ThedecreasesobservedweredrivenbyourcontinuedfocusonincreasingoperationalefficiencyandprocessautomationandfromourcostsavingsinitiativesaspartofourCOVID-19responsestrategyasdiscussedabove.

R&Dexpensesasapercentageofrevenuedecreasedfrom6%to5%inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.ThedecreaseisprimarilyfromadecreaseinourR&Dexpensesasdetailedaboveandanincreaseintotalrevenuesfromexpandingsales.

Selling,GeneralandAdministrativeExpense ThreeMonthsEndedJune30, Change SixMonthsEndedJune30, Change (Dollarsinmillions) 2020 2019 $ % 2020 2019 $ % Selling,generalandadministrative $ 661 $ 647 $ 14 2% $ 1,288 $ 1,351 $ (63) -5%Asapercentageofrevenues 11% 10%

11% 12%

Selling,generalandadministrative(“SG&A”)expensesgenerallyconsistofpersonnelandfacilitiescostsrelatedtoourstores,marketing,sales,executive,finance,humanresources,informationtechnologyandlegalorganizations,aswellasfeesforprofessionalandcontractservicesandlitigationsettlements.

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SG&Aexpensesincreased$14million,or2%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Theincreasewasprimarilyduetoanincreaseof$119millioninstock-basedcompensationexpense,ofwhich$111millionwasattributabletothe2018CEOPerformanceAward.Wehadrecordeda$79millioncumulativecatch-upexpensefortheserviceprovidedfromthegrantdatewhenanadditionaloperationalmilestonewasconsideredprobableofbeingmetinthesecondquarterof2020andtheremainingunamortizedexpenseof$22millionforthefirsttranchewasrecognizedinthesecondquarterof2020uponvestingasthefirstmarketcapitalizationmilestonewasachieved(seeNote11,EquityIncentivePlans,totheconsolidatedfinancialstatementsincludedelsewhereinthisQuarterlyReportonForm10-Q).TheremainderoftheincreaseinSG&Aexpensefromthe2018CEOPerformanceAwardisattributedtotheadditionalperformancemilestonethatwasdeemedprobableinthefourthquarterof2019.Theincreasewaspartiallyoffsetbyadecreaseof$74millioninemployeeandlaborrelatedexpensesanda$46milliondecreaseinoffice,informationtechnologyandfacilities-relatedexpensesandsalesandmarketingactivities.ThedecreasesobservedweredrivenbyourcontinuedfocusonincreasingoperationalefficiencyandprocessautomationandfromourcostsavingsinitiativesaspartofourCOVID-19responsestrategyasdiscussedabove.

SG&Aexpensesasapercentageofrevenueincreasedfrom10%to11%inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Theincreaseisprimarilyfromadecreaseintotalrevenuesasaresultoftemporarysuspensionofourfactoriesduringthefirsthalfof2020andanincreaseinourSG&Aexpensesasdetailedabove.

SG&Aexpensesdecreased$63million,or5%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019Thedecreaseisprimarilyduetoa$123milliondecreaseinemployeeandlaborrelatedexpensesand$64milliondecreaseinoffice,informationtechnologyandfacilities-relatedexpensesandsalesandmarketingactivities.ThedecreasesobservedweredrivenbyourcontinuedfocusonincreasingoperationalefficiencyandprocessautomationandfromourcostsavingsinitiativesaspartofourCOVID-19responsestrategyasdiscussedabove.Thedecreaseswerepartiallyoffsetbyanincreaseof$125millioninstock-basedcompensationexpense,ofwhich$122millionwasattributabletothe2018CEOPerformanceAward.Wehadrecordeda$79millioncumulativecatch-upexpensefortheserviceprovidedfromthegrantdatewhenanadditionaloperationalmilestonewasconsideredprobableofbeingmetinthesecondquarterof2020andtheremainingunamortizedexpenseof$22millionforthefirsttranchewasrecognizedinthesecondquarterof2020uponvestingasthefirstmarketcapitalizationmilestonewasachieved(seeNote11,EquityIncentivePlans,totheconsolidatedfinancialstatementsincludedelsewhereinthisQuarterlyReportonForm10-Q).TheremainderoftheincreaseinSG&Aexpensefromthe2018CEOPerformanceAwardisattributedtotheadditionalperformancemilestonethatwasdeemedprobableinthefourthquarterof2019.

SG&Aexpensesasapercentageofrevenuedecreasedfrom12%to11%inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.ThedecreaseisprimarilyfromadecreaseinourSG&Aexpensesasdetailedaboveandanincreaseintotalrevenuesfromexpandingsales.

Restructuringandother ThreeMonthsEndedJune30, Change SixMonthsEndedJune30, Change (Dollarsinmillions) 2020 2019 $ % 2020 2019 $ % Restructuringandother $ — $ 117 $ (117) -100% $ — $ 161 $ (161) -100% Asapercentageofrevenues 0% 2% 0% 1%

Duringthefirsthalfof2019,wecarriedoutcertainrestructuringactionsinordertoreducecostsandimproveefficiency.Asaresult,werecognized$50millionofcostsprimarilyrelatedtoemployeeterminationexpensesandlossesfromclosingcertainstores.Thesecostsweresubstantiallypaidbytheendofsecondquarterof2019.Duringthesecondquarterof2019,werecognized$47millioninimpairmentrelatedtoIPR&Dasweabandonedfurtherdevelopmenteffortsand$15millionfortherelatedequipment.Wealsoincurredalossof$49millionforclosingcertainfacilities.TherewerenorestructuringactionsinthethreeandsixmonthsendedJune30,2020.

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InterestExpense ThreeMonthsEndedJune30, Change SixMonthsEndedJune30, Change (Dollarsinmillions) 2020 2019 $ % 2020 2019 $ % Interestexpense $ 170 $ 172 $ (2) -1% $ 339 $ 330 $ 9 3%Asapercentageofrevenues 3% 3% 3% 3%

Interestexpensedecreasedby$2million,or1%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.

Interestexpenseincreasedby$9million,or3%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019,

primarilyduetoanincreaseinouraverageoutstandingindebtednessascomparedtothesixmonthsendedJune30,2019.

OtherIncome(Expense),Net

ThreeMonthsEndedJune30, Change SixMonthsEndedJune30, Change (Dollarsinmillions) 2020 2019 $ % 2020 2019 $ % Otherexpense,net $ (15) $ (41) $ 26 -63% $ (69) $ (15) $ (54) 360% Asapercentageofrevenues 0% -1% -1% 0%

Otherincome(expense),net,consistsprimarilyofforeignexchangegainsandlossesrelatedtoourforeigncurrency-denominatedmonetary

assetsandliabilitiesandchangesinthefairvaluesofourfixed-for-floatinginterestrateswaps.Weexpectourforeignexchangegainsandlosseswillvarydependinguponmovementsintheunderlyingexchangerates.

Otherexpense,net,changedfavorablyby$26million,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Thechangewasprimarilyduetoadecreaseinlossesfrominterestrateswapsrelatedtoourdebtfacilitiesyear-over-yearandfavorablefluctuationsinforeigncurrencyexchangeratescomparedtothethreemonthsendedJune30,2019.

Otherexpense,net,changedunfavorablyby$54million,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.ThechangewasprimarilyduetounfavorablefluctuationsinforeigncurrencyexchangeratescomparedtothesixmonthsendedJune30,2019.

ProvisionforIncomeTaxes ThreeMonthsEndedJune30, Change SixMonthsEndedJune30, Change (Dollarsinmillions) 2020 2019 $ % 2020 2019 $ % Provisionforincometaxes $ 21 $ 19 $ 2 11%$ 23 $ 42 $ (19) -45%Effectivetaxrate 14% -5%

10% -4%

Ourprovisionforincometaxesincreasedby$2million,or11%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Theincreaseisprimarilyduetoanincreaseindiscretetaxexpenseinthecurrentperiodrelatedtoforeignreturn-to-provisionitems,partiallyoffsetbyreducedtaxableprofitswithincertainforeignjurisdictionscomparedtothesameperiodintheprioryear.

Ourprovisionforincometaxesdecreasedby$19million,or45%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsended

June30,2019.Thedecreasewasprimarilyduetoreducedtaxableprofitswithincertainforeignjurisdictions,partiallyoffsetbyanincreaseindiscretetaxexpenseinthecurrentperiodrelatedtoforeignreturn-to-provisionitemscomparedtothesameperiodintheprioryear.

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Oureffectivetaxrateincreasedfrom-5%to14%inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Oureffectivetaxrateincreasedfrom-4%to10%inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2020.Theincreaseswereprimarilyduetobeinginapre-taxearningspositioninthethreeandsixmonthsendedJune30,2020ascomparedtoapre-taxlosspositionforthesameperiodsintheprioryear.

NetIncomeAttributabletoNoncontrollingInterestsandRedeemableNoncontrollingInterests ThreeMonthsEndedJune30, Change SixMonthsEndedJune30, Change (Dollarsinmillions) 2020 2019 $ % 2020 2019 $ % Netincomeattributabletononcontrollinginterestsandredeemablenoncontrollinginterestsinsubsidiaries $ 25

$ 19

$ 6

32%

$ 77

$ 53 $ 24 45%

Ournetincomeattributabletononcontrollinginterestsandredeemablenoncontrollinginterestswasrelatedtofinancingfundarrangements.

Netincomeattributabletononcontrollinginterestsandredeemablenoncontrollinginterestsincreasedby$6million,or32%,inthethreemonthsendedJune30,2020ascomparedtothethreemonthsendedJune30,2019.Netincomeattributabletononcontrollinginterestsandredeemablenoncontrollinginterestsincreasedby$24million,or45%,inthesixmonthsendedJune30,2020ascomparedtothesixmonthsendedJune30,2019.Theincreaseswereprimarilyduetoloweractivitiesfromnewfinancingfundarrangements.

LiquidityandCapitalResourcesAsofJune30,2020,wehad$8.62billionofcashandcashequivalents.BalancesheldinforeigncurrencieshadaU.S.dollarequivalentof

$3.60billionandconsistedprimarilyofChineseyuan,eurosandCanadiandollars.Oursourcesofcasharepredominantlyfromourdeliveriesofvehicles,salesandinstallationsofourenergystorageproductsandsolarenergysystems,proceedsfromdebtfacilities,proceedsfromfinancingfundsandproceedsfromequityofferings.

Oursourcesofliquidityandcashflowsenableustofundongoingoperations,researchanddevelopmentprojectsfornewproducts,establishmentand/orincreasesofModel3andModelYproductioncapacityattheFremontFactoryandatGigafactoryShanghai,thecontinuedexpansionofGigafactoryNevada,theconstructionofGigafactoryBerlinandGigafactoryTexas,themanufacturingrampoftheSolarRoofatGigafactoryNewYork,andthecontinuedexpansionofourretailandservicelocations,bodyshops,MobileServicefleetandSuperchargernetwork.

AsdiscussedinandsubjecttotheconsiderationsreferencedinPartI,Item2,Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations—ManagementOpportunities,ChallengesandRisks—TrendsinCashFlow,CapitalExpendituresandOperatingExpensesinthisQuarterlyReportonForm10-Q,consideringtheexpectedpaceofthemanufacturingrampsforourproducts,constructionandexpansionofourfactories,andpipelineofprojectsunderdevelopment,andconsistentwithourcurrentstrategyofusingapartnertomanufacturebatterycells,aswellasconsideringallotherinfrastructuregrowth,wecurrentlyexpectouraverageannualcapitalexpendituresin2020andthetwosucceedingfiscalyearstobe$2.5billionto$3.5billion.

Weexpectthatthecashwegeneratefromourcoreoperationswillgenerallybesufficienttocoverourfuturecapitalexpendituresandtopaydownournear-termdebtobligations,althoughwemaychoosetoseekalternativefinancingsources.Forexample,weexpectthatmuchofourinvestmentinGigafactoryShanghaiwillcontinuetobefundedthroughindebtednessarrangedthroughlocalfinancialinstitutionsinChina,suchastheRMB9.0billion(ortheequivalentamountinU.S.dollars)fixedassettermfacilityandRMB2.25billion(ortheequivalentamountinU.S.dollars)workingcapitalrevolvingfacilitythatourlocalsubsidiaryenteredintoinDecember2019,andweexpectthesamewithrespecttoGigafactoryBerlin.Asalways,wecontinuallyevaluateourcapitalexpenditureneedsandmaydecideitisbesttoraiseadditionalcapitaltofundtherapidgrowthofourbusiness.

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Wehaveanagreementtospendorincur$5.0billionincombinedcapital,operationalexpenses,costsofgoodssoldandothercostsintheStateofNewYorkduringthe10-yearperiodbeginningApril30,2018.InApril2020,thegovernmentagencyoverseeingthisagreementissuedguidancethatallobligationsrelatingtoinvestmentandemploymenttargetsundercertainofitsprojects,includingourobligationtobecompliantwithourapplicabletargetsundersuchagreementonApril30,2020,maybedeferredforaone-yearperioduponsuchagency’sapprovalofanapplicationforreliefbytheobligor.AswetemporarilysuspendedmostofourmanufacturingoperationsatGigafactoryNewYorkpursuanttoaNewYorkStateexecutiveorderissuedinMarch2020asaresultoftheCOVID-19pandemic,weweregrantedsuchdeferral,whichwasmemorializedinanamendmenttothisagreementinJuly2020.Moreover,aswehadexceededourinvestmentandemploymentobligationsunderthisagreementpriortosuchmandatedreductionofoperations,wedonotcurrentlyexpectanyissuesmeetingallapplicablefutureobligationsunderthisagreement,andwedonotbelievethatwefaceasignificantriskofdefault.

Weexpectthatourcurrentsourcesofliquiditytogetherwithourprojectionofcashflowsfromoperatingactivitieswillprovideuswithadequateliquidityoveratleastthenext12months.Alargeportionofourfutureexpendituresistofundourgrowth,andwecanadjustourcapitalandoperatingexpendituresbyoperatingsegment,includingfutureexpansionofourproductofferings,retailandservicelocations,bodyshops,MobileServicefleet,andSuperchargernetwork.Forexample,ifournear-termmanufacturingoperationsareatasmallerscaleorrampmoreslowlythanexpected,includingduetoglobaleconomicconditionsandlevelsofconsumercomfortandspendimpactingdemandintheworldwidetransportation,automotiveandenergyproductindustries,thepaceofourcapitalexpendituresmaybecorrespondinglyslowed.Wemayneedorwanttoraiseadditionalfundsinthefuture,andthesefundsmaynotbeavailabletouswhenweneedorwantthem,oratall.Ifwecannotraiseadditionalfundswhenweneedorwantthem,ouroperationsandprospectscouldbenegativelyaffected.

Inaddition,wehad$1.83billionofunusedcommittedamountsunderourcreditfacilitiesandfinancingfundsasofJune30,2020,someofwhicharesubjecttosatisfyingspecifiedconditionspriortodraw-down(suchaspledgingtoourlenderssufficientamountsofqualifiedreceivables,inventories,leasedvehiclesandourinterestsinthoseleases,solarenergysystemsandtheassociatedcustomercontracts,ourinterestsinfinancingfundsorvariousotherassets;andcontributingorsellingqualifiedsolarenergysystemsandtheassociatedcustomercontractsorqualifiedleasedvehiclesandourinterestsinthoseleasesintothefinancingfunds).Fordetailsregardingourindebtednessandfinancingfunds,refertoNote10,Debt,andNote13,VariableInterestEntityArrangements,totheconsolidatedfinancialstatementsincludedelsewhereinthisQuarterlyReportonForm10-Q.

SummaryofCashFlows SixMonthsEndedJune30, (Dollarsinmillions) 2020 2019 Netcashprovidedbyoperatingactivities $ 524 $ 224Netcashusedininvestingactivities $ (1,046) $ (547)Netcashprovidedbyfinancingactivities $ 2,831 $ 1,490CashFlowsfromOperatingActivities

Ourcashflowsfromoperatingactivitiesaresignificantlyaffectedbyourcashinvestmentstosupportthegrowthofourbusinessinareassuchasresearchanddevelopmentandselling,generalandadministrativeandworkingcapital,especiallyinventory,whichincludesvehiclesintransit.Ouroperatingcashinflowsincludecashfromvehiclesales,customerleasepayments,customerdeposits,cashfromsalesofregulatorycreditsandenergygenerationandstorageproducts.Thesecashinflowsareoffsetbyourpaymentstosuppliersforproductionmaterialsandpartsusedinourmanufacturingprocess,operatingexpenses,operatingleasepaymentsandinterestpaymentsonourfinancings.

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Netcashprovidedbyoperatingactivitiesincreasedby$300millionto$524millionduringthesixmonthsendedJune30,2020from$224millionduringthesixmonthsendedJune30,2019.Thisfavorablechangewasprimarilyduetoanincreaseinnetincome,excludingnon-cashexpensesandgains,of$1.42billionand$188millionoftherepaymentofour0.25%ConvertibleSeniorNotesduein2019duringthethreemonthsendedMarch31,2019(whichwasclassifiedasanoperatingactivity,asthisrepresentedaninterestpaymentonthediscountedconvertiblenotes),partiallyoffsetbyanincreaseinworkingcapitalof$1.31billion.TheincreaseinworkingcapitalwasmainlydrivenbyadecreaseindeferredrevenueinthesixmonthsendedJune30,2020ascomparedtoanincreaseinthesixmonthsendedJune30,2019,duetodeliveryofregulatorycreditsunderapreviousarrangementwherewehadreceivedpaymentinadvance,andadecreaseinaccountspayableandaccruedliabilitiesinthesixmonthsendedJune30,2020ascomparedtoanincreaseinthesameperiodin2019,fromreleasesofresalevalueguaranteeliabilitiesandlesssalesrelatedtaxdueasaresultofquarter-over-quarterchangesindeliveries.Additionally,therewasalargerincreaseininventoryfrombuildupofrawmaterials,alargerincreaseinprepaidexpensesandothercurrentassets,andalargerincreaseinoperatingleasevehicles,asModel3directleasingwasintroducedinthesecondquarterof2019.TheincreaseinworkingcapitalwaspartiallyoffsetbyanincreaseincustomerdepositsinthesixmonthsendedJune30,2020ascomparedtoadecreaseforthesameperiodin2019.

CashFlowsfromInvestingActivitiesCashflowsfrominvestingactivitiesandtheirvariabilityacrosseachperiodrelatedprimarilytocapitalexpenditures,whichwere$1.00billion

duringthesixmonthsendedJune30,2020,mainlyforModelYproductionattheFremontFactoryandconstructionofGigafactoryShanghaiandGigafactoryBerlin,and$530millionduringthesixmonthsendedJune30,2019,mainlyforModel3production.Design,acquisitionandinstallationofsolarenergysystemsamountedto$46millionand$43millionforthesixmonthsendedJune30,2020and2019,respectively.

CashFlowsfromFinancingActivitiesCashflowsfromfinancingactivitiesduringthesixmonthsendedJune30,2020consistedprimarilyof$2.31billionfromourFebruary2020

publicofferingofcommonstock,netofissuancecosts,$724millionofnetborrowingsunderloanagreementsenteredintobycertainChinesesubsidiaries,$514millionofnetborrowingsunderourvehiclelease-backedloanandsecurityagreements(the“WarehouseAgreements”),and$217millionofproceedsfromexerciseofstockoptionsandotherstockissuances.Thesecashinflowswerepartiallyoffsetby$254millionofpaymentsoftheautomotiveasset-backednotes,$177millionofpaymentsundertheseniorsecuredasset-basedrevolvingcreditagreement(the“CreditAgreement”),collateralizedleaserepaymentsof$168million,and$154millionprincipalrepaymentsofourfinanceleases.

CashflowsprovidedbyfinancingactivitiesduringthesixmonthsendedJune30,2019consistedprimarilyof$1.82billionfromtheissuanceof2.00%ConvertibleSeniorNotesduein2024(“2024Notes”),netoftransactioncosts,and$847millionfromtheissuanceofcommonstock,netofunderwritingdiscountsandofferingcosts,inregisteredpublicofferings,$230millionofnetborrowingsundertheWarehouseAgreements,$200millionofnetborrowingsundertheCreditAgreement,and$174millionfromtheissuanceofwarrantsinconnectionwiththeofferingofthe2024Notes.Thesecashinflowswerepartiallyoffsetbya$732millionportionoftherepaymentofour0.25%ConvertibleSeniorNotesduein2019thatwasclassifiedasfinancingactivity,apurchaseofconvertiblenotehedgesof$476millioninconnectionwiththeofferingofthe2024Notes,andrepaymentsof$228millionoftheautomotiveasset-backednotes.

ContractualObligationsContractualobligationsdidnotmateriallychangeduringthesixmonthsendedJune30,2020exceptfordebtactivity,asdiscussedinmore

detailinNote10,Debt,andtheaggregateimpactofnewandupdatedsupplierarrangementsforGigafactoryShanghaiandGigafactoryBerlinduringthesixmonthsendedJune30,2020.ThefollowingtablessetsforththeaggregateimpactfromthesesupplierarrangementsonourpurchaseobligationsasofJune30,2020(inmillions):

SixmonthsendingDecember31,2020 $ 557

2021 108Total $ 665

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Off-BalanceSheetArrangements

Duringtheperiodspresented,wedidnothaverelationshipswithunconsolidatedentitiesorfinancialpartnerships,suchasentitiesoftenreferredtoasstructuredfinanceorspecialpurposeentities,whichwereestablishedforthepurposeoffacilitatingoff-balancesheetarrangementsorothercontractuallynarroworlimitedpurposes.

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ITEM3.QUANTITATIVEANDQUALITATIVEDISCLOSURESABOUTMARKETRISKForeignCurrencyRisk

Wetransactbusinessgloballyinmultiplecurrenciesandhencehaveforeigncurrencyrisksrelatedtoourrevenue,costsofrevenue,operatingexpensesandlocalizedsubsidiarydebtdenominatedincurrenciesotherthantheU.S.dollar(primarilytheChineseyuan,euro,BritishpoundandCanadiandollarinrelationtoourcurrentyearoperations).Ingeneral,weareanetreceiverofcurrenciesotherthantheU.S.dollarforourforeignsubsidiaries.Accordingly,changesinexchangeratesand,inparticular,astrengtheningoftheU.S.dollarhaveinthepast,andmayinthefuture,negativelyaffectourrevenueandotheroperatingresultsasexpressedinU.S.dollarsaswedonottypicallyhedgeforeigncurrencyrisk.

Wehavealsoexperienced,andwillcontinuetoexperience,fluctuationsinournetincome(loss)asaresultofgains(losses)onthesettlementandthere-measurementofmonetaryassetsandliabilitiesdenominatedincurrenciesthatarenotthelocalcurrency(primarilyconsistingofourintercompanyandcashandcashequivalentsbalances).ForthesixmonthsendedJune30,2020,werecognizedanetforeigncurrencylossof$38millioninother(expense)income,net,withourlargestre-measurementexposuresfromtheU.S.dollar,SouthKoreanwonandMexicanpesoasoursubsidiaries’monetaryassetsandliabilitiesaredenominatedinvariouslocalcurrencies.ForthesixmonthsendedJune30,2019,werecognizedanetforeigncurrencygainof$11millioninother(expense)income,net,withourlargestre-measurementexposuresfromtheU.S.dollar,JapaneseyenandChineseyuan.

Weconsideredthehistoricaltrendsinforeigncurrencyexchangeratesanddeterminedthatitisreasonablypossiblethatadversechangesinforeigncurrencyexchangeratesof10%forallcurrenciescouldbeexperiencedinthenear-term.Thesechangeswereappliedtoourtotalmonetaryassetsandliabilitiesdenominatedincurrenciesotherthanourlocalcurrenciesatthebalancesheetdatetocomputetheimpactthesechangeswouldhavehadonournetincome(loss)beforeincometaxes.Thesechangeswouldhaveresultedinanadverseimpactof$246millionatJune30,2020and$362millionatDecember31,2019assumingnoforeigncurrencyhedging.

InterestRateRiskWeareexposedtointerestrateriskonourborrowingsthatbearinterestatfloatingrates.Pursuanttoourriskmanagementpolicies,incertain

cases,weutilizederivativeinstrumentstomanagesomeofthisrisk.Wedonotenterintoderivativeinstrumentsfortradingorspeculativepurposes.Ahypothetical10%changeininterestratesonourfloatingratedebtwouldhaveincreasedordecreasedourinterestexpenseforthesixmonthsendedJune30,2020and2019by$3millionand$5million,respectively.

ITEM4.CONTROLSANDPROCEDURESEvaluationofDisclosureControlsandProcedures

Ourmanagement,withtheparticipationofourChiefExecutiveOfficerandourChiefFinancialOfficer,evaluatedtheeffectivenessofourdisclosurecontrolsandprocedurespursuanttoRule13a-15undertheSecuritiesExchangeActof1934,asamended(the“ExchangeAct”).Indesigningandevaluatingthedisclosurecontrolsandprocedures,ourmanagementrecognizesthatanycontrolsandprocedures,nomatterhowwelldesignedandoperated,canprovideonlyreasonableassuranceofachievingthedesiredcontrolobjectives.Inaddition,thedesignofdisclosurecontrolsandproceduresmustreflectthefactthatthereareresourceconstraintsandthatourmanagementisrequiredtoapplyitsjudgmentinevaluatingthebenefitsofpossiblecontrolsandproceduresrelativetotheircosts.

Basedonthisevaluation,ourChiefExecutiveOfficerandourChiefFinancialOfficerconcludedthat,asofJune30,2020,ourdisclosurecontrolsandproceduresweredesignedatareasonableassurancelevelandwereeffectivetoprovidereasonableassurancethattheinformationwearerequiredtodiscloseinreportsthatwefileorsubmitundertheExchangeActisrecorded,processed,summarizedandreportedwithinthetimeperiodsspecifiedintheSecuritiesandExchangeCommissionrulesandforms,andthatsuchinformationisaccumulatedandcommunicatedtoourmanagement,includingourChiefExecutiveOfficerandourChiefFinancialOfficer,asappropriate,toallowtimelydecisionsregardingrequireddisclosures.

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ChangesinInternalControloverFinancialReportingTherewerenochangesinourinternalcontroloverfinancialreporting,asidentifiedinconnectionwiththeevaluationrequiredbyRule13a-

15(d)andRule15d-15(d)oftheExchangeAct,thatoccurredduringthethreemonthsendedJune30,2020thathavemateriallyaffected,orarereasonablylikelytomateriallyaffect,ourinternalcontroloverfinancialreporting.

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PARTII.OTHERINFORMATIONITEM1.LEGALPROCEEDINGS

Foradescriptionofourmaterialpendinglegalproceedings,pleaseseeNote12,CommitmentsandContingencies,totheconsolidatedfinancialstatementsincludedelsewhereinthisQuarterlyReportonForm10-Q.

Inaddition,thefollowingmatterisbeingdisclosedpursuanttoItem103ofRegulationS-Kbecauseitrelatestoenvironmentalregulationsandaggregatecivilpenaltiescouldpotentiallyexceed$100,000.

TheBayAreaAirQualityManagementDistrict(the“BAAQMD”)hasissuednoticesofviolationtousrelatingtoairpermittingfortheTeslaFactory,buthasnotinitiatedformalproceedings.WedisputecertainoftheseallegationsandareworkingtoresolvethemwiththeBAAQMD.Further,weassertthattherehasbeennorelatedadversecommunityorenvironmentalimpact.Whilewecannotpredicttheoutcomeofthismatter,includingthefinalamountofanypenalties,itisnotexpectedtohaveamaterialadverseimpactonourbusiness.

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ITEM1A.RISKFACTORS

Youshouldcarefullyconsidertherisksdescribedbelowtogetherwiththeotherinformationsetforthinthisreport,whichcouldmateriallyaffectourbusiness,financialconditionandfutureresults.Therisksdescribedbelowarenottheonlyrisksfacingourcompany.Risksanduncertaintiesnotcurrentlyknowntousorthatwecurrentlydeemtobeimmaterialalsomaymateriallyadverselyaffectourbusiness,financialconditionandoperatingresults.

RisksRelatedtoOurBusinessandIndustry

Wehavebeen,andmayinthefuturebe,adverselyaffectedbytheglobalCOVID-19pandemic,thedurationandeconomic,governmentalandsocialimpactofwhichisdifficulttopredict,whichmaysignificantlyharmourbusiness,prospects,financialconditionandoperatingresults.

Commencinginthefirstquarterof2020,therehasbeenawidespreadworldwideimpactfromtheCOVID-19pandemic.Wehadtemporarilysuspendedoperationsateachofourmanufacturingfacilitiesworldwideatsomepointduringthefirsthalfof2020asaresultofgovernmentrequirementsortoaccommodaterelatedchallengesforouremployees,theirfamiliesandoursuppliers.Certainofoursuppliersandpartners,includingPanasonic,ourpartnerthatmanufactureslithium-ionbatterycellsforourproductsatourGigafactoryNevada,alsoexperiencedsuchtemporarysuspensions.Wehadalsoinstitutedtemporarylaborcostreductionmeasuresbyfurloughingcertainofourhourlyemployees,reducingmostsalariedemployees’basesalariesgloballyandreducingourbonusandcommissionstructureswhileourU.S.operationswerescaledback.Bytheendofthesecondquarterof2020,wehadresumedoperationsatallofourmanufacturingfacilities.

Numerousgovernmentregulationsandpublicadvisories,aswellasshiftingsocialbehaviors,thathavetemporarilyorsporadicallylimitedor

closednon-essentialtransportation,governmentfunctions,businessactivitiesandperson-to-personinteractionsremaininplace.Insomecases,therelaxationofsuchtrendshasbeenfollowedbyareturntostringentrestrictions.Wecannotpredictthedurationordirectionofsuchtrends,whichhavealsoadverselyaffectedandmayinthefutureaffectouroperations.Forexample,reducedoperationsorclosuresatmotorvehicledepartments,vehicleauctionhousesandmunicipalandutilitycompanyinspectorsresultedincertainchallengesinorpostponementsforournewvehicledeliveries,usedvehiclesales,andenergyproductdeploymentsinthefirsthalfof2020.Wemayalsobeaffectedbyglobalmacroeconomicconditionsandchanginglevelsofconsumercomfortandspendinthefuture,whichcouldfurtherimpactdemandintheworldwidetransportationandautomotiveindustriesandforconstructionprojectssuchastheadditionofsolarenergysystems.Likewise,ourabilitytosustainourproductiontrajectorydependsontheongoingstatusofvariousgovernmentregulationsregardingmanufacturingoperations,thereadinessandsolvencyofoursuppliersandvendors,andastableandmotivatedproductionworkforce.Government-imposedtravelorvisarestrictionsmayalsopreventpersonnelemployedbyusorourvendorsfromtravelingtooursitestoworkonkeyprojects,whichmaydelaytheirprogress.Finally,itispossiblethatthecontingenciesgenerallyinherentintheconstructionofandrampatnewfacilitiessuchasGigafactoryShanghai,GigafactoryBerlinandGigafactoryTexasmaybeexacerbatedbysuchconditions.

Ultimately,wehavealwaysmonitoredmacroeconomicconditionstoremainflexibleandoptimizeandevolveourbusinessasappropriate,and

wewillcontinuetodoso.Becausetheimpactofcurrentconditionsonasustainedbasisisyetlargelyunknown,israpidlyevolving,andhasbeenvariedacrossgeographicregions,thisongoingassessmentwillbeparticularlycriticaltoallowustoaccuratelyprojectdemandandinfrastructurerequirementsgloballyanddeployourproduction,workforce,andotherresourcesaccordingly.Ifcurrentglobalmarketconditionscontinueorworsen,orifwecannotordonotmaintainoperationsatascopethatiscommensuratewithsuchconditionsorarelaterrequiredtoorchoosetosuspendsuchoperationsagain,ourbusiness,prospects,financialcondition,andoperatingresultscouldbemateriallyharmed.

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Wehaveexperiencedinthepast,andmayexperienceinthefuture,delaysorothercomplicationsinthedesign,manufacture,launch,andproductionrampofourvehicles,energyproducts,andproductfeatures,ormaynotrealizeourmanufacturingcosttargets,whichcouldharmourbrand,business,prospects,financialconditionandoperatingresults.Wehavepreviouslyexperiencedlaunchandproductionrampdelaysorothercomplicationsinconnectionwiththeintroductionofnewvehicle

modelsandvehiclefeatures.Forexample,weencounteredunanticipatedsupplychainconstraintsthatledtoinitialdelaysinproducingModelXandanisolatedsupplierlimitationinthemanufactureofModel3.Similarly,duringourinitialModel3productionramp,wehadchallengesrampingfullyautomatedprocesses,suchasportionsofthebatterymoduleassemblyline,materialflowsystemandthegeneralassemblyline,whichweaddressedbyreducingthelevelsofautomationandintroducingsemi-automatedormanualprocesses.Inaddition,wehaveintroducedinthepastandmayintroduceinthefuturenewmanufacturingtechnologies,techniquesandprocessesforourvehicles,suchasaluminumspotweldingsystemsandhigh-speedblowformingofcertaindifficulttostampvehicleparts,anduniquedesignfeatureswithdifferentmanufacturingchallenges,suchaslargedisplayscreens,dualmotordrivetrain,hardwareforourAutopilotandFSDfeatures,falcon-wingdoors,andaheatpumpandoctovalvesystemforincreasedpowerefficiency.Thereisnoguaranteethatwewillbeabletosuccessfullyandtimelyintroduceandscaleanysuchnewprocessesorfeatures.

Inparticular,ourfuturebusinessdependsinlargepartonthehigh-volumeproductionofModel3andModelY,whichwebelieveareourvehicleswiththelargestmarkets.WehavelimitedexperiencetodateinmanufacturingModel3athighvolumesandcontinuouslyincreasingitsproductionrates,particularlyacrossmultiplevehiclemanufacturingfacilities,whichwecommencedinthefourthquarterof2019withGigafactoryShanghaicomingonline.Inordertobesuccessful,wewillneedtoimplement,maintainand/orrampefficientandcost-effectivemanufacturingcapabilities,processesandsupplychainsandachievethedesigntolerances,highqualityandmaximumoutputrateswehaveplanned,includingatGigafactoryShanghai,andforModelY,whichwecommencedmanufacturingattheFremontFactoryinthefirstquarterof2020.Bottleneckssuchasthosewehaveexperiencedinthepastwithnewproductrampsandotherunexpectedchallengesmayalsoariseaswerampproduction,anditwillbeimportantthatweaddressthempromptlywhilecontinuingtoreduceourmanufacturingcosts.Ifwearenotsuccessfulindoingso,orifweexperienceissueswithourongoingmanufacturingprocessimprovementsandcost-downefforts,wecouldfacedelaysinestablishingand/orsustainingourModel3andModelYrampsorbeunabletomeetourrelatedcostandprofitabilitytargets.

Moreover,wewillneedtohire,trainandcompensateskilledemployeestooperatehigh-volumeproductionfacilitiestosupportourvehiclerampattheFremontFactoryandGigafactoryShanghai,aswellasatGigafactoryNevadatosupportthemanufactureofbatterypacksanddriveunitsforcertainofourvehicles.Finally,becauseourvehiclemodels,inparticularModel3andModelY,maysharecertainparts,suppliersorproductionfacilitieswitheachother,thevolumeorefficiencyofproductionwithrespecttoonemodelmayimpactalsotheproductionofothermodelsorleadtobottlenecksthatimpacttheproductionofallmodels.

Wemayalsoexperiencesimilarfuturedelaysorothercomplicationsinlaunchingand/orrampingproductionofnewvehicles,suchasTeslaSemi,CybertruckandthenewTeslaRoadster,ourenergystorageproductsandtheSolarRoof,aswellasfuturefeaturesandservicessuchasnewAutopilotorFSDfeaturesandtheautonomousTeslaride-hailingnetwork.Likewise,wemayencounterdelayswiththedesign,constructionandregulatoryorotherapprovalsnecessarytobuildandbringonlinefuturemanufacturingfacilities,includingatGigafactoryShanghai,GigafactoryBerlinandGigafactoryTexas.

Anysignificantdelayorothercomplicationincost-effectivelyrampingtheproductionofourcurrentproducts,orthedevelopment,manufacture,

launchandproductionrampofourfutureproducts,featuresandservices,includingcomplicationsassociatedwithexpandingourproductioncapacityandsupplychainorobtainingormaintainingrelatedregulatoryapprovals,couldmateriallydamageourbrand,business,prospects,financialconditionandoperatingresults.

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Wemaybeunabletomeetourgrowingproductsales,delivery,installation,vehicleservicingandchargingplans,oraccuratelyprojectandmanagethisgrowthinternationally,whichcouldharmourbusinessandprospects.Concurrentwithdeveloping,launchingandrampingourproducts,oursuccesswilldependonourabilitytocontinuetosignificantlyincrease

theirsales,deliveries,installationsandservicingworldwide,whileallocatingouravailableresourcesamongmultipleproductssimultaneously.Asweexpandglobally,wewillalsoneedtoensureweareincompliancewithanyregulatoryrequirementsapplicabletothesale,installationandserviceofourproducts,thesaleofelectricitygeneratedthroughoursolarenergysystems,dispatchofelectricityfromenergystorageproductsandoperationofSuperchargersinvariousjurisdictions,whichcouldtakeconsiderabletimeandexpense.Theseplansrequiresignificantcashinvestmentsandmanagementresourcesandthereisnoguaranteethattheywillultimatelygenerateadditionalsalesorinstallationsofourproducts.

Wecontinuouslyevaluate,andasappropriateevolve,ourretailoperationsandproductofferingsinordertomaximizeourreachandoptimizeourcosts,vehicleline-upandmodeldifferentiation,andpurchasingexperience.However,thereisnoguaranteethateachstepinourevolvingstrategywillbeperceivedasintendedbyprospectivecustomersaccustomedtomoretraditionalsalesmodels.Likewise,whilewearepioneeringtouchlessvehicledeliveriesandtestdrivesincertainregionstoallowprospectivecustomerstoexperienceourvehicleswhilepromotingtheircomfortandconvenience,thereisnoguaranteethatsuchmeasureswillbeeffectivelarge-scalesubstitutesfortraditionaltransactions.Inparticular,wearetargetingwithModel3andModelYaglobalmassdemographicwithabroadrangeofpotentialcustomers,inwhichwehavelimitedexperienceprojectingdemandandpricingourproducts.Wecurrentlyproducenumerousinternationalvariantsatalimitednumberoffactories,andifourspecificdemandexpectationsforthesevariantsproveinaccurate,wemaynotbeabletotimelygeneratesalesmatchedtothespecificvehiclesthatweproduceinthesametimeframeorthatarecommensuratewithouroperationsinagivenregion,whichmaynegativelyimpactourdeliveriesandoperatingresultsinaparticularperiod.Likewise,aswedevelopandgrowourenergyproductsandservicesworldwide,oursuccesswilldependonourabilitytocorrectlyforecastdemandindifferentmarkets.

Moreover,becausewedonothaveindependentdealernetworks,weareresponsiblefordeliveringallofourvehiclestoourcustomersandmeetingtheirvehicleservicingneeds.Whilewehavesubstantiallyimplementedandimprovedmanyaspectsofourdeliveryandserviceoperations,westillhaverelativelylimitedexperiencewith,andmayfacedifficultiesin,suchdeliveriesandservicingathighvolumes,particularlyininternationalmarketsasweexpand.Forexample,significanttransittimemayberequiredtotransportvehiclesinvolumeintointernationalmarkets,andwealsosawchallengesininitiallyrampingourlogisticalchannelsinChinaandEuropeaswedeliveredModel3thereforthefirsttimeinthefirstquarterof2019.Toaccommodategrowingvolumes,wehavedeployedanumberofdeliverymodels,suchasdeliveriestocustomers’homesandworkplaces,someofwhichhavenotbeenpreviouslytestedatscaleandindifferentgeographiesandmaynotultimatelybesuccessful.Likewise,becauseofouruniqueexpertisewithourvehicles,werecommendthatourvehiclesbeservicedbyourservicecenters,MobileServicetechniciansorcertainauthorizedprofessionalsthatwehavespecificallytrainedandequipped.Ifweexperiencedelaysinaddingsuchservicingcapacityorexperienceunforeseenissueswiththereliabilityofourvehicles,particularhigher-volumeandneweradditionstoourfleetsuchasModel3andModelY,itcouldoverburdenourservicingcapabilitiesandpartsinventory.Finally,theincreasingnumberofTeslavehiclesalsorequiresustocontinuetorapidlyincreasethenumberofourSuperchargerstationsandconnectorsthroughouttheworld.

WearealsoexpandingourinstallationcapabilitiesfortheSolarRoofaswecontinueitsrampbytrainingbothourownpersonnelandthirdpartyinstallers.Ifwearenotsuccessfulinmatchingouroverallinstallationcapabilitywithproduction,orifweexperienceunforeseendelaysintheproductionramporinaccuratelyforecastdemandfortheSolarRoof,ouroperatingresultsmaybenegativelyimpacted.

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Thereisnoassurancethatwewillbeabletorampourbusinesstomeetoursales,delivery,servicing,chargingandinstallationtargetsglobally,thatourprojectionsonwhichsuchtargetsarebasedwillproveaccurate,orthatthepaceofgrowthorcoverageofourcustomerinfrastructurenetworkwillmeetcustomerexpectations.Moreover,wemaynotbesuccessfulinmanagingourglobaloperationsifweareunabletoavoidcostoverrunsandotherunexpectedoperatingcosts,adaptourproductsandconductouroperationstomeetlocalrequirementsandregulations,implementrequiredlocalinfrastructure,systemsandprocesses,andfindandhireasneededadditionalsales,service,electricalinstallation,constructionandadministrativepersonnel.Ifwefailtomanageourgrowtheffectively,itcouldresultinnegativepublicityanddamagetoourbrandandhaveamaterialadverseeffectonourbusiness,prospects,financialconditionandoperatingresults.

Ourfuturegrowthandsuccessisdependentuponconsumers’willingnesstoadoptelectricvehiclesandspecificallyourvehicles.Weoperateintheautomotiveindustry,whichisgenerallysusceptibletocyclicalityandvolatility.Ourgrowthishighlydependentupontheworldwideadoptionbyconsumersofalternativefuelvehiclesingeneralandelectricvehiclesin

particular.Althoughwehavesuccessfullygrowndemandforourvehiclesthusfar,thereisnoguaranteeofsuchfuturedemand,orthatourvehicleswillnotcompetewithoneanotherinthemarket.Moreover,thetargetdemographicsforourvehicles,inparticularthemassmarketdemographicforModel3andModelY,arehighlycompetitive.IfthemarketforelectricvehiclesingeneralandTeslavehiclesinparticulardoesnotdevelopasweexpect,developsmoreslowlythanweexpect,orifdemandforourvehiclesdecreasesinourmarkets,ourbusiness,prospects,financialconditionandoperatingresultscouldbeharmed.

Wehaveonlyrelativelyrecentlyachievedhigh-volumeproductionofvehicles,andarestillatanearlierstageandhavelimitedresourcesrelativetoourcompetitors.Moreover,themarketforalternativefuelvehiclesisrapidlyevolving.Asaresult,themarketforourvehiclescouldbeaffectedbynumerousfactors,suchas: • perceptionsaboutelectricvehiclefeatures,quality,safety,performanceandcost; • perceptionsaboutthelimitedrangeoverwhichelectricvehiclesmaybedrivenonasinglebatterycharge; • competition,includingfromothertypesofalternativefuelvehicles,plug-inhybridelectricvehiclesandhighfuel-economyinternal

combustionenginevehicles; • volatilityinthecostofoilandgasoline; • governmentregulationsandeconomicincentives; • accesstochargingfacilities;and • concernsaboutourfutureviability.

Forexample,themarketpriceofcrudeoilhasfluctuatedwidelyin2020andmaycontinuetodoso,andanycorrespondingchangesinthecostofgasolinemayimpactthemarketforelectricvehicles.Inaddition,salesofvehiclesintheautomotiveindustrytendtobecyclicalinmanymarkets,whichmayexposeustoincreasedvolatility,especiallyasweexpandandadjustouroperationsandretailstrategies.Moreover,travelrestrictionsandsocialdistancingeffortsinresponsetotheCOVID-19pandemicmaynegativelyimpactthetransportationandautomotiveindustriesforanunknown,butpotentiallylengthy,periodoftime.Specifically,itisuncertainastohowsuchmacroeconomicfactorswillimpactusasacompanythathasbeenexperiencinggrowthandincreasingmarketshareinanindustrythathasgloballybeenexperiencingarecentdeclineinsales.

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Wearedependentonoursuppliers,themajorityofwhicharesingle-sourcesuppliers,andtheinabilityofthesesupplierstodelivernecessarycomponentsofourproductsaccordingtoourscheduleandatprices,qualitylevelsandvolumesacceptabletous,orourinabilitytoefficientlymanagethesecomponents,couldhaveamaterialadverseeffectonourfinancialconditionandoperatingresults.Ourproductscontainthousandsofpurchasedpartsthatwesourcegloballyfromhundredsofdirectsuppliers.Weattempttomitigateour

supplychainriskbyenteringintolong-termagreementswhereitispracticalandbeneficialtodoso,qualifyingandobtainingcomponentsfrommultiplesourceswheresensible,andmaintainingsafetystockforkeypartsandassembliesanddiebanksforcomponentswithlengthyprocurementleadtimes.However,ourlimited,andinmostcasessingle-source,supplychainexposesustomultiplepotentialsourcesofdeliveryfailureorcomponentshortagesforourproduction,suchasthosewhichweexperiencedin2012and2016inconnectionwithourslower-than-plannedModelSandModelXramps.Furthermore,unexpectedchangesinbusinessconditions,materialspricing,laborissues,wars,governmentalchanges,tariffs,naturaldisasterssuchastheMarch2011earthquakesinJapan,healthepidemicssuchastheglobalCOVID-19pandemic,andotherfactorsbeyondourandoursuppliers’controlcouldalsoaffectthesesuppliers’abilitytodelivercomponentstousonatimelybasisortoremainsolventandoperational.Thelossofanysupplier,particularlyasingle-orlimited-sourcesupplier,orthedisruptioninthesupplyofcomponentsfromoursuppliers,couldleadtoproductdesignchanges,productiondelaysofkeyrevenue-generatingproducts,idlemanufacturingfacilities,andpotentiallossofaccesstoimportanttechnologyandpartsforproducing,servicingandsupportingourproducts,anyofwhichcouldresultinnegativepublicity,damagetoourbrandandamaterialandadverseeffectonourbusiness,prospects,financialconditionandoperatingresults.

Wemayalsobeimpactedbychangesinoursupplychainorproductionneeds.Wehaveexperiencedinthepast,andmayexperienceinthefuture,costincreasesfromcertainofoursuppliersinordertomeetourqualitytargetsanddevelopmenttimelinesaswellasduetoourdesignchanges.Likewise,anysignificantincreasesinourproduction,suchasforModel3andourexpectationsforModelY,hasrequiredand/ormayinthefuturerequireustoprocureadditionalcomponentsinashortamountoftime.Oursuppliersmaynotultimatelybeabletosustainablyandtimelymeetourcost,qualityandvolumeneeds,requiringustoreplacethemwithothersources.Whilewebelievethatwewillbeabletosecureadditionaloralternatesourcesofsupplyformostofourcomponentsinarelativelyshorttimeframe,thereisnoassurancethatwewillbeabletodosoordevelopourownreplacementsforcertainhighlycustomizedcomponents.Additionally,wecontinuouslynegotiatewithexistingsupplierstoobtaincostreductionsandavoidunfavorablechangestoterms,seeknewandlessexpensivesuppliersforcertainparts,andattempttoredesigncertainpartstomakethemlessexpensivetoproduce.Ifweareunsuccessfulinoureffortstocontrolandreducesuppliercosts,ouroperatingresultswillsuffer.

OutsideoftheU.S.,wehavelimitedmanufacturingexperienceandwemayexperienceissuesordelaysincreasingtheleveloflocalizedprocurementatourGigafactoryShanghaiandinthefutureatourGigafactoryBerlin.Furthermore,asthescaleofourvehicleproductionincreases,wewillneedtoaccuratelyforecast,purchase,warehouseandtransportcomponentstoourmanufacturingfacilitiesandservicinglocationsinternationallyandatmuchhighervolumes.Ifweareunabletoaccuratelymatchthetimingandquantitiesofcomponentpurchasestoouractualneedsorsuccessfullyimplementautomation,inventorymanagementandothersystemstoaccommodatetheincreasedcomplexityinoursupplychain,wemayincurunexpectedproductiondisruption,storage,transportationandwrite-offcosts,whichcouldhaveamaterialadverseeffectonourfinancialconditionandoperatingresults.

AnyproblemsordelaysinexpandingGigafactoryNevadaorrampingandmaintainingoperationstherecouldnegativelyaffecttheproductionandprofitabilityofourproducts,suchasModel3,ModelYandourenergystorageproducts.Inaddition,thebatterycellsproducedtherestorelargeamountsofenergy.Tolowerthecostofcellproductionandproducecellsinhighvolume,wehaveverticallyintegratedtheproductionoflithium-ioncellsat

GigafactoryNevada,wherewealsomanufacturebatterypacksanddriveunitsforcertainvehiclesandenergystorageproductsandassembleourMegapackproduct.Productionoflithium-ioncellsatGigafactoryNevadabeganin2017,andwehavenootherdirectexperienceintheproductionoflithium-ioncells.Giventhesizeandcomplexityofthisundertaking,itispossiblethatfutureeventscouldresultinissuesordelaysinfurtherrampingourproductsandexpandingproductionoutputatGigafactoryNevada.

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Inordertoachieveourvolumeandgrossmargintargetsforourvehiclesandenergystorageproducts,wemustcontinuetosustainandrampsignificantcellproductionatGigafactoryNevada,which,amongotherthings,requiresPanasonictosuccessfullyoperateandfurtherrampitscellproductionlinesatsignificantvolumes.AlthoughPanasonichasalongtrackrecordofproducinghigh-qualitycellsatsignificantvolumeatitsfactoriesinJapan,ithasrelativelylimitedexperiencewithcellproductionatGigafactoryNevada.Moreover,althoughPanasonicisco-locatedwithusatGigafactoryNevada,itisfreetomakeitsownoperationaldecisions,suchasitsdeterminationtotemporarilysuspenditsmanufacturingthereinresponsetotheCOVID-19pandemic.Inaddition,weproduceseveralcomponentsforModel3andModelY,suchasbatterymodulesincorporatingthelithium-ioncellsproducedbyPanasonicanddriveunits(includingtosupportGigafactoryShanghaiproduction),atGigafactoryNevada.Someofthemanufacturinglinesforsuchcomponentstooklongerthananticipatedtoramptotheirfullcapacity.Whilewehavelargelyovercomethisbottleneckafterdeployingmultiplesemi-automatedlinesandimprovingouroriginallines,additionalbottlenecksmayariseaswecontinuetoincreasetheproductionrateandintroducenewlines.IfweorPanasonicareunabletoorotherwisedonotmaintainGigafactoryNevadaproduction,orifweareunabletocost-effectivelyrampoutputadditionallyovertimeasneededorhireandretainasubstantialnumberofhighlyskilledpersonnel,ourabilitytosupplybatterypacksorothercomponentsforModel3,ModelYandourotherproductscouldbenegativelyimpacted,whichcouldnegativelyaffectourbrandandharmourbusiness,prospects,financialconditionandoperatingresults.

Inaddition,thehighvolumesoflithium-ioncellsandbatterymodulesandpacksmanufacturedatGigafactoryNevadaarestoredandrecycledatourvariousfacilities.Anymishandlingofbatterycellsmaycausedisruptiontotheoperationofsuchfacilities.Whilewehaveimplementedsafetyproceduresrelatedtothehandlingofthecells,therecanbenoassurancethatasafetyissueorfirerelatedtothecellswouldnotdisruptouroperations.Suchdisruptionsorissuescouldnegativelyaffectourbrandandharmourbusiness,prospects,financialconditionandoperatingresults.

Anyissuesordelaysinmeetingourprojectedtimelines,costsandproductionatorfundingtherampofGigafactoryShanghai,oranydifficultiesingeneratingandmaintaininglocaldemandforvehiclesmanufacturedthere,couldadverselyimpactourbusiness,prospects,operatingresultsandfinancialcondition.Aspartofourcontinuingworktoincreaseproductionofourvehiclesonasustainedbasis,andinordertomakethemaffordableininternational

marketsbyaccessinglocalsupplychainsandworkforces,wehaveestablishedGigafactoryShanghaiinChina.WearecurrentlymanufacturingModel3atGigafactoryShanghai,andweareconstructingitsnextphasetoaddModelYmanufacturingcapacitythere.TherampandfurtherexpansionofGigafactoryShanghaiaresubjecttoanumberofuncertaintiesinherentinallnewmanufacturingoperations,includingongoingcompliancewithregulatoryrequirements,maintenanceofoperationallicensesandapprovalsforadditionalexpansion,potentialsupplychainconstraints,hiring,trainingandretentionofqualifiedemployees,andthepaceofbringingproductionequipmentandprocessesonlinewiththecapabilitytomanufacturehigh-qualityunitsatscale.Wehavelimitedexperiencetodatewithoperatingmanufacturingfacilitiesabroad,andonlyrecentlybegantosellModel3inChina.Ifweexperienceanyissuesordelaysinmeetingourprojectedtimelines,costs,capitalefficiencyandproductioncapacityforGigafactoryShanghai,orinmaintainingandcomplyingwiththetermsoflocaldebtfinancingthatweintendwilllargelyfundit,oringeneratingandmaintainingdemandlocallyforthevehicleswemanufactureatGigafactoryShanghai,ourbusiness,prospects,operatingresultsandfinancialconditioncouldbeadverselyimpacted.

Inparticular,localmanufacturingiscriticaltoourexpansionandsalesinChina,whichisthelargestmarketforelectricvehiclesintheworld.OurvehiclesalesinChinahavebeennegativelyimpactedinthepastbycertaintariffsonautomobilesmanufacturedintheU.S.,suchasourvehicles.IfwearenotabletosuccessfullyandtimelyrampGigafactoryShanghai,wemaycontinuetobeexposedtotheimpactofsuchunfavorabletariffs,dutiesorcoststoourdetrimentcomparedtolocally-basedcompetitors.

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Wefacerisksassociatedwithourinternationaloperations,includingunfavorableanduncertainregulatory,political,economic,taxandlaborconditions,andwithestablishingourselvesinnewmarkets,allofwhichcouldharmourbusiness.Wehaveaglobalfootprintwithdomesticandinternationaloperationsandsubsidiaries.Accordingly,wearesubjecttoavarietyoflegal,

politicalandregulatoryrequirementsandsocial,environmentalandeconomicconditionsoverwhichwehavelittlecontrol.Forexample,wemaybeimpactedbytradepolicies,environmentalconditions,politicaluncertaintyandeconomiccyclesinvolvinggeographicregionswherewehavesignificantoperations,whichareinherentlyunpredictable.Wearesubjecttoanumberofrisksassociatedinparticularwithinternationalbusinessactivitiesthatmayincreaseourcosts,impactourabilitytosellourproductsandrequiresignificantmanagementattention.Theserisksincludeconformingourproductstovariousinternationalregulatoryandsafetyrequirementsaswellaschargingandotherelectricinfrastructures,organizinglocaloperatingentities,difficultyinestablishing,staffingandmanagingforeignoperations,challengesinattractingcustomers,foreigngovernmenttaxes,regulationsandpermitrequirements,ourabilitytoenforceourcontractualrights,traderestrictions,customsregulations,tariffsandpriceorexchangecontrols,andpreferencesofforeignnationsfordomesticallymanufacturedproducts.

Increasesincosts,disruptionofsupplyorshortageofmaterials,inparticularforlithium-ioncells,couldharmourbusiness.Wemayexperienceincreasesinthecostoforasustainedinterruptioninthesupplyorshortageofmaterials.Anysuchincrease,supply

interruptionorshortagecouldmateriallyandnegativelyimpactourbusiness,prospects,financialconditionandoperatingresults.Weusevariousmaterialsinourbusinessincludingaluminum,steel,lithium,nickel,copperandcobalt,aswellaslithium-ioncellsfromsuppliers.Thepricesforthesematerialsfluctuate,andtheiravailablesupplymaybeunstable,dependingonmarketconditionsandglobaldemandforthesematerials,includingasaresultofincreasedproductionofelectricvehiclesandenergystorageproductsbyourcompetitors,andcouldadverselyaffectourbusinessandoperatingresults.Forinstance,weareexposedtomultiplerisksrelatingtolithium-ioncells.Theserisksinclude: • anincreaseinthecost,ordecreaseintheavailablesupply,ofmaterialsusedinthecells; • disruptioninthesupplyofcellsduetoqualityissuesorrecallsbybatterycellmanufacturersoranyissuesthatmayarisewithrespect

tocellsmanufacturedatourownfacilities;and • fluctuationsinthevalueofanyforeigncurrenciesinwhichbatterycellandrelatedrawmaterialpurchasesareormaybedenominated,

suchastheJapaneseyen,againsttheU.S.dollar.

Ourbusinessisdependentonthecontinuedsupplyofbatterycellsforthebatterypacksusedinourvehiclesandenergystorageproducts.Whilewebelieveseveralsourcesofthebatterycellsareavailableforsuchbatterypacks,andexpecttoeventuallyrelysubstantiallyonbatterycellsmanufacturedatourownfacilities,wehavetodatefullyqualifiedonlyaverylimitednumberofsuppliersforthecellsusedinsuchbatterypacksandhaveverylimitedflexibilityinchangingcellsuppliers.Anydisruptioninthesupplyofbatterycellsfromsuchsupplierscoulddisruptproductionofourvehiclesandofthebatterypacksweproduceforenergyproductsuntilsuchtimeasadifferentsupplierisfullyqualified.Furthermore,fluctuationsorshortagesinpetroleumandothereconomicconditionsmaycauseustoexperiencesignificantincreasesinfreightchargesandmaterialcosts.Substantialincreasesinthepricesforourmaterialsorpriceschargedtous,suchasthosechargedbybatterycellsuppliers,wouldincreaseouroperatingcosts,andcouldreduceourmarginsifwecannotrecouptheincreasedcoststhroughincreasedvehicleprices.Anyattemptstoincreaseproductpricesinresponsetoincreasedmaterialcostscouldresultincancellationsofordersandreservationsandthereforemateriallyandadverselyaffectourbrand,image,business,prospectsandoperatingresults.

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Ifourvehiclesorotherproductsthatwesellorinstallfailtoperformasexpected,ourabilitytodevelop,marketandsellourproductsandservicescouldbeharmed.Ifourvehiclesorourenergyproductscontaindefectsindesignandmanufacturethatcausethemnottoperformasexpectedorthatrequire

repair,orcertainfeaturesofourvehiclessuchasnewAutopilotorFSDfeaturestakelongerthanexpectedtobecomeenabled,arelegallyrestrictedorbecomesubjecttoonerousregulation,ourabilitytodevelop,marketandsellourproductsandservicescouldbeharmed.Forexample,theoperationofourvehiclesishighlydependentonsoftware,whichisinherentlycomplexandmaycontainlatentdefectsanderrorsorbesubjecttoexternalattacks.Issuesexperiencedbyvehiclecustomershaveincludedthoserelatedtothesoftwareforthe17-inchdisplayscreen,aswellasthepanoramicroofandthe12-voltbatteryintheModelSandtheseatsanddoorsintheModelX.Althoughweattempttoremedyanyissuesweobserveinourproductsaseffectivelyandrapidlyaspossible,sucheffortsmaynotbetimely,mayhamperproductionormaynotbetothesatisfactionofourcustomers.Whilewehaveperformedextensiveinternaltestingontheproductswemanufacture,wecurrentlyhavealimitedframeofreferencebywhichtoevaluatedetailedlong-termquality,reliability,durabilityandperformancecharacteristicsofourbatterypacks,powertrains,vehiclesandenergystorageproducts.Therecanbenoassurancethatwewillbeabletodetectandfixanydefectsinourproductspriortotheirsaletoorinstallationforcustomers.

Anyproductdefects,delaysorlegalrestrictionsonproductfeatures,orotherfailureofourproductstoperformasexpected,couldharmourreputationandresultindeliverydelays,productrecalls,productliabilityclaims,breachofwarrantyclaims,andsignificantwarrantyandotherexpenses,andcouldhaveamaterialadverseimpactonourbusiness,financialcondition,operatingresultsandprospects.

Wemaybecomesubjecttoproductliabilityclaims,whichcouldharmourfinancialconditionandliquidityifwearenotabletosuccessfullydefendorinsureagainstsuchclaims.Althoughwedesignourvehiclestobethesafestvehiclesontheroad,productliabilityclaims,eventhosewithoutmerit,couldharmour

business,prospects,operatingresultsandfinancialcondition.Theautomobileindustryinparticularexperiencessignificantproductliabilityclaimsandwefaceinherentriskofexposuretoclaimsintheeventourvehiclesdonotperformorareclaimedtonothaveperformedasexpected.Asistrueforotherautomakers,ourvehicleshavebeeninvolvedandweexpectinthefuturewillbeinvolvedincrashesresultingindeathorpersonalinjury,andsuchcrasheswhereAutopilotorFSDfeaturesareengagedarethesubjectofsignificantpublicattention.Wehaveexperiencedandweexpecttocontinuetofaceclaimsarisingfromorrelatedtomisuseorclaimedfailuresofnewtechnologiesthatwearepioneering,includingAutopilotandFSDfeaturesinourvehicles.Inaddition,thebatterypacksthatweproducemakeuseoflithium-ioncells.Onrareoccasions,lithium-ioncellscanrapidlyreleasetheenergytheycontainbyventingsmokeandflamesinamannerthatcanignitenearbymaterialsaswellasotherlithium-ioncells.Whilewehavedesignedthebatterypacktopassivelycontainanysinglecell’sreleaseofenergywithoutspreadingtoneighboringcells,therecanbenoassurancethatafieldortestingfailureofourvehiclesorotherbatterypacksthatweproducewillnotoccur,inparticularduetoahigh-speedcrash,whichcouldsubjectustolawsuits,productrecallsorredesignefforts,allofwhichwouldbetimeconsumingandexpensive.

Moreover,asoursolarenergysystemsandenergystorageproductsgenerateandstoreelectricity,theyhavethepotentialtocauseinjurytopeopleorproperty.Asuccessfulproductliabilityclaimagainstuscouldrequireustopayasubstantialmonetaryaward.Moreover,aproductliabilityclaimcouldgeneratesubstantialnegativepublicityaboutourproductsandbusinessandcouldhaveamaterialadverseeffectonourbrand,business,prospectsandoperatingresults.Inmostjurisdictions,wegenerallyself-insureagainsttheriskofproductliabilityclaimsforvehicleexposure,meaningthatanyproductliabilityclaimswilllikelyhavetobepaidfromcompanyfundsandnotbyinsurance.

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Themarketsinwhichweoperatearehighlycompetitive,andwemaynotbesuccessfulincompetingintheseindustries.Wecurrentlyfacecompetitionfromnewandestablisheddomesticandinternationalcompetitorsandexpecttofacecompetitionfromothersinthefuture,includingcompetitionfromcompanieswithnewtechnology.Theworldwideautomotivemarket,particularlyforalternativefuelvehicles,ishighlycompetitivetodayandweexpectitwillbecomeevenmore

sointhefuture.Thereisnoassurancethatourvehicleswillbesuccessfulintherespectivemarketsinwhichtheycompete.Asignificantandgrowingnumberofestablishedandnewautomobilemanufacturers,aswellasothercompanies,haveenteredorarereportedtohaveplanstoenterthealternativefuelvehiclemarket,includinghybrid,plug-inhybridandfullyelectricvehicles,aswellasthemarketforself-drivingtechnologyandapplications.Insomecases,suchcompetitorshaveannouncedanintentiontoproduceelectricvehiclesexclusivelyatsomepointinthefuture.Mostofourcurrentandpotentialcompetitorshavesignificantlygreaterfinancial,technical,manufacturing,marketing,vehiclesalesresourcesandnetworksthanwedoandmaybeabletodevotegreaterresourcestothedesign,development,manufacturing,distribution,promotion,saleandsupportoftheirproducts.Inparticular,somecompetitorsarecompetingorpreparingtocompetewithusinimportantandlargemarketsforelectricvehicles,suchasinChinaandEurope.Increasedcompetitioncouldresultinlowervehicleunitsales,pricereductions,revenueshortfalls,lossofcustomersandlossofmarketshare,whichcouldharmourbusiness,prospects,financialconditionandoperatingresults.Inaddition,Model3andModelYfacecompetitionfromexistingandfutureautomobilemanufacturersintheextremelycompetitiveentry-levelpremiumsedanandcompactSUVmarkets,includingBMW,Ford,Lexus,Mercedes,VolkswagenGroupandVolvo.

Thesolarandenergystorageindustriesarehighlycompetitive.Wefacecompetitionfromothermanufacturers,developers,installersandserviceprovidersforsolarandenergystoragesystems,aswellasfromlargeutilities.Decreasesintheretailorwholesalepricesofelectricityfromutilitiesorotherrenewableenergysourcescouldmakeourproductslessattractivetocustomersandleadtoanincreasedrateofresidentialcustomerdefaultsunderourexistinglong-termleasesandPPAs.Moreover,pricesforsolarproductcomponentsandpricesperkWhforlithium-ionbatterycellshavedeclinedandmaycontinuetodecline,whichmayadverselyimpactourabilitytocost-effectivelymanufacturesuchcomponentsourselves.

Ifweareunabletoestablishandmaintainconfidenceinourlong-termbusinessprospectsamongconsumers,analystsandwithinourindustries,oraresubjecttonegativepublicity,thenourfinancialcondition,operatingresults,businessprospectsandaccesstocapitalmaysuffermaterially.Consumersmaybelesslikelytopurchaseourproductsiftheyarenotconvincedthatourbusinesswillsucceedorthatourserviceandsupport

andotheroperationswillcontinueinthelongterm.Similarly,suppliersandotherthirdpartieswillbelesslikelytoinvesttimeandresourcesindevelopingbusinessrelationshipswithusiftheyarenotconvincedthatourbusinesswillsucceedoverthelongterm.Accordingly,inordertobuildandmaintainourbusiness,wemustmaintainconfidenceamongcustomers,suppliers,analysts,ratingsagenciesandotherpartiesinourlong-termfinancialviabilityandbusinessprospects.Maintainingsuchconfidencemaybeparticularlycomplicatedbycertainfactorsincludingthosethatarelargelyoutsideofourcontrol,suchasourlimitedoperatinghistory,customerunfamiliaritywithourproducts,anydelaysinscalingmanufacturing,deliveryandserviceoperationstomeetdemand,competitionanduncertaintyregardingthefutureofelectricvehiclesorourotherproductsandservices,andourquarterlyproductionandsalesperformancecomparedwithmarketexpectations.

Inparticular,Tesla’sproducts,business,resultsofoperations,statementsandactionsarewell-publicizedbyarangeofthirdparties.Suchattentionincludesfrequentcriticism,whichisoftenexaggeratedorunfounded,suchasspeculationregardingthesufficiencyorstabilityofourmanagementteam.Anysuchnegativeperceptions,whethercausedbyusornot,couldharmourbusinessandmakeitmoredifficulttoraiseadditionalfundsifneeded.

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Ifwefailtoeffectivelygrowandmanagethecompliance,residual,financing,andcreditrisksrelatedtoourvariousfinancingprograms,ourbusinessmaysuffer.WeofferfinancingarrangementsforourvehiclesinNorthAmerica,Europe,andAsiaprimarilythroughvariousfinancialinstitutions.Wealso

currentlyoffervehiclefinancingarrangementsdirectlythroughourlocalsubsidiariesintheUnitedStates,Canada,GermanyandtheUK,forcertainmodelsdependingonthecountry.Sucharrangementsincludeleasesdirectlywithus,underwhichwetypicallyreceiveonlyaverysmallportionofthetotalvehiclepurchasepriceatthetimeoflease,followedbyastreamofpaymentsoverthetermofthelease.Wehavealsoofferedvariousarrangementsforcustomersofoursolarenergysystems,wherebytheypayusafixedpaymenttoleaseorfinancethepurchaseofsolarenergysystems,orpurchaseelectricitygeneratedbyoursystems.Ifwedonotsuccessfullymonitorandcomplywithapplicablenational,state,and/orlocalfinancialregulationsandconsumerprotectionlawsgoverningthesetransactions,wemaybecomesubjecttoenforcementactionsorpenalties,eitherofwhichmayharmourbusiness.

Also,theprofitabilityofanyvehiclesreturnedtousattheendoftheirleasesdependsonourabilitytoaccuratelyprojectourvehicles’residualvaluesattheoutsetoftheleases,andsuchvaluesmayfluctuatepriortotheendoftheirtermsdependingonvariousfactorssuchassupplyanddemandofourusedvehicles,economiccycles,andthepricingofnewvehicles.Wehavemadeinthepastandmaymakeinthefuturecertainadjustmentstoourpricesfromtimetotimeintheordinarycourseofbusiness,includingasweintroducenewvehiclesandvariantsandoptimizethepricingamongthem.Suchpricingchangesmayimpacttheresidualvaluesofourvehicles.Thevehicleleasingprogramalsoreliesonourabilitytosecureadequatefinancingand/orbusinesspartnerstofundandgrowthisprogram.Weexpecttheavailabilityofleasingandothervehiclefinancingoptionswillbeimportantforourvehiclecustomers.Ifweareunabletoadequatelyfundourleasingprogramthroughinternalfunds,partnersorotherexternalfinancingsources,andcompellingalternativefinancingprogramsarenotavailableforourcustomers,wemaybeunabletogrowourvehicledeliveries.Furthermore,ifourvehicleleasingbusinessgrowssubstantially,ourbusinessmaysufferifwecannoteffectivelymanagethegreaterlevelsofresidualriskresultingfromgrowth.

Moreover,wehaveprovidedresalevalueguaranteestovehiclecustomersandpartnersforcertainfinancingprograms,underwhichsuchcounterpartiesmayselltheirvehiclesbacktousatcertainpointsintimeatpre-determinedamounts.However,actualresalevalues,aswithresidualvaluesforleasedvehicles,aresubjecttosimilarfluctuationsoverthetermofthefinancingarrangements,suchasfromthevehiclepricingchangesdiscussedabove.Iftheactualresalevaluesofanyvehiclesresoldorreturnedtouspursuanttotheseprogramsaremateriallylowerthanthepre-determinedamountswehaveoffered,ouroperatingresults,profitabilityand/orliquiditycouldbenegativelyimpacted.

Finally,ourvehicleandsolarenergysystemfinancingprogramsandourenergystoragesalesprogramsalsorequireustoscreenforandmanagecustomercreditrisk.Intheeventofawidespreadeconomicdownturnorothercatastrophicevent,oursolarenergy,energystorageand/orourvehiclecustomersmaybeunableorunwillingtosatisfytheirpaymentobligationstousonatimelybasisoratall.Ifasignificantnumberofourcustomersdefault,wemayincurcreditlossesand/orhavetorecognizeimpairmentchargeswithrespecttotheunderlyingassets,whichmaybesubstantial.Anysuchcreditlossesand/orimpairmentchargescouldadverselyaffectouroperatingresultsorfinancialcondition.

Theunavailability,reductionoreliminationof,orunfavorabledeterminationswithrespectto,governmentandeconomicincentivesintheU.S.andabroadsupportingthedevelopmentandadoptionofelectricvehicles,energystorageproductsorsolarenergycouldhavesomeimpactondemandforourproductsandservices.Weandourcustomerscurrentlybenefitfromcertaingovernmentandeconomicincentivessupportingthedevelopmentandadoptionofelectric

vehicles.IntheU.S.andabroad,suchincentivesincludetaxcreditsorrebatesthatencouragethepurchaseofelectricvehicles.Specificpoliciesinplacearoundtheworldincludeexemptingthepurchaseofelectricvehiclesfromimporttaxes,valueaddedtaxes,orcarbondioxideandweight-basedpurchasetaxes.Suchprogramscouldbereduced,eliminatedorexhausted.Forexample,undercurrentregulations,a$7,500federaltaxcreditthatwasavailableintheU.S.forthepurchaseofourvehicleswasreducedinphasesduring2019andendedonDecember31,2019.Webelievethatthissequentialphase-outlikelypulledforwardsomevehicledemandintotheperiodsprecedingeachreduction.Moreover,inJuly2018,apreviouslyavailableincentiveforpurchasesofModel3inOntario,CanadawascancelledandTeslabuyersinGermanylostaccesstoelectricvehicleincentivesforashortperiodoftimebeginninglate2017.InApril2017andJanuary2016,respectively,previously

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availableincentivesinHongKongandDenmarkthatfavoredthepurchaseofelectricvehiclesexpired,negativelyimpactingsales.EffectiveMarch2016,Californiaimplementedregulationsphasingouta$2,500cashrebateonqualifiedelectricvehiclesforhigh-incomeconsumers.Suchdevelopmentscouldhavesomenegativeimpactondemandforourvehicles,andweandourcustomersmayhavetoadjusttothem.

Inaddition,certaingovernmentalrebates,taxcreditsandotherfinancialincentivesthatarecurrentlyavailablewithrespecttooursolarandenergystorageproductbusinessesallowustolowerourcostsandencouragecustomerstobuyourproductsandinvestorstoinvestinoursolarfinancingfunds.However,theseincentivesmayexpireonaparticulardatewhentheallocatedfundingisexhausted,reducedorterminatedasrenewableenergyadoptionratesincrease,sometimeswithoutwarning.Forexample,theU.S.federalgovernmentcurrentlyoffersaninvestmenttaxcredit(ITC)fortheinstallationofsolarpowerfacilitiesandenergystoragesystemsthatarechargedfromaco-sitedsolarpowerfacility;however,theITCiscurrentlyscheduledtodeclineinphases,from26%forqualifyingsolarsystemsforwhichconstructionbeganbyDecember31,2020,to10%forcommercialandutilitysystemsandto0%forcustomer-ownedresidentialsystemsforwhichconstructionbeginsafterDecember31,2021.Likewise,injurisdictionswherenetenergymeteringiscurrentlyavailable,ourcustomersreceivebillcreditsfromutilitiesforenergythattheirsolarenergysystemsgenerateandexporttothegridinexcessoftheelectricloadtheyuse.Severaljurisdictionshavereduced,alteredoreliminatedthebenefitavailableundernetenergymetering,orhaveproposedtodoso.Inaddition,netenergymeteringhasbeencontestedandmaycontinuetobecontestedonanationwidebasisintheU.S.beforetheFederalEnergyRegulatoryCommission(FERC).Anyreductionsinorterminationofgovernmentalincentivescouldadverselyimpactourresultsbymakingourproductslesscompetitiveforpotentialcustomers,increasingourcostofcapitalandadverselyimpactingourabilitytoattractinvestmentpartnersandtoformnewfinancingfundsforoursolarandenergystorageassets.

Moreover,weandourfundinvestorsclaimtheITCandcertainstateincentivesinamountsbasedonthefairmarketvalueofoursolarandenergystoragesystems.Althoughweobtainindependentappraisalstosupporttheclaimedfairmarketvalues,therelevantgovernmentalauthoritieshaveauditedsuchvaluesandincertaincaseshavedeterminedthattheyshouldbelower,andtheymaydosoagaininthefuture.Suchdeterminationsmayresultinadversetaxconsequencesand/orourobligationtomakeindemnificationorotherpaymentstoourfundsorfundinvestors.

AnyfailurebyustocomplywiththetermsofouragreementwiththeResearchFoundationfortheStateUniversityofNewYorkrelatingtoourGigafactoryNewYork,couldresultinnegativeconsequencesforourbusiness.WearepartytoanoperatingleaseandaresearchanddevelopmentagreementthroughtheSUNYFoundation.Theseagreementsprovidefor

theconstructionanduseofourGigafactoryinBuffalo,NewYork,whichwehaveprimarilyusedforthedevelopmentandproductionofourSolarRoofandothersolarproductsandcomponents,energystoragecomponents,andSuperchargercomponents,andforotherlessor-approvedfunctions.Underthisagreement,weareobligatedto,amongotherthings,directlyemployspecifiedminimumnumbersofpersonnelintheStateofNewYorkandspendorincur$5.0billionincombinedcapital,operationalexpenses,costsofgoodssoldandothercostsintheStateofNewYorkduringthe10-yearperiodbeginningApril30,2018.InApril2020,thegovernmentagencyoverseeingthisagreementissuedguidancethatallobligationsrelatingtoinvestmentandemploymenttargetsundercertainofitsprojects,includingourobligationtobecompliantwithourapplicabletargetsundersuchagreementonApril30,2020,maybedeferredforaone-yearperioduponsuchagency’sapprovalofanapplicationforreliefbytheobligor.AswetemporarilysuspendedmostofourmanufacturingoperationsatGigafactoryNewYorkpursuanttoaNewYorkStateexecutiveorderissuedinMarch2020asaresultoftheCOVID-19pandemic,weweregrantedsuchdeferral,whichwasmemorializedinanamendmenttoouragreementwiththeSUNYFoundationinJuly2020.WhileweexpecttohaveandgrowsignificantoperationsatGigafactoryNewYorkandthesurroundingBuffaloarea,includingwithourrampandmanufactureoftheSolarRoof,ifwefailinanyyearoverthecourseofthetermoftheagreementtomeetallapplicablefutureobligations,wewouldbeobligatedtopaya“programpayment”of$41.2milliontotheSUNYFoundationforsuchyear.AnyinabilityonourparttocomplywithapplicablefuturerequirementsofthisagreementmayresultinthepaymentofsignificantamountstotheSUNYFoundation,theterminationofourleaseatGigafactoryNewYork,and/ortheneedtoadjustcertainofouroperations,inparticularourproductionrampoftheSolarRooforSuperchargercomponents.Anyoftheforegoingeventscouldhaveamaterialadverseeffectonourbusiness,prospects,financialconditionandoperatingresults.

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Ifweareunabletoattractand/orretainkeyemployeesandhirequalifiedpersonnel,ourabilitytocompetecouldbeharmed.Thelossoftheservicesofanyofourkeyemployeescoulddisruptouroperations,delaythedevelopmentandintroductionofourvehiclesand

services,andnegativelyimpactourbusiness,prospectsandoperatingresults.Inparticular,wearehighlydependentontheservicesofElonMusk,ourChiefExecutiveOfficer.

Noneofourkeyemployeesisboundbyanemploymentagreementforanyspecifictermandwemaynotbeabletosuccessfullyattractandretainseniorleadershipnecessarytogrowourbusiness.Ourfuturesuccessdependsuponourabilitytoattractandretainexecutiveofficersandotherkeytechnology,sales,marketing,engineering,manufacturingandsupportpersonnel,especiallytosupportourhigh-volumemanufactureofvehicles,expansionplansandtechnologicalinnovation,andanyfailureordelayindoingsocouldadverselyimpactourbusiness,prospects,financialconditionandoperatingresults.

KeytalentmayleaveTesladuetovariousfactors,suchasaverycompetitivelabormarketfortalentedindividualswithautomotiveortechnologyexperience,oranynegativepublicityrelatedtous.InCalifornia,Nevadaandotherregionswherewehaveoperations,includingoutsideoftheU.S.,thereisincreasingcompetitionforindividualswithskillsetsneededforourbusiness,includingspecializedknowledgeofelectricvehicles,softwareengineering,manufacturingengineering,andotherskillssuchaselectricalandbuildingconstructionexpertise.Thiscompetitionaffectsourabilitytoretainandhirekeyemployees.Moreover,wehaveinthepastconductedreductionsinforceinordertooptimizeourorganizationalstructureandreducecosts,andcertainseniorpersonnelhavealsodepartedforvariousreasons.Likewise,asaresultofourtemporarysuspensionofvariousU.S.manufacturingoperationsinthefirsthalfof2020,inApril2020wetemporarilyfurloughedcertainhourlyemployeesandreducedmostsalariedemployees’basesalaries.Ourcontinuedsuccessdependsuponourcontinuedabilitytohirenewemployeesinatimelymanner,especiallytosupportourexpansionplans,retaincurrentemployees,includingfurloughedemployeeswhenourU.S.operationsfullyresume,andreplacedepartedsenioremployeeswithqualifiedandexperiencedindividuals,whichistypicallyatime-consumingprocess.Additionally,wecompetewithbothmatureandprosperouscompaniesthathavefargreaterfinancialresourcesthanwedoandstart-upsandemergingcompaniesthatpromiseshort-termgrowthopportunities.Difficultiesinretainingorrecruitingemployeescouldhaveanadverseeffectonourperformanceandresults.

Finally,ourcompensationphilosophyforallofourpersonnelreflectsourstartuporigins,withanemphasisonequity-basedawardsandbenefitsinordertocloselyaligntheirincentiveswiththelong-terminterestsofourstockholders.Wehavetoperiodicallyseekandobtainapprovalfromourstockholdersforfutureincreasestothenumberofawardsthatmaybegrantedandsharesthatmaybepurchasedunderourequityincentiveandemployeestockpurchaseplans.Ifweareunabletoobtaintherequisitestockholderapprovalstoobtainfutureincreasestothenumberofawardsthatmaybegrantedandsharesthatmaybepurchasedundersuchplans,andcompensateourpersonnelinaccordancewithourcompensationphilosophy,ourabilitytoretainandhirequalifiedpersonnelwouldbenegativelyimpacted.

WearehighlydependentontheservicesofElonMusk,ourChiefExecutiveOfficer.WearehighlydependentontheservicesofElonMusk,ourChiefExecutiveOfficerandlargeststockholder.AlthoughMr.Muskspends

significanttimewithTeslaandishighlyactiveinourmanagement,hedoesnotdevotehisfulltimeandattentiontoTesla.Mr.MuskalsocurrentlyservesasChiefExecutiveOfficerandChiefTechnicalOfficerofSpaceExplorationTechnologiesCorp.,adeveloperandmanufacturerofspacelaunchvehicles,andisinvolvedinotheremergingtechnologyventures.

Wearecontinuouslyexpandingandimprovingourinformationtechnologysystemsandusesecuritymeasuresdesignedtoprotectoursystemsagainstbreachesandcyber-attacks.Iftheseeffortsarenotsuccessful,ourbusinessandoperationscouldbedisruptedorourintellectualpropertycouldbecompromised,asaresultofwhichouroperatingresultsandreputationcouldbeharmed.

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Wearecontinuouslyexpandingandimprovingourinformationtechnologysystems,includingimplementingnewinternallydevelopedsystems

anddeployingsuchsystemsglobally,toassistusinthemanagementofourbusiness.Inparticular,ourvolumeproductionofmultiplevehiclesnecessitatescontinueddevelopment,maintenanceandimprovementofourinformationtechnologysystemsintheU.S.andabroad,includingatGigafactoryShanghai,suchassystemsforproductdatamanagement,procurement,inventorymanagement,productionplanningandexecution,sales,serviceandlogistics,dealermanagement,financial,taxandregulatorycompliancesystems.Wealsomaintaininformationtechnologymeasuresdesignedtoprotectusagainstintellectualpropertytheft,databreachesandothercyber-attacks.Theimplementation,maintenance,segregationandimprovementofthesesystemsrequiresignificantmanagementtime,supportandcost.Moreover,thereareinherentrisksassociatedwithdeveloping,improvingandexpandingourcoresystemsaswellasimplementingnewsystemsandupdatingcurrentsystems,includingthedisruptionofourdatamanagement,procurement,manufacturingexecution,finance,supplychainandsalesandserviceprocesses.Theserisksmayaffectourabilitytomanageourdataandinventory,procurepartsorsuppliesormanufacture,sell,deliverandservicevehicles,adequatelyprotectourintellectualpropertyorachieveandmaintaincompliancewith,orrealizeavailablebenefitsunder,taxlawsandotherapplicableregulations.

Wecannotbesurethatthesesystemsortheirrequiredfunctionalitywillbeeffectivelyimplemented,maintainedorexpandedasplanned.Ifwedonotsuccessfullyimplement,maintainorexpandthesesystemsasplanned,ouroperationsmaybedisrupted,ourabilitytoaccuratelyand/ortimelyreportourfinancialresultscouldbeimpaired,anddeficienciesmayariseinourinternalcontroloverfinancialreporting,whichmayimpactourabilitytocertifyourfinancialresults.Moreover,ourproprietaryinformationorintellectualpropertycouldbecompromisedormisappropriatedandourreputationmaybeadverselyaffected.Ifthesesystemsortheirfunctionalitydonotoperateasweexpectthemto,wemayberequiredtoexpendsignificantresourcestomakecorrectionsorfindalternativesourcesforperformingthesefunctions.

Anyunauthorizedcontrolormanipulationofourproducts’systemscouldresultinlossofconfidenceinusandourproductsandharmourbusiness.Ourproductscontaincomplexinformationtechnologysystems.Forexample,ourvehiclesandenergystorageproductsaredesignedwithbuilt-

indataconnectivitytoacceptandinstallperiodicremoteupdatesfromustoimproveorupdatetheirfunctionality.Wehavedesigned,implementedandtestedsecuritymeasuresintendedtopreventunauthorizedaccesstoourinformationtechnologynetworks,ourproductsandtheirsystems.However,hackershavereportedlyattempted,andmayattemptinthefuture,togainunauthorizedaccesstomodify,alterandusesuchnetworks,productsandsystemstogaincontrolof,ortochange,ourproducts’functionality,userinterfaceandperformancecharacteristics,ortogainaccesstodatastoredinorgeneratedbyourproducts.Weencouragereportingofpotentialvulnerabilitiesinthesecurityofourproductsviaoursecurityvulnerabilityreportingpolicy,andweaimtoremedyanyreportedandverifiedvulnerability.Accordingly,wehavereceivedreportsofpotentialvulnerabilitiesinthepastandhaveattemptedtoremedythem.However,therecanbenoassurancethatvulnerabilitieswillnotbeexploitedinthefuturebeforetheycanbeidentified,orthatourremediationeffortsareorwillbesuccessful.

Anyunauthorizedaccesstoorcontrolofourproductsortheirsystemsoranylossofdatacouldresultinlegalclaimsorproceedings.Inaddition,regardlessoftheirveracity,reportsofunauthorizedaccesstoourproducts,theirsystemsordata,aswellasotherfactorsthatmayresultintheperceptionthatourproducts,theirsystemsordataarecapableofbeing“hacked,”couldnegativelyaffectourbrandandharmourbusiness,prospects,financialconditionandoperatingresults.Wehavebeenthesubjectofsuchreportsinthepast.

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Wearesubjecttosubstantiallawsandregulationsthatcouldimposesubstantialcosts,legalprohibitionsorunfavorablechangesuponouroperationsorproducts,andanyfailuretocomplywiththeselawsandregulations,includingastheyevolve,couldnegativelyimpactourabilitytooperateourmanufacturingfacilitiesandsubstantiallyharmourbusinessandoperatingresults.Asamanufacturingcompany,includingwithrespecttoourcurrentfacilitiessuchastheFremontFactory,GigafactoryNevada,Gigafactory

NewYorkandGigafactoryShanghaiandourfuturefacilitiesatGigafactoryBerlinandGigafactoryTexas,weareorwillbesubjecttocomplexenvironmental,manufacturing,healthandsafetylawsandregulationsatnumerousjurisdictionallevelsintheU.S.,China,Germanyandotherlocationsabroad,includinglawsrelatingtotheuse,handling,storage,recycling,disposalandhumanexposuretohazardousmaterialsandwithrespecttoconstructing,expandingandmaintainingourfacilities.Thecostsofcompliance,includingremediatingcontaminationifanyisfoundonourpropertiesandanychangestoouroperationsmandatedbyneworamendedlaws,maybesignificant.Wemayberequiredtoincuradditionalcoststocomplywithanychangestosuchregulations,andanyfailurestocomplycouldresultinsignificantexpenses,delaysorfines.Wearesubjecttolawsandregulationsapplicabletothesupply,manufacture,import,saleandserviceofautomobilesinternationally.Forexample,incountriesoutsideoftheU.S.,wearerequiredtomeetstandardsrelatingtovehiclesafety,fueleconomyandemissions,amongotherthings,thatareoftenmateriallydifferentfromrequirementsintheU.S.,thusresultinginadditionalinvestmentintothevehiclesandsystemstoensureregulatorycomplianceinthosecountries.Thisprocessmayincludeofficialreviewandcertificationofourvehiclesbyforeignregulatoryagenciespriortomarketentry,aswellascompliancewithforeignreportingandrecallmanagementsystemsrequirements.

Inparticular,weofferinourvehiclesAutopilotandFSDfeaturesthattodayassistdriverswithcertaintediousandpotentiallydangerousaspectsofroadtravel,butwhichcurrentlyrequiredriverstoremainengaged.WearecontinuingtodevelopourFSDtechnologywiththegoalofachievingfullself-drivingcapabilityinthefuture.Thereisavarietyofinternational,federalandstateregulationsthatmayapplytoself-drivingvehicles,whichincludemanyexistingvehiclestandardsthatwerenotoriginallyintendedtoapplytovehiclesthatmaynothaveadriver.Suchregulationscontinuetorapidlychange,whichincreasesthelikelihoodofapatchworkofcomplexorconflictingregulations,ormaydelayproductsorrestrictself-drivingfeaturesandavailability,whichcouldadverselyaffectourbusiness.

Finally,asamanufacturer,installerandserviceproviderwithrespecttosolargenerationandenergystoragesystemsandasupplierofelectricitygeneratedandstoredbythesolarenergyandenergystoragesystemsweinstallforcustomers,weareimpactedbyfederal,stateandlocalregulationsandpoliciesconcerningelectricitypricing,theinterconnectionofelectricitygenerationandstorageequipmentwiththeelectricgrid,andthesaleofelectricitygeneratedbythird-partyownedsystems.Forexample,existingorproposedregulationsandpolicieswouldpermitutilitiestolimittheamountofelectricitygeneratedbyourcustomerswiththeirsolarenergysystems,chargefeesandpenaltiestoourcustomersrelatingtothepurchaseofenergyotherthanfromthegrid,adjustelectricityratedesignssuchthatthepriceofoursolarproductsmaynotbecompetitivewiththatofelectricityfromthegrid,restrictusandourcustomersfromtransactingunderourPPAsorqualifyingforgovernmentincentivesandbenefitsthatapplytosolarpower,andlimitoreliminatenetenergymetering.Ifsuchregulationsandpoliciesarecontinuedoradopted,orifotherregulationsandpoliciesthatadverselyimpacttheinterconnectionoruseofoursolarandenergystoragesystemsareintroduced,theycoulddeterpotentialcustomersfrompurchasingoursolarandenergystorageproducts,threatentheeconomicsofourexistingcontractsandcauseustoceasesolarandenergystoragesystemsalesandoperationsintherelevantjurisdictions,whichcouldharmourbusiness,prospects,financialconditionandresultsofoperations.

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FailuretocomplywithavarietyofU.S.andinternationalprivacyandconsumerprotectionlawstowhichwearesubjectcouldharmus.Ourprivacynoticeispostedonourwebsite,andanyfailurebyusorourvendororotherbusinesspartnerstocomplywithitorwithfederal,

stateorinternationalprivacy,dataprotectionorsecuritylawsorregulationsrelatingtotheprocessing,collection,use,retention,securityandtransferofpersonallyidentifiableinformationcouldresultinregulatoryorlitigation-relatedactionsagainstus,legalliability,fines,damages,ongoingauditrequirementsandothersignificantcosts.Substantialexpensesandoperationalchangesmayberequiredinconnectionwithmaintainingcompliancewithsuchlaws,andinparticularcertainemergingprivacylawsarestillsubjecttoahighdegreeofuncertaintyastotheirinterpretationandapplication.Forexample,inMay2018,theGeneralDataProtectionRegulationbegantofullyapplytotheprocessingofpersonalinformationcollectedfromindividualslocatedintheEuropeanUnion,andhascreatednewcomplianceobligationsandhassignificantlyincreasedfinesfornoncompliance.Similarly,asofJanuary2020,theCaliforniaConsumerPrivacyActimposescertainlegalobligationsonouruseandprocessingofpersonalinformationrelatedtoCaliforniaresidents.Althoughwetakestepstoprotectthesecurityandintegrityofourcustomers’personalinformation,wemayberequiredtoexpendsignificantresourcestocomplywithdatabreachrequirementsif,forexample,thirdpartiesimproperlyobtainandusethepersonalinformationofourcustomersorweotherwiseexperienceadatalosswithrespecttocustomers’personalinformation.Amajorbreachofournetworksecurityandsystemscouldhavenegativeconsequencesforourbusinessandfutureprospects,includingpossiblefines,penaltiesanddamages,reducedcustomerdemandforourvehiclesandharmtoourreputationandbrand.

Ourbusinessmaybeadverselyaffectedbyanydisruptionscausedbyunionactivities.Itisnotuncommonforemployeesofcertaintradesatcompaniessuchasustobelongtoaunion,whichcanresultinhigheremployeecostsand

increasedriskofworkstoppages.Moreover,regulationsinsomejurisdictionsoutsideoftheU.S.mandateemployeeparticipationinindustrialcollectivebargainingagreementsandworkcouncilswithcertainconsultationrightswithrespecttotherelevantcompanies’operations.Althoughweworkdiligentlytoprovidethebestpossibleworkenvironmentforouremployees,theymaystilldecidetojoinorseekrecognitiontoformalaborunion,orwemayberequiredtobecomeaunionsignatory.Fromtimetotime,laborunionshaveengagedincampaignstoorganizecertainofouroperations,aspartofwhichsuchunionshavefiledunfairlaborpracticechargesagainstuswiththeNationalLaborRelationsBoard,andtheymaydosointhefuture.InSeptember2019,anadministrativelawjudgeissuedarecommendeddecisionforTeslaoncertainissuesandagainstusoncertainothers.TheNationalLaborRelationsBoardhasnotyetadoptedtherecommendationandwehaveappealedcertainaspectsoftherecommendeddecision.AnyunfavorableultimateoutcomeforTeslamayhaveanegativeimpactontheperceptionofTesla’streatmentofouremployees.Furthermore,wearedirectlyorindirectlydependentuponcompanieswithunionizedworkforces,suchaspartssuppliersandtruckingandfreightcompanies,andworkstoppagesorstrikesorganizedbysuchunionscouldhaveamaterialadverseimpactonourbusiness,financialcondition,oroperatingresults.Ifaworkstoppageoccurs,itcoulddelaythemanufactureandsaleofourproductsandhaveamaterialadverseeffectonourbusiness,prospects,operatingresults,orfinancialcondition.

Wemaychoosetoorbecompelledtoundertakeproductrecallsortakeothersimilaractions,whichcouldadverselyaffectourbrandimageandfinancialperformance.Anyproductrecallwithrespecttoourproductsmayresultinadversepublicity,damageourbrand,andadverselyaffectourbusiness,prospects,

operatingresults,andfinancialcondition.Forexample,certainvehiclerecallsthatweinitiatedhaveresultedfromvariouscauses,includingacomponentthatcouldpreventtheparkingbrakefromreleasingonceengaged,aconcernwiththefirmwareintherestraintscontrolmoduleincertainright-hand-drivevehicles,industry-wideissueswithairbagsfromaparticularsupplier,ModelXseatcomponentsthatcouldcauseunintendedseatmovementduringacollision,andconcernsofcorrosioninModelSandModelXpowersteeringassistmotorbolts.Furthermore,testingofourproductsbygovernmentregulatorsorindustrygroupsmayrequireustoinitiateproductrecallsormayresultinnegativepublicperceptionsaboutthesafetyofourproducts.Inthefuture,wemayatvarioustimes,voluntarilyorinvoluntarily,initiatearecallifanyofourproductsorourelectricvehiclepowertraincomponentsthatwehaveprovidedtoothervehicleOEMs,includinganysystemsorpartssourcedfromoursuppliers,provetobedefectiveornoncompliantwithapplicablelawsandregulations,suchasfederalmotorvehiclesafetystandards.Suchrecalls,whethervoluntaryorinvoluntaryorcausedbysystemsorcomponentsengineeredormanufacturedbyusoroursuppliers,couldinvolvesignificantexpenseandcouldadverselyaffectourbrandimageinourtargetmarkets,aswellasourbusiness,prospects,financialconditionandresultsofoperations.

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Ourcurrentandfuturewarrantyreservesmaybeinsufficienttocoverfuturewarrantyclaimswhichcouldadverselyaffectourfinancialperformance.Weprovideamanufacturer’swarrantyonallnewandusedTeslavehiclesandproductionpowertraincomponentsandsystemswesell.In

addition,wealsoprovidewarrantiesontheinstallationandmaintenanceofoursystemsinadditiontothecomponentsoftheenergygenerationandstoragesystemswesell.Forcomponentsnotmanufacturedbyus,wepassthroughtoourcustomerstheinverterandpanelmanufacturers’warranties.Finally,weofferaperformanceguaranteewithourfinancedsolarenergysystemsthatcancompensateacustomeronanannualbasisiftheirsystemdoesnotmeettheelectricityproductionguaranteessetforthintheirPPAorlease.Undertheseperformanceguarantees,webeartheriskofelectricityproductionshortfallsresultingfromaninverterorpanelfailure.Theserisksareexacerbatedintheeventthepanelorinvertermanufacturersceaseoperationsorfailtohonortheirwarranties.

Ifourwarrantyreservesareinadequatetocoverfuturewarrantyclaimsonourproducts,ourbusiness,prospects,financialcondition,andoperatingresultscouldbemateriallyandadverselyaffected.Warrantyreservesincludeourmanagement’sbestestimateoftheprojectedcoststorepairortoreplaceitemsunderwarranty.Theseestimatesarebasedonactualclaimsincurredtodateandanestimateofthenature,frequency,andcostsoffutureclaims.Suchestimatesareinherentlyuncertainandchangestoourhistoricalorprojectedexperience,especiallywithrespecttoproductssuchasModel3,ModelY,andSolarRoofthatwehaverecentlyintroducedand/orthatweexpecttoproduceatsignificantlygreatervolumesthanourpastproducts,maycausematerialchangestoourwarrantyreservesinthefuture.

Ourinsurancecoveragestrategymaynotbeadequatetoprotectusfromallbusinessrisks.Wemaybesubject,intheordinarycourseofbusiness,tolossesresultingfromproductsliability,accidents,actsofGod,andotherclaims

againstus,forwhichwemayhavenoinsurancecoverage.Asageneralmatter,wedonotmaintainasmuchinsurancecoverageasmanyothercompaniesdo,andinsomecases,wedonotmaintainanyatall.Additionally,thepoliciesthatwedohavemayincludesignificantdeductiblesorself-insuredretentions,andwecannotbecertainthatourinsurancecoveragewillbesufficienttocoverallfuturelossesorclaimsagainstus.Alossthatisuninsuredorwhichexceedspolicylimitsmayrequireustopaysubstantialamounts,whichcouldadverselyaffectourfinancialconditionandoperatingresults.

Ourfinancialresultsmayvarysignificantlyfromperiodtoperiodduetofluctuationsinouroperatingcostsandotherfactors.Weexpectourperiod-to-periodfinancialresultstovarybasedonouroperatingcosts,whichweanticipatewillfluctuateasthepaceatwhichwe

continuetodesign,develop,andmanufacturenewproductsandincreaseproductioncapacitybyexpandingourcurrentmanufacturingfacilitiesandaddingfuturefacilities,maynotbeconsistentorlinearbetweenperiods.Additionally,ourrevenuesfromperiodtoperiodmayfluctuateasweintroduceexistingproductstonewmarketsforthefirsttimeandaswedevelopandintroducenewproducts.Asaresultofthesefactors,webelievethatquarter-to-quartercomparisonsofourfinancialresults,especiallyintheshortterm,arenotnecessarilymeaningfulandthatthesecomparisonscannotberelieduponasindicatorsoffutureperformance.Moreover,ourfinancialresultsmaynotmeetexpectationsofequityresearchanalysts,ratingsagencies,orinvestors,whomaybefocusedonlyonquarterlyfinancialresults.Ifanyofthisoccurs,thetradingpriceofourstockcouldfallsubstantially,eithersuddenlyorovertime.

Servicingourindebtednessrequiresasignificantamountofcash,andthereisnoguaranteethatwewillhavesufficientcashflowfromourbusinesstopayoursubstantialindebtedness.AsofJune30,2020,weandoursubsidiarieshadoutstanding$13.15billioninaggregateprincipalamountofindebtedness(seeNote10,Debt,

totheconsolidatedfinancialstatementsincludedelsewhereinthisQuarterlyReportonForm10-Q).Oursubstantialconsolidatedindebtednessmayincreaseourvulnerabilitytoanygenerallyadverseeconomicandindustryconditions.Weandoursubsidiariesmay,subjecttothelimitationsinthetermsofourexistingandfutureindebtedness,incuradditionaldebt,secureexisting,orfuturedebtorrecapitalizeourdebt.

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Holdersofconvertibleseniornotesissuedbyusoroursubsidiarymayconvertsuchnotesattheiroptionpriortothescheduledmaturitiesofthe

respectiveconvertibleseniornotesundercertaincircumstancespursuanttothetermsofsuchnotes.Uponconversionoftheapplicableconvertibleseniornotes,wewillbeobligatedtodelivercashand/orsharespursuanttothetermsofsuchnotes.Moreover,holdersofsuchconvertibleseniornotesmayhavetherighttorequireustorepurchasetheirnotesupontheoccurrenceofafundamentalchangepursuanttothetermsofsuchnotes.

Ourabilitytomakescheduledpaymentsoftheprincipalandinterestonourindebtednesswhendue,tomakepaymentsuponconversionorrepurchasedemandswithrespecttoourconvertibleseniornotes,ortorefinanceourindebtednessaswemayneedordesire,dependsonourfutureperformance,whichissubjecttoeconomic,financial,competitive,andotherfactorsbeyondourcontrol.Ourbusinessmaynotcontinuetogeneratecashflowfromoperationsinthefuturesufficienttosatisfyourobligationsunderourexistingindebtednessandanyfutureindebtednesswemayincur,andtomakenecessarycapitalexpenditures.Ifweareunabletogeneratesuchcashflow,wemayberequiredtoadoptoneormorealternatives,suchasreducingordelayinginvestmentsorcapitalexpenditures,sellingassets,refinancing,orobtainingadditionalequitycapitalontermsthatmaybeonerousorhighlydilutive.Ourabilitytorefinanceexistingorfutureindebtednesswilldependonthecapitalmarketsandourfinancialconditionatsuchtime.Inaddition,ourabilitytomakepaymentsmaybelimitedbylaw,byregulatoryauthority,orbyagreementsgoverningourfutureindebtedness.Wemaynotbeabletoengageinanyoftheseactivitiesorengageintheseactivitiesondesirabletermsoratall,whichcouldresultinadefaultonourexistingorfutureindebtednessandhaveamaterialadverseeffectonourbusiness,resultsofoperations,andfinancialcondition.

Ourdebtagreementscontaincovenantrestrictionsthatmaylimitourabilitytooperateourbusiness.Thetermsofcertainofourcreditfacilities,includingtheCreditAgreement,contain,andanyofourotherfuturedebtagreementsmaycontain,

covenantrestrictionsthatlimitourabilitytooperateourbusiness,includingrestrictionsonourabilityto,amongotherthings,incuradditionaldebtorissueguarantees,createliens,repurchasestock,ormakeotherrestrictedpayments,andmakecertainvoluntaryprepaymentsofspecifieddebt.Inaddition,undercertaincircumstanceswearerequiredtocomplywithafixedchargecoverageratio.Asaresultofthesecovenants,ourabilitytorespondtochangesinbusinessandeconomicconditionsandengageinbeneficialtransactions,includingtoobtainadditionalfinancingasneeded,mayberestricted.Furthermore,ourfailuretocomplywithourdebtcovenantscouldresultinadefaultunderourdebtagreements,whichcouldpermittheholderstoaccelerateourobligationtorepaythedebt.Ifanyofourdebtisaccelerated,wemaynothavesufficientfundsavailabletorepayit.

Wemayneedorwanttoraiseadditionalfundsandthesefundsmaynotbeavailabletouswhenweneedthem.Ifwecannotraiseadditionalfundswhenweneedorwantthem,ouroperationsandprospectscouldbenegativelyaffected.Thedesign,manufacture,sale,installation,and/orservicingofautomobiles,energystorageproductsandsolarproductsisacapital-intensive

business,andthespecifictimingofcashinflowsandoutflowsmayfluctuatesubstantiallyfromperiodtoperiod.Untilweareconsistentlygeneratingpositivefreecashflows,wemayneedorwanttoraiseadditionalfundsthroughtheissuanceofequity,equity-related,ordebtsecuritiesorthroughobtainingcreditfromfinancialinstitutionstofund,togetherwithourprincipalsourcesofliquidity,thecostsofdevelopingandmanufacturingourcurrentorfuturevehicles,energystorageproducts,and/orsolarproducts,topayanysignificantunplannedoracceleratedexpensesorfornewsignificantstrategicinvestments,ortorefinanceoursignificantconsolidatedindebtedness,evenifnotrequiredtodosobythetermsofsuchindebtedness.Weneedsufficientcapitaltofundongoingoperations,researchanddevelopmentprojectsfornewproducts,establishmentand/orincreasesofModel3andModelYproductioncapacityattheFremontFactoryandatGigafactoryShanghai,thecontinuedexpansionofGigafactoryNevada,theconstructionofGigafactoryBerlin,themanufacturingrampoftheSolarRoofatGigafactoryNewYork,andthecontinuedexpansionofourretailandservicelocations,bodyshops,MobileServicefleetandSuperchargernetwork.Wecannotbecertainthatadditionalfundswillbeavailabletousonfavorabletermswhenrequired,oratall.Ifwecannotraiseadditionalfundswhenweneedthem,ourfinancialcondition,resultsofoperations,business,andprospectscouldbemateriallyandadverselyaffected.

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Wecouldbesubjecttoliability,penalties,andotherrestrictivesanctionsandadverseconsequencesarisingoutofcertaingovernmentalinvestigationsandproceedings.WearecooperatingwithcertaingovernmentinvestigationsasdiscussedinNote12,CommitmentsandContingencies,totheconsolidated

financialstatementsincludedelsewhereinthisQuarterlyReportonForm10-Q.Toourknowledge,nogovernmentagencyinanysuchongoinginvestigationhasconcludedthatanywrongdoingoccurred.However,wecannotpredicttheoutcomeorimpactofanysuchongoingmatters,andthereexiststhepossibilitythatwecouldbesubjecttoliability,penalties,andotherrestrictivesanctionsandadverseconsequencesiftheSEC,theDOJ,oranyothergovernmentagencyweretopursuelegalactioninthefuture.Moreover,weexpecttoincurcostsinrespondingtorelatedrequestsforinformationandsubpoenas,andifinstituted,indefendingagainstanygovernmentalproceedings.

Forexample,onOctober16,2018,theU.S.DistrictCourtfortheSouthernDistrictofNewYorkenteredafinaljudgmentapprovingthetermsofasettlementfiledwiththeCourtonSeptember29,2018,inconnectionwiththeactionstakenbytheSECrelatingtoMr.Musk’sstatementonAugust7,2018thathewasconsideringtakingTeslaprivate.Pursuanttothesettlement,we,amongotherthings,paidacivilpenaltyof$20million,appointedanindependentdirectorastheChairoftheBoard,appointedtwoadditionalindependentdirectorstoourboardofdirectors,andmadefurtherenhancementstoourdisclosurecontrolsandothercorporategovernance-relatedmatters.OnApril26,2019,thissettlementwasamendedtoclarifycertainofthepreviously-agreeddisclosureprocedures,whichwassubsequentlyapprovedbytheCourt.Allothertermsofthepriorsettlementwerereaffirmedwithoutmodification.Althoughweintendtocontinuetocomplywiththetermsandrequirementsofthesettlement,ifthereisalackofcomplianceoranallegedlackofcompliance,additionalenforcementactionsorotherlegalproceedingsmaybeinstitutedagainstus.

Ifweupdateordiscontinuetheuseofourmanufacturingequipmentmorequicklythanexpected,wemayhavetoshortentheusefullivesofanyequipmenttoberetiredasaresultofanysuchupdate,andtheresultingaccelerationinourdepreciationcouldnegativelyaffectourfinancialresults.Wehaveinvestedandexpecttocontinuetoinvestsignificantlyinwhatwebelieveisstateofthearttooling,machinery,andother

manufacturingequipmentforourvariousproductlines,andwedepreciatethecostofsuchequipmentovertheirexpectedusefullives.However,manufacturingtechnologymayevolverapidly,andwemaydecidetoupdateourmanufacturingprocesswithcutting-edgeequipmentmorequicklythanexpected.Moreover,wearecontinuallyimplementinglearningsasourengineeringandmanufacturingexpertiseandefficiencyincrease,whichmayresultinourabilitytomanufactureourproductsusinglessofourcurrentlyinstalledequipment.Alternatively,aswerampandmaturetheproductionofourproductstohigherlevels,ourlearningsmaycauseustodiscontinuetheuseofalreadyinstalledequipmentinfavorofdifferentoradditionalequipment.Theusefullifeofanyequipmentthatwouldberetiredearlyasaresultwouldbeshortened,causingthedepreciationonsuchequipmenttobeaccelerated,andourresultsofoperationscouldbenegativelyimpacted.

Weareexposedtofluctuationsincurrencyexchangerates,whichcouldnegativelyaffectourfinancialresults.Wetransactbusinessgloballyinmultiplecurrenciesandhaveforeigncurrencyrisksrelatedtoourrevenue,costsofrevenue,operating

expenses,andlocalizedsubsidiarydebtdenominatedincurrenciesotherthantheU.S.dollar,currentlyprimarilytheChineseyuan,euro,BritishpoundandCanadiandollar.Totheextentwehavesignificantrevenuesdenominatedinsuchforeigncurrencies,anystrengtheningoftheU.S.dollarwouldtendtoreduceourrevenuesasmeasuredinU.S.dollars,aswehavehistoricallyexperienced.Inaddition,aportionofourcostsandexpenseshavebeen,andweanticipatewillcontinuetobe,denominatedinforeigncurrencies,includingtheJapaneseyenandChineseyuan.IfwedonothavefullyoffsettingrevenuesinthesecurrenciesandifthevalueoftheU.S.dollardepreciatessignificantlyagainstthesecurrencies,ourcostsasmeasuredinU.S.dollarsasapercentofourrevenueswillcorrespondinglyincreaseandourmarginswillsuffer.Moreover,whileweundertakelimitedhedgingactivitiesintendedtooffsettheimpactofcurrencytranslationexposure,itisimpossibletopredictoreliminatesuchimpact.Asaresult,ouroperatingresultscouldbeadverselyaffected.

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Wemayfaceregulatorylimitationsonourabilitytosellvehiclesdirectly,whichcouldmateriallyandadverselyaffectourabilitytosellourelectricvehicles.Wesellourvehiclesdirectlytoconsumersusingmeansthatwebelievewillmaximizeourreach,currentlyincludingthroughourwebsiteand

ourownstores.Whileweintendtocontinuetoleverageourmosteffectivesalesstrategies,wemaynotbeabletosellourvehiclesthroughourownstoresineachstateintheU.S.,assomestateshavelawsthatmaybeinterpretedtoimposelimitationsonthisdirect-to-consumersalesmodel.Insomestates,wehavealsoopenedgalleriestoeducateandinformcustomersaboutourproducts,butsuchlocationsdonotactuallytransactinthesaleofvehicles.Theapplicationofthesestatelawstoouroperationscontinuestobedifficulttopredict.Lawsinsomestateshavelimitedourabilitytoobtaindealerlicensesfromstatemotorvehicleregulatorsandmaycontinuetodoso.

Inaddition,decisionsbyregulatorspermittingustosellvehiclesmaybechallengedbydealerassociationsandothersastowhethersuchdecisionscomplywithapplicablestatemotorvehicleindustrylaws.Wehaveprevailedinmanyoftheselawsuitsandsuchresultshavereinforcedourcontinuingbeliefthatstatelawswerenotdesignedtopreventourdistributionmodel.Insomestates,therehavealsobeenregulatoryandlegislativeeffortsbydealerassociationstoproposelawsthat,ifenacted,wouldpreventusfromobtainingdealerlicensesintheirstatesgivenourcurrentsalesmodel.Afewstateshavepassedlegislationthatclarifiesourabilitytooperate,butatthesametimelimitsthenumberofdealerlicenseswecanobtainorstoresthatwecanoperate.

Internationally,theremaybelawsinjurisdictionswehavenotyetenteredorlawsweareunawareofinjurisdictionswehaveenteredthatmayrestrictoursalesorotherbusinesspractices.Evenforthosejurisdictionswehaveanalyzed,thelawsinthisareacanbecomplex,difficulttointerpretandmaychangeovertime.Continuedregulatorylimitationsandotherobstaclesinterferingwithourabilitytosellvehiclesdirectlytoconsumerscouldhaveanegativeandmaterialimpactourbusiness,prospects,financialconditionandresultsofoperations.

Wemayneedtodefendourselvesagainstintellectualpropertyinfringementclaims,whichmaybetime-consumingandcouldcauseustoincursubstantialcosts.Others,includingourcompetitors,mayholdorobtainpatents,copyrights,trademarks,orotherproprietaryrightsthatcouldprevent,limit,or

interferewithourabilitytomake,use,develop,sell,ormarketourproductsandservices,whichcouldmakeitmoredifficultforustooperateourbusiness.Fromtimetotime,theholdersofsuchintellectualpropertyrightsmayasserttheirrightsandurgeustotakelicenses,and/ormaybringsuitsalleginginfringementormisappropriationofsuchrights.Whileweendeavortoobtainandprotecttheintellectualpropertyrightsthatweexpectwillallowustoretainoradvanceourstrategicinitiatives,therecanbenoassurancethatwewillbeabletoadequatelyidentifyandprotecttheportionsofintellectualpropertythatarestrategictoourbusiness,ormitigatetheriskofpotentialsuitsorotherlegaldemandsbyourcompetitors.Accordingly,wemayconsidertheenteringintolicensingagreementswithrespecttosuchrights,althoughnoassurancecanbegiventhatsuchlicensescanbeobtainedonacceptabletermsorthatlitigationwillnotoccur,andsuchlicensesandassociatedlitigationcouldsignificantlyincreaseouroperatingexpenses.Inaddition,ifwearedeterminedtohaveorbelievethereisahighlikelihoodthatwehaveinfringeduponathirdparty’sintellectualpropertyrights,wemayberequiredtoceasemaking,selling,orincorporatingcertaincomponentsorintellectualpropertyintothegoodsandservicesweoffer,topaysubstantialdamagesand/orlicenseroyalties,toredesignourproductsandservices,and/ortoestablishandmaintainalternativebrandingforourproductsandservices.Intheeventthatwewererequiredtotakeoneormoresuchactions,ourbusiness,prospects,operatingresults,andfinancialconditioncouldbemateriallyadverselyaffected.Inaddition,anylitigationorclaims,whetherornotvalid,couldresultinsubstantialcosts,negativepublicity,anddiversionofresourcesandmanagementattention.

Ourfacilitiesoroperationscouldbeadverselyaffectedbyeventsoutsideofourcontrol,suchasnaturaldisasters,wars,orhealthepidemics.Wemaybeimpactedbynaturaldisasters,wars,healthepidemics,orothereventsoutsideofourcontrol.Forexample,ourcorporate

headquarters,theFremontFactory,andGigafactoryNevadaarelocatedinseismicallyactiveregionsinNorthernCaliforniaandNevada,andourGigafactoryShanghaiislocatedinaflood-pronearea.Ifmajordisasterssuchasearthquakes,floods,orothereventsoccur,orourinformationsystemorcommunicationsnetworkbreaksdownoroperatesimproperly,ourheadquartersandproductionfacilitiesmaybeseriouslydamaged,orwemayhavetostopordelayproductionandshipmentofourproducts.Inaddition,theglobalCOVID-19pandemichasimpactedeconomicmarkets,manufacturingoperations,supplychains,employmentandconsumerbehaviorinnearlyeverygeographicregionandindustryacrosstheworld,andwehavebeen,andmayinthefuturebe,adverselyaffectedasaresult.Wemayincurexpensesordelaysrelatingtosucheventsoutsideofourcontrol,whichcouldhaveamaterialadverseimpactonourbusiness,operatingresultsandfinancialcondition.

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RisksRelatedtotheOwnershipofOurCommonStockThetradingpriceofourcommonstockislikelytocontinuetobevolatile.Thetradingpriceofourcommonstockhasbeenhighlyvolatileandcouldcontinuetobesubjecttowidefluctuationsinresponsetovarious

factors,someofwhicharebeyondourcontrol.Ourcommonstockhasexperiencedanintra-daytradinghighof$1,794.99pershareandalowof$211.00pershareoverthelast52weeks.Thestockmarketingeneral,andthemarketfortechnologycompaniesinparticular,hasexperiencedextremepriceandvolumefluctuationsthathaveoftenbeenunrelatedordisproportionatetotheoperatingperformanceofthosecompanies.Inparticular,alargeproportionofourcommonstockhasbeenandmaycontinuetobetradedbyshortsellerswhichmayputpressureonthesupplyanddemandforourcommonstock,furtherinfluencingvolatilityinitsmarketprice.Publicperceptionandotherfactorsoutsideofourcontrolmayadditionallyimpactthestockpriceofcompanieslikeusthatgarneradisproportionatedegreeofpublicattention,regardlessofactualoperatingperformance.Inaddition,inthepast,followingperiodsofvolatilityintheoverallmarketandthemarketpriceofaparticularcompany’ssecurities,securitiesclassactionlitigationhasoftenbeeninstitutedagainstthesecompanies.Moreover,stockholderlitigationlikethishasbeenfiledagainstusinthepast.Whilewedefendsuchactionsvigorously,anyjudgmentagainstusoranyfuturestockholderlitigationcouldresultinsubstantialcostsandadiversionofourmanagement’sattentionandresources.

Wemayfailtomeetourpubliclyannouncedguidanceorotherexpectationsaboutourbusiness,whichcouldcauseourstockpricetodecline.Wemayprovidefromtimetotimeguidanceregardingourexpectedfinancialandbusinessperformance,whichmayincludeprojections

regardingsalesandproduction,aswellasanticipatedfuturerevenues,grossmargins,profitability,andcashflows.Correctlyidentifyingkeyfactorsaffectingbusinessconditionsandpredictingfutureeventsisinherentlyanuncertainprocess,andourguidancemaynotultimatelybeaccurateandhasinthepastbeeninaccurateincertainrespects,suchasthetimingofnewproductmanufacturingramps.Ourguidanceisbasedoncertainassumptionssuchasthoserelatingtoanticipatedproductionandsalesvolumes(whichgenerallyarenotlinearthroughoutagivenperiod),averagesalesprices,supplierandcommoditycosts,andplannedcostreductions.Ifourguidanceisnotaccurateorvariesfromactualresultsduetoourinabilitytomeetourassumptionsortheimpactonourfinancialperformancethatcouldoccurasaresultofvariousrisksanduncertainties,themarketvalueofourcommonstockcoulddeclinesignificantly.

Transactionsrelatingtoourconvertibleseniornotesmaydilutetheownershipinterestofexistingstockholders,ormayotherwisedepressthepriceofourcommonstock.Theconversionofsomeoralloftheconvertibleseniornotesissuedbyusoroursubsidiarywoulddilutetheownershipinterestsofexisting

stockholderstotheextentwedeliversharesuponconversionofanyofsuchnotes.Suchconvertibleseniornotesareconvertibleattheoptionoftheirholderspriortotheirscheduledtermsundercertaincircumstances.Ifholderselecttoconverttheirnotes,wecouldberequiredtodelivertothemasignificantnumberofsharesofourcommonstock.Anysalesinthepublicmarketofthecommonstockissuableuponsuchconversioncouldadverselyaffectprevailingmarketpricesofourcommonstock.Inaddition,theexistenceoftheconvertibleseniornotesmayencourageshortsellingbymarketparticipantsbecausetheconversionofsuchnotescouldbeusedtosatisfyshortpositions,oranticipatedconversionofsuchnotesintosharesofourcommonstockcoulddepressthepriceofourcommonstock.

Moreover,inconnectionwithcertainoftheconvertibleseniornotes,weenteredintoconvertiblenotehedgetransactions,whichareexpectedtoreducethepotentialdilutionand/oroffsetpotentialcashpaymentswearerequiredtomakeinexcessoftheprincipalamountuponconversionoftheapplicablenotes.Wealsoenteredintowarranttransactionswiththehedgecounterparties,whichcouldseparatelyhaveadilutiveeffectonourcommonstocktotheextentthatthemarketpricepershareofourcommonstockexceedstheapplicablestrikepriceofthewarrantsontheapplicableexpirationdates.Inaddition,thehedgecounterpartiesortheiraffiliatesmayenterintovarioustransactionswithrespecttotheirhedgepositions,whichcouldalsocauseorpreventanincreaseoradecreaseinthemarketpriceofourcommonstockortheconvertibleseniornotes.

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ElonMuskhaspledgedsharesofourcommonstocktosecurecertainbankborrowings.IfMr.Muskwereforcedtosellthesesharesinordertosatisfyhisloanobligations,suchsalescouldcauseourstockpricetodecline.CertainbankinginstitutionshavemadeextensionsofcredittoElonMusk,ourChiefExecutiveOfficer,aportionofwhichwasusedtopurchase

sharesofcommonstockincertainofourpublicofferingsandprivateplacementsatthesamepricesofferedtothird-partyparticipantsinsuchofferingsandplacements.Wearenotapartytotheseloans,whicharepartiallysecuredbypledgesofaportionoftheTeslacommonstockcurrentlyownedbyMr.Musk.Ifthepriceofourcommonstockweretodeclinesubstantially,Mr.MuskmaybeforcedbyoneormoreofthebankinginstitutionstosellsharesofTeslacommonstocktosatisfyhisloanobligationsifhecouldnotdosothroughothermeans.Anysuchsalescouldcausethepriceofourcommonstocktodeclinefurther.

Anti-takeoverprovisionscontainedinourgoverningdocuments,applicablelaws,andourconvertibleseniornotescouldimpairatakeoverattempt.Ourcertificateofincorporationandbylawsaffordcertainrightsandpowerstoourboardofdirectorsthatcouldcontributetothedelayor

preventionofanacquisitionthatitdeemsundesirable.WearealsosubjecttoSection203oftheDelawareGeneralCorporationLawandotherprovisionsofDelawarelawthatlimittheabilityofstockholdersincertainsituationstoeffectcertainbusinesscombinations.Inaddition,thetermsofourconvertibleseniornotesmayrequireustorepurchasesuchnotesintheeventofafundamentalchange,includingatakeoverofourcompany.Anyoftheforegoingprovisionsandtermsthathastheeffectofdelayingordeterringachangeincontrolcouldlimittheopportunityforourstockholderstoreceiveapremiumfortheirsharesofourcommonstock,andcouldalsoaffectthepricethatsomeinvestorsarewillingtopayforourcommonstock.

ITEM2. UNREGISTEREDSALESOFEQUITYSECURITIESANDUSEOFPROCEEDSNone.

ITEM3. DEFAULTUPONSENIORSECURITIESNone.

ITEM4. MINESAFETYDISCLOSURESNotapplicable.

ITEM5. OTHERINFORMATION

InApril2020,thegovernmentagencyoverseeingthatcertainAmendedandRestatedAgreementforResearch&DevelopmentAllianceonTriexModuleTechnology,datedSeptember2,2014,asamended(the“GigafactoryNewYorkLeaseAgreement”),betweenSilevo,LLC,awholly-ownedsubsidiaryofTesla,andtheSUNYFoundation,issuedguidancethatallobligationsrelatingtoinvestmentandemploymenttargetsundercertainofitsprojectsmaybedeferredforaone-yearperioduponsuchagency’sapprovalofanapplicationforreliefbytheobligor.AswehadtemporarilysuspendedmostofourmanufacturingoperationsatGigafactoryNewYorkpursuanttoaNewYorkStateexecutiveorderissuedinMarch2020asaresultoftheCOVID-19pandemic,weappliedforsuchdeferralwithrespecttotheGigafactoryNewYorkLeaseAgreement,andweregrantedsuchreliefinJune2020.

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OnJuly22,2020,Silevo,LLCandTeslaEnergyOperations,Inc.,anotherwholly-ownedsubsidiaryofTesla,enteredintoanEleventhAmendmenttotheGigafactoryNewYorkLeaseAgreementwiththeSUNYFoundation(the“GigafactoryNewYorkLeaseAmendment”).TheGigafactoryNewYorkLeaseAmendment,amongotherthings:(i)addsTeslaEnergyOperations,Inc.asapartytotheGigafactoryNewYorkLeaseAgreement,(ii)recognizesandeffectuatesthepreviously-granteddeferralofthesecondannualmeasurementdateforourminimumemploymentandinvestmentrequirementsundertheGigafactoryNewYorkLeaseAgreementbyoneyearfromApril30,2020toApril30,2021,(iii)memorializesApril30,2018asthecommencementdateofthe10-yearmeasurementperiodfortheminimumemploymentandinvestmentobligationsundertheGigafactoryNewYorkLeaseAgreement,and(iv)modifiesthescopeofpersonnelandinvestmentsthatqualifyforsuchminimumemploymentandinvestmentobligations.

TheforegoingsummaryisqualifiedinitsentiretybyreferencetothetextoftheGigafactoryNewYorkLeaseAmendment,whichisfiledasExhibit10.6tothisQuarterlyReportonForm10-Qandisincorporatedhereinbyreference.

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ITEM6. EXHIBITS

SeeIndextoExhibitsattheendofthisQuarterlyReportonForm10-QfortheinformationrequiredbythisItem.

INDEXTOEXHIBITS

Exhibit IncorporatedbyReference FiledNumber ExhibitDescription Form FileNo. Exhibit FilingDate Herewith

10.1†

SecondLeaseAmendment,enteredintoonJune9,2020,byandbetweenTesla,Inc.andPanasonicEnergyofNorthAmerica,adivisionofPanasonicCorporationofNorthAmerica,withrespecttotheAmendedandRestatedFactoryLeasedatedJanuary1,2017.

— — — —

X

10.2†

AmendedandRestatedGeneralTermsandConditionsforGigafactory,enteredintoonJune10,2020,byandamongRegistrant,TeslaMotorsNetherlandsB.V.,PanasonicCorporationandPanasonicCorporationofNorthAmerica.

— — — —

X

10.3†

2020PricingAgreement(Gigafactory2170Cells),enteredintoonJune9,2020,byandamongRegistrant,TeslaMotorsNetherlandsB.V.,PanasonicCorporationandPanasonicCorporationofNorthAmerica.

— — — —

X

10.4IndemnificationAgreement,effectiveasofJune23,2020,betweenRegistrantandElonR.Musk.

— — — —

X

10.5†

WorkingCapitalLoanContact,datedasofMay7,2020,betweenIndustrialandCommercialBankofChina,China(Shanghai)PilotFreeTradeZoneLingangSpecialAreaBranchandTesla(Shanghai)Co.,Ltd.

— — — —

X

10.6

EleventhAmendmenttoAmendedandRestatedAgreementforResearch&DevelopmentAllianceonTriexModuleTechnology,effectiveasofJuly22,2020,amongtheResearchFoundationfortheStateUniversityofNewYork,Silevo,LLCandTeslaEnergyOperations,Inc.

— — — —

X

31.1Rule13a-14(a)/15(d)-14(a)CertificationofPrincipalExecutiveOfficer

— — — —

X

31.2Rule13a-14(a)/15(d)-14(a)CertificationofPrincipalFinancialOfficer

— — — —

X

32.1* Section1350Certifications — — — —

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https://www.sec.govtsla-ex101_6.htm/

Exhibit IncorporatedbyReference FiledNumber ExhibitDescription Form FileNo. Exhibit FilingDate Herewith

101.INS InlineXBRLInstanceDocument — — — — X

101.SCH InlineXBRLTaxonomyExtensionSchemaDocument — — — — X

101.CALInlineXBRLTaxonomyExtensionCalculationLinkbaseDocument.

— — — —

X

101.DEFInlineXBRLTaxonomyExtensionDefinitionLinkbaseDocument

— — — —

X

101.LABInlineXBRLTaxonomyExtensionLabelLinkbaseDocument

— — — —

X

101.PREInlineXBRLTaxonomyExtensionPresentationLinkbaseDocument

— — — —

X

104

CoverPageInteractiveDataFile(formattedasinlineXBRLwithapplicabletaxonomyextensioninformationcontainedinExhibits101)

† PortionsofthisexhibithavebeenredactedincompliancewithRegulationS-KItem601(b)(10).* Furnishedherewith

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SIGNATURES

PursuanttotherequirementsofSection13or15(d)theSecuritiesExchangeActof1934,theregistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersigned,thereuntodulyauthorized. Tesla,Inc. Date:July28,2020 /s/ZacharyJ.Kirkhorn ZacharyJ.Kirkhorn ChiefFinancialOfficer

(PrincipalFinancialOfficerandDulyAuthorizedOfficer)

79Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatewhereomissionshavebeenmade.

Exhibit10.1

SECONDLEASEAMENDMENT

ThisSecondLeaseAmendment (“SecondAmendment”) is entered into effective as ofApril 1, 2020, by andbetweenTesla, Inc.(“Tesla”)andPanasonicEnergyofNorthAmerica,adivisionofPanasonicCorporationofNorthAmerica(“PENA”),withrespecttotheAmendedandRestatedFactoryLeasedatedJanuary1,2017(the“FactoryLease”).Termsusedhereinwithinitialcapitalizationhave themeanings specifiedwhere used or in theGigafactoryContract. For good and valuable consideration, the receipt andsufficiencyofwhichareherebyacknowledged,thePartiesherebyagreeasfollows:

1. Fortheperiodof[***]through[***],PENAshallpayforitsusageof[***]attheratessetforthinthefirsttableofAppendixC:UtilityRatestotheFactoryLease(the“AppendixC-1Table”).

2. On or before [***], the Partieswill discuss in good faith andmutually agreewhether [***] set forth in the second table ofAppendixC:UtilityRates(“AppendixC-2Table”)willapply[***]to[***].

3. On or before [***], the Partieswill discuss in good faith andmutually agreewhether [***] set forth in the second table ofAppendixC:UtilityRates(“AppendixC-2Table”)willapply[***]to[***].

4. ThisSecondAmendment,togetherwiththeFactoryLeaseandalldocumentsreferencedorincorporatedtherein,constitutesthe entire agreement between the Parties with respect to its subject matter and supersedes all prior agreements andunderstandings, both oral and written, between the Parties with respect to its subject matter. No subsequent terms,conditions,understandings,oragreementspurportingtomodifythetermsofthisAmendmentwillbebindingunlessinwritingandsignedbybothParties.ThisAmendmentmaybeexecutedincounterparts,eachofwhichwhensoexecutedanddeliveredwillbedeemedanoriginal,andallofwhichtakentogetherwillconstituteoneandthesameinstrument.

INWITNESSWHEREOF,thePartieshaveexecutedthisSecondAmendmentbypersonsdulyauthorizedbelow:

Tesla,Inc. PanasonicEnergyofNorthAmericaadivisionofPanasonicCorporationofNorthAmerica

By: /s/KarnBudhiraj By: /s/ThomasG.Korte Printed: KarnBudhiraj Printed: ThomasG.Korte Title: VP,GlobalSupplyManagement Title: SeniorVicePresidentofOperationsof

PanasonicCorporationofNorthAmericaandChiefFinancialOfficerofPanasonic’sUSCompany

Date: 9June2020

Date: Jun5,2020

SecondLeaseAmendment Page1Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade.

Exhibit10.2

AMENDEDANDRESTATEDGENERALTERMSANDCONDITIONSFORGIGAFACTORYTheseAmendedandRestatedGeneralTermsandConditions forGigafactory (“AmendedGTC”)areentered intoeffectiveasof January1,2020(“AmendmentEffectiveDate”)byandbetweenTesla, Inc.,aDelawarecorporationwithofficesat3500DeerCreekRoad,PaloAlto,California,94304,USA,andTeslaMotorsNetherlandsB.V.,aDutchcorporationwithofficesatBurgemeesterStramanweg122,1101ENAmsterdam, the Netherlands (collectively, “Tesla”), on the one hand, and Panasonic Corporation (“Panasonic Corp.”) and PanasonicCorporationofNorthAmerica,byandthroughitsdivisionPanasonicEnergyofNorthAmerica(“PNA”)(collectively,“Seller”),ontheotherhand. Each Tesla and Seller entity is referred to herein as a “Party” and such entities are collectively referred to herein as the“Parties.”ThisAmendedGTCshall,asoftheAmendmentEffectiveDate,amendandrestateinentiretytheGeneralTermsandConditionsdated October 1, 2014 by and between the Parties (as amended, the “2014 GTC”); provided, however, that any provisions related toterminationofthe2014GTC,suchasthosesetforthinSection13.4(ObligationsUponTermination),shallnotapplyinconnectionwiththeexecutionof thisAmendedGTC,and the2014GTC shall controlwith respect to all investmentsmadebySeller inSeller’sProperty andSeller’smanufacture,supplyand/orprovisionofGoodspriortotheAmendmentEffectiveDate.Foravoidanceofdoubt,claimsarisingunderthe2014GTCshallcontinuetobegovernedby,andsubjectto,the2014GTC.

PURPOSETesladesires toengageSeller todevelop, supply,andsupportproducts foruse inTeslaProductsat themanufacturing facilityownedbyTesla inSparks,Nevada (the “Factory”). ThisAmendedGTC shall govern the relationshipof theParties as of theAmendmentEffectiveDate.

1. ProductionPlanningandOrderProcess. 1.1 ProductionPlanning. (a) Eachmonth during the Term, Teslawill provide a rollingmonthly forecast of its anticipated requirements forGoods for the

followingperiodsoftime:(i)forthenext[***]foreachforecastprovideduntilSellerhasinvestedinSeller’sPropertyrequiredforSeller’smanufacture,supplyand/orprovisionofGoodsattheFactoryinvolumesuptoanannualaggregateenergycapacityofthirty-five gigawatt-hours (35 GWh); and (ii) for the next [***] for each forecast provided thereafter. Tesla’s forecast is non-bindingandprovided forplanningpurposesonly.Atamonthlymeeting ledbyTesla (“ProductionMeeting”), thePartiesshallreviewingoodfaithTesla’sforecast,thesupplychainandotherrequirementstomanufactureperTesla’sforecast,anypotentialor actual constraints on Seller’s ability to manufacture Goods in accordance with Tesla’s forecast, and other business- andproduction-related issues. The Partiesmay alsomutually agree to invite sub-suppliers that are co-located at the Factory toattendtheProductionMeeting.ThePartieswillthenestablishaproductionplanand/orupdatetheexistingproductionplanformanufactureanddeliveryofGoodsbasedontheapplicableLeadTime(s).Sellershallnotwithhold,conditionordelayitsconsentto Tesla’s proposed production plan if Seller is capable of meeting Tesla’s forecast, based on such factors as supply chainconstraints, laborconstraints,andtheperformancecapabilityoftheProperty. Theagreedplanisthe“ProductionPlan.”TheParties may agree in writing to adjust the Production Plan at any time. Seller shall deliver the Goods that fall within theforecastedvolumesintheProductionPlan,atpricessetinaccordancewiththethen-currentproductionpricingagreement(the“PricingAgreement”).

(b) AttheProductionMeeting,thePartiesshallalsodiscussingoodfaith(i)Seller’sprogressinachievingtheoperationaltargetssetforthintheContract(s)andtheProductionPlan,(ii)Seller’sproposedprocurement,transportation,installation,orconfigurationattheFactoryofSeller’sPropertyinconnectionwiththeContract(s)andtheProductionPlan,and(iii)additionaltopicsproposedbyTeslaand/orSeller.SelleracknowledgesthatallinvestmentsbyorforSellerinSeller’sPropertyforthemanufacture,supplyand/orprovisionofGoodsattheFactorywillbeatSeller’ssoleriskandexpense,excepttotheextentexpresslyagreedotherwiseinaseparatewrittenagreementthatissignedbyaVice-PresidentorhigherforbothParties(e.g.intheFactoryLease,achangeorder,thePricingAgreement,oraninvestmentletteragreement).

Tesla-PanasonicAmendedGeneralTermsandConditions Page1of36

Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (c) ExceptasotherwiseagreedinwritingbyTeslaandSeller,thePartiesshall,forthepurposeofexploringthecosteffectivenessof

theGoods,simplifyinglogistics,reducingLeadTime,andotheragreedreasons,useCommerciallyReasonableEffortstocauseSeller’ssub-suppliersrequired forproductionofGoodsat theFactory toestablishoperationsat theFactoryonoraroundthemutually-agreedtiming.Fortheavoidanceofdoubt,TeslaacknowledgesthatSellercannotguaranteethatitssub-supplierswillagreetoestablishoperationsattheFactory.

1.2 Offer. (a) TheAuthorizedPurchaserswillissueoneormorePurchaseOrdersinaccordancewiththeapprovedProductionPlanforTesla’s

anticipatedneedsasfollows:(i)forGoodsoveradefinedperiodoftime,whichmayincludedefinedperiodsoftimeassetforthinthePricingAgreement(eachsuchorderisa“ProductionOrder”);and/or(ii)forGoods,includingdevelopmentparts(eachsuchorderisa“DiscreteOrder”).

(b) QuantitiesreferencedinanyProductionOrderrepresentTesla’sestimateofitsanticipatedneedsforGoodsduringthetimeframereferenced in such Production Order and are provided for Seller’s planning purposes only. Tesla’s liability for purchase ofquantitiesreferenced insuchProductionOrders is limitedasset forth inSection1.5andelsewhere inthisAmendedGTC.ByacceptingaProductionOrder,SelleragreesitiswillingandabletoprovideallquantitiesreferencedinsuchProductionOrderduringtheperiodreferencedtherein.

(c) Authorized Purchasersmay issue Releases against a Production Order to Seller, specifying quantities and delivery dates forProductsreferencedinsuchPurchaseOrder.EachReleasemaybeissuedonarollingbasis.EachReleaseisbindingtotheextentsetforthinSection1.5.Releasesmaybeissuedviaanelectronicdatainterface.

(d) Tesla intendsto issueoneormorePurchaseOrder(s)and/orRelease(s)onarollingbasis [***]. PurchaseOrdersacceptedbySellerarebindingonTeslatotheextentsetforthinSection1.5.

1.3 Acceptance. (a) PurchaseOrders.SellershallacceptorrejecteachPurchaseOrderasfollows:(i)[***]afterreceiptofaProductionOrderwhich

conforms to theProductionPlan; and (ii) [***] after receipt of either aDiscreteOrder or aProductionOrderwhichdoesnotconform to the Production Plan. If Seller cannotmeet the terms set forth in a PurchaseOrder, Sellerwill inform Tesla andproposealternativeterms.IfTeslaacceptssuchalternativeterms,TeslashallissuearevisedPurchaseOrderthatincludessuchalternative terms. Alternative terms are expressly rejected unless incorporated into a Purchase Order. Notwithstanding theforegoing,SellermayonlyrejectaProductionOrdertotheextent it fails toconformtothetermsof theProductionPlan,andSellershallbedeemedtohavewaivedanyobjectionsandacceptedtheProductionOrderifSellerfailstoobjectinwritingwithinthetimeframespecifiedabove.Seller’sacceptanceofaPurchaseOrderisreferredtoasthe“Acceptance”.

(b) Releases. Seller shall accept, and shall not reject, each Release to the extent it conforms to this Amended GTC and theProductionOrder.SellerwillbedeemedtohavewaivedtheseobjectionsandacceptedaReleaseif(i)SellerfailstoobjecttotheRelease in writing within two business days after receipt thereof, or (ii) automatically without a response if the Release isconsistentwiththethen-currentProductionPlan.IfSellercannotdeliverbythedate(s)specifiedintheRelease,Sellershall[***]proposeareviseddatethatisatorbeforetheLeadTimefromthedateoftheRelease.

1.4 TermsoftheContract. UponSeller’sAcceptance,thetermsoftherelevantPurchaseOrder,togetherwiththetermsintheotherrelevantContractDocuments,willbecomeabindingcontractbetweenTeslaandSeller(each,a“Contract”).AcceptanceisexpresslylimitedtothetermsprovidedbytheContract.Termsinanyinvoiceandanyothermodifications,counterproposals,orcounteroffersproposedbySellertoaPurchaseOrderorReleaseareexpresslyrejectedandshallnotbecomepartoftheContract.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. 1.5 Purchase Order Liability. Tesla may, at any time and without any liability to Seller, adjust the volume(s) of Goods under any

Contract,upordown,as followsuponwrittennotice: (a)byupto[***] forGoodstobedeliveredbetween[***]afterthedateofTesla’snotice,providedthatsuchtimeframeiswithintheapplicableLeadTimeandsuchtimeframeshallbeincreasedbytheperiodoftimereasonablyrequiredforSellertoshipmaterialsfromitscurrentoffshoresuppliers(nottoexceedatotalofonemonth)(forexample,bygivingnoticeon[***],TeslamayadjustthevolumeofGoodstobedeliveredbetween[***]and[***]by[***]);(b)byupto[***] forGoods to be delivered [***] and [***]weeks after the date of Tesla’s notice, provided that such timeframe iswithin theapplicableLeadTimeandsuchtimeframeshallbeincreasedbytheperiodoftimereasonablyrequiredforSellertoshipmaterialsfromitscurrentoffshoresuppliers(nottoexceedatotalof[***])(forexample,bygivingnoticeon[***],TeslamayadjustthevolumeofGoods to be delivered between [***] and [***] by [***]); and (c) by any amount, subject only to Seller's actual capacity, laborconstraintsandsupplychainconstraints,forGoodstobedeliveredaftertheperiodoftimefollowingsuchnoticethatisequaltotheapplicableLeadTime.SellershallbedeemedtoautomaticallyconsenttoanysuchadjustmentpursuanttothisSection1.5withouttheneedforawrittenconsent.

1.6 PurchaseCommitment.Teslawillcommittopurchaseallconformingandnon-defectiveGoodsduringtheTermandpursuanttotheProductionPlanuptoanannualaggregateenergycapacityof thirty-fivegigawatt-hours(35GWh)providedthat: (a) [***]; (b) theGoods[***];and(c)marketconditionssupportthepurchaseofGoodsinvolumescontemplatedbytheProductionPlan,butwithoutlimiting Tesla’s commitments inwritten agreements between the Parties for investments in Seller’s Property as contemplated inSection1.1(b).

2. Goods. 2.1 Quantity. Quantitiesanddeliverydatesshallbeasstated intheapplicablePurchaseOrderorReleaseacceptedbySeller,unless

otherwise agreed to inwriting by the Parties. If Seller has reason to believe that its ability to deliver anyGoods is ormay beconstrained,Sellershall[***]notifyTeslasettingforththecausefortheanticipateddelay. Anyoralcommunicationshallbe[***]confirmedinwriting.

2.2 Changes. (a) Sellershallnotmakeanychangeto:(i)theGoodswithoutTesla’spriorwrittenconsent,whichTeslamaywithholdinitssolebut

reasonablediscretion;(ii)itsmanufacturingprocessinamannerthatcouldresultinnon-conformingordefectiveGoodsorthatcould impact operations at the Factory of one ormore other companies (i.e. Tesla and/or a co-located sub-supplier) withoutTesla’spriorwrittenconsent,whichTeslawillnotunreasonablywithhold;and(iii)itssuppliersinamannerthatcouldresultinnon-conformingordefectiveGoodsor thatcould impactoperationsat theFactoryofoneormoreothercompanies (i.e.Teslaand/oraco-locatedsub-supplier)withoutpriorwrittennoticetoTesla,providedthat(A)SellershallconsideranyobjectionsbyTeslaingoodfaithanddiscusstheproposedchangewithTeslaingoodfaith,and(B)Sellershallnotmakeanysuchchangethatwill,orisreasonablylikelyto,adverselyaffectanyofthefollowingwithrespecttotheGoods:[***].

(b) [***].If[***],SellershalluseCommerciallyReasonableEffortstonotifyTeslainwritingwithin[***]afterreceiptofsuchrequestorproposalandpriortomakingthechangeifsuchchangewillaffectcostortiming,andSellershallalsoprovidethebasisforsuchdetermination.IfSellerproposesachangehereunder,Teslawill[***]. TeslaandSellerwill[***]inconnectionwithanychange, but [***] shall not [***] due to [***] unless Tesla [***]. For clarification, Seller is not obliged tomake such changerequested or proposed by Tesla unless [***]or other appropriate [***] in connectionwith such change is agreed between thePartiesinwriting.

2.3 [***].TeslamayproposethatSeller[***].Insuchcase,SellerwilldiscusswithTeslaandconsidersuchproposalingoodfaith.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. 2.4 TeslaResponsibilities. (a) InordertofacilitateSeller’sperformanceof itsobligationsundertheContract,Teslawillperformthosetasksandfulfillthose

responsibilitiesofTesla(including,asapplicable,provisionofTesla-SuppliedItems)asexpresslysetforthinthisAmendedGTCand/or the Contract (“Tesla Responsibilities”). Seller’s performance of its obligations may be dependent in somecircumstances on Tesla’s timely and effective performance of the Tesla Responsibilities and timely decisions andapprovalsbyTesla.

(b) Tesla's failure to perform any of the Tesla Responsibilities (or cause them to be performed) will not constitute grounds forterminationbySellerexceptasprovidedinSection13.3(Termination);provided,however,thatSeller’snonperformanceof itsobligationsunder thisAmendedGTCand/or theContractwillbeexcused ifandto theextent (i)suchnonperformanceresultsfrom Tesla’s failure to perform any Tesla Responsibilities, and (ii) Seller provides Tesla with reasonable notice of suchnonperformanceand,ifrequestedbyTesla,usesCommerciallyReasonableEffortstoperformnotwithstandingTesla’sfailuretoperform.IfSeller’suseofCommerciallyReasonableEffortstoperformitsobligationsinsuchacircumstancewouldcauseSellertoincursignificantuncompensatedexpenses,SellermaynotifyTesla.Inthatcase,Seller’sobligationtocontinueitseffortstoworkaroundTesla’sfailuretoperformTeslaResponsibilitieswillbesubjecttoTeslaagreeingtoreimburseSellerforitsactual,reasonableandincrementaluncompensatedexpenses.ThePartiesshallalsodiscussingoodfaithSeller’sactualandreasonableout-of-pocketcostsandexpensescausedbyTesla’s failuretoperformanyTeslaResponsibility(e.g. lossofmaterial, increasedlaborcosts)and,subjecttoSection12(Liability),TeslawillberesponsibleforreimbursingsuchcostsandexpenseswhichSellercannotmitigateoravoidusingCommerciallyReasonableEfforts.

(c) Fromtimetotime,TeslamayprovideSellerwithaccesstoproprietarycomputersystemsandtechnologiesownedandoperatedbyTeslaand/oritsAffiliates(the“Systems”)tofacilitatetheperformanceofSeller’sobligationsundertheContract.Sellerisnotobliged touse theSystemsunlessagreedbySeller inwriting. Sellerwill onlyuse theSystems for thebusinesspurposesofTesla.TeslamayperiodicallymonitorallusesoftheSystemsasallowedbylawandreviewuseraccessrecordsmaintainedbySeller.TothemaximumextentpermittedbyapplicableLaw,Seller’suserswillhavenoexpectationofprivacyinconnectionwiththeir use of theSystems. Seller shall be solely responsible for obtainingandmaintaining thehardwareand software it useswhicharenecessarytoproperlyaccesstheSystemsandperformitsobligationsundertheContract.

2.5 [***]Cells. (a) ThePartieshavediscussed theproductionof [***]. Whenused inconjunctionwith [***]anddemonstrated toSeller’s

reasonablesatisfaction[***],thePartiesanticipatethat[***]willperforminasimilarmannerto[***]withrespectto[***].The[***]asofthedateofsignatureofthisAmendedGTCperformstoSeller’sreasonablesatisfaction.

(b) For[***]incorporatedinto[***],Teslawilluse[***]demonstratedtoSeller’sreasonablesatisfactionwithinareasonabletimeandscope,unlessSellerapprovesanexception.ThePartieswilldiscussingoodfaithanyrequestedexceptions.Ifandtotheextentthat [***]. Intheeventof [***],andthePartieswillpromptlyengage inagoodfaithdiscussionwithrespect[***].Followingsuchgoodfaithdiscussion,Sellershalltheright[***].Teslashallberesponsiblefor[***].


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade.3. Delivery. 3.1 Packing and Shipment. Tesla may specify the method of transportation and the type and number of packing slips and other

documentstobeprovidedwitheachshipment.ThePartiesshalldiscussingoodfaithandagreeonthemannerinwhichSellerwillpack and ship Goods, including labeling and hazardous materials instructions. If Tesla has not provided packing or shippinginstructions,SellerwillpackandshipGoods inaccordancewith industrystandards (withreference to the lithium-ionbatterycellindustry). If Seller is required to use Tesla’s returnable packaging, the Parties will discuss in good faith the responsibility forcleaningandmaintainingsuchreturnablepackaging.

3.2 DeliveryTerms. SellerwilldeliverGoods instrictaccordancewith theContract terms. Unlessotherwisestated in theContract,Goodswillbedelivered[***]andtitleandriskoflosswilltransferuponreceiptoftheGoodsbyTesla.

3.3 Time isof theEssence. TIME ISOFTHEESSENCEASTODELIVERYOFALLGOODS. IfSellerdoesnotdeliveranyGoods inaccordancewiththeProductionPlanthen,subjecttoSections2.4(TeslaResponsibilities)and12.2(ForceMajeure)andexceptforanyothercauseattributabletoTesla,SellershallbeinDefault.InadditiontoanyotherobligationstowhichSellershallbesubjectto under the Contract, if Seller cannotmeet the delivery dates and/or quantities of Goods specified in the Contract, Seller willpromptlynotifyTeslaandtheAuthorizedPurchaserand:(a)SellershallprovidesubstitutegoodsattheagreedpriceintheContractfrom its operations at the Factory or elsewhere; and (b) if Seller cannot provide substitute goodswithin a reasonable time, theAuthorizedPurchasermaycancelanyremainingportion(s)oftherelevantPurchaseOrderorRelease,asapplicable,withoutliabilitytoSeller,inwhichcasetherequiredvolumessetforthinwritingbetweentheParties(e.g.ProductionPlan)shallbereduced.

3.4 Over-Shipments.IfSellerdeliversmoreGoodsthanspecifiedinanOrder,thePartiesshalldiscusstheover-shipmentingoodfaithandSellershall,atitssolediscretion,either:(a)acceptthereturnoftheGoodsdeliveredinexcessofthePurchaseOrderorRelease[***] (the “ExcessGoods”), or (b) allow theAuthorizedPurchaser to retain theExcessGoods [***], inwhich case theAuthorizedPurchasermayalsoinitssolediscretionreducethequantitiesforfuturedeliveriesundertheProductionPlanandunderitsPurchaseOrder(s)andRelease(s)bythequantityofExcessGoods.

3.5 [***].DuringtheTerm,Sellershallnot[***]GoodswhicharemanufacturedattheFactory,[***]unless:(a)Teslagivespriorwrittenconsent,whichTeslamaywithhold in its sole but reasonable discretion; and (b) [***], as reasonably determined by bothPartiesbasedonagoodfaithdiscussion,[***].Priorto[***]underthisSection,Teslashall,asreasonablyrequestedbySeller,providetoSellertheinformationreasonablyrequiredforSellertocomplywithsub-paragraph(b)above,including,the[***].

4. InvoicingandPayment. 4.1 [***]. Except to the extent expressly otherwise agreed to by the Parties in a Pricing Agreement, Seller shall provide Tesla

[***].SuchinformationshallbedeemedtobeSeller’sHighlyConfidentialInformationundertheNDA. 4.2 Pricing.ThepricingandpricingmethodologyapplicabletotheGoodsshallbesetforthinthethen-currentPricingAgreement. 4.3 Invoicing.InvoiceswillbeinthecurrencyspecifiedinthePricingAgreement,unlessotherwiseagreed,andwillbesenttoTesla’s

Accounts Payable Department as reasonably directed by Tesla. The invoice will detail the Goods for which payment is beingrequested, and the applicable PurchaseOrder number. Charges associatedwith shipping forwhich Tesla is responsiblewill beinvoicedseparately.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. 4.4 Payment.ExceptasexpresslyagreedotherwisebythePartiesinwriting,Teslawillpay,andwillcauseitsAuthorizedPurchaser(s)

to pay, Seller’s charges [***] after receipt of each invoice; provided, however, that (i) Tesla or the Authorized Purchaser maywithhold payment of any invoiced charges that are disputed in good faith; (ii) payment of any charges shall not be deemed anapprovalof suchchargesoracceptanceofnon-conformingGoods,andTeslaor theAuthorizedPurchasermay laterdispute suchcharges;and(iii)Tesla’sortheAuthorizedPurchaser’spaymentofchargesshallnotrelieveSellerofanyofitswarrantiesorotherobligationsundertheContract.IfanyAuthorizedPurchaserisrepeatedlylateorearlyinmakingpayment,thePartiesshalldiscussingoodfaithwhethertoadjustthethen-currentpaymenttermsandpricingmethodology.

4.5 [***].IfanyAuthorizedPurchaserfailstopayundisputedamountsdueinatimelymannerwhichareinamaterialamount,SellermaygivenoticetoTeslaandthePartiesshallwithinareasonabletimediscussingoodfaithatameetingwithseniorrepresentativesofbothParties.IftheAuthorizedPurchaserfailstopaypromptlyafterthemeeting,[***]untilTeslaortheAuthorizedPurchaserpaystheundisputedamountsinfullwhicharepastdue.

4.6 Credits;Customs.Creditsorbenefitsrelatedtotaxesandexport/importdutiesresultingfromtheContract,includingtradecredits,export credits or the rights to the refund of duties, taxes, or fees, belong to Tesla unless otherwise prohibited by applicablelaw.SellershallretainallinformationrelatedtotheGoodsand/ormaterialstherefor(asapplicable)asrequiredbyUnitedStatesandanyother applicable customsauthorities, and shall provideall such informationand certificates related to theGoods and/ormaterials therefor (as applicable) (includingNAFTACertificates ofOrigin) necessary topermitTesla to receive thesebenefits orcredits. SellerwillprovideTeslawithall informationand records relating to theGoodsnecessary forTesla to: (a) receive thesebenefits,credits,andrights; (b) fulfillanycustomsobligations,originmarkingor labelingrequirements,andcertificationor localcontentreportingrequirements;(c)claimpreferentialdutytreatmentunderapplicabletradepreferenceregimes;and(d)participateinanydutydeferralorfreetradezoneprogramsofthecountryofimport.Ifandtotheextentapplicable,Seller(or,ifapplicable,itssupplier)willobtainexportlicensesandauthorizationsandpayexporttaxes,duties,andfeesrelatedtotheGoodsand/ormaterialstherefor (as applicable) which are imposed, levied or otherwise payable prior to delivery of such Goods and/or materials (asapplicable)totheAuthorizedPurchaserunlessotherwisestatedintheContract,inwhichcaseSellerwillprovideallinformationandrecordsnecessarytoenableTeslatoobtainthoseexportlicensesorauthorizations.

4.7 Taxes. (a) This Section 4.7 sets forth the allocation of responsibility between the Parties for taxes arising out of or in relation to this

AmendedGTCandeachContract.

(b) UnlessotherwisestatedintheContract,includingthethen-currentPricingAgreement,theContractpriceincludesallapplicablefederal, state, provincial, and local taxes other than sales, value added, or similar turnover taxes or charges. The GoodspurchasedfromSellerareforresalewhichisexemptfromallsales,use,valueaddedorsimilartaxes,andSellerwillnotchargesales,use,valueaddedorsimilartaxesonitsinvoicestoTeslaforGoodsprovidedthatTeslahasprovidedSelleravalidresalecertificateforSeller’srecords.IfSellerisrequiredbylawtopayorcollectfromTeslaanytaxesorcharges,SellerwillseparatelyinvoiceTeslaforsuchtaxesorchargessubjecttoSection4.6(Credits).

(c) SubjecttoSection4.8(b)above,eachPartywillremainresponsibleforandshallpay(withoutreimbursement)anyandalltaxesthatareassessedonanygoodsorservicesusedorconsumedbysuchParty(oritsAffiliates)inperformingitsobligationsunderthe Contract where the tax is imposed on such Party’s (or its Affiliates’) acquisition or use of the goods or services in theperformanceofsuchobligations,andotherpersonalpropertytaxesonpropertyownedorleasedbysuchParty(oritsAffiliates)unlessotherwiseexpresslyprovidedintheContract.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (d) EachPartyshallberesponsible forany: (i) taxeson its (or itsAffiliates’)revenue,net incomeorgrossreceipts; (ii) franchise,

businessandoccupationaltaxes(orsimilarinnature)onitsbusinessactivities,and(iii)employer-relatedtaxeswithrespecttoitspersonnel(e.g.employeetaxes,workerscompensationandunemploymentinsurance).

(e) ThePartiesagreetocooperatewitheachothertoenableeachtomoreaccuratelydetermineitsowntaxliabilityandtominimizesuchliabilitytotheextentlegallypermissible.

4.8 NevadaIncentives.

a. “Nevada Incentives”means any tax credits or any exclusion, exemption, abatement, or reimbursement from tax liabilities asdescribedin,collectively,SenateBillNo.1ofthe28th(2014)SpecialSessionoftheNevadaLegislature(“SBNo.1”),AssemblyBillNo.1ofthe28th(2014)SpecialSessionoftheNevadaLegislature(“ABNo.1”),NevadaRevisedStatutes(“NRS”)Chapters231 and 360, Ordinance 14-260 of Storey County, Nevada referred to as the Economic Diversification District CreationOrdinance,theIncentiveAgreementdatedOctober17,2014,betweentheStateofNevadaandTesla,Inc.(the“StateIncentiveAgreement”),andtheReimbursementAgreementdatedOctober17,2014,betweenStoreyCounty,Nevada,andTesla,Inc.(the“CountyReimbursementAgreement”),andanyandallLawsrelatedtotheforegoing.

b. Exhibit 2 (Nevada Incentives) sets forth the Parties’ understanding and agreement as to their respective responsibilities inqualifying for,andreceiving thebenefitsof, theNevada Incentives forpurposesof theGigafactory. Ifand to theextent thatTesla requests new or different type(s) of data than those described in Exhibit 2 for purposes of theNevada Incentives, theParties shall discuss such request in good faith andPNAwill not unreasonablywithhold, condition, or delay consent to suchrequest. If and to the extent that PNA is required to provide information regarding the wages, salary, benefits, or othercompensation offered to one ormore specific PNA employees at an individual level (as opposed to an aggregated, summaryreport) for purposes of the Nevada Incentives, PNA shall only be required to disclose such specific information to theindependentCPAengagedbyTeslaforpurposesoftheNevadaIncentivesandtodiscloseonlyanaggregated,summaryreportofsuchinformationtoTesla.

c. IfandtotheextentthataPartydoesnotreceive,oralternativelydoesnotreceivethebenefitof,anyNevadaIncentivestowhichit is entitled and such failure results from the other Party’s failure to comply with its obligations under Exhibit 2 (NevadaIncentives)(inSeller’scasesuchobligationsareidentifiedwith“***”),thePartiesshallworktogetheringoodfaithtoattempttocure any deficiency in the requirements to qualify for such Nevada Incentives and, if the Parties are unable to cure suchdeficiency,thePartiesshalldiscuss[***].

5. ProductWarranties. 5.1 ProductWarranties. (a) SellerrepresentsandwarrantstoTeslaandtherelevantAuthorizedPurchaser(s)asfollows:

(i) Upondelivery,theGoodswill:(1)benew(andnotrefurbished),unlessexpresslyapprovedotherwiseinwritingbyTeslaineachcase;(2)befreeandclearofanyandallliens,securityinterests,andencumbrancesofanynature,withtitlevestingsolely in the Authorized Purchaser; and (3) conform to all applicable Laws of the In-Scope Countries (as may besupplementedperthedefinitionofthatterminSection16.17below).

(ii) SubjecttoSection5.1(c)below,theGoodswillconformtoandcomplywiththeapplicableSpecificationsupondeliveryandcontinuingforthefollowingperiodoftime:(1)forthetimeframesofany[***]aspectsofsuchSpecifications,and(2)foraperiodof[***]forotheraspectsoftheSpecifications;

(iii) Upondeliveryandforaperiodof[***],theGoodswillbefreefromdefectsindesign,workmanshipandmaterialasdeliveredbyorforSeller;


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade.

(iv) [***].

(1) Recognizingthe importancetomassmarketacceptanceofEVsofensuringthatbatterypacksexhibita [***],whichmayoccurbeyondstandardwarrantyperiodsandbeyondthespecifiedcycleandstoragelifeofthecell,theParties’ cell technical teamsshallwork together ingood faith to identify, andensure that somespecificaspectsofcellperformancerelatedto[***]shallnotunacceptably[***]throughoutthe[***]oftheCell.

(2) The[***]oftheCellshallbedefinedastheearliestof(a)[***]assetforthintheapplicableSpecification.

(3) UnlessmodifiedintheapplicableSpecification,thePartiesagreethatthefollowingaspectsofcellperformanceareimportantthroughoutthe[***]:

(a) For Goods designed to include a [***], the [***] should function at a cell [***] equal to or less than the [***]operationupondelivery;

(b) The[***]pressureequaltoorlessthanthe[***]of[***]operationupondelivery;

(c) [***]shouldbeequaltoorlessthanthe[***]upondelivery;

(d) If and to the extent that the Cell is [***]within the Specification: (a) the Cell should not lose [***] asmeasuredby[***]testingconductedinaccordancewith[***];and(b)ata[***]rateof[***],the[***]oftheCellshouldnot[***]by[***]ormore,where[***]isthe[***]measuredbyTeslathroughperiodicsampletestingof[***];

(e) Cell(s)shouldnotdevelop[***];

(f) Cell(s)shouldnotdevelop[***]thatcouldresultinmeasurable[***]and/ordisconnectionof[***];and

(g) AdditionalaspectsasmaybedescribedintheapplicableSpecifications.

(4) Should the Parties determine that a population of Cells in a particular Cell Model does not meet [***]requirements,theParties’celltechnicalteamsshallworktogetheringoodfaithtoassessandmitigatethe[***]includingreviewof [***], conducting [***],andperforming [***]. Mitigationsmay involveadjustmentof [***],implementationofadditional[***],or[***].

(v) Recognizing the importance of limiting [***] among [***] Cells from [***], the Parties’ cell technical teams shall worktogetheringoodfaithto[***]andSellerwillusebesteffortstoavoid[***]thatexceeds[***]observedin[***]withrespectto[***],andotherrelevantfactors.

(vi) Theforegoingtimeframesare,asapplicable,the“WarrantyPeriod”.

(b) TeslaherebyacknowledgesandagreesthatifGoodsarenotdefectiveand/orcomplywiththeapplicableSpecifications,itdoesnotmeanthataTeslabatterypack,Moduleand/orTeslaProductcannotbedefectiveforsomeotherreason,including,withoutlimitation,improperdesignormanufacturingbyTeslaorathirdparty.

(c) Exclusions. Teslaunderstands that thewarranties set forthabovewillnotapplyundercertaincircumstances thatarewithinTesla’scontroloroutsideSeller’scontrolafterdelivery.Accordingly,thewarrantiesinSection5.1(a)willnotapplytodamageorNon-ConformitiesinGoodstotheextentcausedbyanyofthefollowing:

(i) thedesign,manufactureand/or functionof theoverall system,equipmentand/orgoodsofwhich theGoodsarepart (e.g.Module,TeslaProduct);

(ii) accidentoractofGod;


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (iii) [***];

(iv) misuse,neglect,abuse,mishandling,misapplication,modification,oralterationbyTesla,therelevantAuthorizedPurchaseroranythirdparty;

(v) improper installation, service, operation, storage, shipment, testing, checkout or maintenance by Tesla, the relevantAuthorizedPurchaseroranythirdparty;

(vi) failurebyTesla, the relevantAuthorizedPurchaser or any thirdparty to follow (A) the reasonable instructions, cautions,warnings,andnotessetforthintheSpecifications,and/or(B)anyotherreasonabledirectionfromSeller;

(vii) [***];

(viii) [***].

5.2 Inspection.TheAuthorizedPurchaserwillinspecteachshipmentofGoodswithin[***]afterreceipt,usingCommerciallyReasonableEfforts to evaluate whether the Goods conform to the warranties set forth herein (including [***]) within [***] afterreceipt.Notwithstandingtheforegoing,Sellershall[***],andTeslawillhavenoobligationto[***].

5.3 WarrantyProcedure. (a) Notice. Tesla and theAuthorized Purchaser(s)will givewritten notice to Seller of any claims that one ormoreCells fail to

conformtoanywarrantyinSection5.1above(eachsuchfailureisa“Non-Conformity”).Thedateofsuchnoticeisreferredtohereinasthe“WarrantyNoticeDate.”

(b) Supporting Information. If requestedbySeller, theAuthorizedPurchaserwillprovideall available information regarding theallegedNon-Conformity in theGoods,whichmay include as applicable: [***] if available, but the inability to provide a serialnumberforcertainGoodsdoesnotinvalidatewarrantycoverage.TeslawilluseCommerciallyReasonableEffortstoachieve[***]ofCellsthroughtheapplicableTeslaProducts.Ifrequestedandwhereappropriate(asdiscussedbytheParties’celltechnicalteams),Teslashall[***]areasonablequantityof[***]andrelevant[***]froma[***]beforedeliveringittoSeller.

(c) WarrantyClaimValidation. (i) Sellermayrequire returnofa reasonablequantityofCellsand/or inspectCellswhichare subject toawarrantyclaim in

ordertovalidatethebasisforsuchclaim.SellermaydeclinewarrantycoverageforanyCellswhicharedisassembledbyTeslaoranyoneactingonTesla’sbehalfifSellerhasnotconsentedtosuchdisassembly.

(ii) TeslashalluseCommerciallyReasonableEffortstosupportSeller’svalidationofthebasisforawarrantyclaimhereunder,andthePartiesshalldiscussthewarrantyclaimingoodfaith.

(iii) IntheeventofadisagreementordisputeastothebasisforawarrantyclaimwithrespecttoCells,thePartieswilldesignatebymutualagreementathirdpartythatwillmakethetechnicaldeterminationoftheexistenceofabasisforthewarrantyclaimandwhethersuchclaimisbasedonabreachofoneormorewarrantiesinSection5.1above.

(iv) Cell(s)will be a “Non-Conforming Item(s)” if and to theextent that theCell(s) fail to conform tooneormoreapplicablewarranties. Tesla and Sellerwill work together in good faith to evaluate, [***], whether the Cell(s)meet all applicablewarranties.Iftheresultsifanysuchevaluationareinconclusive,thePartiesshall[***].


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (d) Remedies.Sellershall,withinareasonabletimeandunlessagreedotherwiseinwritingbytheParties,providethefollowingin

connectionwithawarrantyclaimhereunderwithrespecttoNon-ConformingItems:

(i) ForCellswhichhave[***]andaresubjecttoaclaimunderoneormoreofthewarrantiesinSection5.1above,Sellerwillprovide[***]foreachsuchCelland[***]oftheNon-ConformingItemandfor[***]ofthereplacementCell.

(ii) ForCellswhichhave[***]anddonotmeetoneormoreofthewarrantiesinSections5.1(a)(i),5.1(a)(ii),or5.1(a)(iii)above:

(1) For[***]Cells:SellerwillpromptlypayTeslaanamountequalto[***](collectively,the“WarrantyCosts”);and (2) For[***]Cells:foreachGood,provide[***]. (iii) ForCellswhichhave[***]anddonotmeetoneormoreofthewarrantiesinSections5.1(a)(i),5.1(a)(ii),or5.1(a)(iii)

above: (1) For [***] Cells: Seller will promptly pay Tesla an amount equal to [***] to compensate Tesla for the

correspondingWarrantyCosts;and (2) For[***]Cells:foreachGoodwhichhasaNon-Conformity,[***]. (iv) Notwithstandingtheforegoing,ifandtotheextentthatWarrantyCostspertainto[***],Seller’sfinancialresponsibilityshall

be[***].TheParties’technicalteamsshalldiscussingoodfaithanysuchcircumstancesandevaluatetheextenttowhichdamagespertainingto[***].

(v) Notwithstandingtheforegoing,ifandtotheextentthatWarrantyCostspertaintoa[***]issueascontemplatedinSection5.1(a)(iv) above, the remedies contemplated in thisSection5.3(d) shall applybutSeller’s financial responsibility shall be[***]asagreedbythePartiesfollowingagoodfaithdiscussion.

(vi) ThepaymentsandremediescontemplatedaboveinthisSection5.3(d)withrespectto[***]Cellsshall–subjecttoSection7(Indemnification) belowwith respect to Claims by an unaffiliated third party, and any available equitable remedies – beTesla’ssoleremedyforeachcorrespondingwarrantyclaimhereunder.

(vii) ThepaymentsandremediescontemplatedaboveinthisSection5.3(d)shallbesubjectto[***]inSection12.1(b)below. (e) Destruction,Recycling. IfSellerinstructsTeslainwritingtodestroyand/orrecycleanyCellswhicharesubjecttoawarranty

claimhereunder(whetherornotsuchclaimisvalid)andexceptasexpresslyagreedotherwiseinwritingbybothParties(e.g.inasignedagreement),Seller[***].

(f) Recalls,ServiceActions.

(i) In addition to complying with its other obligations hereunder (including Sections 5.8 (Corrective Actions) and 5.3(d)(Remedies)above),Sellerwillalsobeliablefor,andwillreimburseTeslafor,[***]totheextent:

(1) [***];or

(2) [***].



(ii) Teslawill [***] notify Seller inwriting of each Service Action andwill use Commercially Reasonable Efforts to limit thenumberofTeslaProductswithout[***]ofCells.TeslawillalsonotifySellerofLossesforwhichTeslaseeksreimbursementandprovidedocumentationregardingsuchLosses,andthePartiesshalldiscusssuchLossesingoodfaith.Fortheavoidanceofdoubt,SellershallhavetherighttoperformaninvestigationoftheCellsinvolvedandtheLossesincurredinconnectionwiththeServiceAction,andSellerwillonlyberesponsiblefor[***].InnoeventwillSellerbeliablefor[***].

5.4 FuturePerformance.AllrepresentationsandwarrantiesofSellerextendto futureperformanceof theGoodsduringtheWarrantyPeriodandarenotmodified,waivedordischargedbydelivery, inspection, tests,acceptanceorpayment. Tesla'sapprovalofanydesign,drawing,material,processorspecificationsingoodfaithwillnotrelieveSelleroftheserepresentationsandwarranties.Thewarranties set forth in this Section 5 shall survive acceptance and payment by Tesla and the termination or expiration of theContract.

5.5 ApplicationofWarranties.SelleragreesthatthewarrantiessetforthinthisSection5extendtoallGoods,notwithstandingthefactthat suchGoodsdelivered toAuthorizedPurchasersunder theContractmaybeproduced, inwholeor inpart,byanyofSeller’sdivisions,parent,subsidiaries,Affiliates,orsuppliersand,therefore,suchwarrantiesshallnotbedisclaimedorotherwiselimitedinanywaymerelyduetothefactthatanyGoodshavebeenproducedbyanysuchentity.

5.6 Disclaimer.THEWARRANTIESSETFORTHINTHISAMENDEDGTCAREEXCLUSIVEANDAREINLIEUOFALLOTHERWARRANTIES WITH RESPECT TO THE GOODS, WHETHER ARISING FROM A COURSE OF DEALING, COURSE OFPERFORMANCE OR TRADE USAGE, OR WHETHER ORAL, WRITTEN, EXPRESS, IMPLIED OR STATUTORY, ALL OFWHICHAREHEREBYWAIVEDBYTESLA,AUTHORIZEDPURCHASERSANDSELLER.THEEMPLOYEESANDAGENTSOF EACH PARTY ARE NOT AUTHORIZED TO MAKE MODIFICATIONS TO SUCH WARRANTIES, OR ADDITIONALWARRANTIESBINDINGONSUCHPARTY;ACCORDINGLY,ADDITIONALSTATEMENTS,WHETHERORALORWRITTEN,DO NOT CONSTITUTE WARRANTIES AND SHOULD NOT BE RELIED UPON BY THE OTHER PARTY. FOR THEAVOIDANCEOFDOUBT,TESLAUNDERSTANDSTHATTHEGOODS[***](I)[***],(II)[***],OR(III)[***].NOACTION,SUITORARBITRATIONSHALLBEBROUGHTONANALLEGEDBREACHOFTHEWARRANTIESSETFORTHINTHISAMENDEDGTCMORETHAN[***]FOLLOWINGTHEEXPIRATIONOFTHEAPPLICABLEWARRANTYPERIOD.

5.7 QualityPlanRequirementsandApproval. (a) Seller will: (i) manufacture and supply Goods in accordance with a mutually-agreed quality plan (“Quality Plan”) which is

developedduringthedesigndevelopmentprocess,duringtheProductionPartApprovalProcess(PPAP),and/oraslistedintheapplicableSpecifications;and(ii)provide,maintainandenforceinaccordancewiththeQualityRequirementsindustry-standardmeasuresnecessarytosecurethequalityofGoodsandthemanufacturingprocessesthereof,includingwithoutlimitation,qualitycontrolstandards,inspectionstandardsandspecifications.OnlyaftertheQualityPlanfortheGoodsisapprovedbyTeslashalltheGoodsbeallowedtobeshippedforuse inTeslaProducts. Sellershallsubmitamutually-agreedquantityofsamplesofastandardproductionrunofGoodstoTeslaperamutually-agreedQualityPlan. Theresponsibility for thecostandexpenseofsuchsampleswillbedeterminedbythemutualagreementbetweentheParties.

(b) AspartoftheQualityPlanandduringPPAP,thePartiesintendtoinclude[***]intheSpecificationforeachGoodasrelatedto[***].


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (c) SellershallalsoprovideTeslawiththefollowing:(i) foranyprocesschangesubsequenttotheinitialPPAP,aProcessChange

Request (“PCR”) explaining the requested change and a report summarizing Seller’s testing and validation processes for therequestedchange;and(ii)amutually-agreedquantityofsamplesoftheGoodsincorporatingthePCRfeatures,producedonmassproductionequipment.TheresponsibilityforthecostandexpenseofsuchsampleswillbedeterminedbythemutualagreementbetweentheParties.OnlyafterthePCRissubmittedandapprovedbyTeslashalltheGoodsbeallowedtobeshippedforuseinTeslaProducts.

(d) SelleragreesthattheGoodsshallconformtotheQualityRequirementsattachedheretoasExhibit1. 5.8 CorrectiveAction.SellerwillpromptlynotifyTeslainwritingifSellerbecomesawareofanyingredient,component,designordefect

intheGoodsthatisormaybecomeharmfultopersonsorpropertyorfailstomeettheSpecificationsorotherrequirementsoftheContract.Sellerwillpromptlydevelop,documentandimplementcorrectiveactionsinaccordancewithallmutually-agreedqualitycontrol policies and standards, including by: (a) promptly investigating and reporting on the root cause of the problem;(b) remedying the cause of the problem for future production and resuming performance in accordance with the Contract;(c)implementingandnotifyingTeslaofmeasurestakenbySellertopreventrecurrencesiftheproblemisotherwiselikelytorecur;and(d)makingwrittenrecommendationstoTeslaforimprovementsinprocedures.

6. RepresentationsandWarranties. 6.1 General.EachPartyrepresentsandwarrantsthatit(anditsAffiliatestotheextentapplicable):(a)willperformallofitsobligations

under thisAmendedGTCand theContract inaprofessionalandworkmanlikemanner, consistentwith industry standardsand inaccordancewithallofthetermsofthisAmendedGTCandtheContract;and(b)hastherightandabilitytoenterinto,performtheobligationsunderandagree to thecovenantscontained in thisAmendedGTCandeachContract. Seller further represents that:(c)[***].Teslafurtherrepresentsthat:(d)eachobligationofanyTeslaentityunderaContractisbindingonallTeslaentitieswhicharePartiestothisAmendedGTCasifeachsuchTeslaentityhadagreedtotheobligation.

6.2 Operations. Seller representsandwarrantsas follows: (a) if and to theextent relevant to theContractandapplicable toSeller,comply with all of the following: industry-standard and/or mutually-agreed supplier quality and development process programrequirements, quality control and safety standards, and procedures and inspection systems, including Exhibit 1, the GlobalAutomotiveDeclarableSubstanceList(“GADSL”),andasapplicableEUDirectives2002/95/EC(RestrictiononHazardousSubstancesor“RoHS”)and2006/66/EC(re:batteriesandaccumulatorsandwastebatteriesandaccumulators),aseachmaybeamendedfromtimetotime;(b)SellerwillprovideanaccurateandcompleteInternationalMaterialDataSystem(“IMDS”)submissionforeachnon-prototypeGood;(c)SellerwillprovideallinformationreasonablyrequiredforTeslatocomplywithitslegalobligations,suchastheCaliforniaTransparencyinSupplyChainsActof2010and(ifandtotheextentapplicabletotheGoods)Section1502oftheDodd-FrankWallStreetReformandConsumerProtectionAct(commonlyreferredtoastheconflictmineralsprovision),aseachmaybeamended from time to time; and (d) Seller will comply with the Tesla Supplier Code of Conduct which is available athttps://www.tesla.com/sites/default/files/about/legal/tesla-supplier-code-of-conduct.pdf and the Tesla Human Rights And ConflictMineralsPolicywhichisavailableathttps://www.tesla.com/about/legal#human-rights-and-conflict-minerals-policy(theforegoingtwopoliciesarereferredto,collectively,as“Tesla’sConductPolicies”).TeslashallnotifySelleratleast[***]inadvanceofanymaterialchangestoTesla’sConductPolicies,unlessmorenoticeisreasonablynecessaryinorderforSellertocomplywithanysuchchangeinTesla’sConductPolicies.UponrequestbyTesla,SellershallprovideevidenceofitscompliancewitheachoftheforegoingandasreasonablyrequestedbyTeslaforpurposesofTesla’scompliancewithitslegalobligations.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. 6.3 CompliancewithLawsandTeslaPolicies.

(a) EachPartyrepresentsandwarrantsthatitwill,atitscostandexpense,obtainallnecessaryregulatoryapprovals,licenses,andpermits(collectively,“Permits”)applicabletoitsbusinessandcomplywithallLawsapplicabletoitsbusinessortheperformanceofitsobligationsunderthisAmendedGTCandeachContract,assuchLawsmayberevisedfromtimetotime.SellerwillprovideTeslawithaccuratematerialsafetydatasheetsregardingtheGoodsand,ifrequestedbyTesla,submittoTeslaevidenceofsuchcompliance.EachPartywillalsoprovidetheotherPartywithallinformationreasonablyrequiredinorderfortheotherPartytocomplywithLawsapplicabletoit.

(b) TotheextentnotprohibitedbyLaw,eachPartyrepresentsandwarrantsthatitwillpromptlynotifytheotherPartyinwritingofanyinvestigationorinquiryintowhethersuchParty(oranyofitssubcontractors)ischargedwithfailingtocomplywithanyLawsthatmayorwillimpact,orareotherwiseapplicableto,suchParty’sperformanceunderthisAmendedGTCand/ortheContract.

(c) SellerrepresentsandwarrantsthatitwillcomplywithanyTeslapolicies,standards,rules,andprocedures(collectively,“TeslaPolicies”)applicabletoperformanceofSeller’sobligationsundertheContractand/ortotheFactorywhicharedisclosedtoSellerinwritingandapprovedbySeller,assuchTeslaPoliciesmayberevisedfromtimetotimesubjecttoSeller’sapproval,andSellershallnotunreasonablywithhold,condition,ordelayitsapprovalforanysuchTeslaPolicyoranychangesthereto.

6.4 Debarment.

(a) DuringtheTerm,Sellerrepresentsandwarrantsasfollows:

(i) Sellerandeachof itsAffiliatesrelevanttoor involvedintheperformanceofobligationshereundershallnotbedebarred,suspended, excluded or disqualified from doing business with the United States Government or listed on the ExcludedParties List System maintained by the General Services Administration of the United States Government (found atwww.epls.gov);

(ii) Sellerand,unlessSellerisalistedentityinastockexchangemarketintheUSorJapan(oranycountrywithsimilarlistingrequirements),eachpersonorentityowninganinterestinSellershallnotbeatanytimeduringthetermoftheContract,and each has never been, a Person with which U.S. Persons are prohibited from transacting business of the typecontemplatedbytheContractorwithwhichU.S.PersonsmusteitherlimittheirinteractionstotypesapprovedbytheOfficeofForeignAssetsControl,DepartmentoftheTreasury(“OFAC”),whetherbyLaw,executiveorder,tradeembargo,economicsanction,listspublishedbyOFAC,orotherwise(suchPersonsare“SpeciallyDesignatedNationalsandBlockedPersons”);

(iii) noneof the fundsorotherassetsofSellerconstitutepropertyof,orarebeneficiallyowned,directlyor indirectly,byanyEmbargoedPersontoSeller’sknowledgebasedonreasonableduediligence;

(iv) unless Seller is a listed entity in a stock exchange market in the US or Japan (or any country with similar listingrequirements),noEmbargoedPersonhasanyinterestofanynature,directorindirect,inSellertoSeller’sknowledgebasedonreasonableduediligence;

(v) noneofthefundsofSellerhavebeenderivedfromanyunlawfulactivitywiththeresultthateitherbusinesswithSellerisprohibitedbyLawortheContractisinviolationofLaw;

(vi) Sellerhasimplementedprocedures,andwillconsistentlyapplythoseprocedures,toensure,usingbestefforts,theforegoingrepresentationsandwarrantiesremaintrueandcorrectatalltimes;



(vii) Seller will not knowingly (based on reasonable due diligence) use funds from any “Prohibited Person” (as such term isdefined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons WhoCommit, Threaten to Commit, or Support Terrorism) to make any payment due to Tesla under this Amended GTC, theFactoryLease,oranyContractDocument,andshalltakesuchmeasuresasarenecessarytoensurethatanyfundsusedtopay amounts due to Tesla hereunder are derived (i) from transactions that do not violateUnitedStates Law and, to theextentsuchfundsoriginateoutsidetheUnitedStates,donotviolatetheLawsofthejurisdictioninwhichtheyoriginated,and(ii)frompermissiblesourcesunderUnitedStatesLawand,totheextentsuchfundsoriginateoutsidetheUnitedStates,undertheLawsofthejurisdictioninwhichtheyoriginated;and

(viii) Seller:(i)toitsknowledge(basedonreasonableduediligence)isnotunderinvestigationbyanygovernmentalauthorityfor,nor has it been chargedwith, or convicted of,money laundering, drug trafficking, terrorist-related activities, any crimeswhichintheUnitedStateswouldbepredicatecrimestomoneylaundering,oranyviolationofanyAnti-MoneyLaunderingLaws;(ii)hasnotbeenassessedcivilorcriminalpenaltiesunderanyAnti-MoneyLaunderingLaws;or(iii)hasnothadanyofitsfundsseizedorforfeitedinanyactionunderanyAntiMoneyLaunderingLaws.

(b) Seller agrees to immediately notify Tesla in writing in the event Seller breaches any of the preceding representations andwarrantiesorhasreasontobelievethatitwillbecomeinbreachofanyoftheprecedingrepresentationsandwarranties.

(c) AbreachofanyrepresentationorwarrantyunderthisSectionshallbedeemedaDefaultundertheContractforwhichTeslamayimmediatelyterminatetheContractwithoutbeingrequiredtoprovidenoticeorpermitSellertocuresuchDefault.

7. Indemnification. 7.1 IndemnificationbySeller. (a) Selleragreestoindemnify,defendandholdharmlessTesla,itsAffiliates,andtheirrespectivedirectors,officers,employersand

agents (collectively “Tesla Indemnitees”) from and against any and all costs, fees, penalties, expenses, third-party damages,attorneys' fees and all other liabilities to any third party whatsoever (“Losses”), arising out of any Claim against any TeslaIndemniteewhicharisesfromorrelatestoanyactualoralleged:

(i) except to the extent that theClaimpertains to TeslaProducts and/orModules, infringement of any Intellectual PropertyRightrelatingtoGoodsoranyportionthereof,onitsownorincombinationwithothergoodsorservices;or

(ii) challengetoTesla'ssoleright,titleandinterestintheFactory,GoodsortheTeslaProperty,orrighttopossessionofTeslaProperty,ineachcasebroughtbyanythirdpartysuppliertoSelleroragenttoSeller,includingtoolmakers,subcontractors,andlendinginstitutions;or

(iii) Personalinjury(includingdeath)orpropertydamagetotheextentcausedbyadefectindesign,workmanshipandmaterial(during or after the Warranty Period) and/or non-conformity (with reference to the applicable Specifications within theWarrantyPeriod)inoneormoreGoods;provided,however,that:

(1) theforegoingobligationshallnotapplytotheextentthat:(A)Teslawasawareofor,intheexerciseofreasonablecare,shouldhavebeenawareoftheexistenceofsuchdefectand/ornon-conformity;(B)theLosseswerecausedbytheTeslaProducts, including but not limited to Tesla’s battery packs, Modules (including circuit and equipment matchingissues),andtheirrespectiveassembly,manufactureorplacement,sale,use,operation,storage,and/ortransportation;and/or(C)theLosseswerecausedby[***]if(y)such[***]wascausedby[***];or(z)such[***]occurredmorethan[***]afterthedeliveryofsuchaffectedGoodstotheAuthorizedPurchaser;and



(2) totheextentpermittedbyLaw,theliabilitiesofSellerpursuanttothisSection7.1(a)(iii)willnot[***].

(b) [***].

(c) SelleragreestoindemnifyandholdharmlesstheTeslaIndemniteesfromandagainstanyandallLossesarisingoutofanyClaimagainstanyTeslaIndemniteewhicharisesfromorrelatestoanybreachofSection6.3(CompliancewithLawsandTeslaPolicies)and/orSection6.4(Debarment),subjectto[***].

7.2 IndemnificationbyTesla. (a) Teslaagreestoindemnify,defendandholdharmlessSeller,itsAffiliates,andtheirrespectivedirectors,officers,employersand

agents (collectively “Seller Indemnitees”) from and against any and all Losses arising out of any Claim against any SellerIndemniteewhicharisesfromorrelatestoanyactualoralleged:

(i) infringementofanyIntellectualPropertyRighttotheextentcausedbyTeslaProductsand/orModulesinwhichtheGoodsareused;

(ii) challenge to Seller’s sole right, title and interest in materials, work-in-process, Goods or Seller Property, or right topossession of Seller Property, in each case brought by any third party supplier to Tesla or agent to Tesla, includingtoolmakers,subcontractors,andlendinginstitutions;or

(iii) Either (i) defects or quality issueswith respect to TeslaProducts (includingbut not limited to Tesla’s battery packs andModules,includingcircuitandequipmentmatchingissues,andtheirrespectiveassembly,manufactureorplacement,sale,use,operation,storage,and/or transportation)or (ii) [***] if (A)such [***] iscaused[***];or (B)such [***]occurredmorethan[***]afterthedeliveryofsuchaffectedGoodstotheAuthorizedPurchaser;provided,however,that:(1)the[***];and(2)tothemaximumextentpermittedbyLaw,[***].

(b) [***]. (c) TeslaagreestoindemnifyandholdharmlesstheSellerIndemniteesfromandagainstanyandallLossesarisingoutofanyClaim

againstanySellerIndemniteewhicharisesfromorrelatestoanybreachofSection6.3(a) (CompliancewithLaws),subjectto[***].

(d) IntheeventofaClaimthatarisesfromorrelatesto[***]inaTeslaProduct(an“[***]Claim”),thePartiesagreeasfollows:

(i) ThePartiesshalldiscussandevaluatethe[***]Claimingoodfaith. (ii) Aftersuchgoodfaithdiscussion,ifandtotheextentthatthePartiesagreethat(i)theLossesarisingoutofthe[***]Claim

[***]and(ii)theLossesarisefromeither(a)[***],or(b)[***],thenTeslawillindemnify,defend,andholdharmlesstheSellerIndemniteesfromandagainstsuchLosses.

(iii) TheobligationinthisSection7.2(d)appliesonlytotheextentpermittedbyLawandissubjectto[***]. 7.3 Procedure. ThePartyseeking indemnificationby theotherPartyunder thisSection7 (the“IndemnifiedParty”)willgiveprompt

writtennoticeof theClaim forwhich indemnification is sought. Failure togivenoticewillnotdiminish the indemnifyingParty’sobligationunderthisSectionifithasorreceivesknowledgeoftheexistenceoftheClaimbyanyothermeansorifthefailuredoesnotmateriallyprejudiceitsabilitytodefendtheClaim.TheindemnifyingPartymayselectlegalcounseltorepresenttheindemnifiedParty (said counsel tobe reasonably satisfactory to the indemnifiedParty) andotherwise control thedefense and, subject to theothertermsofthisSection7.3,resolutionoftheClaim.IftheindemnifyingPartyelectstocontrolthedefenseofsuchClaim,theindemnifiedPartymayatitsoptionparticipateinthedefenseofanyClaimwithitsowncounselatitsownexpense;providedthatsuchindemnifiedPartyshallnotresolvetheClaimwithoutthepriorwrittenconsentoftheindemnifyingParty.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. If theClaim isone that cannotby itsnaturebedefendedsolelyby the indemnifyingParty, then the indemnifiedPartywillmake

available informationandassistanceasthe indemnifyingPartymayreasonablyrequest,atthe indemnifyingParty’sexpense. TheindemnifyingPartymaynot,withoutthepriorwrittenconsentoftheindemnifiedParty,(i)consenttotheentryofanyjudgmentorenterintoanysettlementthatprovidesforinjunctiveorothernon-monetaryreliefaffectinganyindemnifiedParty,or(ii)consenttotheentryofany judgmentorenter intoanysettlementunlesssuch judgmentorsettlementprovides foranunconditionalandfullreleaseoftheindemnifiedPartyanddoesnotdiminishanyofsuchParty’srightsunderthisAmendedGTCand/ortheContractorresultinadditionalfeesorchargestotheindemnifiedParty.TheindemnifiedPartymaynotmakeanypartyadmissionsinrespectofaClaimif the indemnifyingPartyelectstocontrol thedefenseoftheClaim. Foravoidanceofdoubt, the indemnifyingPartymayinvokeanyapplicablestatutesoflimitationsinconductingthedefenseofanysuchClaim.

7.4 Limitations. To the maximum extent permitted by applicable law and subject to [***] (as applicable), the Parties’ respectiveobligationsunderthisSection7willapplyevenifanIndemnifiedParty’sconducthascontributedtotheLosses,buttheobligationtoindemnifywillnotapply to theextent thatLosseswerecausedbysuchIndemnifiedParty. EachParty’sobligationtodefendandindemnifyunderthisSection7willalsoapplyregardlessofwhethertheClaimarisesintort,negligence,contract,warranty,strictliabilityorotherwise.

7.5 InfringementClaims.IfanyGoodsbecome,orinSeller’sreasonableopinionis likelytobecome,thesubjectofaninfringementormisappropriationClaim, Sellerwill promptly notify Tesla (the “InfringementNotice”) and, at Seller’s expense and in addition toindemnifyingTesla Indemniteesasprovided in thisSection7 (Indemnification)and to theotherrightsTeslamayhaveunder thisAmendedGTC:(a)promptlysecuretherighttocontinuemanufacturingandsellingtheGoods;or(b)ifthiscannotbeaccomplishedwith Commercially Reasonable Efforts, then replace ormodify the Goods tomake it non-infringing orwithoutmisappropriation;provided,however,thatanysuchreplacementormodificationmaynotdegradetheperformanceorqualityoftheGoodsordisruptTesla’sbusinessoperations;or(c)ifneitheroftheforegoingcanbeaccomplishedbySellerwithCommerciallyReasonableEfforts,then,noearlierthan[***]afterthedateofSeller’sInfringementNotice,[***].Duringtheforegoing[***]periodoftimeandunlessprohibitedbyLaw,SellershallnotsuspenddeliveryofGoodsinaccordancewiththeProductionPlanandSellershallnot[***]asthedirectresultofsuchinfringementormisappropriationClaim.IfSellerchoosestostopsellingGoodstoTeslapursuanttothisSection(butnotifSellerisprohibitedbyLawfromsellingsuchGoods),SellerwillbedeemedtobeinDefaultandTeslamayexerciseitsterminationandotherrightsandremedies.

8. Confidentiality.Thenon-disclosureagreementbetweenthePartiesdatedJanuary1,2017(“NDA”)setsforththeParties’respectiveconfidentialityobligationshereunder.TheNDAisherebyincorporatedbyreferenceinthisAmendedGTCandtheContract,andthetermsandconditionsoftheNDAwillcontinueinforcethroughouttheTerm.

9. Property. 9.1 Property. The tooling, jigs, dies, gauges, fixtures,molds, patterns, other equipment (collectively, the “Tooling”), aswell as the

supplies,materials,andothertangiblepropertythatareorwillbeusedbySellertomanufacture,store,andtransportGoods,orusedtodevelopormakeGoodsforTesla(suchTooling,supplies,materialsandothertangiblepropertyshallcollectivelybereferredtoasthe“Property”)willbeownedbyTeslaifTeslahas[***](“TeslaProperty”);provided,however,thatPropertywillnotbedeemedtobeTeslaPropertyifTeslahas[***].“Seller’sProperty”meansallPropertywhich(a)isownedand/orusedbySellerinconnectionwiththisAmendedGTCand/ortheContract(s)and(b)isnotTeslaProperty.SellerwillnotpurchaseontheaccountoforchargeTeslaforanyTeslaPropertyexceptasauthorizedinaPurchaseOrder.TitletoTeslaPropertyshalltransfertoTeslauponTesla’spaymentinfullforsuchProperty.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (a) SellerwillassigntoTeslacontractrightsorclaimsinwhichSellerhasaninterestwithrespecttoTeslaPropertyandexecute

billsof sale, financingstatements,orotherdocuments requestedbyTeslaor required toevidenceTesla’sownershipofTeslaProperty.

(b) SellerwillhavenointerestinTeslaPropertypaidforbyTeslaexceptasanat-willbailee.Totheextentpermittedbylaw,Sellerwaives any lien or similar right itmayhavewith respect to TeslaProperty. Tesla is responsible for personal property taxesassessedagainstTeslaProperty.

9.2 OperationsandMaintenance.Sellerwill:(a))subjecttoSection1.1(b)above,[***],procure,transport,installandconfigureattheFactorytheSeller’sPropertyasreasonablyrequiredtodeliverGoodsinaccordancewiththeContractandtheProductionPlan(e.g.,as required for [***]; (b) [***]maintain all Seller’s Property used by Seller in good condition and repair, normal wear and tearexcepted;(c)furnish,maintainingoodcondition,replaceandimproveallSeller’sPropertyreasonablyrequiredtodeliverGoodsinaccordancewiththeContractandtheProductionPlan;and(d)atTesla’srequestandexpense,markTeslaPropertyasbelongingtoTesla. Further, (e) all replacement parts, additions, improvements, and accessories to Tesla Tooling will become part of TeslaTooling; and (f) Tesla will, [***], be responsible for procuring, maintaining in good condition, replacing and improving all TeslaPropertywhichTeslaisexpresslyrequiredtoprovidehereunderasaTeslaResponsibility,ifany,inordertoenableSellertoperformitsobligationsundertheContractandtheProductionPlan.

9.3 Tesla’sRightsofPossession,EquitableRelief.Teslahastherighttothesole,unencumbered,unqualified,andabsolutepossessionofTeslaPropertyatanytime,aselectedbyTeslaandSellerwill[***]releasetoTeslauponrequest,andTeslamayretakeimmediatepossessionofTeslaPropertyatanytimewithorwithoutcauseandwithoutpaymentofanykindunlessotherwiseprovidedintheContract.TeslawillberesponsiblefortransportationcostswithrespecttoTeslaProperty.

9.4 WaiverofLiens. AsacontinuingconditionofSeller’spossessionoruseofTeslaProperty,SellershallensurethatnothirdpartyobtainsanylienorotherrightinTeslaPropertyandherebywaivesandrelinquishes,andagreestoobtainfromanythirdpartieswhomight claim any such lien (includingwithout limitationmechanic’s liens) or right, theirwrittenwaiver and relinquishment of allrights,ifany,toanylienorotherrightofretentionwhatsoeverwithrespecttoTeslaProperty.

10. IntellectualProperty. 10.1 CovenantNot toSue. Seller and itsAffiliates covenantnot tobring, assist others inbringing, or otherwise assert againstTesla

and/or its Affiliates, and their respective successors and assigns, any claim for infringement of any of Seller’s and/or any of itsAffiliates’IntellectualPropertyRightincorporatedintheGoodsarisingfromanyofthefollowing:[***].Fortheavoidanceofdoubt,theforegoingcovenantextendstoanyapplicationofoneormoreGoodsif,atthetimeofsaleofoneormoreGood(s)toTesla,(a)SellerknowsthatTeslaand/oritsAffiliatesplanstousesuchGood(s)insuchapplicationor(b)theapplicationbyTeslaand/oritsAffiliatesispubliclyavailableand/ordisclosed.

10.2 IndependentEffortsandSimilarGoods.ProvidedthereisnoinfringementoftheotherParty’sIntellectualPropertyRights,nothinginthisAmendedGTCortheContractwillimpaireitherParty’srighttodevelop,manufacture,purchase,use,sellormarket,directlyorindirectly,aloneorwithothers,productsorservicescompetitivewiththoseofferedbytheotherParty.

10.3 NoImpliedRights.ExceptfortherightsexpresslytransferredinthisAmendedGTCortheContract,nothingthereinwilloperatetotransferanyinterestinIntellectualPropertyRightsbyimplication,estoppelorotherwise.

11. FactoryColocation. 11.1 FactoryLease.AscontemplatedintheAmendedandRestatedFactoryLeasedatedJanuary1,2018byandbetweenTesla,Inc.and

PNA(asamended,the“FactoryLease”),Sellerwillco-locateattheGigafactoryforproductionofGoodshereunder.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. 11.2 SellerPersonnel. (a) ResponsibilityforSellerPersonnel. Sellerwillmanage,superviseandprovidedirectiontoSellerPersonnelandcausethemto

comply with the obligations and restrictions applicable to Seller under these Amended GTC and/or Contract. Each Party isresponsiblefortheactsandomissionsofitsownpersonnelunderorrelatingtotheseAmendedGTCand/ortheContract.SellerisresponsibleforvalidatingtheidentityofandensuringthatSellerPersonnelassignedtoperformworkhereunder(i)havethelegalrighttoworkinthecountry(ies)inwhichtheyareassignedtowork,and(ii)conformtoallreasonableandapplicableTeslaPoliciesdisclosedtoSellerandapprovedbySeller(suchapprovalnottobeunreasonablywithheld,conditionedordelayed)withrespect to personal and professional conduct at the Factory (including adherence to general safety, behavior, and securitypractices).Fromtimetotime,thePartiesmayalso,inconjunctionwiththeProductionMeeting,consultingoodfaithregardingstaffingrequirementsforSellerPersonnelattheFactory.

(b) BackgroundChecks.PriortoassigninganySellerPersonneltoworkattheFactory,Sellershallperformabackgroundcheckofeachpersonor, inthecaseofemployeesoragentsofasubcontractor,Sellershallcausethesubcontractortoconductsuchabackgroundcheck.SuchbackgroundchecksmayhavebeenperformedaspartofSeller’sstandardpre-employmentscreeningprocess andwill include the following, at aminimumbut only to the extent permitted by applicable Law: (i) social securityverification (forUSemployees); and (ii) felonyandmisdemeanorcriminal checks.To theextentpermittedbyapplicableLaw,Tesla may require Seller to provide written evidence of the background checks on Seller Personnel at any time. Unlessprohibited by Law, neither Partymay assign any person to performwork at the Factorywhowas convicted of any criminaloffenseinvolvingdishonesty,abreachoftrust,moneylaundering,orwhohasbeenconvictedofafelonycrimewithinthelastsevenyearswithouttheotherParty’spriorwrittenconsent.

11.3 ExtensionofLease.FollowingexpirationorterminationoftheAmendedGTC,SellershallbeentitledtoextendthedurationoftheFactoryLeaseasfollows:

(a) IfTeslaterminatesthisAmendedGTCforSeller’sDefaultortheFactoryLeaseforTenant’sLeaseDefault,Sellermaycontinueitsleaserights[***].Sellershall[***]andSellershall[***].

(b) If (i) thisAmendedGTC expire or (ii) in the event of a termination of thisAmendedGTCand/or theFactory Lease for forcemajeurebyeitherPartyor termination foraChangeofControlEventaffecting theotherParty,Sellermaycontinue its leaserights[***].Sellershall[***]andthePartiesshallnegotiateingoodfaithapotentialextensionoftheFactoryLease.IncaseofterminationforforcemajeureorforChangeofControlbyeitherParty,Teslashallberesponsible[***];provided,however,thatTeslawill have sole financial responsibilitywith respect to any Tesla-Supplied Items and/orUtilitieswhichwere installed byTesla.ThePartiesshallalso,inconnectionwithanysuchexpirationortermination,discussingoodfaith[***]–and,inthe[***],suchdiscussionshallincludetheimpacton[***].Inthecaseofexpiration(butnotterminationforforcemajeureorforChangeofControl),[***]providedthat(i)Sellerhasused[***],(ii)theamount(s)[***];provided,however,thatsuchTesla’sapprovalshallnot be unreasonably withheld, delayed or conditioned, and (iii) Tesla shall not be responsible for any such [***]. Tesla willprovideanestimatedcostorprofit for [***],andSellerwill [***]. Sellershallhave financial responsibility for [***];provided,however,thatTesla[***].IfSellerchoosesto[***],Sellershall[***].IfSellerchoosesto[***],Teslashall[***],andifthe[***],Teslawill[***].IfSeller[***],Sellerwillbedeemedtohave[***]andTeslawill[***]initssolediscretionandatTesla’s[***].Foravoidanceofdoubt,Sellershallhave[***].InnoeventshallTesla[***].Exceptassetforthinthisparagraph,eachPartyshallberesponsibleforitsowncostsandexpensesrelatedtosuchexpirationortermination.

(c) IfSellerterminatesthisAmendedGTCforTesla’sDefaultortheFactoryLeaseforTesla’sLeaseDefault,Sellermay:(i)electtocontinueitsleaserightsforthe[***]without[***]andSellermay[***]and,ifapplicable,[***];and(ii)[***].


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (d) IfSellerterminatesthisAmendedGTCandtheContract(s)duetoaChangeofControlEventwithrespecttoTesla,Sellermay,in

itssolediscretionandinadditiontotheremediescontemplatedinSection11.3(b),choosetocontinueitsleaserights[***].

12. Liability. 12.1 LimitationsofLiabilityandExclusions. (a) ExceptasprovidedinSection12.1(e),Tesla’sliabilitytoSellerunderthisAmendedGTCandallContracts(includingtermination,

expirationorcancellation)shallnotexceedthefollowing:

(i) withrespecttoeachinvestmentbyorforSellerinSeller’sPropertyascontemplatedinSection1.1(b)aboveandinthethen-currentPricingAgreement,the[***]pursuanttothisAmendedGTCandthethen-currentPricingAgreement;

(ii) with respect toGoods or other itemsdelivered bySeller pursuant to aContract, [***] in accordancewith the applicableContract;

(iii) with respect toamounts forwhichTesla isexpressly responsiblepursuant to thisAmendedGTC– includingSections2.4(TeslaResponsibilities),11.3(ExtensionofLease),and13.4(ObligationsUponTermination)ifandtotheextentapplicable–and/orotherrelevantagreementsbetweenthePartiesinconnectionwiththisAmendedGTC(e.g.,FactoryLease)ifandtotheextentapplicable,the[***];

(iv) withrespecttoClaimswhichare[***];and

(v) forotherdamageswhicharerecoverablepursuanttothisAmendedGTCand/oraContractduetooneormoreeventsgivingrisetoliabilityinarollingperiodof[***].

(b) Except as provided in Section 12.1(e), Seller’s total liability to Tesla under this AmendedGTC and/or anyContract shall notexceedthefollowing:(i)forClaimswhichare[***];and(ii)foroneormoreeventsgivingrisetoliabilityinarollingperiodof[***],or(B)[***].

(c) Exceptasprovided inSection12.1(e)andnotwithstandinganythingtothecontrary inSections12.1(a)or12.1(b)above,eachPartyshallbeliableifit[***];provided,however,thatsuchliabilityshallnotexceed[***].

(d) ExceptasprovidedinSection12.1(e)andtotheextentpermittedbyapplicablelaw,neitherPartywillbeliabletotheotherPartyforanyanticipatedprofits,lossofrevenueorsavings,lossofgoodwill,depreciationcostduetoreducedproductioncapacity,costof capital, production downtime costs, interest, penalties or incidental, special, indirect, consequential, punitive,multiple, orexemplarydamagesorliabilitiesinconnectionwiththisAmendedGTCand/oranyContract,whetherforbreachofcontract,latepayment,propertydamage,personalinjury, illness,ordeathorotherwise,evenifsuchPartywasadvisedorwasawareofthepossibilityofsuchdamagesorliabilities.

(e) ThelimitationsandexclusionsofliabilitysetforthinSections12.1(a),12.1(b),12.1(c)and12.1(d)willnotapplywithrespecttodamagesattributableto:(i)aParty’sintentionaltorts,unlawfulconduct,willfulmisconduct,orgrossnegligence;or(ii)Lossesrelatedto[***].Further,theexclusionsofliabilitysetforthinSection12.1(d)willnotapplywithrespecttodamagesattributableto:(iii)LossesrelatedtoClaimsthatare[***].

(f) ThePartiesacknowledgeandagreethatthefollowingwillbeconsidereddirectdamagesandthatneitherPartywillassertthattheyaretypesofdamagesthatareexcludedunderSection12.1(d)totheextenttheyresultfromthefailureofaParty(orentitiesorpersonsforwhomaPartyisresponsible)toperforminaccordancewiththisAmendedGTCand/ortheContract:

(i) costsandexpensesforwhichaPartyisexpresslyresponsibleunderthisAmendedGTCoraContract, includingcostsandexpensesrelatedto[***]andTesla’sobligationstopay[***]paidbySeller[***];


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (ii) the actual and reasonable damages, losses, costs and expenses incurred by Tesla as a direct result of Seller’s Default

pursuanttoSection3.3(TimeisoftheEssence); (iii) actualandreasonabledamages,losses,costsandexpensesincurredbyTeslaascontemplatedin[***]; (iv) payments,fines,penaltiesorinterestimposedbyagovernmentalbodyorregulatoryentity,totheextentcausedbytheother

Party,theotherParty’sAffiliates,ortheirrespectiveagentsandsubcontractors; (v) actualandreasonabledamages,losses,costsandexpensesasadirectresultofSeller’sfailuretocomplywithitsobligations

under[***],butonlytotheextentthat[***]; (vi) amounts for which a Party is expressly responsible pursuant to this Amended GTC (including Sections 2.4 (Tesla

Responsibilities),11.3(ExtensionofLease),and13.4(ObligationsUponTermination)),thethen-currentPricingAgreement,theFactoryLease,and/oreachContract;

(vii) damagesintortattributabletothe“simple”or“ordinary”negligenceofaParty, itsemployeesand/oragents inamannerrelatedtothisAmendedGTC,aContractand/ortheFactory;

(viii) actualandreasonablecostsandexpenses[***],totheextentcausedbytheotherParty,itsemployeesand/oragentsor,if[***]usingCommerciallyReasonableEfforts,damagesinanamountequal[***];

(ix) actualandreasonabledamagesforpersonalinjury,illnessand/ordeathwithrespecttoaParty’semployeesoragentstotheextentcausedbytheotherParty’sfailuretomaintainadequatehealthandsafetyconditionsattheFactory;

(x) actual and reasonable damages and liability incurred by a Party with respect to environmental conditions or issues(includingactualandreasonablecostsofremediation,ifapplicable),either(A)totheextentcausedbytheotherPartyand/or(B)totheextentsuchconditionsorissuesarethelegalresponsibilityoftheotherParty;and

(xi) subject toSection12.1(a)(v)above, theactualandreasonabledamages, losses,costsandexpensesexplicitlydescribed inSection2.5(b)aboveandincurredbySellerasadirectresultofTesla’sDefaultpursuanttoSection2.5(b)([***]).

(g) EachPartyshalluseCommerciallyReasonableEffortstomitigatethedamages incurredinconnectionwithanybreachbytheotherParty.

(h) SubjecttoSections5.3(d)(Remedies)and5.3(f)(Recalls;ServiceActions)andsubjecttothelimitationsandexclusionssetforthinthisSection12.1,allremediesprovidedinthisAmendedGTCand/ortheContractarecumulativeandinadditiontoandnotinlieuofanyotherremediesavailabletoaPartyunderthisAmendedGTCand/ortheContract,atlaw,orinequity.

12.2 ForceMajeure. “ForceMajeureEvent”means [***] thatdelays orprevents theParty fromperforming its obligationsunder thisAmendedGTCand/ortheContract,providedthat(a)thenon-performingPartyiswithoutfault incausingorfailingtopreventtheevent,and(b)theeventcannotbecircumventedthroughtheuseofcommerciallyreasonablealternativesources,workaroundplansorothermeans.TheaffectedPartywillpromptlynotifytheotherPartyofanyForceMajeureEventandofitsplansandeffortstoimplementawork-around,inwhichcasetheaffectedPartywillbeexcusedfromfurtherperformanceoftheaffectedobligationsaslongastheForceMajeureEventcontinues.TheaffectedPartywillcontinuetouseCommerciallyReasonableEffortstoperformtotheextentpossibleandwillcomplywithanyapplicableandagreeddisasterrecoveryobligations.TheaffectedPartywillnotifytheotherPartypromptlywhentheForceMajeureEventhasabated.IfaForceMajeureEventpreventsperformancefor[***],thentheunaffectedPartymayterminatethisAmendedGTCandtheContract(s)asofadatespecifiedbysuchParty inawrittennoticeofterminationtotheaffectedParty,inwhichcase(i)TeslawillpaySeller’schargesforGoodsdeliveredinaccordancewith[***],but(ii)Teslawillnotbeliableforanycostspertainingto[***]and(iii)neitherPartywillbeliabletotheotherPartyforpaymentof[***],exceptasmaybeexpresslypermittedunderSection11.3(b).IfaForceMajeureEventpreventsperformancebySellerandresultsinabacklogofunfulfilledordersforGoods,Sellershall,asdirectedbyTesla,[***]withinthe[***]period.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade.13. TermandTermination. 13.1 InitialTermandRenewal.ThisAmendedGTCwillbeeffectiveasoftheAmendmentEffectiveDateandcontinuethroughthedate

thatoccursten(10)yearsafterSellerachievestheProductionRunRate(the“Term”). Beginningfive(5)yearsaftertheStartofProduction and at least once per year during the Term, the Parties will discuss in good faith the possibility of extending theTerm. The “Production Run Rate” will be deemed to occur on the first day of the month following the month in which SellerproducesbatterycellsattheFactory[***].

13.2 Termination,Generally. ThisAmendedGTCand theContractmay only be terminated as provided in this Section 13 (TermandTermination).TerminationbyaPartywillbewithoutprejudicetoanyotherrightsandremediesavailabletoaParty.NeitherPartywillbeobligedtopayanyterminationchargesordemobilizationfeestotheotherPartyinconnectionwithanytermination,exceptasmaybeexpresslysetforthinthisAmendedGTCand/ortheapplicableContract.

13.3 Termination.SubjecttoSections2.4(TeslaResponsibilities)ofthisAmendedGTC,thePartywhoisnotinDefaultmayterminatethisAmendedGTCand/ortheContractasfollows:(a)iftheotherPartybreachesamaterialobligationunderthisAmendedGTC,theFactoryLease,and/ortheContractandfailstocurethebreachwithin[***]afterreceiptofnoticeofsuchbreachexpresslystatingthenon-breachingParty’sintenttoterminate(“NoticeofTermination”)or,ifthebreachcannotreasonablybecuredwithinsuch[***]period,[***]afterreceiptofNoticeofTermination;(b)iftheotherPartybecomesadebtorinabankruptcy,insolvency,receivership,orsimilarproceedingcommencedbyathirdpartythatisnotdismissedwithinareasonabletimeaftercommencement;or(c)[***]uponNoticeofTermination in theeventofan incurablematerialbreach, including(i)aParty’srepudiationof thisAmendedGTCand/ortheContract,(ii)incaseofSection6.4(Debarment),or(iii)iftheotherPartymakesanassignmentforthebenefitofcreditorsinviolationofthisAmendedGTCand/ortheContractorvoluntarilyinstitutesproceedingsinbankruptcyorinsolvency.Eachoftheforegoingtypesofbreachshallbedeemedtobea“Default.”ThePartiesmayalsoterminate:(d)asprovidedinSection12.2(ForceMajeure);or(e)forconvenience(i.e.withoutcause)uponpriorwrittennoticetotheotherPartyifsuchotherPartyexperiencesaChangeofControlEvent,butonlyifboth:(i)theChangeofControlEventwill,orisreasonablylikelyto,materiallyandadverselyaffecttheterminatingParty’sinterestspertinenttothisAmendedGTCandtheContract(s),and(ii)theterminatingPartyterminateswithin[***]aftersuchChangeofControlEvent.(f)SubjecttoSection11.3(ExtensionofLease)ofthisAmendedGTC,thisAmendedGTCandallContractsshallautomaticallyexpirewithoutanyfurtheractionbythePartiesuponexpirationoftheFactoryLease.ThePartythatissuestheNoticeofTerminationmayapprovealongercureperiodinitssolediscretion.

13.4 ObligationsUponTermination.FollowinganyterminationpursuanttoSection13.3aboveandinadditiontoanyactionsorpaymentsexpresslyrequiredbythisAmendedGTCand/ortheapplicableContract:

(a) Sellershall:

(i) immediately cease all work under the Contract, unless and to the extent that Tesla requests that Seller complete themanufactureofGoodsusingmaterialsandcomponentswhichwerepreviouslyacquiredbySellerwithintheapplicableLeadTimetomeetitsobligationsundertheaffectedContract(s)andwhichSellercannot,usingCommerciallyReasonableEfforts,[***]inamannerthatresultsin[***]withrespecttosuchmaterialsandcomponents;

(ii) transfertitleanddelivertoTeslaallfinishedGoodscompletedpriortotheterminationdatepursuanttoaPurchaseOrderorRelease,providedthatSellermayinitssolebutreasonablediscretionchangethepaymenttermsforsuchGoodsifSellerhasterminatedforTesla’sDefault;

(iii) withoutlimitingSeller’srighttodamagesforTesla’sDefault,[***];


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (iv) cooperatewithTeslainminimizingcostsandlossesrelatedtothetermination(including,withoutlimitation,byreturningthe

materialsforarefundorcreditorotherwiseusingorsellingtoanyofSeller’sothercustomers);

(v) uponterminationoftheFactoryLease,complywiththeobligationsdescribedintheFactoryLeaseandinSection11.3abovewithrespectto[***];and

(vi) in caseofTesla’s termination forSeller’sDefault and if requestedbyTesla, but subject toSeller's actual capacity, laborconstraintsandsupplychainconstraints, issueafinalPurchaseOrderforaquantityofGoodsatvolumesnot inexcessof[***] of purchases by Tesla over [***] preceding termination and on the [***], and Seller shall not reject such PurchaseOrder.

(b) Teslawill,afterexercisinganysetoffrightspermittedbyLaw,paytoSellerthefollowingamounts,withoutduplicationandinaccordancewiththethen-currentpaymenttermsbetweenTeslaandSeller:

(i) The purchase price for all conforming Goods received by Tesla prior to the termination date or delivered following theterminationdatepursuanttothisSection13.4;

(ii) [***],unlessTeslahasterminatedforeither(A)Seller’sDefaultor(B)aChangeofControlEventwithrespecttoSeller;and

(iii) [***]paidbySellerfor[***]attheFactoryforwhich[***];provided,however,thatTeslashallnothaveanyobligationto[***]such amounts if Tesla terminates (A) for Seller’s Default, (B) as permitted under Section 12.2 (Force Majeure) (unlessexpressly agreed otherwise in writing by Tesla pursuant to the good faith negotiation contemplated in Section 11.3(b)above),or(C)foraChangeofControlEventwithrespecttoSeller;and

(iv) Anycostsand/orexpensesthatTeslaisobligatedtopaypursuanttoSection11.3(ExtensionofLease).

(c) NotwithstandinganyotherprovisionshereintothecontrarybutsubjecttoSection12(Liability),incaseofaParty’sterminationduetoChangeofControlwithrespecttotheotherParty,thePartyexercisingsuchterminationrightshallbeentitledtorecoveraterminationchargeequaltothefollowing:(i) in[***]oftheTerm,onebillion,fivehundredmilliondollars($1.5billionUSD;(ii) in [***]of theTerm,onebillion($1.0billionUSD);and(iii) thereafterduringtheTerm,seven-hundredfiftymilliondollars($750millionUSD).

14. Insurance.DuringtheTermofthisAmendedGTC,Sellershallobtainandmaintainatitsowncostandexpense(andshallcauseeachsubcontractortomaintain)policiesforthetypesandamountsofinsurancethatarerequiredunderapplicableLaw.

15. DisputeResolution. 15.1 GoverningLaw.ThisAmendedGTCandeachContractwillbeinterpretedandconstruedinaccordancewiththesubstantiveLawsof

CaliforniaandtheUnitedStatesgenerallyapplicabletherein,withoutregardtoanyprovisionsofitschoiceoflawrulesthatwouldresultinadifferentoutcome.TheUNConventiononContractsfortheInternationalSaleofGoodswillnotapplytotheContract.

15.2 InformalDisputeResolution.Intheeventanydisputes,differencesorcontroversiesarisebetweentheParties,outoforinrelationtoorinconnectionwiththeprovisionsofthisAmendedGTCand/ortheContract,thePartiesshallthoroughlyexploreallpossibilitiesforanamicablesettlement.

15.3 Arbitration.AnydisputearisingoutoforrelatingtothisAmendedGTCand/oraContractthatisnotresolvedthroughnegotiationshallbesettledexclusivelybyfinalandbindingarbitrationconductedinaccordancewiththethen-currentCommercialArbitrationRulesof the JudicialArbitrationandMediationServices/Endispute (“JAMS”). Theexistence,contentandresultof thearbitrationshallbeheldinconfidencebytheParties,theirrepresentatives,anyotherparticipants,andthearbitrator.ThearbitrationwillbeconductedbyasinglearbitratorselectedbyagreementofthePartiesor,failingsuchagreement,


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. appointedinaccordancewiththeJAMSrules.Thearbitratorshallbeexperiencedinagreementsforcapitalequipment.Anydemand

forarbitrationandanycounterclaimwillspecifyinreasonabledetailthefactsandlegalgroundsformingthebasisfortheclaimant’srequestforreliefandwillincludeastatementofthetotalamountofdamagesclaimed,ifany,andanyotherremedysoughtbytheclaimant. The arbitrationwill be conducted in the English language in San Francisco, California. Each Partywill bear its ownexpensesinthearbitrationandwillshareequallythecostsofthearbitration;provided,however,thatthearbitratormay, intheirdiscretion,awardreasonablecostsandfeestotheprevailingParty.ThearbitratorwillhavefullpowerandauthoritytodetermineissuesofarbitrabilityandtointerpretorconstruetheapplicableprovisionsoftheContractand/orthisAmendedGTCandtofashionappropriate remedies for breaches of the Contract and/or this Amended GTC (including interim or permanent injunctive relief);providedthatthearbitratorwillnothaveanyrightorauthority:(i)inexcessoftheauthorityofacourthavingjurisdictionoverthePartiesandthedisputewouldhaveabsentthisarbitrationagreement;(ii)toawarddamagesinexcessofthetypesandlimitationofdamages found in the Contract and/or this Amended GTC; or (iii) to modify the terms of either the Contract or this AmendedGTC.Theawardofthearbitratorwillbeissuedwithinthirty(30)daysofthecompletionofthehearing,shallbeinwriting,andshallstatethereasoningonwhichtheawardisbased.Judgmentupontheawardrenderedinthearbitrationmaybeenteredinanycourtofcompetentjurisdiction.EachPartywillhavetherighttoapplyatanytimetoajudicialauthorityforappropriateinjunctiverelief(orotherinterimorconservatorymeasures),andbydoingsowillnotbedeemedtohavebreacheditsagreementtoarbitrateortohaveimpairedthepowersreservedtothearbitrator.ThePartiesfurtherconsenttothejurisdictionofanystateorfederalcourtwithsubjectmatterjurisdictionlocatedwithinadistrictthatencompassesassetsofaPartyagainstwhomajudgment(oraward)hasbeenrenderedfortheenforcementofthejudgment(oraward)againsttheassetsofsuchParty.

15.4 ContinuedPerformance.EachPartyagreestocontinueperformingitsobligationsunderthisAmendedGTCandeachContractwhileadisputeisbeingresolvedunlessanduntilsuchobligationsareterminatedbytheterminationorexpirationthereof.

16. Miscellaneous. 16.1 AssignmentandSubcontracting. (a) WithoutpriorwrittenconsentoftheotherParty,neitherPartymayassignthisAmendedGTCoranyContractorsubcontractor

delegatetheperformanceofitsdutiesthereunder,andanyattempttodososhallbevoid;provided,however,that(i)eachPartymay,withoutrequiringtheotherParty’sconsentormeetinganyothercondition,addanAffiliatewhichoperatesintheFactoryasaco-partytothisAmendedGTCand/oranyContract,and(ii)Teslamay,uponthewrittennoticetoSeller,assignanyorallofitsrights,benefitsorremediesunderanyContracttoanAffiliatewhichassumesallofTesla’sobligationsundertheContract,provided that Tesla remains responsible for (1) payment if the Affiliate fails to pay in accordance with the Contract, (2)performanceofTeslaResponsibilitiesapplicabletotheContract,ifany,iftheAffiliatefailstoperformsuchTeslaResponsibilitiesand(3)Tesla’sindemnificationobligationsprovidedinSection7.2.

(b) IfSeller intends thatallorpartof themanufactureofGoodswillbesubcontracted toa third-partysubcontractor,Sellerwill:(i) be solely responsible for payments to the subcontractor; (ii) include in its purchase order or any other contract with thesubcontractor awaiver of subcontractor liens to themaximumextentpermittedbyapplicable law; (iii) beforepermittinganysubcontractortouseTeslaPropertyand/oraccesstheFacility,obtainTesla’spriorwrittenconsent;(iv)providenoticetoTeslaateachProductionMeetingof[***];and(v)[***]inconnectionwiththisAmendedGTCand/oraContractasreasonablyrequestedbyTeslawithinareasonabletimeafterreceiptofTesla’snoticeandfollowingagoodfaithdiscussion.Teslahasnoobligationwith respect toSeller’s subcontractorother thanpayment toSellerof theagreedpriceof theconformingGoodsdelivered toAuthorizedPurchaserspursuanttotheirPurchaseOrder(s)acceptedbySellerexceptasprovidedin[***].


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (c) Any subcontracting, assignment or delegation by Seller does not relieve Seller of any responsibility under the Contract, and

Sellerremainsresponsible tothesameextentas if thesubcontracted,assignedordelegatedresponsibilitieswereretainedbySeller.

(d) In theeventofaChangeofControlEventaffectingaParty, thepersonorentitywhichacquiresControlof thePartyshallbesubjecttothetermsandconditionsof,andshallassumealloftheacquiredParty’sobligationsunder,thisAmendedGTCandtheaffectedContract(s).

(e) ThisAmendedGTCandallContract(s)shallbebindingupontherespectivesuccessorsandpermittedassignsoftheParties. 16.2 AuditandInspection.Teslaanditsauthorizedrepresentativesshallhavetherightwithreasonablepriorwrittennoticefromtimeto

timetoaccessSeller’sleasedareasapprovedbySeller(suchapprovalwillnotbeunreasonablywithheldbySeller)and,subjecttothe NDA, verify Seller’s compliance with the terms of this Amended GTC and the Contract. Seller will maintain records asreasonably necessary to demonstrate Seller’s compliance with the terms of this Amended GTC, the Pricing Agreement, and theContract,includingshowingthatamountschargedtoTeslaaretrueandcorrect.SuchauditwillbemadeattheagreeddateandthenormalbusinesshourofSellerattheFactory.TeslaanditsrepresentativesmayauditSeller’srecordsmadewithin[***]priortotheauditdate,totheextentneededtoverifycompliancewiththisAmendedGTC,thePricingAgreement,andtheContract,andSellerwillmakesuchrecordsavailabletoTeslaanditsauditorsforexaminationandcopyingupontheirreasonablerequest;providedthatSellerisnotobligedtomakeavailableanytechnicalorengineeringconfidentialrecords,dataand/orinformationownedorcontrolledbySellerwithoutthepriorwrittenagreementbetweentheParties.AnyauditwillbeconductedatTesla’sexpense.NotwithstandingtheforegoingandunlessapprovedotherwisebySeller,anyauditofSeller’scompliancewith[***]shallbeconductedsolelybyanauthorizedthird-partyrepresentativeofTeslawhichisboundnottodisclosetoTeslathespecific[***].

16.3 Conflicts.IntheeventofaconflictbetweenoramongthedocumentscomprisingthisAmendedGTCand/oraContract,thefollowingorderofprecedencewillapply(documents listedindescendingorderofpriority): (a)anywrittenagreementsignedbyauthorizedrepresentativesofthePartiesexpresslyamendingthisAmendedGTCand/oraContractDocument;(b)aPricingAgreementsignedby theParties; (c) theapplicablePurchaseOrderacceptedbySeller; (d) theProductionPlan; (e)anyProduct-specificexhibitsorattachments to this Amended GTC (e.g. cell warranty); (f) this Amended GTC and any exhibits, attachments, schedules anddocumentsincludedorreferencedinthisAmendedGTCthatarenotProduct-specificattachmentsorschedules;and(g)anyotherContract Document. This Amended GTC shall supersede any standard terms and conditions that are automatically attached topurchaseordersissuedbyTesla.

16.4 Counterparts. ThisAmendedGTCmaybeexecuted incounterparts, eachofwhich shallbeanoriginaland togetherwhich shallconstituteoneandthesameinstrument.

16.5 CovenantofGoodFaith.Exceptwhereanobligationisspecificallyidentifiedasbeinginaparty’ssolediscretion,eachParty,initsrespectivedealingswiththeotherPartyunderorinconnectionwiththisAmendedGTCandeachContract,shallactingoodfaithandwithfairdealing.

16.6 ElectronicCommunication. Subject toSection2.4(c),Sellerwillcomplywith themethodofelectroniccommunicationreasonablespecifiedbyTeslafromtimetotime,includingrequirementsforelectronicfundstransfer,purchaseordertransmission,electronicsignature,andcommunication.

16.7 EntireAgreement.ThisAmendedGTC,theNDA,thePricingAgreement,theContractDocuments,andeachContractconstitutetheentireagreementbetweenthePartieswithrespecttoitssubjectmatter,andsupersedesallpriororalorwrittenrepresentationsoragreementsby thePartieswithrespect to thesubjectmatter thereof. Exceptasauthorized inSection2.2,nosubsequent terms,conditions, understandings, or agreements purporting to modify the terms of this Amended GTC, the Pricing Agreement, anyContractDocuments,oraContractwillbebindingunless inwritingandsignedbyaVice-Presidentorhigher forbothTeslaandSeller.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. 16.8 Environmentally Friendly Practices. In addition to complying with all environmental and safety requirements, to the maximum

extent practicable, each Party will use environmentally conscious materials and practices in the development, manufacturing,packaginganddeliveryofallGoodsand/orinconnectionwiththeFactory.

16.9 NoThirdPartyBeneficiaries.ThisAmendedGTCandeachContractareenteredintosolelybetweenTeslaandSellerand,exceptforthe Parties’ indemnification obligations under Section 7 (Indemnification) and the Authorized Purchasers,will not be deemed tocreateanyrightsinanythirdpartiesortocreateanyobligationsofeitherTeslaorSellertoanythirdparties.

16.10NoWaiver.ThefailureofeitherPartytoenforceonaparticularoccasionanyrightorremedyprovidedinthisAmendedGTCand/ortheContractorbylaworinequitywillnotbedeemedawaiverofthatrightorremedyonasubsequentoccasionorawaiverofanyotherrightorremedy.

16.11Notices.Allformalnotices,requests,demands,approvalsandcommunicationsunderthisAmendedGTCand/ortheContract(otherthanroutineoperationalcommunications)(collectively,“Notices”)willbeinwritingandmaybeservedeither(a)inpersonor(b)byregistered or certified mail with proof of delivery, addressed to the Party at the addresses set forth below. Notices given asdescribedintheprecedingsentencewillbeconsideredreceivedonthedayofactualdelivery.APartymaychangeitsaddressordesignee for notification purposes by giving the other Party priorwritten notice of the new address or designee in themannerprovidedabove.ThePartiesmaymutuallyagreethatcertaintypesofroutineapprovalsandnoticesofanon-legalnaturemaybegivenbyelectronicmail.

InthecaseofTesla: Withacopyto:Tesla,Inc. Tesla,Inc.3500DeerCreekRoad,PaloAlto,CA94304 3500DeerCreekRoad,PaloAlto,CA94304Attn:VicePresident,GlobalSupplyManagement Attn:LegalDepartmentInthecaseofSeller: Withacopyto:SANYOElectricCo.,Ltd. PanasonicCorporationofNorthAmericaTeslaEnergyBusinessDivision LegalDepartment,12thFloorAttn:AssociateDirector,GlobalSales&Marketing1-1MatsushitachouMoriguchiCity,Osaka570-8511,Japan

TwoRiverfrontPlazaNewark,NewJersey07102-5490

16.12Relationship of Parties. The Parties are independent contractors under this Amended GTC and the Contract and no otherrelationshipisintended,including,withoutlimitation,apartnership,franchise,jointventure,agency,employer/employee,fiduciary,master/servant relationship, or other special relationship. Neither Party shall act in a manner that expresses or implies arelationshipotherthanthatofindependentcontractor,norbindtheotherParty.

16.13RulesofInterpretation.Sectionreferencesaretosectionsofthedocumentinwhichthereferenceiscontainedandwillbedeemedto refer to and include all subsections of the referenced section. The section headings in this AmendedGTC are for referencepurposes only andmaynot be construed tomodify or restrict any of the termsof thisAmendedGTCand/or theContract. ThisAmended GTC and each Contract will be deemed to have been written by both Tesla and Seller. Unless the context requiresotherwise,(a)“including”(andanyofitsderivativeforms)meansincludingbutnotlimitedto,(b)“may”meanshastheright,butnottheobligationtodosomethingand“maynot”meansdoesnothavetherighttodosomething,(c)thewords“will”and“shall”areshallbeunderstoodtoapplytoamandatoryobligation,notapermissivestatement,and(d)termsdefinedinthesingularincludethepluralandviceversa.ThisAmendedGTCandtheContractDocumentsarewrittenintheEnglishlanguage,andtheEnglishtextofthisAmendedGTCandofeachContractshallprevailoveranytranslationhereof.

16.14Severability.IfforanyreasonacourtofcompetentjurisdictionfindsanyprovisionofthisAmendedGTCand/ortheContracttobeunenforceable,thatprovisionofthisAmendedGTCand/ortheContract


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. willbeenforcedtothemaximumextentpermissiblesoastoimplementtheintentoftheParties,andtheremainderofthisAmended

GTCand/ortheContractwillcontinueinfullforceandeffect. 16.15Survival. Any provision of this Amended GTC and/or of a Contract that contemplates or governs performance or observance

subsequenttoterminationorexpirationthereofwillsurvivetheexpirationorterminationthereofforanyreason,includingwithoutlimitationSeller’sobligations,representationsandwarrantiesandTesla’srightsundertheContractwithrespecttoGoodsdeliveredororderedthereunder.

16.16Sustainability.TeslaandSellereachacknowledgetheimportanceofmaintainingasustainablesupplychain,inwhichvendorsandsuppliersatall levelscomply in fullwithallapplicableLaws, industrystandards,andTesla’sConductPolicies (definedabove), ineach casewith respect to sustainable laborpractices, includinga zero-tolerancepolicywith respect to child or forced labor androbustsafetystandards(collectively,the“SustainabilityStandards”).Accordingly,thePartiesagreeasfollows:

(a) Sellershallcontractuallyrequireitssuppliersandsub-suppliersto[***]forpurposesofproductionofGoodsunderthisAmendedGTC.“Minerals”meansanyformofcobaltand/or‘conflictminerals’(asthattermisusedinTesla’sConductPolicies).

(b) Atleast[***]duringtheTerm,Sellershall[***](collectively,“MineralsSuppliers”).Sellershallconducteach[***]inaccordancewith [***], including as applicable [***] from [***] and the commitments adopted by the [***], and using [***] with relevantindustryexperience.Thescopeandmethodologyof[***],andshallscheduleeach[***]tofacilitate[***].SellerwillprovideTeslaanditsindependentauditorswitha[***].Sellershallcompleteeach[***]anddelivera[***]duringtheTerm.

(c) Ifandtotheextentthat[***],thenthePartiesshallpromptlydiscussingoodfaithandoneofthefollowingshallapply:

(i) Seller shall promptly: (a) cause the [***] to [***]andprovide evidence toTesla that [***]; and/or (b) [***] related to thisAmendedGTCand[***];or

(ii) IfSellerisunabletoachievecomplianceascontemplatedinSubsection(i)above,TeslamayrequireSellerto[***]. 16.17Defined Terms. Terms used in this AmendedGTCwith initial capitalization have themeanings specifiedwhere used or in this

Section16.16.

(a) “Affiliate”meanswithrespecttoanentity,anyotherentityorpersonControlling,Controlledby,orundercommonControlwith,suchentity.

(b) “AmendmentEffectiveDate”hasthemeaningsetforthinintroduction.

(c) “Anti-BriberyLaws”meanstheUnitedStatesForeignCorruptPracticesActof1977,theUnitedKingdomBriberyActof2010,theOECDConventiononCombatingBriberyofForeignPublicOfficialsinInternationalBusinessTransactions(ineachcase,asamendedfromtimetotime)andallotherapplicablenational,regional,provincial,state,municipalorlocallawsandregulationsthatprohibit thebriberyof,ortheprovidingofunlawfulgratuities, facilitationpaymentsorotherbenefitsto,anygovernmentofficialoranyotherperson.

(d) “Anti-MoneyLaunderingLaws”shallmeanallapplicableLawsthat: (a) limit theuseofand/orseekthe forfeitureofproceedsfrom illegal transactions; (b) limit commercial transactionswith designated countries or individuals believed to be terrorists,narcoticsdealersorotherwiseengagedinactivitiescontrarytotheinterestsoftheUnitedStates;(c)requireidentificationanddocumentationofthepartieswithwhomaFinancialInstitutionconductsbusiness;or(d)aredesignedtodisrupttheflowoffundsto terrorist organizations. Such Laws, regulations and sanctions shall be deemed to include, without limitation, the USAPATRIOTActof2001,Pub.L.No.107-56,theBankSecrecyActof1970,asamended,31U.S.C.Section5311etseq.,theTradingwiththeEnemyAct,50U.S.C.App.Section1etseq.,theInternationalEmergencyEconomicPowersAct,50U.S.C.Section1701etseq.,andthe


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. sanctionregulationspromulgatedpursuanttheretobytheOFAC,aswellasLawsrelatingtopreventionanddetectionofmoney

launderingin18U.S.C.Sections1956and1957.

(e) “AuthorizedPurchaser”meansTeslaoranyAffiliateofTeslathatisauthorizedbyTeslatopurchaseGoodsonbehalfofTeslaandthatTeslanotifiesinwritingtoSeller.

(f) “Cell”meansa[***]batterycellmanufacturedbyorforSellerhereunder,andhasthesamemeaningastheterm“Good”whenusedintheGigafactoryContractDocuments.

(g) [***]meansthe[***]ofoneormoreGoodswhich[***]otherGoods.

(h) “ChangeofControlEvent”meansatransactionorevent involvingaPartywhereby(i)anyotherentity,personor“group”(assuch term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended) has acquired Control of all orsubstantiallyallof theassets,of suchParty (oranyparentcompanyof suchParty),whetherdirectlyor indirectly, inasingletransactionorseriesofrelatedtransactions,or(ii)suchParty(oranyparentcompanyofsuchParty)hasconsolidatedwith,ormergedwithorinto,anotherentity,orsold,assigned,conveyed,transferred,leasedorotherwisedisposedofallorsubstantiallyallofitsassetstoanotherperson(s)orentity(ies).

(i) “Claim” means any demand, or any civil, criminal, administrative or investigative claim, action or proceeding (includingarbitration)asserted,commencedorthreatenedagainstanentityorpersonbyanunaffiliatedthirdparty.Forthepurposesofthisdefinition,anemployeeofeitherPartyisconsideredanunaffiliatedthirdparty.

(j) “CommerciallyReasonableEfforts”meanstakingallsuchstepsandperforminginsuchamannerasawell-managedcompanywouldundertakewhereitwasactinginadetermined,prudentandreasonablemannertoachieveaparticulardesiredresultforitsownbenefit.

(k) “ContractDocuments”meansthePurchaseOrderacceptedbySeller,theapplicablePricingAgreement(ifany),theprovisionsofthis Amended GTC relevant to the obligations under the accepted Purchase Order (e.g., production and delivery of Goods),documents and attachments which are both referenced in any of the foregoing (including Specifications) relevant to theobligations under the accepted Purchase Order (e.g., production and delivery of Goods), and any other additional writtenagreementswhich are signed by authorized representatives of the Parties and pertain to the obligations under the acceptedPurchaseOrder(e.g.,productionanddeliveryofGoods).

(l) “Control”means possessing, directly or indirectly, the power to direct or cause the direction of themanagement, policies oroperationsofanentity,whetherthroughownershipofvotingsecurities,bycontractorotherwise.

(m) [***]means[***]nearthe[***].

(n) “EmbargoedPerson”meansanyperson,entityorgovernmentsubjecttotraderestrictionsunderU.S.Law,includinganyAnti-MoneyLaunderingLawsandanyExecutiveOrdersorregulationspromulgatedthereunder,withtheresultthateitherbusinesswithSellerisprohibitedbyLawortheContractisinviolationofLaw.

(o) “EnergyProducts”meansstoragetechnologyinastationaryinstallation,notinamobileorotherwiseportabledevice,inwhichoneormorecellsstoreelectricpowerforanauxiliarycomponent.

(p) “EPCells”means,collectively,GoodsintendedforuseinEnergyProductsandpurchasedundertheGigafactoryContract.

(q) “EVCells”means,collectively,GoodsintendedforuseinvehiclesthatareTeslaProductsandpurchasedundertheGigafactoryContract.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (r) “Goods”meansallproductsspecifically identifiedinastatementofworkorproductspecificattachmentoramendmenttothis

AmendedGTC,andallproductsthatarenotsoidentified,butwhicharemadebyoronbehalfofSellerattheFactoryandofferedorsoldbySellertoTeslaoranyofitsAuthorizedPurchasers.Goodsshall includegoodsmadebyoronbehalfofSellerattheFactory and soldbySeller to anyAuthorizedPurchaser, directly or indirectly including through resellers, distributors, value-addeddistributorsandsubassemblymanufacturers.“Goods”includesprototypeanddevelopmentparts,pre-productionversionsofGoods.TotheextentthattheGoodsareSoftware,referencesto“sale”orwordsofsimilarmeaningshallbedeemedtorefertoa“license”ofsuchGoodsconsistentwiththetermsintheContract.“Goods”shallnotincludescrapnotdeliveredtoTeslaintheformof(i)defectiveornon-conformingCellsor(ii)anymaterialsorcomponentscomprisingCells.

(s) “In-ScopeCountries”means, foreachtypeofCell, theapplicablecountryofdeliveryandadditionalcountriesasrequestedbyTesla and approved in writing by Seller. Tesla will give reasonable notice of each country that it wishes to include in thisdefinitionwithrespecttoaCelltype,theParties’celltechnicalteamswillworktogetheringoodfaithtoevaluateandconfirmwhethertheCelltype(s)canmeettheapplicableLawsofsuchcountry,andSellershallnotbeunreasonablywithhold,condition,ordelayitsconsenttoanysuchrequest.

(t) “Intellectual Property Rights” means all intellectual and industrial property rights recognized in any jurisdiction, includingcopyrights, mask work rights, moral rights, trade secrets, patent rights, rights in inventions, trademarks, trade names, andservicemarks(includingapplicationsfor,andregistrations,extensions,renewals,andre-issuancesof,theforegoing).

(u) “Law(s)”meansany statute, regulation, ordinance, rule, order, decreeorgovernmental requirementenacted,promulgatedorimposedbyanygovernmentalauthorityatany level (e.g.,municipal,county,province,stateornational).Fortheavoidanceofdoubt, the term “Laws” includes any and all applicable Anti-Bribery Laws and any and all applicable Laws with respectto:(i)occupationalsafetyandhealth;(ii)protectionofpersonsandpropertyfromdeath,injuryordamage;(iii)theenvironmentandtheuse,handling,storage,labelinganddisposaloftoxicorhazardousmaterials;and/or(iv)laborandemployment.

(v) “LeadTime”means[***].

(w) “Module”meanssmallestreplaceableunitinaTeslabatterypack.InthecaseoftheTeslaRoadster,theModuleconsistsof621batterycellsconnectedinaseries/parallelarrangement.

(x) “Person” means an individual, corporation, partnership, limited partnership, joint venture, association, joint stock company,trust, trustee, estate, limited liability company, unincorporated organization, real estate investment trust, government or anyagencyorpoliticalsubdivisionthereof,oranyotherformofentity.

(y) “PurchaseOrder”meansapurchaseorderforGoodsissuedbyTeslaoranotherAuthorizedPurchaser(e.g.,aProductionOrderoraDiscreteOrder).

(z) “Release”meansawrittencommunicationissuedbyTeslaoranAuthorizedPurchaserthatidentifiesaspecificquantityofGoodsandassociateddeliverydatebywhichSellershalldeliversuchGoods.

(aa) “Seller Personnel” means any personnel furnished by Seller or any of its Affiliates and working at the Factory inconnection with the Contract, including employees and independent contractors of Seller, its Affiliates andsubcontractors.

(bb) “Seller’sProperty”hasthemeaninggiveninSection9.1ofthisAmendedGTC.


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade. (cc) “Specifications”meansthemostcurrentversionofallapplicablespecificationsandrequirementsthatare:(i)providedbyTesla

(includingotherdocumentsorrequirementsspecificallyincorporatedorreferencedinthisAmendedGTC,PurchaseOrders,billsof materials, statements of work, project schedules, drawings, and CAD data) and approved in writing by Seller; and/or(ii) provided by Seller (including any samples, drawing, CAD data, spec sheets, or other descriptions or specifications orrepresentations) and either (a) approved of by Tesla inwriting or (b) relied upon by Tesla.Notwithstanding anything to thecontrary in this Amended GTC, the Parties intend to describe all aspects of the design of the Goods in the applicableSpecificationstotheextentfeasible.

(dd) “Tesla”meansTesla,Inc.and/oranAffiliate(s)ofTesla. (ee) “TeslaSupplierHandbook”meansthemostcurrentversionofthewrittensetofguidelines,standardsandrequirementsprovided

by Tesla regarding development and production of Goods under this Amended GTC. The Tesla Supplier Handbook may beprovidedbyTeslaelectronicallyorviaaweb-basedportal.

(ff) “TeslaProduct”meansanyproductthatismanufacturedbyoronbehalfofTesla(excludingGoods).TeslaProductsmayincludevehicles,chargers,subassemblies,systemsandcomponents.

(gg) “Tesla-SuppliedItems”means,collectively,therawmaterials,components,supplies,and/orservicestobeprovidedbyTeslainconnectionwiththisAmendedGTCorFactoryLease(e.g.Utilities)and/ortheContractasaTeslaResponsibility.

(hh) “US Person”means aUnited States citizen, entity organized under the Laws of theUnited States or its territories or entityhavingitsprincipalplaceofbusinesswithintheUnitedStatesoranyofitsterritories.

(ii) “WarrantyPeriod”hasthemeaninggiveninSection5.1(a).


Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade.INWITNESSWHEREOF,thePartieshaveexecutedtheseAmendedandRestatedGeneralTermsandConditionsforGigafactorybypersonsdulyauthorizedbelow:

Tesla,Inc. TeslaMotorsNetherlandsB.V. By: /s/KarnBudhiraj By: StephanWerkman

Printed: KarnBudhiraj Printed: StephanWerkman

Title: VP,GlobalSupplyChainManagement Title: Director

Date: 9June2020 Date: Jun10,2020

PanasonicCorporation PanasonicCorporationofNorthAmerica,byandthroughitsdivisionPanasonicEnergyofNorthAmerica

By: /s/MototsuguSato By: /s/ThomasGKorte

Printed: MototsuguSato Printed: ThomasG.Korte

Title: RepresentativeDirector,ExecutiveVicePresident Title: SeniorVicePresidentofOperationsatPanasonicCorporationofNorthAmerica,andChiefFinancialOfficerofPanasonic’sUSCompany

Date: 2020June6

Date: Jun5,2020



Exhibit1–QualityRequirements1. QualityRequirements.AllGoodssoldtoTeslaundertheContractshallbemanufacturedandprovidedinaccordancewithagreedTesla’s quality control procedures and requirements, including, without limitation, all Tesla quality standards (collectively, the “QualityRequirements”).ThePartiesshalldetermineuponthemutualconsultationwhethertheGoodsmeettheQualityRequirements.Sellershall,inaccordancewiththeQualityRequirements,provide,maintainandenforceallmeasuresnecessarytosecurethequalityofGoodsandthemanufacturingprocessesthereof,includingwithoutlimitation,qualitycontrolstandards,inspectionstandardsandspecifications.2. PPAP.AllcellsshallgothroughaformalProductionPartApprovalProcess(“PPAP”)processpriortouseinaTeslaproduct.ThePPAPprocessrequiresareviewofproductandprocessdocuments (FMEA,ControlPlans, InspectionStandard, IEEE,etc.)andaprocessaudit (as deemed necessary by TeslaQuality Personnel). Seller shall informTesla of any process and product changes that occur aftercompletionofthePPAPprocess.3. Evidence of Seller’s Quality Assurance; Testing. Upon Tesla’s request andwithin the scope that the Parties agree, Seller shalldelivertoTesla[***]aswillvalidatecompliancewithallQualityRequirements. IfqualityproblemsbasedupontheQualityRequirementsarisefromtheGoods,Teslamay,uponpriornoticeandduringnormalbusinesshours:[***].4. Pre-deliveryInspection.SellershallberesponsibleforthequalitycontroloftheGoodsitsuppliestoTeslapursuanttotheContract,including,withoutlimitation,reasonableandappropriateinspectionandtestingofGoodspriortodelivery.5. TeslaTesting.IfqualityproblemsbasedupontheQualityRequirementsarisefromtheGoods,uponreceiptofareasonablerequestbyTesla,SellershallpromptlyconductrequiredengineeringandqualitycontroltestsofGoodsmanufacturedpursuanttotheContract,andshallprovideTeslawiththeresultsofthosetests.6. ThisExhibit1doesnotlimittheParties’respectiverightsandobligationsundertheContract.



Exhibit2–NevadaIncentives

TOPIC DESCRIPTION TIMING PURPOSE RISKS

QuarterlySB-1AuditCompliance

***PNAtoprovidecompleteandaccuratedata,onlytotheTeslaemployeesandagentsexpresslyidentifiedinwritingbyTesla,regardingthefollowing:1.TheamountofCapitalInvestmentintheStateofNevada,

whichwillbefurthercategorizedbydepreciable-life.***Foravoidanceofdoubt,thischartdoesnotobligatePNAtomakeanyminimumamountofCapitalInvestments,but[***].

2.ThenumberofemployeesengagedintheconstructionoftheProject,andshowthetotalnumberofconstructionemployeesandthepercentageofconstructionemployeeswhoareNevadaResidents.***

3.ThenumberofQualifiedEmployeesattheProject,theaveragewagepaidtoQualifiedEmployeesthroughouttheperiod,andshowthetotalnumberofQualifiedEmployeesandthepercentageofQualifiedEmployeeswhoareNevadaResidents.Foravoidanceofdoubt,thischartdoesnotobligatePNAtopayanyparticularwagesorwagelevelstoitsemployees.***

IfandtotheextentthatPNAdiscoversthatanyoftheforegoingdataasreportedtoTeslawasinaccurateorincomplete,PNAwillpromptlynotifyTeslaandthePartieswillcollaborativelyassesstheimpactofsuchinaccurateorincompletedataonpastandfuturetaxincentivesfromtheStateofNevada.Dependingonthenature,magnitude,andimpactoftheinaccurateorincompletedata,TeslawillworkwiththeStateofNevadainatimelymannertoremediatetheerrorandtomitigatethepotentiallossoftaxincentives.

Quarterly TofacilitatetheSB-1Compliancerequirement

RisklosingallincentivesifSB-1complianceisnotmet.




Teslawillselectandengageindependentcertifiedpublicaccountant(“CPA”)toperformSB-1compliancerequirements.PNAtocollaboratewithsameindependentCPAandtoadoptsameagreed-uponproceduresasdeterminedbyTesla.[***]relatedtotheincentivescontemplatedherein.[***]providedtoPNAbysuchindependentCPA.

As-needed PursuanttoSB-1,Tesla,asLeadParticipant,isrequiredtoissueacompliancereport(atleastonanannualbasis)thatiscertifiedbyanindependentCPA.

***PNAwillprovidethefollowingtoselectedindependentCPAandcomplywithmutually-agreedprocedures(PNAwillnotunreasonablyobjecttoTesla’sproposedprocedures):1.Detailedlistsofallpertinentrealandpersonalproperty,

includingallCapitalInvestmentsincurredbyPNAfortheProjectforeachperiod;

2.Schedulelistingallconstructionemployeeswithrespecttotheforeachperiod;and

3.SchedulelistingallQualifiedEmployeeswithrespecttotheProjectSiteforeachperiod.

PNAwillworkwithTeslaandtheindependentCPAtoensurethattheSB-1auditcomplianceprocesswillnotidentifyanymaterialdifferencesbetweenPNA’sreporteddataandtheactualdata.PNAwillalsopromptlyremediateanyerrorsidentifiedbytheindependentCPAinPNA’sreporteddataandPNAwillnotifyTeslaofPNA’sremediationstepsanddiscusssuchstepsingoodfaithwithTesla.

Quarterly ToensurethattheSB-1complianceissatisfiedandacceptabletoNevada'sGovernorOfficeofEconomicDevelopment




MonthlySales&UseTaxReimbursementCompliance

[***].PNAagreesthatpropertypurchasedforthepurposesofcellproductionattheGigafactorywillbedeliveredtoandusedattheGigafactorysite,butequipmentmaybestoredoffsiteafterdeliveryfromtimetotimeifnotinuse.

Monthly Toensurethatsales/usetaxultimatelydoesnotapplytoGigafactorypurchases

Riskthattheincentiveswillnotapply,subjectingTeslatounwarrantedsalestaxexpense

***PNAtoprovidethefollowing:1.CopiesofallAbatementreturnsfiledforthecurrentperiod

(i.e.,returnsfiledbyPNA);2.CopiesofproofofpaymentassociatedwitheachAbatement

return;3.Copiesofallvendorinvoicessupportingthetaxamounts

reportedoneachAbatementreturn,uponrequestbyTeslaoritsindependentCPA;

4.AnExcelschedulesummarizingallamountsfiledforeachAbatementreturnwhichlists:VendorInvoiceNumber,VendorInvoiceDate,TotalInvoiceAmount,andTaxableInvoiceAmount.

ItisunderstoodthatadelayinprovidingtheinformationlistedabovewilldelayTesla’sabilitytofilewithStoreyCountyand/ortheStateofNevada(asapplicable)forthecorrespondingtaxincentivesandTeslamayincuralatefilingfeeorpenalty.

Monthly TofacilitatetheSUTreimbursementclaimprocess(asTeslaisrequiredtofileonbehalfofallParticipants)

Riskofnotreceiving(ordelayedreceiptof)salestaxreimbursementfromStoreyCounty

TeslawillfileSUTreimbursementclaimonbehalfofPNAtoStoreyCountyandTeslawillremitanysuchamountstoPNAinatimelymanner.

Monthly AllSUTreimbursementispaidtoTesla.However,TeslawillremittheamountsreceivedofPNA'sportionofanyreimbursementclaimtoPNAuponreceiptofpaymentfromStoreyCounty




TransferableTaxCredit

PNAagreesthatanyTransferableTaxCreditincurredbytheProjectwillbeentitledtoTesla,asLeadParticipant.

N/A PursuanttoSB-1,transferabletaxcreditisavailabletoLeadParticipantonly.

N/A

Cell[***] [***].

N/A Duetothebenefitofvarioustaxabatementsandexemptions,theaforementioned[***].

Riskofinaccurate[***]

NVIncentive–ProjectRequirement

***PNAagreestomaintainanylicensesandpermitsrequiredtobeingoodstandingintheStateofNevadaand/orStoreyCounty.IfPNAdiscoversthatitisnotingoodstandingintheStateofNevadaand/orStoreyCounty,PNAwillpromptlyremediatethesituationwiththeStateofNevadaand/orStoreyCountyandnotifyTeslaofthesituation.Dependingonthenature,magnitude,andimpactofafailurebyPNAtoremainingoodstanding,TeslawillworkwiththeStateofNevadainatimelymannertomitigatethepotentiallossoftaxincentives.

N/A SB-1Requirement Risklosingallincentives.

[***]. N/A SB-1Requirement Risklosingallincentives.




AnyrecaptureofAbatedTaxesorTransferableTaxCreditswillberepaid[***].

N/A ToensurethatPNAisnotsubjecttoanyrecaptureprovisions(whichisalsoalreadystatedinTesla/StateIncentiveAgreement)

Teslaissolelyresponsibleforanyrecapture

***PNAwillmaintaincopiesofalldocuments,records,andrelatedinformationpertainingtoanydatareportedtoTesla,theindependentCPA,theStateofNevada,and/orStoreyCountyforpurposesoftheNevadaIncentives,andprovideaccesstothereasonablyrequestedsupportingdatatoTesla,theStateofNevada,andStoreyCountyuponrequestfor5yearsaftertheexpirationoftheIncentiveAgreement(June30,2039).

N/A SB-1Requirement RisklosingallincentivesifsupportingdocumentationisinsufficienttosupportpotentialauditbyGOEDorDept.ofTaxation.



ProjectGovernance

TeslaandPNAwillmeetasneededtodiscussthefollowing,butnotlimitedto:1.businessupdate,includingheadcount/investment

projections;2.SB-1compliance;3.SUTreimbursement.

Quarterly ToensurethatbothpartiesarealignedonIncentive-relatedmatters,andultimatelypartneringtoensureallSB-1requirementsaremetandtoachievemaxvalueofIncentivesavailableunderSB-1.

Riskofreportinginefficienciesanddelay

Tesla-PanasonicAmendedGeneralTermsandConditions Page36of36Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade.

Exhibit10.3

2020PricingAgreement(2170Cells)PPAEffectiveDate:4/1/2020

Seller’sVendorNumberwithTesla 133618PricingValidityPeriod(“PricingTerm”) 4/1/2020 through 3/31/2023ForecastedVolumesduringPricingTerm SeeSection8(a)belowPaymentTerms [***]

1. This 2020 Pricing Agreement (Gigafactory 2170 Cells) (the “PPA”) is entered into by the Tesla, Inc. and Tesla Motors

NetherlandsB.V. (collectively, “Tesla”)andPanasonicCorporation (“PanasonicCorp.”)andPanasonicCorporationofNorthAmerica,forandonbehalfofitsdivisionPanasonicEnergyofNorthAmerica(“PENA”)(collectively,“Seller”)withrespecttocertain cylindrical lithium-ion battery cells made by or on behalf of Seller (collectively, "Cells") at Tesla’s Gigafactory inSparks,Nevada(the“Factory”).ThePartiesshallmeetandconferingoodfaithtofinalizeanagreed,writtenSpecificationforeach typeofGoods, including theagreedwatt-hour (Wh) capacity and size. ThepriceperCell is referred to as the “UnitPrice.”TermsusedhereinwithinitialcapitalizationhavethemeaningsgivenwhereusedorintheGigafactoryContract.

2. PricingTerm. ThePricingTerm for this PPA shall be as set forth in the table above, subject to the following: bygivingwrittennoticetotheotherPartyonorpriortoJune30,2021,eitherPartymayelecttoterminatethisPPAforconvenienceasofMarch31,2022.IntheeventthataPartyelectstosoterminatethisPPA,thePartiesshallnegotiateingoodfaithtermsandconditionsforanewpricingagreement.

3. Orders.TeslaandanyofitsAffiliatesmayorderGoodspursuanttoPurchaseOrdersorReleasesissueddirectlytoSellerandeachsuchPurchaseOrderandReleaseshallbegovernedbytheGigafactoryContract.TheapplicabledeliverydateswillbespecifiedinPurchaseOrdersorReleasesissuedandacceptedperSections1.2and1.3oftheGTCorotherwiseagreedpertheproductionplanningprocess inSection1.1oftheGTC. Sellershalldirectall invoicesunderaPurchaseOrdertotheTeslaentityidentifiedinthePurchaseOrderor,ifapplicable,intheapplicableRelease.

4. Volumes. a. VolumeCommitment. Subject to Section 4.c (Conditions), Teslawill order and purchase, and Sellerwill produce and

deliver,[***]BaseVolumeCommitmentofCellsinTable1beloworthevolumeofCellsthatare[***]agreedperSection4.bbelow(the“VolumeCommitment”)asfollows:

Table1–BaseVolumeCommitment

Timeframe Volume[***] [***][***] [***] [***] [***] [***][***] [***] [***] [***] [***]*SeeSection4.c.ibelow **SeeSection4.c.viiibelow

2020PricingAgreement(2170Cells) Page1of9


b. ProductionPlanning.ThePartieswillconfirmtheProductionPlanasfollows:duringtheTransition(definedbelow),atthebeginningofeachmonth;andthereafter,atthebeginningofeachcalendarquarter.Tothatend,Teslawillprovide[***],Sellerwillprovide its [***], and thePartieswilldiscuss ingood faith. TheProductionPlan is intended tocover[***].ThisprocessenablesthePartiestoadjustvolumesunderthepriorProductionPlanandconfirmthevolumesforthesubsequentperiodof[***].Asnotedabove,theVolumeCommitmentwillbethe[***]thevolumes[***]orthevolumesdescribedinSection4.aabove,subjecttofluctuationswithinthattimeframeaspermittedbyGTCsection1.5orbyPPAsection4.c.i.

c. Conditions. i. DuringTransition,iftheproductionvolumesbySellerexceedtheVolumeCommitment,theVolumeCommitment

shallincreasebasedonactualincreaseinSeller’sproductionupto[***]Cells.IfTransitionisdelayedpastthescheduledtimeframe,then:(1)theVolumeCommitmentduringtheTransitionshallbe[***]Cells;and(2)ifthedelay is due to circumstances beyond the Parties’ reasonable control which cannot be mitigated throughCommerciallyReasonableEfforts,thePartieswilldiscussingoodfaitha[***]totheVolumeCommitmentbasedontheanticipatedproductionimpactwithreferencetoTable2below.

Table2–TargetProductionVolumebyLine[***] [***]

[***] [***][***] [***][***] [***]

ii. Tesla’s obligations to purchase the Volume Commitment is subject to the conditions set out in Section 1.6(PurchaseCommitment)oftheGTC.

iii. Tesla’sobligationtopurchasetheVolumeCommitmentshallbereducedbythequantityofCells[***]. iv. Seller’sobligationtodelivertheVolumeCommitmentshallbereducedbythequantityofCells[***]. v. Anyforecastvolumes inexcessof theVolumeCommitment isprovidedforplanningpurposesonlyand isnota

volume guarantee and neither Tesla nor Seller shall have any liability for such excess volumes except to theextentexpresslyagreedthroughtheProductionPlan.

vi. Tesla’sobligationtopurchasetheVolumeCommitmenthereundershallbedeemedtobesatisfiedandshallbereduced,asapplicable,totheextentthatoneormoreAuthorizedPurchaserspurchasesGoodsinconnectionwiththisPPA.

vii. If Seller reasonably believes that Tesla will not order and purchase the Volume Commitment, or if TeslareasonablybelievesthatSellerwillnotproduceanddelivertheVolumeCommitment,eitherPartymaynotifytheotherinwritingandthePartiesshalldiscussingoodfaith.

viii. The[***]BaseVolumeCommitmentfor[***],respectively,setforthinTable1[***]shallapplyif[***];provided,however,thattheBaseVolumeCommitmentin[***]issubjecttoSection4.d.iibelow.

d. Capital. i. ExceptasotherwiseagreedinwritingbyTesla(e.g.intheLeaseorinasignedchangeorder),Sellershallmake

all capital and operational investments required for production of Goods for Tesla in accordance with theProductionPlanandunderthisPPA(e.g.equipment,systems,othertangibleitems,etc.),includingequipmentandlaborforproductionorfor[***].Forpurposesoftheforegoingclause,Teslawillacceptresponsibilityfor[***]isundertakenatTesla’srequestandpursuanttoachangeorderthatissignedpriorto[***].



ii. Sellercommitsto[***]togetherwith[***],subjecttoapprovalbytheBoardofDirectorsofPanasonicCorp.Seller

willusebesteffortstosecuresuchapproval.Ifsoapproved,Sellerwillusebesteffortsto[***].Innoeventshallthe[***]theBaselinePricessetforthinTable3below.If[***],theBaseVolumeCommitment[***]perTable1above.

iii. ThePartiesagreeandacknowledgethat[***](including,withoutlimitation,equipmentpurchasesandinstallationcosts)inconnectionwith[***]through[***]andin[***],whichthePartiesagreeandacknowledge[***],providedthat [***]. The Parties agree that Tesla shall have the right to audit [***] upon request, at minimum onceannually.

iv. Without limiting anything to the contrary herein or in the GTC, the Partieswill discuss in good faith if TeslarequeststhatSeller[***]andSellerwillnotbeobligatedtoproceedexceptasagreedinwritingbybothParties.

5. Pricing. The Parties agree that the Unit Prices for Cells will be firm and fixed prices determined with reference to theapplicablebaselineprice(“BaselinePrice”)andwillnot increase foranyreasonexceptasexpresslycontemplatedbeloworotherwisemutuallyagreedbythePartiesthrougheitheraformalsignedamendmenthereoforaPOthatisissuedbyTeslaandacceptedbySeller.NofurtheramountsshallbepayablebyTeslaforanyreason,exceptasmaybeapplicableperSection9(Changes)beloworSection4(Volumes)above.

a. BaselinePricing. i. TheBaselinePricefor2170CellsproducedattheFactoryshallbeasfollowsperCell([***]isincludedforeaseof

referenceonly): Table3–BaselinePrices [***] [***] [***] [***] [***] [***]

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

[***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

[***]



ii. TheBaselinePricesinTable3[***]shall[***].

iii. If[***],theVolumeCommitment[***]perTable1.Totheextentthat[***],thePartiesshall[***].

iv. [***]BaselinePrice[***]inTable3aboveis[***].The[***]BaselinePrice[***]shallbe[***].

b. MetalsAdjustment. EachmonthduringthePricingTermstarting[***], theBaselinePriceshalladjustasfollows: thePartieswillmeasurethe[***]for[***]pertheapplicableindexormetricfortheapplicablemeasurementwindowinthetable below (this is the “Index Average Cost”), and adjust the Baseline Price (up or down) based on the differencebetweenthethen-currentIndexAverageCostforeachmaterialandthebaselinecommodityassumptionssetforthbelow.

Table4:MetalsAdjustmentCellMaterial [***] [***] [***] [***]Index/Metric [***] [***] [***] [***]MeasurementWindow

[***] [***] [***] [***]

ContentperCell:[***]Baseline

[***]perCell [***]perCell [***]perCell [***]perCell





[***] [***] [***] [***] [***]*Theforegoingvaluesshallbesetbasedon[***].

c. LithiumAdjustment. Each [***]during thePricingTermstarting [***], theBaselinePriceshalladjustas follows: thePartieswillmeasurethe[***]pricesfor[***]fortheapplicablemeasurementwindowinthetablebelow,andadjusttheBaseline Price (up or down) based on the difference between the then-current Index Average Cost and the baselinecommodityassumptionsetforthbelow.

Table5-A:LithiumAdjustmentCellMaterial [***]Index/Metric [***]MeasurementWindow SeeTable5-BbelowContentperCell:[***]Baseline [***]perCellContentperCell:[***]Baseline [***]perCellContentperCell:[***]Baseline [***]perCellCommodityPriceBaseline [***]*Theforegoingvalueshallbesetbasedon[***].



Table5-B:MeasurementWindowforLithiumAdjustmentand[***]

PricingPeriod MeasurementWindowCalendarYear[***] [***]CalendarYear[***] [***]CalendarYear[***] [***]CalendarYear[***] [***]

d. [***]Adjustment.Each[***]duringthePricingTermstarting[***],theBaselinePriceshalladjustbasedonthechangeinthe [***] and [***] forCellMaterials [***] per the [***]. For example, forGoods scheduled for delivery in [***], thisadjustment shall take place with respect to the exchange rate for [***]. The baseline exchange rate as of the PPAEffectiveDateshallbe[***].

e. AdjustmentforSavings.IfandtotheextentthatthePartiesrealizesavingsdueto[***],thePartiesshalldiscussingoodfaithandmaymutuallyagreeona[***]adjustmenttotheBaselinePricesfor[***]CellsthrougheitheraformalsignedamendmenthereoforaPOthatisissuedbyTeslaandacceptedbySeller.

f. Adjustmentfor[***].ThePartiesagreethatthe[***]BaselinePricessetforthaboveincludechargesforthe[***]relatedto[***],asdescribedinTable6below.ThePartiesagreethatthe[***]BaselinePricesshall[***]inTable6.Sellershalldocumentandsubstantiate[***]uponrequestbyTesla.

Table6[***] [***] [***]

[***] [***] [***][***] [***] [***][***] [***] [***][***] [***] [***]

6. [***]TransitionCosts. a. Sellerhassolefinancialresponsibilityforall[***](collectively,"TransitionCosts")forthe[***](the"Transition"),except

asexpresslystatedotherwisebelow. b. Assumptions. The [***] Baseline Prices assume that [***] during Transition [***] and [***]. [***]. The Parties

acknowledgethat[***]theforegoingassumptions. c. [***]. [***]means thequantityofCells [***]. [***]means [***]. [***]means [***],where [***]means [***] inTable7

below.

Table7:[***][***] [***] [***] [***] [***][***] [***] [***] [***] [***][***] [***] [***] [***] [***][***] [***] [***] [***] [***]

d. [***].Sellerwill[***]asdescribedinthetableattachedasExhibitA[***].



e. MonthlyReporting.AttheendofeachmonththroughthecompletionoftheTransition,SellershallreviewwithTesla’s

commercialandfinanceteaminperson(ifpossible)theactualandincremental[***]forsuchmonth[***]. f. One-TimeAnnualTrue-Up. AtthecompletionoftheTransition, , thePartieswillreview[***]relatedtotheTransition

[***]and: i. Iftheactual[***],SellershallpayTeslaanamountequalto[***]; ii. Iftheactual[***],TeslashallpaySelleranamountequalto[***]; iii. Iftheactual[***],SellershallpayTeslaanamountequalto[***]; iv. Iftheactual[***]Teslashall[***].

7. BillofMaterials.

a. Except as expressly agreed inwritingby theParties and subject toSection7.bbelow,Seller shall be responsible (asbetweentheParties)for[***],andinnoevent[***]inconnection[***].

b. ThePartiesmayengageinprojectswithrespecttothebillofmaterialsforCellstoimprovequalityandreducecostandpricingduringthePricingTermasmutuallyagreedafteragoodfaithdiscussion.

c. AsreasonablyrequestedbySeller,TeslawillparticipateinallsupplierandmaterialqualificationprocessesrelevanttothisPPAandtothecosttrajectoryandwillnotunreasonablywithholdordelayitsparticipationinsuchprocesses.

8. MaterialSourcing. a. Seller will comply with the Tesla Supplier Code of Conduct which is available at

https://www.tesla.com/sites/default/files/about/legal/tesla-supplier-code-of-conduct.pdf and, to the extent applicable, theTeslaHumanRightsAndConflictMineralsPolicywhichisavailableathttps://www.tesla.com/about/legal#human-rights-and-conflict-minerals-policy(theforegoingtwopoliciesarereferredto,collectively,as“Tesla’sConductPolicies”).

b. In connectionwith the sourcing of cobalt and battery cellmaterials producedwith cobalt (e.g. cathode) (collectively,“Cobalt”) and if applicable conflictminerals,Seller shall (i) complywith theResponsibleMinerals Initiative standards(“RMIStandards”),(ii)complywithallapplicableLaws,(iii)requireeachsupplierandsub-supplierofCobalttosubmitacomprehensive response using the Cobalt Reporting Template, available athttp://www.responsiblemineralsinitiative.org/emerging-risks/cobalt-reporting-template/, to confirm that such entitiescomplywiththeRMIStandards,and(iv)providecopiesofallsuchresponsesanddatatoTeslanolaterthanFebruary28ofeachyearthroughduringthePricingTerm.

c. IfandtotheextentthatSellerdiscoversthatasupplierorsub-supplierfailstocomplywithanapplicableLaw,theRMIStandards,orTesla’sConductPolicies, theParties shallpromptlydiscuss ingood faithhow tomitigate the impactonTesla.

9. Changes. Section2.2 (Changes)of theGTCshall governanyChanges,whichmay includeequitablepriceadjustmentsorotherappropriateadjustmentsnotexpresslydescribedinthisPPA,agreedbythePartiesduringthePricingTerm.



10. Customs,Duties,andTariffs.ExceptasexpresslyagreedinwritingbytheParties:(a)[***];(b)[***].TheUnitPricesshall

notchangeduringthePricingTerminconnectionwithanychangeintheamountsofanysuchduties,tariffs,orothercharges;provided,however,that[***].

11. Miscellaneous. a. TheParties’AmendedandRestatedGeneralTermsandConditionsforGigafactorydatedJanuary1,2020(“Amendedand

Restated GTC”), including Section 4.1 (Open Book Structure) thereof and Non-Disclosure Agreement for CommercialAgreement,GigafactorydatedJuly1,2019(“NDA”),areincorporatedbyreferenceasintegralpartshereof.

b. TheAmendedandRestatedGTC, theNDA, thisPPA, applicable sections of theAmendedandRestatedFactoryLeasedated January 1, 2017 (“Lease”), and Purchase Orders and Releases issued by or for Tesla hereunder (collectively,“GigafactoryContract”)constitute theentireagreementbetweenthePartieswithrespect to thesubjectmatterof thisPPA and supersede all prior oral or written representations or agreements by the Parties with respect to its subjectmatter.Nosubsequentterms,conditions,understandings,oragreementspurportingtomodifythetermsofthisPPAwillbebindingunlessinwritingandsignedbybothParties.

c. In the event of a conflict between or among the document comprising theGigafactoryContract, the conflict shall beresolvedperSection16.3(Conflicts)oftheGTC.Fortheavoidanceofdoubt,(i)thisPPAshallcontrolintheeventofaconflictbetween the termshereofand the termsof theProductionPricingAgreementdatedSeptember30,2014 (the“2014 PPA”) with respect to the subject matter hereof, and (ii) the signature of this PPA shall not terminate, or bedeemedtoterminate,the2014PPA.

d. ThisPPAmaybeexecutedincounterparts,eachofwhichwhensoexecutedanddeliveredwillbedeemedanoriginal,andallofwhichtakentogetherwillconstituteoneandthesameinstrument.[Signaturepagefollows]



AgreedbyauthorizedrepresentativesofeachPartyandsignedbythePartiesasofthePPAEffectiveDate.

Tesla,Inc. TeslaMotorsNetherlandsB.V. By: /s/KarnBudhiraj By: /s/StephanWerkman Printed: KarnBudhiraj Printed: StephanWerkman Title: VP,GlobalSupplyManagement Title: Director Date: 9June2020 Date: 10/06/2020

PanasonicCorporation PanasonicCorporationofNorthAmerica,forandonbehalf

ofitsdivisionPanasonicEnergyofNorthAmerica By: /s/MototsuguSato By: /s/ThomasGKorte Printed: MototsuguSato Printed: ThomasG.Korte Title: RepresentativeDirector,ExecutiveVice

President Title: SeniorVicePresidentofOperationsat

PanasonicCorporationofNorthAmerica,andChiefFinancialOfficerofPanasonic’sUSCompany

Date: 2020June6

Date: Jun5,2020



ExhibitA:[***]

[***]


Exhibit10.4

INDEMNIFICATIONAGREEMENT

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into, effective as of June 23, 2020 (the“Effective Date”) by and between Elon R. Musk (the “Indemnitor”) and Tesla, Inc., a Delaware corporation (the“Company”).

WHEREAS,itisessentialtotheCompanytoretainandattractasdirectorsandofficersthemostcapablepersonsavailable;

WHEREAS, the Indemnitor and theCompany recognize the increased riskof litigation andother claimscurrentlybeingassertedandthatmaybeassertedinthefutureagainstdirectorsandofficersofcorporations;

WHEREAS,theCompanyhasenteredandmayfromtimetotimeenter into indemnificationagreements(each, an “Indemnification Agreement”) with its directors, persons holding officerships, and persons holding equivalentpositionswiththeCompany’ssubsidiaries(eachsuchindividualwhohasexecutedanIndemnificationAgreementpriortoaChangeinControl(asdefinedbelow),an“Indemnitee”)pursuanttowhichtheCompanyisorwillbeobligatedtoindemnifyand pay or advance certain Expenses (as defined in the applicable Indemnification Agreement) of each such Indemniteearising from an Indemnifiable Event (as defined in the applicable Indemnification Agreement) to the maximum extentpermittedbylaw;

WHEREAS, inaddition toentering into IndemnificationAgreementswith Indemnitees, theCompanyhaspurchasedfromtimetotimeinthepastdirectors’andofficers’liabilityinsurancetoindemnifysuchIndemniteesfromcertainlossesandexpensesnototherwiseindemnifiablebytheCompanypursuanttoapplicablelaws;

WHEREAS,thebindingquoteproposalfordirectors’andofficers’liabilityinsurancemostrecentlyobtainedbytheCompanyinJune2019wouldhaverequiredthepaymentofasignificantamountofpremiumstothirdpartiesthattheCompanydeemedatsuchtimetobeunreasonablydisproportionatetotheamountofcoverageprovided;

WHEREAS,theCompanyintendstoobtainabindingquoteproposalforadirectors’andofficers’ liabilityinsurance policy with an aggregate “Side A” coverage limit of $100,000,000 from a reputable insurance broker withnationwidestanding,foratermcommencingupontheendoftheTerm(the“2020InsuranceQuote”);

WHEREAS,inrecognitionofeachIndemnitee’sneedforsubstantialprotectionagainstpersonalliabilityinorder to enhance such Indemnitee’s continued and effective service to theCompany and/or its subsidiaries as a directorand/or officer, including during the pendency of the 2020 Insurance Quote, the Indemnitor, subject to the terms herein,desirestoagree, inhis individualcapacity, to indemnifyeachIndemniteeforExpensesofsuchIndemniteearisingfromanIndemnifiable Event, and solely to the extent that the Company is unable to do so, in order to provide assurance to theIndemniteesoftheavailabilityoffundstomakepaymentsthattheIndemniteeswould,butforsuchinabilityoftheCompany,beentitledtopursuanttotheIndemnificationAgreementsoradirectors’andofficers’liabilityinsurancepolicy;and

WHEREAS,theCompanyanditsBoardofDirectors(the“Board”)believeittobeinthebestinterestsoftheCompanyanditsstockholderstoenterintothisAgreementpendingthe2020InsuranceQuote.

NOW,THEREFORE,inconsiderationoftheabovepremisesandcovenantshereinandforgoodandvaluableconsideration,thesufficiencyofwhichisherebyacknowledged,andintendingtobelegallyboundhereby,thepartiesagreeasfollows:

1. CertainDefinitions.

(a) “Change inControl” shall bedeemed tohaveoccurred if (i) any “person”(assuchtermisusedinSections13(d)and14(d)oftheSecuritiesExchangeActof1934,asamended(the“ExchangeAct”)),otherthanatrusteeorotherfiduciaryholdingsecuritiesunderanemployeebenefitplanoftheCompanyoracorporationowneddirectlyorindirectlybythestockholdersoftheCompanyinsubstantiallythesameproportionsastheirownershipofstockofthe Company, is or becomes the “beneficial owner” (as defined in Rule 13d‑3 under the Exchange Act), directly orindirectly,ofsecuritiesoftheCompanyrepresenting50%ormoreofthetotalvotingpowerrepresentedbytheCompany’sthenoutstandingvotingsecurities,or(ii)duringanyperiodoftwoconsecutiveyears,individualswhoatthebeginningofsuch period constitute the Board and any new director whose election by the Board or nomination for election by theCompany’sstockholderswasapprovedbyavoteofatleasttwo-thirds(2/3)ofthedirectorsthenstillinofficewhoeitherweredirectors at thebeginningof theperiodorwhoseelectionornomination for electionwaspreviously so approved,ceaseforanyreasontoconstituteamajorityoftheBoard,or(iii)thestockholdersoftheCompanyapproveamergerorconsolidationoftheCompanywithanyotherentity,otherthanamergerorconsolidationthatwouldresult inthevotingsecuritiesoftheCompanyoutstandingimmediatelypriortheretocontinuingtorepresent(eitherbyremainingoutstandingorbybeingconvertedintovotingsecuritiesofthesurvivingentity)atleast80%ofthetotalvotingpowerrepresentedbythevotingsecuritiesoftheCompanyorsuchsurvivingentityoutstandingimmediatelyaftersuchmergerorconsolidation,or(iv)thestockholdersoftheCompanyapproveaplanofcompleteliquidationoftheCompanyoranagreementforthesaleordispositionbytheCompany(inonetransactionoraseriesoftransactions)ofallorsubstantiallyalloftheCompany’sassets.

(b) “Proceeding”or“claim”shallmeananythreatened,pending,orcompletedaction,suit,orproceedingoranyalternativedisputeresolutionmechanism(includinganactionbyorintherightoftheCompany),oranyinquiry, hearing, or investigation, whether conducted by the Company or any other party, that Indemnitee in good faithbelieves might lead to the institution of any such action, suit, or proceeding, whether civil, criminal, administrative,investigative,orother.

(c) “Term”shallhavethemeaningspecifiedinSection8herein.

2. AgreementtoIndemnify.

(a) General Agreement. Subject to Section 5, in the event an Indemnitee was, is, orbecomesapartytoorwitnessorotherparticipantin,oristhreatenedtobemadeapartytoorwitnessorotherparticipantin,aProceedingbyreasonof(orarisinginpartoutof)anIndemnifiableEvent,theIndemnitorshallindemnifyIndemniteefromandagainstanyandallExpenses (orportion thereof)arising fromanyclaimsmadeonorafter theEffectiveDate,arisingoutofIndemnifiableEventsthatoccurredpriortotheEffectiveDateorduringtheTerm,andthatarenototherwise

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indemnifiedorindemnifiablebytheCompanyandcertifiedbytheCompanyassuch. ThepartiesheretointendthatthisAgreementshallprovideforindemnificationinexcessofthatexpresslypermittedbystatute,including,withoutlimitation,any indemnification provided or required to be provided by the Company pursuant to an applicable IndemnificationAgreement, theCompany’sCertificateof Incorporation, itsBylaws,voteof itsstockholdersordisinteresteddirectors,orapplicablelaw.

(b) Claims Made. Notwithstanding anything in this Agreement to the contrary, theIndemnitorshallonlybeliableunderthisAgreementtoindemnifyandmakepaymentsinconnectionwithProceedingsfirstinstituted,orclaimsfirstmade,againstanIndemniteeduringtheTermandinconnectionwithProceedingsfirstinstituted,orclaimsfirstmade,againstanIndemniteeaftertheTermbutthatarisesoutofanIndemnifiableEventthatoccurredduringtheTerm.

(c) InitiationofProceeding.Notwithstandinganything in thisAgreement to thecontrary,noIndemniteeshallbeentitledtoindemnificationpursuanttothisAgreementinconnectionwithanyProceedingorpartthereof initiated by such Indemnitee against Indemnitor, theCompany or any other director or officer of theCompanyunless(i)theCompanyhasjoinedinortheBoardhasconsentedtotheinitiationofsuchProceedingorpartthereof;or(ii)theProceedingorpartthereofisonetoenforceindemnificationrightsunderthisAgreement.

(d) ExpenseAdvances. SubjecttoSection5, ifsorequestedbyanIndemniteepriortoitbeing established that an Indemnitee is entitled to indemnification from the Indemnitor under this Agreement, theIndemnitor shall advance (within thirty business days following such request any and all Expenses incurred by suchIndemnitee (an “Expense Advance”), provided that such Expense Advancemay be conditioned upon the receipt by theIndemnitorofawrittenundertakingbysuchIndemniteetorepaysuchExpenseAdvancestotheIndemnitorifandtotheextentthatitisultimatelydeterminedbyacourtofcompetentjurisdictioninafinaljudgment,notsubjecttoappeal,thatsuchIndemniteeisnotentitledtobeindemnifiedbytheIndemnitorhereunder.

(e) Mandatory Indemnification.Subject toSection2(a)andSection5of thisAgreement,notwithstandinganyotherprovisionofthisAgreement,totheextentthatanyIndemniteehasbeensuccessfulonthemeritsorotherwiseindefenseofanyProceedingrelatinginwholeorinparttoanIndemnifiableEventorindefenseofanyissueormattertherein,suchIndemniteeshallbeindemnifiedbyIndemnitoragainstallExpensesincurredinconnectiontherewith.

(f) Prohibited Indemnification. No indemnification pursuant to this Agreement shall bepaidbytheIndemnitoronaccountofanyProceedinginwhichjudgmentisrenderedagainstanyIndemniteeforanaccountingof profitsmade from thepurchase or sale by such Indemnitee of securities of theCompanypursuant to theprovisions ofSection16(b)oftheExchangeAct,orsimilarprovisionsofanyfederal,state,orlocallaws.

3. IndemnificationPayment. IndemniteeshallreceivepaymentofanyExpensesastowhichsuchIndemniteeisentitledtoindemnificationfromtheIndemnitorinaccordancewiththisAgreementwithinten(10)businessdaysafterIndemniteehasmadeavalidwrittendemandontheIndemnitorforindemnification.

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4. Notification and Defense of Proceeding. Notwithstanding anything to the contrary in thisAgreement, in no event shall the Indemnitor be obligated to indemnify an Indemnitee for any Expenses or make anyExpense Advances to such Indemnitee unless such Indemnitee has complied with: (i) in the case of any Expenses orExpenseAdvancesastowhichtheCompanywouldotherwisebeobligatedtoindemnifysuchIndemniteepursuanttotheapplicableIndemnificationAgreement,allprovisionsinsuchIndemnificationAgreementrelatingtothenotificationtotheCompanyof,defenseandsettlementofanyProceedingrelatingtosuchExpenses(the“NoticeandDefenseProvisions”),and(ii)inthecaseofallotherExpensesorExpenseAdvancesastowhichtheIndemnitorisobligatedtoindemnifysuchIndemniteehereunder, allNotice andDefenseProvisions as if they applied to suchExpenses orExpenseAdvances andreplacingtherightsandpowersofCompanywiththoseoftheIndemnitor,mutatismutandis.

5. LimitsonIndemnification.

(a) Notwithstanding anything to the contrary herein, in no event shall Indemnitor berequired to make any payment or advance under this Agreement in excess of $100,000,000 in the aggregate with allpaymentsandadvancesmadeby Indemnitorhereunder,netofanyamounts repaid to the Indemnitorother than the feepursuanttoSection6.

(b) The Indemnitor shall not be liable under this Agreement to make any payment inconnectionwithanyclaimmadeagainstanyIndemniteetotheextentIndemniteehasotherwisereceivedpayment(underanIndemnificationAgreement,any insurancepolicy,Bylaw,orotherwise)of theamountsotherwise indemnifiablehereunder.Notwithstanding anything to the contrary herein, the Indemnitor may condition the payment of any amount to anIndemniteeunderthisAgreementonthereceiptofawrittenundertakingfromsuchIndemniteetorepaytotheIndemnitoranyamountsthatareduplicativeofanyotherpaymentthatisultimatelyreceivedbysuchIndemniteefromtheCompany,anyinsurancepolicyorothersourceoffundsorcontribution.

6. Obligationsof theCompany. Inexchange for Indemnitor’sagreement to indemnifypursuant tothisAgreementandtheotherobligationsofIndemnitorsetforthherein,theCompanyagreestopayIndemnitoraone-timefeeof$972,361upontheexecutionofthisAgreement.Inaddition,theCompanyagreestouseitsreasonablebesteffortstoobtain the 2020 Insurance Quote no later than the last day of the Term. In the event that the amount of such 2020Insurance Quote multiplied by 0.125 (1/8) is greater than the one-time fee paid by the Company to Indemnitor, theCompanyshallpaythedifferencetoIndemnitor.

7. Amendmentof thisAgreement.Nosupplement,modification,oramendmentofthisAgreementshallbebindingunlessexecutedinwritingbyIndemnitorandtheCompanywiththeapprovaloftheBoard.Nowaiverofanyof the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whomenforcementofthewaiverissought,andnosuchwaivershalloperateasawaiverofanyotherprovisionshereof(whetherornotsimilar),norshallsuchwaiverconstituteacontinuingwaiver.Exceptasspecificallyprovidedherein,no failure toexerciseoranydelayinexercisinganyrightorremedyhereundershallconstituteawaiverthereof.

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8. Term.ThisAgreementshallbeeffectiveasoftheEffectiveDateandshallremainineffectuntilof

the90thday following theEffectiveDate,unlesssooner terminatedby themutualagreementof the Indemnitorand theCompany with the approval of the Board (the “Term”). Expiration or termination of this Agreement shall operateprospectivelyonly,so thatallprovisionsof thisAgreementshall remain in full forceandeffectas toanyclaimassertedagainstanIndemniteeduringtheTerm,andastoanyclaimassertedagainstanIndemniteeaftertheTermbutthatarisesfromanIndemnifiableEventthatoccurredduringtheTerm.

9. BindingEffect.ThisAgreementconstitutestheentireagreementbetweenthepartiesheretowithrespecttothesubjectmatterhereofandsupersedesallprioragreementsandunderstandings,oral,writtenand implied,betweenthepartiesheretowithrespecttothesubjectmatterhereof.ThisAgreementshallbebindinguponandinuretothe benefit of and be enforceable by the parties hereto and their respective successors, assigns, spouses, heirs, andpersonalandlegalrepresentatives.TheindemnificationprovidedunderthisAgreementshallcontinueastoIndemniteeforanyactiontakenornottakenwhileIndemniteewasservinginanindemnifiedcapacitypertainingtoanIndemnifiableEventeventhoughs/hemayhaveceasedtoserveinsuchcapacityatthetimeofanyProceeding.

10. Severability. Ifanyprovision (orportion thereof)of thisAgreementshallbeheldbyacourtofcompetentjurisdictiontobeinvalid,void,orotherwiseunenforceable,theremainingprovisionsshallremainenforceabletothefullestextentpermittedbylaw.Furthermore,tothefullestextentpossible,theprovisionsofthisAgreement(including,without limitation, each portion of this Agreement containing any provision held to be invalid, void, or otherwiseunenforceable,thatisnotitselfinvalid,void,orunenforceable)shallbeconstruedsoastogiveeffecttotheintentmanifestedbytheprovisionheldinvalid,void,orunenforceable.

11. Third-Party Beneficiaries. Each Indemnitee is an express third-party beneficiary of thisAgreement, and may specifically enforce the Indemnitor’s or the Company’s obligations hereunder as though a partyhereunder,subjecttothelimitationsspecifiedherein.

12. GoverningLaw.ThisAgreementshallbegovernedbyandconstruedandenforcedinaccordancewiththelawsoftheStateofCaliforniaapplicabletocontractsmadeandtobeperformedinsuchStatewithoutgivingeffecttoitsprinciplesofconflictsoflaws.

13. Counterparts. ThisAgreementmaybe executed in one ormore counterparts, each ofwhichshallbedeemedanoriginal,butallofwhichtogethershallconstituteoneandthesameinstrument.

*****

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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the day

specifiedabove.

TESLA,INC.aDelawarecorporation By: /s/AlPrescottName: AlPrescottTitle: Secretary

ELONR.MUSK,asIndemnitor/s/ElonR.MuskElonR.Musk

-6-Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade.

Exhibit10.5

EnglishConvenienceTranslation

-OriginalAgreementhasbeenexecutedinMandarinChinese-

ContractNo.:[***]

WorkingCapitalLoanContract(Version2020)

ImportantNotice:ThisContractisenteredintobythePartiesinaccordancewithlawsbasedonequalityandfreewill,

andthetermsandconditionsofthisContractfullyreflectthegenuineintentionofthePartieshereto.InordertoprotectlegalrightsandinterestsoftheBorrower,theLenderherebydrawstheBorrower'sspecialattentiontothetermsandconditionsofthisContractinrelationtoeachParty'srightsandobligations,inparticularthoseinbold.

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Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade.Lender:IndustrialandCommercialBankofChina,China(Shanghai)PilotFreeTradeZoneLingangSpecialAreaBranchPerson-in-charge:ZhanShengContactPerson:OuyangJingDomicile(Address):[***]PostCode:[***]Telephone:[***]Fax:/Email:[***]

Borrower:Tesla(Shanghai)Co.,Ltd.LegalRepresentative:ZhuXiaotongContactPerson:XianYuDomicile(Address):[***][***] PostCode:[***]Telephone:[***] Fax:/Email:[***][TheBorrowermust inserttheaboveinformationaccuratelyandcompletelyforthetimelyserviceofsubsequentnoticesandlegalprocess.]

Uponequalnegotiationsandmutualagreement,theLenderandtheBorrowerenterintothisContractinrelationtotheprovisionof

relevantloanbytheLendertotheBorrower.

PartIGeneralProvisionsClause1PurposesTheloanshereundershallbeusedforthefollowingpurposes.WithoutwrittenconsentoftheLender,theBorrowermaynotusethe

loansforanypurposeotherthanthoselistedbelow.TheLendermaysupervisetheuseoftheloan.Theloanshereundershallbeappliedtofinance:

1.costsandexpensesduringtheproductionprocess,includingthepurchaseofrawmaterialsrelatedtotheproductionofvehiclesandparts;

2.operatingexpenses for theproductionprocess, includingbutnot limited to thedailyoperation,wages, taxes, service feesandconsultingfees;

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3.repaymentofanyintercompanyloan(whichhasalreadybeenused)betweenaffiliatedcompanies(includingbutnotlimitedtotheamountborrowedortobeborrowedbytheBorrowerfromitsaffiliatedcompany),providedthatsuchintercompanyloanshallbeusedfortheabovepurposesandtheinterestrateofsuchintercompanyloanshallbeincompliancewithPRClaws;and

4.repaymentofanyoutstandingamountunderanytradefinancefacility.

Clause2FacilityAmountandLoanPeriod2.1 The currency of the loans under this Contract shall be RMB or USD, and the facility amount thereof shall be

RMB4,000,000,000.00(INWORDS:RMBfourbillion)(ortheequivalentamountdrawninUSD)(if thereisanyinconsistencybetweentheamount in figures and the amount in words, the amount in words shall prevail), whether the loan is drawn in RMB or USD shall bedeterminedaccordingtotheBorrower’sactualneeds.

2.2The loanperiodunder thisContractshallbe1yearcommencing fromthe firstdrawdowndatehereunder.The finalmaturitydateshallbethedatefallingone(1)yearfromthefirstdrawdowndate.

2.3Withrespecttoeachloan,thedrawdowndateshallbethedateonwhichtheloanispaidtotheloanaccount,andthematuritydateshallbetherepaymentdatesetforthinthecorrespondingdrawdownnotice;therepaymentdateofeachloanshallbenolaterthanthefinalmaturitydate.

Clause3InterestRate,InterestandFees3.1InterestRateforLoansDrawninRMBTherateofinterestaccruedoneachloandrawninRMBshallbefixedinterestrate,whichshallbethe1-year(1-year/above-5-year)

loanprimerate(LPR)publishedbytheNationalInterbankFundingCenteron20April2020minus(plus/minus)35basispoint(s)(“BP”,onebasispointequals0.01%,similarlyhereinafter), i.e.3.5%/year(tax included(fortheavoidanceofdoubt,excludingforeigntaxes,similarlyhereinafter)).

3.2InterestRateforLoansDrawninForeignCurrencyTherateofinterestaccruedoneachloandrawninforeigncurrencyshallbefixedinterestrate,whichshallbetheUSDBenchmark

Rateplus80BPs(taxincluded).(TheUSDBenchmarkRatemeans,onthetwo(2)Londonbusinessdayspriortoarelevantdrawdowndate,theoneyearLondonInterbankOfferedRateadministeredbyICEBenchmarkAdministrationLimited(oranyotherpersonwhichtakesovertheadministrationofthatrate)forUSDquotedat11:00a.m.(Londontime)displayedonpagesLIBOR01orLIBOR02 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on theappropriatepageofsuchotherinformationservicewhichpublishesthatratefromtimetotimeinplaceof

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Certainidentifiedinformationhasbeenomittedfromthisdocumentbecauseitisnotmaterialandwouldbecompetitivelyharmfulifpubliclydisclosed,andhasbeenmarkedwith“[***]”toindicatedwhereomissionshavebeenmade.ThomsonReuters.) If the USD Benchmark Rate is no longer announced, the Borrower and the Lender shall endeavor to establish analternaterateofinteresttosuchUSDBenchmarkRatethatgivesdueconsiderationtothethenprevailingmarketconventionfordeterminingarateofinterestforthefacilityinthePRCinUSDatsuchtime,andshallenterintoanamendmenttothisContracttoreflectsuchalternaterateof interest (includinganymathematical or other adjustments to thebenchmark (if any) incorporated therein), provided that, if suchalternaterateofinterestassodeterminedwouldbelessthanzero,suchrateshallbedeemedtobezeroforthepurposesofthisContract.

3.3Interestonanyamountsoutstandinghereundershallaccruefromdaytodayandbecomputedonthebasisofa360-dayyearandtheactualnumberofdayselapsed.TheBorrowershallrepayalloutstandingamountsonthefinalmaturitydate.

3.4Thedefaultinterestforoverdueamountsshallaccrueontheoverduesum,fromitsduedateuptothedateoffullpayment,at130% of the interest rate; the default interest for misappropriation shall accrue on the misappropriated amount, from the date ofmisappropriationuntilthedatesuchmisappropriationisremedied,includingbyusingsuchmisappropriatedfundsforapurposesetforthinthis Contract or repayment by Borrower of such misappropriated funds, at 150% of the interest rate. If a loan is both overdue andmisappropriated,thedefaultinterestrateaccruedthereonshallbethehigheroftwo.

Clause4DrawdownTheBorrowermay(basedonitsactualneeds)drawoneormoreadvancesunderthefacilitybeforethefinalmaturity

date.Thereisnolimitationtothenumberofdrawdowns,butthetotaloutstandingamountshallnotexceedthefacilityamountdescribedinClause2.1above.

Clause5RepaymentTheBorrowermayrepayanyandalloutstandingadvancespriortothefinalmaturitydate,andtheBorrowershallrepay

alloutstandingadvancesonthefinalmaturitydate.

Clause6SpecialProvisionsinRelationtoRevolvingLoanTheloanshereundermaybedrawnonarevolvingbasis.ThefacilityamountassetoutinClause2aboveisthelimitoftherevolving

loan,andthetermoftherevolvingloanshallcommenceontheeffectivedateofthisContractandendonthefinalmaturitydate.

Clause7FinancialCovenants(optionalclause:thisClauseisNotApplicable(Applicable/NotApplicable))

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Clause8DisputeResolutionDisputes arising out of or in connection with this Contract shall be submitted to the China International Economic and Trade

ArbitrationCommission,ShanghaiSub-Commissionforarbitration,whichshallbeconductedinaccordancewiththearbitrationrulesinforceatthetimeoftheapplicationforarbitration,andthenumberofarbitratorsisthree(3).InrespectofthedisputebetweentheLenderandtheBorrower arising out of or in connectionwith thisContract, the Lender and theBorrower, each as a party, shall appoint one arbitratorrespectively,and the thirdarbitrator shallbe jointlyappointedby theLenderand theBorrowerorappointedby theChairmanwith jointauthorisationgrantedbytheLenderandtheBorrower.ThearbitralawardshallbefinalandbindingontheParties.

Clause9Miscellaneous9.1ThisContract isexecutedintwooriginals.TheLenderandtheBorrowershalleachkeeponeoriginal,andeachoriginalshall

havethesamelegaleffect.

9.2ThefollowingschedulesandotherschedulesasconfirmedbybothPartiesshallconstituteanintegralpartofthisContractandhaveequallegaleffectasthisContract:

Schedule1: FormofDrawdownNoticeSchedule2: EntrustedPaymentAgreementSchedule3: FormofTransferCertificate

Clause10OtherMattersAgreedbytheParties10.1StampDutiesandFees(1)StampdutiesAllstampduties inrespectofthisContractshallbebornebytheBorrowerandtheLenderrespectivelypursuanttothe lawsand

regulations.(2)CostsandexpensesAny costs and expenses (including legal fees, appraiser fees, etc.) incurred in relation to the execution of thisContract and the

facilityhereunder(includingbutnotlimitedtotheexpensesincurredinrelationtothepreparation,negotiation,printingandenforcementofthisfacility)shallbebornebyeachPartyrespectively.

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PartIISpecificProvisionsClause1InterestRateandInterest1.1ThebenchmarkinterestrateforloansdrawninforeigncurrencyshallbedeterminedinaccordancewithClause3.2ofPartIof

thisContract.

1.2TheinterestrateaccruedoneachloanunderthisContractshallbeafixedinterestrate,fixedatthetimeoftheadvanceofsuchloan.

1.3TheBorrowershallrepayinterestaccruedoneachloantogetherwiththeprincipal.1.4Interestshallaccrueoneachadvancecommencingonthedateonwhichsuchadvanceispaidtotheloanaccount.

Clause2DrawdownandPayments2.1MakingAdvancesTheLendermakinganadvancepursuanttoClause2.6(ConditionsPrecedenttoEachDrawdown)underPartIIofthisContractshall

paytheadvancedenominatedinRMBorUSDunderthefacilitytotheloanaccountnolaterthan11:00a.m.(Beijingtime)oftheproposeddrawdowndatespecifiedinthedrawdownnoticeinrespectofthatadvance.

2.2PaymentofLoan(1)IfanysinglepaymentamountexceedsRMB10,000,000(INWORDS:RMBtenmillion)oritsequivalentinUSD,paymentbythe

Lenderuponentrustmentshallbeapplicable.EntrustedpaymentbytheLenderreferstotheLenderpayingouteachadvancetothe loanaccount on each drawdown date in accordancewith theBorrower’s drawdown notice and entrustment of payment, and transferring therelevantadvancetotheaccountsoftheBorrower’scounterpartyonthesameday.

In the event of payment by the Lender upon entrustment, the Borrower shall submit the agreements related to the entrustedpaymentordocumentsevidencingtheloanusagetotheLenderbeforeeachadvanceismade,andtheBorrowerandtheLendershallenterintoanentrustedpaymentagreementsubstantiallyintheformandsubstancesetoutinSchedule2(EntrustedPaymentAgreement)hereof.

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(2)Inadditiontothecircumstancesstipulatedinthefirstparagraphabove,theBorrowermaychoosetomakepaymentbyeitherindependentpaymentorentrustedpaymentatitsowndiscretion.IndependentpaymentbytheBorrowermeansthattheLenderpaysouttheadvances to the loan account in accordance with the Borrower’s drawdown notice and the Borrower independently pays out to theBorrower’s counterparties in satisfaction of the usage purposes stipulated herein. The Borrower shall present the relevant payment listevidencingthepaymentstatusofeachadvanceonaquarterlybasistotheLender.

(3)IftheBorrowerhasmettheconditionsprecedenttothefirstdrawdownandtheconditionsprecedenttoeachdrawdownunderPartIIofthisContract,theLenderisobligedtomaketheadvanceontheproposeddrawdowndate.

2.3PaymentbytheBorrowerThe Borrower shall pay any amount payable under this Contract on its due date no later than 11:00 a.m. (Beijing Time) to the

accountdesignatedbytheLenderattheeffectivedateofthisContract.

2.4DrawdownNotice(1)TheBorrowermay(basedon itsactualneeds)drawoneormoreadvancesunder the facilitybefore the finalmaturitydate in

accordancewith theprovisionshereof. There is no limitationon thenumberof drawdowns, but the total outstandingadvances shall notexceedthefacilityamountdescribedinClause2.1underPartIofthisContract.

(2)Inconnectionwitharequestforanadvance,theBorrowershalldeliveradrawdownnoticetotheLendernolaterthanthree(3)businessdayspriortotheproposeddrawdowndatespecifiedinthedrawdownnotice.

(3)Eachdrawdownnoticeshallsatisfythefollowingrequirements:(1)itshallbesubstantiallyintheformandsubstancesetoutinSchedule 1 (Form of DrawdownNotice) hereof; (2) it shall be executed by the authorized signatory of the Borrower (including throughhandwrittensigningoraffixingchopoflegalrepresentativeoraffixingsignaturechop)orbystampingtheBorrower’sofficialseal;(3)theproposeddrawdowndatespecifiedinthedrawdownnoticeshallbeabusinessday;(4)theproposeddrawdownamountshallnotexceedthefacilityamountavailableasofthedateofsuchdrawdownnotice.

2.5ConditionsPrecedenttotheFirstDrawdownBeforethefirstdrawdown,theBorrowershallprovidetheLenderwiththefollowingdocumentsorcompletethefollowingmattersto

thesatisfactionoftheLender,andtheLendershallnotunreasonablyrefuseordelaytoconfirmthesatisfactionofeachfollowingconditionsprecedent:

(1)thisoriginalcopyoftheexecutedversionofthisContract;

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(2)photocopies(stampedwiththeBorrower’sofficialseal)ofthelatestbusinesslicense,thelatestarticlesofassociation,andtheoriginalcopyoftheboardresolutionsoftheBorrower;

(3)theloanaccounthasbeenopened;(4)theShanghaiforeigninvestmentprojectfilingcertificatestampedwiththeBorrower’ssealrelatingtotheprojectobtainedbythe

Borrower(theProjectShanghaiCode:310115MA1H9YGWX20195E2101001);(5)aphotocopyoftheevidencethattheBorrowerhasobtainedtheenvironmentimpactassessmentfillingcertificateinrelationto

theproject,stampedwiththeBorrower’sofficialseal;(6)aphotocopyoftheproductionpermitstampedwiththeBorrower’sofficialseal;and(7)iftheadvancewillbeintheformofanentrustedpayment,submittingascannedcopyoftherelevantagreementorproofofuse

oftheentrustedpaymentorphotocopiesofsuchevidencestampedwiththeBorrower’sofficialseal.

2.6ConditionsPrecedenttoEachDrawdownTheLendershallconfirmthateachoftheconditionprecedentssetoutbelowhavebeensatisfied(suchconditionsprecedentshallbe

satisfactorytotheLenderprovidedthatsuchsatisfactionshallnotbeunreasonablywithheldordelayed),ortheLenderhasotherwisewaivedthecondition.

(1)TheLenderhasreceivedadrawdownnoticeissuedbytheBorrowerinaccordancewiththeprovisionshereof.(2)Ontheproposeddrawdowndatespecifiedinthedrawdownnotice,eachrepresentationoffactmadebytheBorrowerinClause7

underPartIIofthisContractistrueandcorrectinallmaterialrespectswiththesameeffectasthoughsuchrepresentationoffacthadbeenmadeonsuchdrawdowndate,itbeingunderstoodandagreedthatanyrepresentationoffactwhichbyitstermsismadeasofaspecifieddateshallberequiredtobetrueandcorrectinallmaterialrespectsonlyasofsuchspecifieddate.

(3)On theproposeddrawdowndate specified in the drawdownnotice, no event of default by theBorrowerhas occurred and iscontinuing.

(4)TheBorrowerhasprovidedthescannedcopiesoftheEnvironmentInfluenceAssessmentFilingCertificateorphotocopiesofsuchcertificatestampedwiththeBorrower’sofficialseal.

(5)IftheadvancewillbeintheformofanentrustmentpaymentpursuanttoClause2.2underPartIIofthisContract,thescannedcopies of relevant supporting agreements or documents evidencing the loan purpose or photocopies of such evidence stampedwith theBorrower’sofficialsealareprovidedwhereentrustedpaymentapplies,exceptwheresuchmaterialshavealreadybeenprovided.

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Clause3RepaymentandPrepayment3.1TheBorrowermay repayanyandall outstandingadvancesprior to the finalmaturitydate,and theBorrower shall repayall

outstandingadvancesonthefinalmaturitydate.

3.2TheBorrowershallnotifytheLenderinwriting(the“PrepaymentNotice”)nolaterthanthree(3)businessdayspriortotheproposedprepaymentdate.TheBorrowershallnotpayanypenaltiesoranyfeesregardinganysuchprepayment,providedthatprepaymentoftheprincipalamountshallbemadetogetherwiththeinterestaccruedonsuchprepaidprincipalthroughtheapplicableprepaymentdate.Anyrepaymentamountmadepriortothefinalmaturitydatecouldbeborrowedagain.TheamountofeachprepaymentbytheBorrowershallnotbelessthanRMB10million,buttheforegoingshallnotapplyiftheBorrowerprepaysalloutstandingadvancesinfull.Amountsprepaidshalloffsettheprincipaloftheoutstandingadvancesinthereverseorder.

Clause4RevolvingLoanThefacilityhereundermaybeusedonarevolvingbasis,providedthat theaggregateamountof theoutstandingadvancesatany

timewithintheloanperiodshallnotexceedthefacilityamount.

Clause5Security(NotApplicable)

Clause6AccountManagement6.1TheBorrowershalldesignate itsaccountopenedwiththeLender(accountnumber:1001727329300012609)asthecollection

account,whichwillbeusedtocollectsalesrevenueorfundstobeusedtorepaytheloan.

6.2TheLendermaymonitorthecollectionaccount,includingbutnotlimitedtomonitoringandsupervisingincomeandexpenditureofsuchaccount,forwhichtheBorrowershallgiveassistance.

Clause7RepresentationsandWarrantiesTheBorrowermakesthefollowingrepresentationstotheLenderontheeffectivedatehereofandoneachdrawdowndate(exceptfor

Clause7.8 (NoMaterialDefault) andClause7.9 (NoMaterial Litigation andArbitration)which shall only begiven on the effectivedatehereof)withreferencetothefactsandcircumstancesthensubsisting:

7.1LegalStatusTheBorrowerisacompanydulyincorporatedandvalidlyexistingunderthelawsandregulationsofthePRC.

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7.2PowerTheBorrowerhasnecessarycapacityforcivilconductandcapacityforcivilrightstoownitsassets,tocarryoutitsoperationsandto

enterintoandperformthisContract.7.3AuthorizationAllnecessary internal authorizations for theBorrower toenter intoandperform thisContracthavebeendulyobtained,and this

ContracthasbeendulyexecutedbytheauthorizedsignatoryoftheBorrower.7.4LegalitySubject to theLegalRestraint, theobligations tobeassumedby theBorrowerunder thisContractconstitute the legal,validand

bindingobligationsoftheBorrower.“LegalRestraint”means(1)theprinciplethatfaircompensationmaybegrantedordeniedinaccordancewiththediscretionofthe

court; (2) in relation to bankruptcy, reorganization and other legal events thatmay generally affect creditors, the laws that enforce theperformanceofpriorityobligations;(3)statutorylimitationperiodoflegalrestrictions;(4)defenseforset-offandcounterclaims;and(5)anyotherrestrictionorreservationunderanyothergenerallyapplicablelawsetoutinthelegalopinion,ifany,deliveredtotheLenderunderthisContract.

7.5BreachofOtherDocumentsTheenteringintoandperformancebytheBorrowerofthisContractdonotandwillnotviolate(a)itsarticlesofassociation,and/or

(b)anyapplicablelawsofthePRC.7.6LiquidationandBankruptcyEventsTheBorrowerhasnotenteredintoanyliquidationprocess,noristhereanybankruptcyevent.7.7InformationAllwrittendocumentsprovidedbytheBorroweraretrueandvalidinallmaterialaspectsasofthedateofdeliveryofthesame.7.8NoMaterialDefaultTotheBorrower’sknowledge,asoftheeffectivedatehereof,thereisnomaterialdefaultoftheBorrowerunderanyagreementto

whichitisaparty(materialisdefinedasRMB500,000,000(oritsequivalentinothercurrency)).7.9NoMaterialLitigationandArbitrationTotheBorrower’sknowledge,asoftheeffectivedatehereof,thereisnolitigationorarbitrationoftheBorrowerthatwillproduce

anyMaterialAdverseEffect(otherthanthoseofafrivolousorvexatiousnaturewhichtheBorroweriscontestingingoodfaith).

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“Material Adverse Effect” means, in the reasonable opinion of the Lender, a material adverse effect on: (i) the ability of theBorrowertoperformitspaymentobligationsthereunder,or(ii)thelegality,validityorenforceabilityofthisAgreement.

Clause8CovenantsbytheBorrowerTheBorrowerundertakeswiththeLenderasfollows:8.1CompliancewithLawTheBorrowershallensurethatany laws,regulationsandrulesrelevantto itsbusinessandoperationwillbecompliedwith inall

materialrespects.8.2SupplyofInformationTheBorrowershall,withinonehundredandeighty(180)daysaftertheendofeachfinancialyearorsuchlongerperiodasconsented

bytheLender (andtheLendershallnotunreasonablyrejectordelay togivesuchconsent),providetheLenderwith itsaudited financialstatements (financialyearmeansaperiodcommencingfromandincludingJanuary1standendingonandincludingDecember31stofeachcalendaryear).

TheBorrower shall,within ninety (90) days after the end of each semi-financial year or such longer period as consentedby theLender (and the Lender shall not unreasonably reject or delay to give such consent), provide the Lender with its unaudited financialstatementsinrespectofthatsemi-financialyear.

8.3ReductionofRegisteredCapitalTherecanbenoreductionoftheregisteredcapitaloftheBorrowerduringtheloanperiodwithoutthepriorconsentoftheLender.8.4NegativePledgeTheBorrowershallnotcreateanysecurityinterestsoveranyofitsinventoryoraccountreceivable,exceptfor:1.anylienarisingintheordinarycourseoftrading,anystatutorypriorityandothersecurityinterestsarisingbyoperationoflaws

andregulations,2.security interestsarising in theordinarycourseof thebusinessof theBorrower (includingbutnot limited toanypriorityover

goods,materialsorequipment(acquired inanarm’s lengthtransaction) incurredorconstitutedbyanytitleretentionarrangement inthetermsandconditionssetoutbythesupplierorsellerinrelevantagreements),

3.securityinterestscreatedaccordingtothisContract,or

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4. security interests createdwith the consent of theLender (such consent shall not beunreasonablywithheld or delayedby theLender).

8.5MaterialDefaultNotificationTheBorrowershallnotifytheLenderofmaterialdefaultunderanyliabilityoftheBorrowertoanythirdparty(materialisdefinedas

exceedingthegreaterof(i)RMB750,000,000(oritsequivalentinothercurrency)or(ii)20%oftheBorrower’snetassets).

“Net Assets” means at any time of determination thereof, the owner’s equity of the Borrower as set forth in the most recentfinancialstatementsoftheBorrowerdeliverabletotheLenderpursuanttothisContract.

Clause9UndertakingsoftheLender9.1TheLendershallmakeadvancestotheBorrowerinaccordancewiththisContract.9.2ConfidentialityObligationsoftheLenderTheLenderagreesthatitwillnot,andshallprocurethatitsseniormanagers,directors,employees,affiliates,advisorsandagents

(theLendermayonlydiscloserelevantinformationtothesaidpersonswhennecessary)willnotdisclose,announceorotherwisepublishtoanythirdpartyany information includingbutnot limited toprovisionsof thisContract, this loan, theBorrowerand itsshareholders.TheLendershallespeciallyabidebythefollowings:

1.TheLendershallensurethatitsseniormanagers,directors,employees,affiliates,advisorsandagentswillnotdisclose,announceorotherwisepublish(includingbutnotlimitedtopublishinginanysocialmedia(includingmicroblogandWechat))toanythirdpartyanyinformationrelatingtothetransactionscontemplatedhereunder,andthepriceinformationhereinshallnotbedisclosedorotherwiseusedbytheforesaidperson.

2.TheLenderwillnot,andshallensurethatitsseniormanagers,directors,employees,affiliates,advisorsandagentswillnot,acceptany interview by any media (including but not limited to any social media) in respect of the project or the transactions contemplatedhereunderoragreetoreportthesame.

AnyconfidentialityagreementoragreementrelatingtoinformationdisclosurealreadysignedbyeachPartybeforetheexecutionofthisContractshallbestillapplicabletotheconfidentialinformationoftheBorrowerprovidedbytheBorroweroranythirdpartyduringthenegotiation,executionandperformanceofthisContract.DuringthetenorofthisContractanduntiltwo(2)yearsoranylongerperiodasmayberequiredbyapplicablelawsandregulationsaftertheterminationorexpirationofthisAgreement,thetermsandconditionscontainedinsuchconfidentialityagreementoragreementrelatingtoinformationdisclosureshallremainvalidandeffective.IntheeventofanyconflictbetweensuchconfidentialityagreementoragreementrelatingtoinformationdisclosureandthisContract,theprovisionsimposingstricterconfidentialityobligationsontheLendershallalwaysprevail.

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However,thefollowingdisclosuresmadebytheLendershallbeexempted:1.informationalreadyknowntothepublic(otherthanbyreasonoftheLender’sbreachofthisclause);2.informationdisclosedincompliancewithandtotheextentrequiredbycompetentgovernmentorregulatoryauthorityaccording

to laws and regulations, and the relevant disclosure shall be limited to theminimum extent as required by the competent government,regulatoryauthorityandlawsandregulations;

3.informationdisclosedincompliancewiththelistingrulesofthestockexchangewhereitislisted,andtherelevantdisclosureshallbelimitedtotheminimumextentasrequiredbythelistingrulesofthestockexchangewhereitislisted;

4.informationdisclosedwiththeBorrower’spriorwrittenconsent.

Clause10EventofDefault10.1OnlythefollowingeventsconstituteeventsofdefaultbytheBorrower:1.PaymentDefaultTheBorrowerfailstopayanyamountdueandpayableonthefinalmaturitydateinaccordancewiththeprovisionsofthisContract,

andfailstoremedysuchdefaultwithintwenty(20)daysfromthefinalmaturitydate.2.MisappropriationTheBorrowermisappropriates any advancewithin the loanperiod and fails to remedy, includingbyusing suchmisappropriated

funds for a purpose set forth in this Contract or repayment by Borrower of suchmisappropriated funds, within twenty (20) days uponoccurrenceofsuchmisappropriation.

3.MisrepresentationTherepresentationsorstatementsmadeinClause7underPartIIofthisContractbytheBorrowerareuntrueandcauseaMaterial

AdverseEffect,andtheBorrowerfailstoremedysuchdefaultwithinforty-five(45)daysfromthedateonwhichtheLenderissuesawrittennoticetotheBorrower.

4.BreachofOtherObligationThe Borrower fails to perform the covenants made in Clause 8 under Part II of this Contract or comply with other obligations

hereunderandcausesaMaterialAdverseEffect, and fails to remedysuchdefaultwithin forty-five (45)days from thedateonwhich theLenderissuesawrittennoticetotheBorrower.

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5.BankruptcyProcessTheBorroweris insolventorenters intobankruptcyprocessandfailstoremedyorterminatethebankruptcyprocesswithinsixty

(60)daysupontheoccurrenceofsuchevents.6.EnforcementEventsThe assets of the Borrowerwith an aggregate value exceeding the greater of (1) RMB750,000,000 (or its equivalent in another

currency)or(2)20%oftheBorrower’sNetAssetsareenforced,distressed,seizedorfrozenbasedonthefinaljudgmentofthecourt,andsuchactionsarenotdischargedwithinsixty(60)days.

7.CrossDefaultTheBorrowerfailstopayanyuncontestedindebtednesswithanaggregatevalueexceedingthegreaterof(i)RMB750,000,000(or

itsequivalentinanothercurrency)or(ii)20%oftheBorrower’sNetAssetsonthematuritydateoruponexpiryofthegraceperiod,andfailstoremedywithinonehundredandeighty(180)daysfromthedateonwhichtheLenderissuesawrittennotice.

10.2RemediesAvailabletotheLender1.Duringtheperiodwhenanyeventofdefaulthasoccurredandiscontinuing,theLendermay,aftergivingwrittennoticetothe

Borrower,exerciseoneormoreofthefollowingrightsinanyorder:(1)tograntanywaiverorapproveanyremedyoftherelevanteventofdefault;(2)todeclaresuspensionofalloranypartofadvancesrequestedinanydrawdownnoticewhichhavenotbeendrawn;(3)tocancelalloranypartofthefacility,andthepartsocancelledmaynotbeborrowedagain;and(4) to declare all or any outstanding advances together with all accrued interests, fees (if any) and other amounts hereunder

immediatelydueandpayable.2.UndertakingsoftheLenderTheLenderagreesnottoexerciseanyofitsrightshereunderinawaythatwouldconflictwiththisContract.

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Clause11TransferofRightsandObligations11.1TransferbytheLenderIftheLender(the“TransferringLender”)intendstotransferalloranyofitsrightsand/orobligationshereundertooneormore

financialinstitutions(the“TransfereeBank”),itshallgiveatleastten(10)businessdays’priornotice(the“TransferNotice”)andobtainthe prior written consent of the Borrower. However, no prior written consent is required under the following circumstances: (1) theTransferringLendertransfersalloranyrightsand/orobligationshereundertoitsbranchesorsub-branches;and(2)aneventofdefaulthasoccurredandiscontinuing.

11.2EffectingaTransferThetransfermadebytheLenderinaccordancewithClause11.1(TransferbytheLender)underPartIIofthisContractshalltake

effectuponthedatespecifiedinadulycompletedTransferCertificateintheformandsubstancesetout inSchedule3(FormofTransferCertificate)hereofandexecutedbytheTransferringLenderandtheTransfereeBank.TheexecutionofaTransferCertificateshallnotbewithheldordelayedbytheLender.

11.3BindingEffectofaTransferAnytransfereffectedandcompletedinaccordancewiththisContractshallbebindingoneachPartytothisContract.11.4ConsequencesofaTransferFromthedateatransfertakeseffect,theTransfereeBankbecomestheLenderandtotheextentofthetransfersubjectasspecified

intheTransferCertificate:(1)theTransferringLendershallnolongerenjoyrightsandbearliabilitiesunderthisContractinrelationtothetransferobject;and(2)theTransfereeBankshallenjoyalltherightsandbearalltheobligationsunderthisContractinrelationtothetransferobject.11.5LimitationofLiabilitiesoftheTransferringLenderTheTransferringLendershallbearnoliabilitytotheTransfereeBankforanyofthefollowing:1. the due execution, genuineness, accuracy, completeness, legality, effectiveness or enforceability of thisContract or any other

documentinconnectionherewith;2.thereceivabilityofanypaymentdueunderthisContract;and3.theaccuracyandcompletenessoftherepresentationsoffactsmadebytheotherPartytothisContracttoanypersonunderorin

connectionwiththisContract.

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11.6FurtherLimitationofLiabilitiesoftheTransferringLenderTheTransferringLenderisnotobligedto:1.retrievefromanyTransfereeBankanyrightand/orobligationwhichisalreadytransferredtothatTransfereeBankinaccordance

withprovisionsofthisContract.2.indemnifyanyTransfereeBankagainstanylossesincurredbyitasaresultofthebreachofanyobligationbytheBorrowerunder

thisContract.11.7ChangeofLendingOfficeTheLendermaychangeitslendingofficebygivingtheBorroweratleasttwenty(20)businessdays’priornotice.

Clause12Effectiveness,AmendmentandTermination12.1ThisContractshall takeeffectuponaffixingcompanysealorcontractualsealbybothParties,andshall terminatewhenthe

Borrowerhasfulfilledalltheobligationshereunder.

12.2AnyamendmenttothisContractshallbeagreedbybothPartiesandbemadeinwriting.Theamendmentclauseoragreementshall be an integral part of this Contract with equal legal effect. The provisions of this Contract which are not amended shall remaineffective.Theprovisionshereofwhicharetobeamendedshallremaineffectiveuntiltherelevantamendmenttakeseffect.

12.3AmendmentstoandreleaseofthisContractshallnotprejudiceeachParty’srighttoclaimcompensationforloss.ThedisputeresolutionprovisionhereofshallsurvivetheterminationofthisContract.

Clause13GoverningLawsandDisputeResolution13.1GoverningLawThisContractisgovernedbyandshallbeconstruedinaccordancewiththelawsofthePRC(forthepurposeofthisContractthe

lawsofthePRCshallnotincludethelawsofHongKongSpecialAdministrativeRegion,MacauSpecialAdministrativeRegionandTaiwanRegion).

13.2DisputeResolutionDisputes arising out of or in connection with this Contract shall be submitted to the China International Economic and Trade

ArbitrationCommission,ShanghaiSub-Commissionforarbitration,whichshallbeconductedinaccordancewiththearbitrationrulesinforceatthetimeoftheapplicationforarbitration,andthenumberofarbitratorsisthree(3).InrespectofthedisputebetweentheLenderandtheBorrower arising out of or in connectionwith thisContract, the Lender and theBorrower, each as a party, shall appoint one arbitratorrespectively,and the thirdarbitrator shallbe jointlyappointedby theLenderand theBorrowerorappointedby theChairmanwith jointauthorisationgrantedbytheLenderandtheBorrower.ThearbitralawardshallbefinalandbindingonbothParties.

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Clause14AddressforServiceofLitigation/ArbitrationProcess14.1 TheBorrower confirms that the address set forth on the first page of thisContract shall be the address for service of the

litigation/arbitration process in relation to any dispute hereunder. Such litigation/arbitration process includes without limitation thesubpoena,noticeofcourtsession,judgment,ruling,mediationagreementandnoticeofperformancewithinaprescribedtimelimit.

14.2TheBorroweragreesthatthearbitrationinstitutionorthecourtmayusethefaxandemailprovidedonthefirstpageofthisContractfortheserviceoflitigation/arbitrationprocessexceptforthejudgment,rulingandmediationagreement.

14.3Theserviceprovisionsaboveshallapplytoeachphaseofthearbitrationorlitigation,includingthefirstandsecondinstances,retrialandenforcement.Thearbitrationinstitutionorthecourtmaydirectlydeliveranyinstrumentbymailtotheaboveaddressforserviceofprocess.

14.4TheBorrowershallensurethattheaddress,contactperson,fax,emailandotherinformationsetforthhereinshallbetrueandvalid.Incaseofanychangetotherelevantinformation,theBorrowershallpromptlynotifytheLenderinwriting;otherwise,servicestotheinitialaddressshallremaineffective,andanylegalconsequencesarisingtherefromshallbesolelybornebytheBorrower.

Clause15EntireContractPart I (General Provisions) and Part II (Specific Provisions) hereof shall together constitute the entire Working Capital Loan

Contract.AtermusedinbothPartsshallhavethesamemeanings.TheBorrowershallbeboundbythetwoPartsjointly.IntheeventofanyconflictbetweenPartIandPartII,PartIIshallalwaysprevail.

Clause16Notices16.1MethodsofNoticesAnynotice,demandorotherdocumentfromonePartytotheotherheretopursuanttotheprovisionsofthisContractshallbemade

inwritingandbedeliveredtothatPartyatsuchcorrespondenceaddressoremailaddressandmarkedfortheattentionofthepersons(ifany)as thatPartymaydesignate from time to time inwriting.The initial contactaddress, telephonenumber,email addressandcontactpersonsdesignatedbyeachPartyarespecifiedonthefirstpageofthisContract.

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16.2DeliveryofNoticesAnycommunicationmadebetweenthePartiesheretoinaccordancewiththeprovisionsofthisContractshallbedeemedashaving

beenreceiveduponsatisfactionofthefollowingconditions:1.ifdeliveredinperson,atthetimeofactualdelivery;2.iftransmittedbyemail,whenreceivedinalegibleform;3.ifsentbymail,onthefifth(5)businessdayfollowingthedateofpostingbyregisteredmailatthecorrectaddress.

16.3ChangeofAddressTheBorrowershallpromptlynotifytheLenderofanychangetothecorrespondenceaddress,telephonenumberoremailaddress.

AnychangeoftheBorrowershallbecomeeffectiveuponnotificationoftheBorrowertotheLender.Uponreceiptofsuchnotice,theLendershallforthwithnotifyotherPartiesheretoofanysuchchange.

16.4LanguageofNoticesAnynoticeunderorinconnectionwiththisContractshallbepreparedandissuedinChinese.

Clause17SpecialProvisionsonValueAddedTaxes(“VAT”)17.1AnyinterestsandfeestobepaidbytheBorrowertotheLenderhereundershallbetax-included.17.2IftheBorrowerrequeststheLendertoissueanyVATinvoice,itshallfirstlyregisteritsinformationwiththeLender,including

its full name, taxpayer's identification number or social credit code, address, telephone number, deposit bank and account number. TheBorrower shall ensure that the relevant informationprovided to theLender is true, accurate and complete, and it shall provide relevantsupportingdocumentsasrequestedbytheLenderaccordingtothespecificrequirementspublishedbytheLenderthroughnoticeinitsofficeorannouncementonitswebsite.

17.3IftheBorroweriscollectingtheVATinvoiceonitsown,itshallprovideapowerofattorneyaffixedwithitsstampdesignatingthe person collecting the invoice and specifying the identity card number and other information of such person to the Lender, and thedesignatedpersonshallcollecttheVATinvoicewithhis/heroriginalidentitycard.Incaseofchangeofdesignatedperson,theBorrowershallreissuethepowerofattorneyaffixedwithitsstamptotheLender.IftheBorrowerchoosestocollecttheVATinvoicebymail,itshallalsoprovidecorrectandvalidmailingdetails.Incaseofanychangeinthemailingdetails,itshalltimelynotifytheLenderinwriting.

17.4IftheLenderfailstoissuetheVATinvoiceinatimelymannerduetonaturaldisaster,governmentact,socialdisruptionandother forcemajeure events or reasons on the part of tax authorities, the Lender has the right to delay issuance of the invoicewithin areasonableperiodwithoutanyliability.

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17.5If theBorrower fails toreceivethecorrespondingsheetof theVAT invoiceor tooffsetanytaxesdueto lossof,damagetooroverduedeclarationoftheVATinvoiceaftersuchinvoiceiscollectedbytheBorrower,theLenderisnotliableforcompensating the relevant financial losses suffered by the Borrower. However, the Lender shall compensate the relevantfinanciallossessufferedbytheBorrowerifthelossof,damagetooroverduedeclarationofanyinvoiceisattributabletotheLender.

17.6Ifitisnecessarytoissuered-letterVATinvoicesduetoreasonssuchasreturnofgoodssold,suspensionoftaxableserviceorerrorininvoicing,orfailureofauthenticationofboththeoffsettingsheetandinvoicesheet,andiftheBorrowerisrequiredtosubmittheInformationSheetforIssuingRed-LetterVATInvoicetothetaxauthorityaccordingtorelevantlaws,regulationsandpolicies,theBorrowershallsubmittheInformationSheetforIssuingRed-LetterVATInvoicetothetaxauthorityandtheLenderwillissueared-letterVATinvoiceafterthetaxauthorityapprovesandnotifiestheLender.

17.7Duringtheperformancehereof, incaseofadjustmentof taxratebythegovernment, theLenderhastheright toadjust thepricestipulatedhereinaccordingtosuchchange.

Clause18Miscellaneous18.1NeitherfailuretoexercisenordelayinexercisingonthepartoftheLenderanyrightunderthisContractshalloperateasa

waiver,norshallanysingleorpartialexerciseofanyrightpreventstheLenderfromanyfurtherorotherwiseexerciseofanyotherrights.

18.2IfatanytimeanyprovisionofthisContractisheldtobeillegal,invalid,orunenforceableinanyrespect,thelegality,validityorenforceabilityofanyotherprovisionsofthisContractshallnotbeaffectedorprejudiced.

18.3ThebillsandvouchersinrespectofthefacilityhereunderpreparedandmaintainedbytheLenderinaccordancewith its business rules shall constitute the valid evidence of the creditor-debtor relationship between theBorrower and theLender,andshallbebindingontheBorrower.

18.4DuringthetermofthisContract,iftheLendercannotcontinuetoperformthisContractinpartorinwholeduetoany enactment or amendment of any laws and regulations, state policies or regulatory rules, it shall communicatewith theBorrower in a timelymanner, cancel the loans undrawn, and take other necessarymeasures acceptable to both Parties inaccordancewithrelevantprovisions.

18.5InthisContract,(i)anyreferencetothisContractshallincludetheamendmentorsupplementhereto;(ii)theheadingsareonlyfortheconvenienceofreferenceandshallnotconstituteanyconstructionofthisContractorlimitationofthecontentsthereunderorscopethereofhowsoever.

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18.6ThisContractismadeandexecutedinChinese;thisEnglishversionispreparedforreferenceonly;ifthereisanydiscrepancy,theChineseversioncontrols.

ThePartiesacknowledgethatsufficientconsultationshavebeencarriedoutonalltheprovisionsofthisContractbytheBorrowerandtheLender.TheLenderhasdrawntheBorrower’sspecialattentiontoalltheprovisionsinrelationtoeachParty’srightsandobligations,requestedtheBorrowertofullyandaccuratelyunderstandsuchprovisions,andmadeclarificationsandexplanationsinrespectofrelevantprovisionsattheBorrower’srequest.TheBorrowerhascarefullyreadandfullyunderstoodall the provisions hereunder, including those in Part I (General Provisions) and Part II (Specific Provisions). Each Party’sunderstandingofeachprovisionhereunder iscompletelyconsistentwith thatof theother,andhasnoobjectionagainst thecontentshereof.

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Lender(Seal):IndustrialandCommercialBankofChina,China(Shanghai)PilotFreeTradeZoneLingangSpecialAreaBranch

Date:May7,2020Borrower(Seal):Tesla(Shanghai)Co.,Ltd.Date:May7,2020

I, as the legal representative/authorized representative of the Borrower, hereby acknowledge that the Borrower hasmadetheborrowingfromtheLenderinaccordancewiththeprovisionshereofandfullycompletedalltheproceduresnecessaryfortheborrowing,andthesealaffixedonthisContractisgenuineandvalid.

LegalRepresentative/AuthorizedRepresentativeoftheBorrower(Signature):/s/XiaoTongZhu(Seal)

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SchedulesListedBelowOmittedPursuanttoRegulationS-KItem601(a)(5)

Schedule1:FormofDrawdownNotice

Schedule3:FormofTransferAgreement

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SCHEDULE2

Ref.No.:[***]

EntrustedPaymentAgreement

Principal(PartyA):Tesla(Shanghai)Co.,Ltd.Address:No.5000JiangshanRoad,China(Shanghai)PilotFreeTradeZoneLingangSpecialAreaLegalRepresentative:XiaotongZhu

Agent (Party B): Industrial and Commercial Bank of China, China (Shanghai) Pilot Free Trade Zone Lingang Special AreaBranch

Address:No.555SouthXinyuanRoad,PudongNewArea,ShanghaiPerson-in-charge:ZhanSheng

Whereas:(1)PartyAandPartyBhaveentered into theWorkingCapitalLoanContract (contractno.: [***], “FinanceContract”),bywhich

PartyBextendsafacilitytoPartyA.

(2)InaccordancewiththerelevantregulatoryrulesandPartyB’smanagementrequirements,entrustedpaymentshallbeapplicableifthepaymentamountmeetscertainconditionsorPartyAagreestoadoptpaymentbyPartyBuponentrustment.EntrustedpaymentreferstotheLenderpayingoutanadvancetotheaccountsoftheBorrower’scounterpartyfortherelevantloanpurposeinaccordancewiththeBorrower’sdrawdownnoticeandentrustmentofpayment.

In order to specify the entrusted payment of financing amounts, Party A and Party B enter into this Agreement upon equalnegotiations.

Clause1ConditionforEntrustedPaymentIf any single payment amount under the Finance Contract by Party A exceeds RMB 10,000,000, entrusted payment shall be

applicable.

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Clause2AuthorizationandEntrustmentInrespectofanadvancethatmeetstheconditionsforentrustedpaymentherein,PartyAauthorizesandentrustsPartyBtopayout

suchadvancetothedesignatedloanaccountofPartyA,andtransfertherelevantadvancetotheaccountsoftheBorrower’scounterpartyfortheloanpurposeasagreedundertheFinanceContract.PartyAshallprovidePartyBwithpaymentvoucherandotherrelevantmaterialsuponPartyB’srequest.

TheloansundertheFinanceContractshallbeappliedtofinance:1.costsandexpensesduringtheproductionprocess,includingthepurchaseofrawmaterialsrelatedtotheproductionofvehicles

andparts;2.operatingexpenses for theproductionprocess, includingbutnot limited to thedailyoperation,wages, taxes, service feesand

consultingfees;3.repaymentofanyintercompanyloan(whichhasalreadybeenused)betweenaffiliatedcompanies(includingbutnotlimitedtothe

amountborrowedor tobeborrowedbyPartyA from itsaffiliatedcompany),provided that such intercompany loanshallbeused for theabovepurposesandtheinterestrateofsuchintercompanyloanshallbeincompliancewithPRClaws;and

4.repaymentofanyoutstandingamountunderanytradefinancefacility.

Clause3EntrustedPayment(1) In the event of entrusted payment, Party A shall open or designate a special accountwith Party B for the use of entrusted

payment.(2)Intheeventofentrustedpayment,PartyAshallprovidePartyBwiththeinformationaboutitsloanaccountandtheaccountsof

itscounterparties,andrelevantsupportingmaterialsevidencingtheloanpurposewheneachadvanceismade.PartyAshallundertakethatallmaterialsprovidedtoPartyBaretrue,completeandvalid.

(3) In theeventofentrustedpayment,PartyBwillonlyconducta formalityexaminationof,amongothers, the informationaboutPartyA’scounterpartiesandthesupportingdocumentsevidencingtheloanpurposeprovidedbyPartyA.IfthematerialsprovidedbyPartyAarenottrue,accurateorcomplete,PartyBshall informPartyAofall thematerialstobesupplementedwithinone(1)businessdayafterreceiptoftheabovematerials.

(4)IfPartyBfindsanyinconsistencyorotherdefectsinthesupportingdocumentsevidencingtheloanpurposeandotherrelevantmaterialsprovidedbyPartyAuponexamination,PartyBhastherighttorequestPartyAtosupplement,replace,explainorresubmittherelevantmaterials.PartyBhastherighttorejectrelevantadvanceandpaymentuntilPartyAsubmitsthematerialstothesatisfactionofPartyB;providedthatPartyBshallnotunreasonablyrefuseordelaytoconfirmthesatisfactionofsuchmaterials.

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(5)DependingontheloanpurposesofPartyA, ifnecessary,PartyBmayreasonablyrequestPartyA, independentintermediariesand other relevant parties to provide a joint verification form and other relevant supporting documents, and then by relying on suchmaterials,PartyBwillmaketheadvanceandpayment.PartyBshallinformPartyAofsuchrequestasearlyaspossiblesothatPartyAhassufficienttimetoprepareforsuchmatters.

(6)IfPartyB,uponexamination,thinksthatthematerialsprovidedbyPartyAconformtotheloanpurposesasagreedhereinandthatthedrawdownmeetstheconditionsprecedentundertheFinanceContract,PartyBshallfirstlytransfertheadvancetoPartyA'sloanaccount and then, according to the needs and the relevant business vouchers provided by Party A, transfer the relevant advance to theaccountsofPartyA’scounterparties.

Clause4AccountFreezingorSuspensionIfPartyBisunabletotimelypayanyamountasentrustedbyPartyAduetothefreezingorattachmentofPartyA’sloanaccountor

theaccountsofPartyA’scounterpartiesbyanycompetentauthority,PartyBshallassumenoliabilityandPartyA’srepaymentobligationsalreadyincurredundertheFinanceContractshallnotbeaffected.

Clause5SupervisionandInspectionofIndependentPaymentIn the event of independent paymentbyPartyA of the advancesunder theFinanceContract, PartyAundertakes to accept and

activelycooperatewiththereasonableinspectionandsupervisionbyPartyBoftheutilizationoftheloans,includingthepurposethereof,bymeansofaccountanalysis,inspectionofcertificates,on-siteinvestigationandotherwise,andtoregularlyreporttheutilizationoftheloansasrequiredbytheFinanceContract.

Clause6ForceMajeureandAccidentPartyBshallnotbeliableforitsfailuretotimelymakeadvancesandpaymentsduetowar,naturaldisasterorotherforcemajeure

eventsthatareunforeseeable,unavoidableandinsurmountable,orduetofailureofPartyB’ssystemorcommunicationorotheraccidents,providedthatPartyBshallimmediatelygiveanoticetoandcommunicatewithPartyAaboutlossreduction.PartyBshallcompensateforanylosssufferedbyPartyAduetoPartyB’sdelayinnotification.

Clause7EffectivenessandTerminationThisAgreementshalltakeeffectuponaffixingcompanysealorcontractualsealbybothParties,andshallterminatewhenPartyA

hasdrawnallloansundertheFinanceContract(includingthecancellationbyPartyBofallundrawnamountsundertheFinanceContractinaccordancewithprovisionsthereof)andPartyBhascompletedtheentrustedpayment.

Clause8MiscellaneousThisAgreementshallbeascheduletoandhavethesamelegaleffectastheFinanceContract.Foranymatternotcoveredherein,

theFinanceContractshallapply.

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PartyA: Tesla(Shanghai)Co.,Ltd.

(Seal) /s/XiaotongZhu(Seal)Date: May7,2020PartyB: IndustrialandCommercialBankofChina,

China(Shanghai)PilotFreeTradeZoneLingangSpecialAreaBranch

(Seal) /s/JingOuyang(Seal)

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Exhibit10.6

ELEVENTHAMENDMENTTOAMENDEDANDRESTATEDAGREEMENTFORRESEARCH&DEVELOPMENTALLIANCE

ONTRIEXMODULETECHNOLOGYThisELEVENTHAMENDMENTTOAMENDEDANDRESTATEDAGREEMENTFORRESEARCH&DEVELOPMENTALLIANCEONTRIEXMODULETECHNOLOGY(this“EleventhAmendment”)iseffectiveasofJuly22,2020(the“EffectiveDate”)andisbyandamongTHERESEARCHFOUNDATIONFORTHESTATEUNIVERSITYOFNEWYORK(“FOUNDATION”),anon-profiteducationalcorporationexistingunderthelawsoftheStateofNewYork,havinganofficelocatedat257FullerRoad,Albany,NewYork12203,onbehalfoftheCollegesofNanoscaleScienceandEngineeringoftheStateUniversityofNewYorkPolytechnicInstituteSILEVO,LLC(assuccessorininterestofSILEVOINC.)(“SILEVO”),aDelawarelimitedliabilitycompanywithofficesat47700KatoRoad,Fremont,California94538andTESLAENERGYOPERATIONS, INC. (“TEO”),aDelawarecorporationwithofficesat47700KatoRoad,Fremont,California94538.FOUNDATION,SILEVOandTEOareeachreferredtohereinsometimesindividuallyasa“Party”or,collectively,as“Parties.”

RECITALS

1.1 FOUNDATION and SILEVO entered into that certain Amended and Restated Agreement for Research&DevelopmentAllianceonTriexModuleTechnologyeffectiveasofSeptember2,2014,asamendedbyaFirstAmendmenttheretoeffectiveasofOctober31, 2014, aSecondAmendment thereto effective as ofDecember15, 2014, aThirdAmendment thereto effective as ofFebruary12,2015,aFourthAmendmenttheretoeffectiveasofMarch30,2015,aFifthAmendmenttheretoeffectiveasofJune30,2015,aSixthAmendmenttheretoeffectiveasofSeptember1,2015,aSeventhAmendmenttheretoeffectiveasofOctober9,2015,anEighthAmendmenttheretoeffectiveasofOctober26,2015(the“EighthAmendment”),aNinthAmendmenttheretoeffectiveasofDecember9,2015(the“NinthAmendment”),andaTenthAmendmenttheretoeffectiveasofMarch31,2017(asamended,the“Agreement”).

1.2 TEOacquiredSILEVOin2014andFOUNDATIONandSILEVOnowwishforTEOtobecomeapartytotheAgreementbyexecutingthisAmendment.

1.3 FOUNDATION,SILEVO,andTEOwishtoamendtheAgreementasmoreparticularlysetforthherein.

THEREFORE, inconsiderationof themutualpromisesandcovenantscontained in thisAmendmentandothergoodandvaluableconsideration,thereceiptandsufficiencyofwhichherebyareacknowledged,andintendingtobelegallyboundhereby,thePartiesagreeasfollowsasoftheEffectiveDate.

1. Section2.1oftheAgreementisdeletedinitsentiretyandreplacedwiththefollowing:

“Affiliatemeans an entity that Controls, is Controlled by, or is under common Control with, another entity, but onlyduringtheperiodthatsuchcontrolexists.ForpurposesofthisAgreement,FOUNDATION’sAffiliatesshallbedeemedtoinclude Fort Schuyler Management Corporation (“FSMC”), New York Center for Research, Economic Advancement,Technology,EngineeringandScienceCorp.,d/b/aNYCREATES,NewYorkStateUrbanDevelopmentCorporation,d/b/aEmpireStateDevelopment,SUNYPolytechnicInstituteFoundation,Inc.,SUNYPolytechnicInstitute, theStateofNewYork, and the StateUniversity ofNew York. For purposes of this Agreement, SILEVO’s Affiliates shall be deemed toinclude,withoutlimitation,TEOfkaSolarCityCorporation,andTesla,Inc.

2. AnewSection4.1(i)oftheAgreementisherebyaddedasfollows:

“OnorpriortoMay31ofeachyear(the“ReportingDate”)duringthetermoftheAgreementuntil2029,SILEVOshallannuallyreporttoFOUNDATIONandEmpireStateDevelopmentonbehalf

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of SILEVO, its Affiliates, and each Collocated Entity (as defined in Section 4.3(a)(2) of the Agreement), concerningcompliance with the Investment & Spending requirements contained in Section 4.3 of the Agreement and theEmploymentTargets contained inSection4.4 of theAgreementusinga form substantially similar toExhibit 2 to thisAmendment.Separatereportsshallbesubmittedfor:(i)SILEVOanditsAffiliates;(ii)eachCollocatedEntity;and(iii)eachEmploymentContractorwhoseemployeesarebeingreportedpursuanttoSection4.4(each,a“ReportingEntity”),inaccordancewithExhibit2.

Subject to SILEVO’s reasonable confidentiality requirements, SILEVO shall also provide to FOUNDATION, or makeavailable for inspection by FOUNDATION, or to Empire State Development as directed by FOUNDATION, copies ofdocumentationasreasonablyrequiredbyFOUNDATIONtovalidatetheaccuracyofeachreport,whichmayincludeforeach Reporting Entity the subject entity’s Form NYS-45 ATT and New York Multiple Worksite Report (ifapplicable). Without limitation,theforegoingreportshall includeaggregate,cumulativetotalswithsufficientdetail toillustrateSILEVO’scompliancewiththeforegoingcontractualrequirements.

For purposes of the Agreement, including Section 4.3 andExhibits A andG, cumulative investments shall include allamountsspentorincurredbyorforSILEVOonorafterJanuary1,2015.

3. Section4.3(SILEVOInvestment&Spending)oftheAgreementisdeletedinitsentiretyandreplacedwiththefollowing:

“(a) In accordance with and subject to the terms set forth in this Agreement, including Exhibit A, providingFOUNDATION performs its obligations as required hereunder: (i) SILEVO commits to invest and spend in theManufacturing Operation at a level that ensures competitive product costs as determined by themarket place for aminimumoffive(5)yearsfromthedateofManufacturingFacilityCompletion;(ii)SILEVOwillberesponsibleforandpayallcostsassociatedwithoperationoftheManufacturingFacilityduringtheTermafterthedateofManufacturingFacilityCompletion;and(iii)SILEVOwillspendorincurapproximately$5Billionincombinedcapital,operationalexpenses,andothercostsinNewYorkState(which,fortheavoidanceofdoubt,shallincludeamountsspentorincurredbySILEVOforconsumables and rawmaterials consumed or used by SILEVO at theManufacturing Facility or other manufacturingfacilityintheStateofNewYorkandamountsspentonemployment,labor,andservices),includingatitsnextgenerationmanufacturing,business,andrelatedoperationinWesternNewYork,duringtheten(10)yearperiodcommencingonthedateofManufacturingFacilityCompletion.

(b) Fromtimetotime,SILEVO,TEO,and/ortheirrespectiveAffiliates(asapplicable,the“Sublessor”)maycontractwith or permit one or more entities to perform Manufacturing Operations and related business functions at theManufacturingFacility,includingtherighttosubletspacewithintheManufacturingFacilitytosuchentitiesundertermsconsistent with the lease by and between the FSMC and Silevo, LLC dated April 30, 2018 with respect to theManufacturingFacility(eachsuchentityisreferredtohereinasa“CollocatedEntity”)andsubjecttotheapprovaloftheFOUNDATION.

(c) The approval of aCollocatedEntity by the FOUNDATIONwill not be unreasonablywithheld, conditioned, ordelayed.Withoutlimitingthegeneralityoftheforegoing,thePartiesagreethattheFOUNDATIONmaywithholdapprovalof a particular proposed sublease with a Collocated Entity if and to the extent that the proposed sublease or otheragreement with the proposed Collocated Entity permits or could otherwise result in the Silevo or TEO financiallybenefittingfromrentreceivedfromtheproposedCollocatedEntityinanyformwithrespecttotheManufacturingFacilityoranyManufacturingEquipmentownedbytheFOUNDATION.Inaddition,thePartiesagreethatindeterminingwhetherto approve a Collocated Entity, FOUNDATION shall be permitted to consider whether the addition of the CollocatedEntitywould

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resultinmorethanhalfofthepersonsemployedattheManufacturingFacilitybeingemployedbyCollocatedEntities.

(d) Anyandall investments,costs,expenses,andotherspendingbySILEVO,TEO,anyAffiliateofSILEVOand/orTEO,oranyCollocatedEntityshallcounttowardsthe investmentandspendingrequirementsset forth inthisSection,Section4.1(a),ExhibitA,andExhibitGunlesssaidexpenseisanIneligibleExpenseasdefinedinthisSection.Withoutlimitation,theforegoingincludesalldirectandindirectcostsandexpensesincurredoraccruedonoperations,equipmentandothertangibleassetsusedforManufacturingOperationsortheProgrambutshallnotincludeanyemploymentcostsincurredoutsideofNewYorkStateorthecostofequipmentorothertangibleassetsthatarenotphysicallylocatedorusedinNewYork(the“ProgramRelatedCosts”).SILEVOandTEOagreethatneithertheynoranyoftheirrespectiveAffiliatesshallsubletorotherwisemakespaceintheManufacturingFacilityavailableinexchangeforrentinanyform.

(e) IneligibleExpensemeans:(i)anyexpensetotheextentpaidorreimbursedbytheFOUNDATIONoritsAffiliates;or(ii)anyexpensethatisnotincurredoraccruedeitherinNewYorkStateorelsewhereforbusinessoperationsinNewYorkState;or(iii)anyexpensebyaCollocatedEntitythatisnotincurredoraccruedeitheratorfortheManufacturingFacility.”

4 Section4.4(SILEVOEmploymentTargets)oftheAgreementisamendedtoincludenewSubsections(e)and(f)and(g)asfollows:

“(e) AnyandallindividualsemployedbyorforSILEVO,TEO,anyAffiliateofSILEVOand/orTEO,oranyCollocatedEntity, including individuals as contemplated below for each such subject entity, shall count towards the employmenttargetsandrequirementssetforthinthisSection,Section4.1(a),ExhibitA,andExhibitGprovidedsuchemployeesareFull-TimeEmployeesandarenotanIneligibleEmployeeasdefinedinthisSection.

(f) Full-TimeEmployeeshallmean:

(i) a full-timeemployeeon thepayroll of the subjectentity,whohasworked in theStateofNewYork foraminimumofthirty(30)hoursperweekfornotlessthanfour(4)consecutiveweeksasoftheReportingDate,andwhoisentitledtoreceivetheusualandcustomaryfringebenefitsextendedbythesubjectentitytootherfull-timeemployeeswithcomparablerankandduties;or

(ii)twopart-timeemployeesonthepayrollofthesubjectentity,whohaveworkedintheStateofNewYorkforacombinedminimumof thirty (30)hoursperweek (i.e. thehours forbothemployeesexceed that thresholdcollectively) for not less than four (4) consecutive weeks as of the Reporting Date andwho are entitled toreceive theusualandcustomary fringebenefitsextendedby thesubjectentity tootherpart-timeemployeeswithcomparablerankandduties;or

(iii)afull-timeindependentcontractororself-employedindividualthatperformsresponsibilitiesinfurtheranceoftheProgramthatwouldotherwisebeperformedbyanemployeeofSilevooritsAffiliateswhoisnotonthesubjectentity’spayrollbutwhohasworkedinNewYorkStateforthesubjectentity foraminimumofthirty(30)hoursperweekfornotlessthanfour(4)consecutiveweeksasoftheReportingDateprovidingservicespursuanttoacontractsignedwitheithertheindividualortheirdirectemployer;or

(iv) two part-time independent contractors or self-employed individuals that perform responsibilities infurtheranceoftheProgramthatwouldotherwisebeperformedbyanemployeeofSilevooritsAffiliateswhoare not on the subject entity’s payroll butwho haveworked inNew York State for the subject entity for acombined minimum of thirty (30) hours per week for not less than four (4) consecutive weeks as of theReportingDate

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providingservicespursuanttoacontractsignedwitheithertheindividualortheirdirectemployer.

(g) IneligibleEmployeemeans: (i)anyemployeeofaCollocatedEntity thatdoesnotperformworkrelatedto theProgram;or(ii)anemployeeorpositionofaCollocatedEntitythatwastransferredtotheManufacturingFacilityfromanotherlocationinNewYorkStateunlesstheemployeeorpositionwas(a)“at-risk”ofeliminationorofleavingNewYorkState on or prior to such transfer, as demonstrated by SILEVO, or (b) backfilled by the Collocated Entity at anotherlocation in New York State after such transfer; or (iii) any employee or position of a Collocated Entity that is notemployedattheManufacturingFacility.”

5. AnewlastsentenceofthefirstparagraphofSection5.1(c)oftheAgreementisherebyaddedasfollows:

“Notwithstanding anything herein to the contrary, the FOUNDATION shall apply any unused portion of theFOUNDATION’sfinancialcommitmentsundertheAgreement(the“UNUSEDFUNDS”)foranyofthefollowingpurposesas previously agreed to by the Parties or as directed by SILEVO: (i) purchase, commission, modify, and improveManufacturingEquipmentfortheManufacturingFacility; (ii) tomakeadditions,modifications,or improvementstotheManufacturingFacility;(iii)totakesuchotheractionsrelatedtotheManufacturingFacilityorManufacturingEquipmentasmaybeagreedbytheParties;or(iv)forotherpurposesrelatedtotheProjectwiththeFOUNDATION’sconsent,whichshallnotbeunreasonablywithheld,conditioned,ordelayed.Notwithstandingtheforegoing,anyUNUSEDFUNDSmustbe(a)foracapital,facility,orequipmentuseorpurposerelatedtoeithertheManufacturingFacilityorManufacturingEquipment,and(b)consistentwithapplicable lawsandsubjecttothetermsandconditionsoftheGrantDisbursementAgreement(s)betweenFSMCandEmpireStateDevelopment,ifany,asprovidedinwritingtoSILEVOontheEffectiveDate.”

6. AnewsecondparagraphofSection5.1(c)oftheAgreementisherebyaddedasfollows:

“The UNUSED FUNDS as of the Effective Date of this Amendment are an amount equal to $28,880,339.51. UponexpenditureoftheremainingbalanceoftheUNUSEDFUNDS,theFOUNDATIONwillhavefullysatisfieditsobligationsunderSections4.1(c),5.1(a),5.1(b),and5.1(c)oftheAgreementandwillhaveforthepurposesoftheAgreementmetitscommitmenttocontribute$750millionfortheproject.TheFOUNDATION,Affiliatesortheircontractors,asapplicableretaintheirwarrantysupportandotherobligationswithrespecttosuchconstructionwork,includingtheopenpunch-listitemssetforthintheFinalBaseBuildPunch-ListattachedheretoasExhibit1.AnyexpensestobepaidwithUNUSEDFUNDSmust be incurred and paymentmust be requested by SILEVOprior toDecember 31, 2021 (the “ExpenditureDate”),andFOUNDATIONshall,orshallcauseitsAffiliateto,promptlypaysuchamountstoSILEVO.Notwithstandingthe foregoing, if and to the extent that the FOUNDATION or its Affiliate does not promptly pay any of theUNUSEDFUNDStoSILEVOorasdirectedbySILEVOduetoanencumbranceorclaimarisingfrompotentialliabilitiesassociatedwithanycontract(s) enteredbyor for theFOUNDATIONor itsAffiliatesunder thisAgreement, theExpenditureDateshall be extended by a period of onemonth for eachmonth or portion thereof that such funds are encumbered andthereforeunavailabletoSILEVOtopayforprojectrelatedpurposes.”

7. Section4.1(b)oftheAgreementisherebydeletedandisreplacedwiththefollowing

“ManufacturingFacilityCompletionmeansApril30,2018.”

ExhibitGisdeletedinentiretyandreplacedwithrevisedExhibitGattachedhereto.

9. TEO shall be a Party to the Agreement as of the date last signed below, and references to “SILEVO” throughout theAgreementshallbedeemedtorefercollectivelytoSILEVOandTEO.

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10. Section18.2isamendedtoincludethefollowingattheendoftheSection:

“InthecaseofTEO:

TeslaEnergyOperations,Inc.

47700KatoRoad

Fremont,California94538

Attn:ChiefTechnologyOfficer

Withaconcurrentpapercopyandaconcurrentelectroniccopyviae-mailto:

TeslaEnergyOperations,Inc.

901PageAvenue

Fremont,CA94538

Attn:LegalDepartment

E-mail:[email protected]

IncaseofFOUNDATION,includingannualreports:

TheResearchFoundationfortheStateUniversityofNewYork

P.O.Box9

AlbanyNY12201-0009


FortSchuylerManagementCorporation

257FullerRoad

Albany,NY12203

Attn:President

E-mail:[email protected]


EmpireStateDevelopment

PortfolioManagementDepartment

633ThirdAvenue–35thFloor

NewYork,NewYork10017-6754

E-mail:[email protected]”

11. Section2.9isdeletedinentiretyandreplacedwiththefollowing:

“Manufacturing Operationsmeans the activities of SILEVO, TEO, any of their respective Affiliates, and/or CollocatedEntities in connection with the research, development, evaluation, testing, manufacture, repair (except for generalconsumervehiclerepair),and/orre-manufactureof

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solar, stationary storage, electric vehicle, semiconductor, sustainable energy, sustainable transportation, and/or anyrelatedproductsandcomponentsproducedbyanysuchentity, includinganyandallsubcomponentsandmaterials forany such products or components and any ancillary administrative activities, including without limitation such costsrequiredtoachieveFullProductionOutputasdefinedinSection4.1(b).”

12. TheParties desire to foster additional research, development, technology, and development jobs at, and in connectionwith, the Manufacturing Facility. Accordingly, the Parties will attempt to solicit additional third parties to collocate at theManufacturingFacility forpurposesofManufacturingOperations,andSILEVO,TEO,andanyof theirrespectiveAffiliates shallinvestigate opportunities to collaboratewith local and regional higher education institutions, including StateUniversity ofNewYork (SUNY) institutions,with the goals to foster student study, training, and hiring in fields relevant to sustainable energy ortransportation. The title of the document is amended to be “Amended and Restated Agreement for Research & DevelopmentAlliance”asoftheEffectiveDateofthisAmendment.

(c) The FOUNDATIONmay designate any Affiliate to provide any and all consents or approvals required in theAgreement. FOUNDATION may assign this Agreement to any Affiliate with SILEVO’s consent, which shall not beunreasonablywithheld,conditioned,ordelayed.

13. Section3.2(a)isdeletedinentiretyandreplacedwiththefollowing:

“(a) Establish a mutually-beneficial joint effort focused on the US-based manufacture, expansion, andcommercialization of the products of SILEVO, TEO, and any of their respective Affiliates and related research anddevelopment.”

Pursuant to an extension granted by ESD on or about June 10, 2020 to the required job and investment milestones requiredpursuanttheAgreementasaresultoftheCOVID-19outbreak,theemploymentandinvestmentcommitmentscontainedinExhibitGareherebydeferredforoneyear.Assuch,andnotwithstandinganythingcontainedinthisAgreementtothecontrary,thePartiesagreethattheSecondAnniversaryMilestonecontainedinSection4.4oftheAgreement,asamended,andExhibitGshallbeApril30,2021.EachsubsequentAnniversaryDateshallbeextendedaccordingly.

15. Unless otherwise expressly amended by this Eleventh Amendment, the terms and conditions of the Agreement shallremain in full forceandeffect. Intheeventofanyconflictsor inconsistenciesbetweentheprovisionscontained inthisEleventhAmendmentandtheprovisionscontainedintheAgreement(excludingtheamendmentsmadetoitbythisEleventhAmendment),theprovisionscontainedinthisEleventhAmendmentshallgovernandprevail.

16. ThisEleventhAmendmentmaybeexecutedincounterparts,eachofwhichshallbedeemedtobeanoriginal,allofwhichtogethershallconstituteoneandthesameinstrument.TofacilitatedeliveryofthisEleventhAmendment,thePartiesmayexchangeexecutedcounterpartsbyfacsimileore-mailinportabledocumentformat(pdf.)

[SignaturePageFollows]

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INWITNESSWHEREOF, thePartiesheretohavecaused thisAmendment tobeexecutedanddeliveredby theirdulyauthorizedrepresentativesasoftheEffectiveDate.

TheResearchFoundationfortheStateUniversityofNewYork

By: /s/ScottBateman Printed: ScottBateman Title: RPOperationsManager Date: 7/22/2020

TeslaEnergyOperations,Inc. Silevo,LLC

By: /s/YaronKlein By: /s/EmmanuelleStewart Printed: YaronKlein Printed: EmmanuelleStewart Title: Treasurer Title: Secretary Date: July22,2020 Date: July22,2020

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Exhibit1

FinalBaseBuildWarrantyList

DateArea/RoomsEquipmentTagPassdownTesla/LPC/NYState:MeetingMinutesandStatusUpdatesSTATUSTuesday,October24,2017ChemicalOffloadDocksCRCCRCsonbothchemicalandDIWdocksarecrackingandliftingoffconcrete10/24/17-DanMwalkeddowndockswithLPC-BradF.Plantobeonsitenextweektoaddress1/10/18:LPCtocomebackoutinthespringtocorrect3/8/2019:LargeCRCpatchesblownoffinrecentwindstormOPENMonday,March11,2019CellManufacturingMAHunitsMezzanine3RAH102–48and52missingsprinklercoverage-foundduringannualinspection.3/11/2019:notifiedFSMCofgapon2/11/2019;noactiontodate-fundinginquestionCompletedFriday,March1,2019CellManufacturingAWDdrainfromnitricCTSAWDdrainlinefromCTStogravitydrainleakinganddissolving-polypropylene(MOC)determinedtobeincompatiblewith69%nitricacid.3/8/2019:pipingtobereplaced.ExpectingreimbursemenetfromNYS.OPENFriday,March1,2019CellManufacturingCHFWDCHFWDleaking3/8/2019:O-ringsinvalvesdeterminedtobeincompatiblematerial.SpeccalledoutforEPDMseals,FKMwasinstalled-bothareincompatiblewithchemistryindrain.FFKM(Kalrez/Chemraz)o-ringsrequired.Materialonorderandisbeingreplaced.ExpectingreimbursementfromNYS.2/13/2020Completedo-ringreplacementforwastedrainvalvesonCLN201-CLN204.Highpointventsandflangegasketsaswellastheconnectionpointtothegravitydrainstillneedtobecompleted.OPENThursday,February21,2019CellManufacturingCWDNumerousleaksonthepipingforthecausticwastedrain.Materialofconstructionissuspect.3/8/2019:CPVChasbeendeterminedtobeincompatiblewithTS42(PORchemistry)andnotabletohandlethePORtemperatureof185F.~1000'ofpipetobereplacedwithNIckel200.2/21/2019-CPVCisratedfor180F,bathoperatesat185F.Overtimetheflexingduetotemperaturevariations

andcrackingthecouplingsandvalves.Designengineertoreviewbasebuildspecsandprocesstodeterminematerialcompatability.

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Exhibit2

AnnualReportThefollowingreportsetsoutthereportoftheReportingEntitiesnamedbelowwithrespecttotheinvestment,spending,andemploymentrequirementsoftheAmendedandRestatedAgreementforResearch&DevelopmentAllianceonTriexTechnologydatedSeptember2,2014.

ReportingEntities

LegalName(s) SilevoLLCandAffiliatesFederalEmployerIdentification

Number(s)(EIN)Seeattachedlist

ProgramYear __AnniversaryofApril30,2018,thedateofManufacturingFacilityCompletion

ReportsRequiredbyLaw

DidtheReportingEntitiesfiletheNYS-45form,includingcoverpageandNYS-45-ATT,and,ifapplicable,theMultipleWorksiteReportform(BLS3020forNYS;“MWR”)forthelastfourcalendarquarters?☐Yes☐No

Explanation(ifneeded)IftheanswertothequestionaboveisNooriftheemploymentfiguresonsuchreportsdiffermateriallyfromthosereportedbelow,pleaseexplain:Clickheretoentertext.

Investments&Spending(USD)Description May1,20__–April30,20__

CumulativeasofApril30,20__

Clickheretoentertext. $___ $___ Totals$___ $___ Asof

April30,20__ Description

NewYorkJobs(totalcurrent)

BuffaloJobs–atManufacturingFacility

____full-timejobsClickheretoentertext.____part-time

jobs

BuffaloJobs–ExcludingManufacturingFacility


jobs

NewYorkStateJobs–ExcludingBuffaloJobs


jobsTheforegoingreportistrueandcorrecttothebestofmyknowledge. Signature:Date:Clickortaptoenteradate. Name(Print):Clickheretoentertext.Title:Clickheretoentertext.

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Exhibit3

EXHIBITG:INVESTMENTANDJOBMILESTONES1.Subject to Section 2 of this ExhibitG, commencing on the date of the first anniversary of April 30, 2018 (the date onwhichManufacturing Facility Completionwas achieved), for each Program Year, if SILEVO fails to achieve the Investment and JobMilestones, SILEVO shall pay the Program Payment for the Program year on or before theMilestone Payment Due Date, asspecifiedinScheduleAbelow.

ScheduleA

ProgramYearProgramPaymentDueDates ProgramPayment

DueSILEVOCumulativeInvestment(asdescribedinSection4.3ofthe

Agreement)Milestone

SILEVOCumulativeJob(asdescribedinSection4.4ofthe

Agreement)Milestone1 First Anniversary of the

Manufacturing CompletionDate

$41.2Million $130,000,000 500

2 Second Anniversary of theManufacturing CompletionDate

$41.2Million $472,000,000 1,460

3 Third Anniversary of theManufacturing CompletionDate

$41.2Million $928,000,000 2,000

4 Fourth Anniversary of theManufacturing CompletionDate

$41.2Million $1,478,000,000 2,500

5 Fifth Anniversary of theManufacturing CompletionDate

$41.2Million $2,056,000,000 3,460

6 Sixth Anniversary of theManufacturing CompletionDate

$41.2Million $2,625,000,000 3,460

7 Seventh Anniversary of theManufacturing CompletionDate

$41.2Million $3,208,000,000 3,460

8 Eighth Anniversary of theManufacturing CompletionDate

$41.2Million $3,793,000,000 3,460

9 Ninth Anniversary of theManufacturing CompletionDate

$41.2Million $4,391,000,000 3,460

10 Tenth Anniversary of theManufacturing CompletionDate

$41.2Million $5,000,000,000 3,460

If,withrespecttoaProgramYearaboveinScheduleA,SILEVOsatisfiestheInvestmentMilestoneandJobMilestonesetforthinScheduleAonorbeforetheapplicableProgramPaymentDueDateinthat

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ProgramYear,thenSILEVOisnotrequiredtopaytheProgramPaymentDuefortheProgramYearonsuchProgramPaymentDate.Notwithstandinganythingcontainedhereinthecontrary,SILEVOshallberequiredtomeettheCumulativeJobMilestoneineachProgramYearregardlessofwhetherithasmettheCumulativeJobMilestoneinanyotherProgramYear.TheSILEVOCumulativeInvestmentMilestonessetforthinScheduleArefertocumulativeinvestments,spend,costs,andexpensesincurred in or related to the State of New York as permitted in the Agreement. If and to the extent that SILEVOmeets theCumulativeInvestmentMilestonerequirementsforaparticularProgramYear,SILEVOshallbedeemedtohavemettheCumulativeInvestmentMilestoneforallapplicableProgramYearsundertheAgreementwheretheCumulativeInvestmentequalsorexceedstheCumulative InvestmentMilestone for thatProgramYear. Forexample, ifSILEVO’s cumulative investment inYear2equals$5,000,000,000,thenSILEVOshallhavemettheSILEVOCumulativeInvestmentMilestonesforYears2throughandincludingYear10.TheSILEVOCumulative JobMilestonesset forth inScheduleA refer to thenumberofFull-TimeEmployeesaspermittedundertheAgreementineachProgramYearandarenotinadditiontothepreviousProgramYear.Forexample,ifSILEVO’sCumulativeJobMilestoneinYear2equals2,000,thenSILEVOshallhavemettheSILEVOCumulativeJobMilestoneforYear2onlyandtheCumulativeJobMilestoneforYear3shallremainat2,000.Ifanyofthefollowingeventsofdefaultoccur,allProgramPaymentsinScheduleAshallbebecomedueandpayableimmediately,withoutdemandornotice:

a. the failureofSILEVOtopay in fullaProgramPaymentpayablebySILEVOtoFOUNDATION inaccordancewithSections1and2ofthisExhibitGonorbeforetheapplicableProgramPaymentDueDate,whichpaymentremainsunpaidforten(10)businessdaysafterdeliveryofwrittennoticeofsuchfailuretoSILEVO;

b. thefilingofbankruptcyproceedingsinvolvingSILEVOasadebtor(whichisnotdismissedwithinninety(90)daysoffiling);

c. theappointmentofareceiverforSILEVO;

d. themakingofageneralassignmentforthebenefitofSILEVO’screditors;

e. theterminationoftheAgreementduetoSILEVO’sdefaultthereunder.

ThetermsandconditionscontainedinthisExhibitGshallsurvivetheterminationoftheAgreement.

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Exhibit31.1

CERTIFICATIONSI,ElonMusk,certifythat:1. IhavereviewedthisQuarterlyReportonForm10-QofTesla,Inc.;2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomake

thestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;

3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;

4. Theregistrant’sothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedinExchangeActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))fortheregistrantandhave:

(a) Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

(b) Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderoursupervision,toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples;

(c) Evaluatedtheeffectivenessoftheregistrant’sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

(d) Disclosedinthisreportanychangeintheregistrant’sinternalcontroloverfinancialreportingthatoccurredduringtheregistrant’smostrecentfiscalquarter(theregistrant’sfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theregistrant’sinternalcontroloverfinancialreporting;and

5. Theregistrant’sothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,totheregistrant’sauditorsandtheauditcommitteeoftheregistrant’sBoardofDirectors(orpersonsperformingtheequivalentfunctions):

(a) Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikelytoadverselyaffecttheregistrant’sabilitytorecord,process,summarizeandreportfinancialinformation;and

(b) Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrant’sinternalcontroloverfinancialreporting.

Date:July28,2020 /s/ElonMusk ElonMusk

ChiefExecutiveOfficer (PrincipalExecutiveOfficer)

Exhibit31.2

CERTIFICATIONSI,ZacharyJ.Kirkhorn,certifythat:1. IhavereviewedthisQuarterlyReportonForm10-QofTesla,Inc.;2. Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomake

thestatementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;

3. Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthefinancialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;

4. Theregistrant’sothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedinExchangeActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))fortheregistrantandhave:

(a) Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,toensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

(b) Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderoursupervision,toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternalpurposesinaccordancewithgenerallyacceptedaccountingprinciples;

(c) Evaluatedtheeffectivenessoftheregistrant’sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

(d) Disclosedinthisreportanychangeintheregistrant’sinternalcontroloverfinancialreportingthatoccurredduringtheregistrant’smostrecentfiscalquarter(theregistrant’sfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomateriallyaffect,theregistrant’sinternalcontroloverfinancialreporting;and

5. Theregistrant’sothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,totheregistrant’sauditorsandtheauditcommitteeoftheregistrant’sBoardofDirectors(orpersonsperformingtheequivalentfunctions):

(a) Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonablylikelytoadverselyaffecttheregistrant’sabilitytorecord,process,summarizeandreportfinancialinformation;and

(b) Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrant’sinternalcontroloverfinancialreporting.

Date:July28,2020 /s/ZacharyJ.Kirkhorn ZacharyJ.Kirkhorn ChiefFinancialOfficer (PrincipalFinancialOfficer)

Exhibit32.1

SECTION1350CERTIFICATIONSI,ElonMusk,certify,pursuantto18U.S.C.Section1350,that,tomyknowledge,theQuarterlyReportofTesla,Inc.onForm10-QforthequarterlyperiodendedJune30,2020,(i)fullycomplieswiththerequirementsofSection13(a)or15(d)oftheSecuritiesExchangeActof1934and(ii)thattheinformationcontainedinsuchForm10-Qfairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsofTesla,Inc.Date:July28,2020 /s/ElonMusk ElonMusk ChiefExecutiveOfficer (PrincipalExecutiveOfficer)

I,ZacharyJ.Kirkhorn,certify,pursuantto18U.S.C.Section1350,that,tomyknowledge,theQuarterlyReportofTesla,Inc.onForm10-QforthequarterlyperiodendedJune30,2020,(i)fullycomplieswiththerequirementsofSection13(a)or15(d)oftheSecuritiesExchangeActof1934and(ii)thattheinformationcontainedinsuchForm10-Qfairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsofTesla,Inc.Date:July28,2020 /s/ZacharyJ.Kirkhorn ZacharyJ.Kirkhorn ChiefFinancialOfficer

(PrincipalFinancialOfficer)