Tesla Motors Inc. Business Plan
University of Notre Dame Integrated Engineering and Business Fundamentals EG40421 Fall 2011 Charles Hunter
Executive Summary: Tesla Motors designs, develops, manufactures, and sells high-performance fully electric vehicles and advanced electric vehicle powertrain components. Tesla owns their sales and service network and has structured their business to rapidly develop and launch electric vehicles and technology. They gain a competitive advantage and differentiate from other automobile manufacturers with their vehicles, research and development, and operations structure. They are the first company to commercially produce a federally compliant electric vehicle. The Tesla Roadster established their foothold in the electric automotive industry and has let them achieve a market niche in which they are leaders in. They intend to stay ahead of the market through a combination of attractive design, driving performance, and zero emissions. The Roadster powertrain system is the foundation of their business and will also form the basis for the Model S sedan which is planned to begin production in mid-2012. Tesla also provides services for the development of electric powertrain components and sells components to other automotive manufacturers such as Daimler and Toyota. They believe their capability in electric vehicle design and systems integration along with their focus solely on electric vehicle technology will sustain their leadership in the electric vehicle industry. The Model S is designed for a significantly broader customer base than the Roadster. They intend to increase the mass production annual rate to approximately 20,000 cars per year for their Fremont, California facility. Tesla Motors purchased this facility in October 2010 from New United Motor Manufacturing, Inc. (NUMMI). They intend to finance the continued development and Fremont facility through a DOE loan agreement with United States Federal Financing Bank and United States Department of Energy. 1|Page
In order to continue growth and leadership in the electric vehicle industry, Tesla Motors is designing their vehicles to enable the cost effective development of future vehicles. Their battery pack is based on commodity battery cells which they believe will form the basis of later generation of battery packs. They use upgradeable software extensively for managing vehicle performance and driver experience. They are also developing a common platform architecture which will form the basis of future vehicles such as the conceptual Model X crossover vehicle. These efforts will allow them to reduce financial costs and lead to greater revenue and net income. Tesla Motors continues to invest most of its revenue into research and development, selling, general, and administrative, and into the cost of developing their products. As the cost of these investments goes down and as Tesla Motors gains experience in the automotive industry they should see a positive trend in their financial activities. Over the past 3 years revenue has increased, but net income has remained in the red. Cash flow analysis has shown the great extent to which Tesla Motors is investing in itself and operating activities. The electric vehicle industry is just beginning to grow and become more popular to the mainstream consumers. Many established automotive manufacturers are beginning to realize the potential in hybrid and electric vehicles and are beginning to design conceptual vehicles and others have already begun production of low cost electric vehicles. The industry is projected to grow over the next 20-30 years and Tesla Motors plans to be a leader in this industry. Tesla remains strong as a luxury electric vehicle manufacturer. Tesla Motors believes to have the necessary resources and capabilities to meet the demand of market needs and achieve success in the auto industry.
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Table of Contents: Company Overview o Our Values …………………………………………………………….....… Pg. 4 o Our Vision ………………………………………………………………..... Pg. 5 o Our Mission …………………………………………………...………….... Pg. 5 o Our Goals ……………….………………………………………………….. Pg. 5 o Our Objectives ……………………………………………………………... Pg. 6
Business Environment o Industry Analysis …………………………………………………………... Pg. 6 o CSF ………………………………………………………………………… Pg. 8 o SWOT ………..…………………………………………………………..… Pg. 9 o Customers ……………………………………………...………………..…. Pg. 10 o Segmentation …………………………………………...…..……………… Pg. 11 o Competition …………………………………………………………..……. Pg. 13
Company Description …………………………..……………………..……….. Pg. 14
Financials ……………………………………….………………………..…...…. Pg. 17
Appendix A: Balance Sheets …………………………………………………. Pg. 21
Appendix B: Cash Flow Statements ………………………………………… Pg. 22
Appendix C: Operations Data Statements ………………………...….…….. Pg. 23
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Company Overview Values Our Company At the core of Tesla Motors is the belief that an electric car need not be a driving sacrifice. We have brought the best of the automotive and technology worlds together to permanently bury the image of an electric car as a step backwards in performance, efficiency, or design. Our key technology is 100% electric powertrain, which propels us in the present and simultaneously establishes a foundation for our future models. We set out to forever alter the perceptions of electric vehicles and to make electric cars a viable alternative. We have produced a car that is at once beautiful and exciting to drive, along with being the most efficient production automobile on the planet. Freedom of Choice The very definition of automobile is freedom of motion. The word itself originated as a literal way to define a vehicle that moves under its own power without need for another vehicle – such as a horse or locomotive. Today the definition of automobile often includes association with an internal combustion engine. We’re here to change this definition one car at a time. The world will once again use the automobile to transport us free of convention. Tesla Motors will be part of this liberation. The Tesla Roadster moves not only under its own power, but ultimately free of the existing and increasingly troublesome petroleum-based infrastructure. Passion for the Future For 130,000 years humans looked upon the moon with wonder and speculation. On July 20, 1969 we walked on its surface. Sixty years ago a computer was comprised of more than 17,000 vacuum tubes and weighed 30 tons. Today one can place many times this same computing power in a jeans pocket. The end result of technological achievement is often so impressive that we forget the drive of the innovators behind the solution. While we are a technology company, we deliver our automotive innovation with enthusiasm and passion for design. We are engineers and designers. We are drivers and racers. We are executives. We are Tesla Motors. Milestone Now The Tesla Roadster is no longer a vision. Our automobile is not merely a claim. The Roadster is our first production car, and will not be our last. With a range of 244 miles on a single charge and a supercar level 3.7 second 0-60 mph acceleration time, the Roadster Sport is proof that the combination of passion and technology can deliver a truly groundbreaking automobile. The Tesla Roadster is just the beginning. We will use what we have created in the Roadster as a foundation for models to come. The 30-ton computer will easily fit in your pocket. The moon will not seem so far away. The car you drive will liberate you from convention. That car will be a Tesla.
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Vision Tesla’s goal is to create the most compelling car company of the 21st century, while accelerating the world’s transition to electric mobility with a full range of increasingly affordable electric cars. We're catalyzing change in the industry. Tesla vehicles and EVs powered by Tesla are fun to drive and environmentally responsible.
Mission Tesla Motors designs and sells high performance, super efficient electric cars. Tesla Motors cars join style, acceleration, and handling with advanced technologies that make them the quickest and most energy-efficient cars on the planet.
Goals 1. Increase the number and variety of EVs available to mainstream consumers in three ways: a. Tesla sells its own vehicles in a growing number of company-owned showrooms and online. b. Tesla sells patented electric powertrain components to other automakers so that they may get EVs to customers sooner. c. Tesla serves as a catalyst and positive example to other automakers 2. Sell EVs to mainstream consumers at more affordable prices. 3. Powertrain development to advance our technology and rapidly and cost effectively develop vehicles. 4. Design Model S with an adaptable platform architecture and common electric powertrain so that we can use the platform of the Model S to create future electric vehicle models, such as a crossover/sport utility vehicle, a van or a cabriolet. 5. Strategy of using commercially available battery cells will enable us to leverage improvement in cell chemistries and rapidly introduce models of our Tesla Roadster and planned vehicles with different range options. 6. Develop a third generation electric vehicle produced at the manufacturing facility in Fremont, California. We intend to offer this vehicle at a lower price point and expect to produce it at higher volumes than the planned Model S. Expect vehicle to be produced a few years after introduction of the Model X.
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Objectives 1. Stores in Tokyo and Milan are scheduled to open during the fourth quarter of 2011. 2. The first Model S alpha is targeted for completion by the end of the year, 2011. 3. Develop a prototype of the Model X by the end of 2011. 4. Launch of the Model S in mid-2012.
Business Environment Industry Analysis Tesla Motors Inc. is an automotive company and is more specifically involved in the electric vehicle industry. Auto industry research company J.D. Power and Associates predict that the sales of electronic vehicles will remain low through 2020. The global sales of hybrid and electric battery vehicles are expected to reach 5.2 million vehicles in 2020 which is only 7.3 percent of the 70.9 million automobiles predicted to be sold that year. Going-Electric, and association for electric vehicles and their users in Europe, have much more optimistic views in regards to the future sales of electronic vehicles. Their optimistic view is based upon the following factors: 
High production volume and technical improvements will reduce the purchase price and in turn make EVs more competitive.

Over time oil prices will continue to increase and discourage consumers from combustion vehicles.

Strong government incentives will persuade consumers to go electric in order to reduce pollution.
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Figure 1: Electric Vehicle Industry Sales Forecast
Market penetration is dependent upon battery pack cost, infrastructure of charging, oil prices, competing and advancing technology, investment in manufacturing processes, and consumer confidence in electric and hybrid vehicles. The U.S. government has also been actively involved in aiding the electric vehicle industry through investments such as loans and incentives for consumers who buy electronic vehicles. The current cost of electronic vehicle lithium-ion battery pack is estimated to be sold to OEMs at between $1,000 and $1,200 per kWh, according to the Boston Consulting Group in 2010. Further predictions estimate that the price for a battery pack will decline to be between $250 and $500 per kWh at production, but will unlikely meet the $250 mark by 2020. The cost of battery packs may be decreasing faster than expected. Nissan has reported that the battery pack for the Nissan Leaf is only $375 per kWh. Adding on, Tesla CEO Elon Musk stated that the 7|Page
Model S battery pack will cost less than the Leaf’s battery. Industry-wide battery pack costs will reduce. The charging infrastructure has been aided by the federal government which will usually cover half of the cost associated with home charging stations. Tesla offers a charging system which can be installed in homes. One can fully recharge a car in less than 4 hours from empty to full and offers a charging rate of 56 miles per hour at max power. A study by Pike Research indicates a very positive forecast for charging stations worldwide. They estimate that rapid falling prices in electronic vehicle supply equipment will lead to a total 7.7 million charging locations worldwide by 2017, 1.5 million of which will be available in the United States. The electronic and hybrid electronic vehicle manufacturers must overcome consumer skepticism. Investments in battery packs will increase the range of vehicles and to the infrastructure of the industry should help persuade consumers to buy EVs. Increased range of EVs will make them more comparable to the vehicle range of combustion vehicles. The Model S “Signature Series” EV (at a cost of $77,400) is estimated to have a range of 300 miles per charge which will compete with internal combustion engine vehicles of a similar range. Hybrid vehicles usually run on electricity for a limited range and then switch to the gasoline tank which allows the cars to obtain a range of 300 miles per charge and gasoline. Hybrid vehicles do not eliminate emissions and will continue to be dependent on gasoline which will lead to an increased cost in owning hybrid electric vehicles compared to electric vehicles.
Critical Success Factors
Develop cheaper models with increased production to worldwide consumers while remaining a luxury electric car company 8|Page
Continue to innovate in EV technology and manufacturing
Continue to build upon enthusiastic brand community
Increase marketing strategy to general public
SWOT Analysis Strengths
First: The Roadster was the first highway-capable EV in the U.S. and Europe.
Design: Tesla emphasizes on zero emissions, performance, and aesthetics of the cars. Allows Tesla to appeal to many consumers.
Partnership: Daimler, Toyota, and Panasonic have allowed Tesla new opportunities to research battery technology and powertrain development. Lotus has aided Tesla in the manufacturing process of their EVs.
Battery Technology: Tesla has been able to increase the range and lifetime of their batteries. Their superior technology gives an edge in the industry.
Weaknesses
Inferior Brand Recognition: Tesla is a small company and not very well known compared to competitors.
Consumer Skepticism: Consumers need to be persuaded to change behavior and adapt EVs. Charging and range anxieties must be overcome.
Lack of Products: Tesla Motors does not have a mass production model. Income is solely based on Roadster sales and Model S reservations. Gives competition room to control market.
Opportunities
International Markets: Optimistic sales forecasts and EV infrastructure in Europe. Tesla will take advantage by opening plant in Tokyo.
Sales: Tesla creates a unique buying experience since all of the car dealerships and manufacturing facilities are owned by Tesla. 9|Page
Community: Tesla has a strong community of owners who are very enthusiastic about the brand and cars. This community includes several high-profile figures.
Threats
Delays in launch: Delays will reflect badly on the company and shake consumer confidence. This will also allow competitors more time to take control of the market.
Economy: Economic downturn has already hurt the automotive industry. Tesla will have a hard time selling luxury vehicles in a bad economy.
Loss of Partnerships: Research and development of key components to Tesla’s success is heavily dependent upon their partnerships.
Slim Market: Tesla Motors only sells electronic vehicles while other competitors sell internal combustion engine, hybrid, and electric vehicles. Consumers need to prefer EVs in order for Tesla to succeed.
Customers Tesla Motors believes they do not just have customers, but enthusiasts. The high cost of the Tesla Roadster has limited the customer range to a small market. The Roadster was targeted toward rich consumers who are environmentally aware. Tesla Motors wants to expand their target market to more general consumers who are environmentally conscious but also are lower income than those targeted by the Roadster. The Model S is slated to be launched in 2012 and retail with 3 different battery pack options for a price range of $57,400-$70,000. Tesla wants to retain its luxury brand and although cheaper in cost to the consumer, the Model S is still considered an upper class vehicle. The Roadster is targeted at a younger upper class consumer and the Model S is targeted at a “baby-boomer” generation middle class consumer.
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Segmentation Tesla Motors believes that their vehicles compete in the market both based on traditional segment classification as well as based on their propulsion technology. There are three primary means of powertrain electrification which will differentiate various competitors in the market:
Electric Vehicles are vehicles powered by a single on-board energy storage system which is refueled directly from an electricity source.
Plug-in Hybrid Vehicles are vehicles powered by both a battery pack with an electric motor and an internal combustion engine which can be refueled with petroleum fuels for the engine and electricity for the battery pack. The engine can work in parallel with the electric motor or be used only to recharge the battery.
Hybrid Electric Vehicles are powered by both a battery pack with an electric motor and an internal combustion engine but which can only be refueled with petroleum fuels as the battery pack is charged through regenerative braking. Tesla Motors currently has only one segment until the Model S is released. With the
launch of the Model S, Tesla’s consumer market will span to those consumers who are environmentally conscious, but also are interested in the style, performance, energy efficiency, and lower cost. The Model S will open up the sedan class of consumers. The following table breaks down the market segment for the Tesla Roadster and Model S. The small market segment which Tesla Motors focuses on currently is a very small portion of the alternative energy vehicle industry. Many of their competitors are focusing on the lower income class of consumers and have yet to make vehicles which are completely electric dependent. 11 | P a g e
Table 1: Tesla Motors Segmentation
Full-sized Full-sized Hybrid Full-sized hybrid/Electric Vehicles Electric Vehicles Vehicles
Customer Income Class $0-$49,999
$50,000-$99,999
$100,000-and up
Think Global - Th!nk City
Tesla - Model S*
Tesla - Roadster
Volvo - V70*
Audi - e-Tron*
Lexus - RX 450h
Mercedes - S400, ML 450
Lexus - LS 600h L
Toyota - Prius, Highlander, Sienna
BMW - X6
BMW - ActiveHybrid 7
Honda - Fit, Civic, Insight
Porsche - Cayenne S
BMW - Mini E*, Active E* Nissan - Leaf Mitsubishi - i MiEV Chevy - Volt Toyota - Prius Plug-in Ford - C-Max Energi* Suzuki - Swift*
Lexus - GS 450h
*indicates cars still in production
Unlike most of its competitors, Tesla sells the electronic vehicles over the internet and at Tesla owned dealerships in cities worldwide. This is a similar process to the way Apple sells its products in the Apple stores. Tesla is planning on increasing their channels by opening more stores to coincide with the launch of the model S. The main goal which the distribution channels is based off of is to control the customer experience and offer the high quality service which may be expected for such a high cost product. Tesla wants to make the customers feel as a part of a community from the moment they walk in to the store. This model has proven successful for Apple but has yet to be tested extensively in the automotive industry.
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Competition The worldwide automotive market, particularly for alternative fuel vehicles, is highly competitive today and expected to become even more so in the future. Before the introduction of the Nissan Leaf in December 2010, no mass produced performance highway-capable electric vehicles were being sold in the United States. In Japan, Mitsubishi has been selling its electric iMiEV since April 2010. Tesla Motors expects additional competitors to enter the United States and Europe within the next several years. In regards to the Tesla Roadster, Tesla Motors faces strong competition from established manufacturers such as Porsche and Ferrari. With the launch of the Model S sedan, Tesla Motors will face competition from existing and future automobile manufacturers in the luxury sedan market, including Audi, BMW, Lexus, and Mercedes. Many established and new automobile manufacturers have entered or announced plans to enter the alternative fuel market. Nissan introduced the Nissan Leaf in 2010 and Ford announced plans to introduce an electric vehicle in 2011. Several manufacturers, including General Motors, Toyota, Ford, and Honda are selling hybrid vehicles and some have announced plug-in versions of the hybrid vehicles. General Motors introduced the Chevrolet Volt, which is a plug-in hybrid vehicle. Reports have shown that BMW, Daimler, Lexus, Audi, Renault, and Volkswagen are also developing electric vehicles. Electric vehicles have already been brought to market in China and other foreign countries and a number of those manufacturers are expected to enter the United States market as well. Most of Tesla Motors current and potential competitors have significantly greater financial, technical, manufacturing, marketing, and resources than Tesla. They may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, 13 | P a g e
sale, and support of their products. All of their competitors have more extensive customer bases and broader customer and industry relationships. Almost all of the competitors have longer operating histories and greater name recognition. They may also be in a stronger position to respond quickly to new technologies. Tesla believes their exclusive focus on electric vehicles and electric vehicle components, as well as their history of vehicle development and production, is the basis on which they can compete in the global automotive market in spite of the challenges posed by the competition.
Company Description Tesla Motors designs, develops, manufactures, and sells high-performance electric vehicles and advanced electric vehicle powertrain components. They own their sales and service network and have structured their business in a manner that will enable the rapid development and launch of advanced electric vehicles and technology. Tesla Motors believes their vehicles, electric vehicle engineering expertise, and operational structure differentiates them from the current automobile manufactures. The automotive industry is an industry which is heavily dependent on their customer base. The major players need to continuously update their technology in order to stay ahead. The following chart shows how Tesla Motors capabilities and resources can meet the industry need.
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Table 2: Tesla Motor’s Capabilities vs. Market Needs
Importance to Industry LOW MOD HIGH X X X X X X X X
Function MANAGEMENT ORGANIZATION/HUMAN RESOURCES CUSTOMER BASE RESEARCH & DEVELOPMENT OPERATIONS MARKETING & SALES DISTRIBUTION & DELIVERY FINANCIAL CONDITION
Capabilities and Resources POOR FAIR GOOD EXCEL X X X X X X X X
Tesla Motors is a new company in the automotive industry and thus does not have a strong customer base. They have found a small niche in the automotive industry with luxury electric vehicles which has allowed them to survive with little marketing and sales. Tesla Motors excels in research and development which has led them to develop the first all electric roadster and give them an edge against the competition. The following chart takes the capabilities of Tesla Motors and compares them to critical success factors in the automotive industry.
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Figure 2: Capabilities vs. Industry CSF’s
Tesla Motors has the capabilities to become a dominant company. They are continuing to improve the research and development team through research partnerships and also building several manufacturing facilities for greater production. A value chain analysis for Tesla Motors shows that the primary function is heavily placed on researching new technology and creating a unique service to its consumer market. Elon Musk is a strong CEO for Tesla Motors. He is well known for co-founding Paypal, SpaceX, and Tesla Motors. His financial investments have allowed Tesla to grow but still have not proven their ability for stable financial control, shown by negative net income over the past five years. The following figure highlights the key components of the value chain analysis.
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Figure 3: Value Chain Analysis
Financials Tesla Motors is a young company in an industry which is filled with large companies and very large histories. According to Tesla Motors’ financial statements, the company has been improving over the past five years. The balance sheets for the previous two years have been analyzed. The next table shows some significant ratios during these years based on the financial statements. Table 3: Key Ratios for Tesla Motors
Financial Leverage Current Ratio Quick Ratio Debt to Equity 2010 1.86 2.76 2.1 0.86 2009 -0.51 1.75 1.27 -0.26
Tesla Motors’ financial standing has improved from 09-10. The current ratio increased to above a 2 and the quick ratio had been above a 1 and increased from the previous year which means 17 | P a g e
Tesla Motors had enough money to pay all of its credit. The debt to equity ratio is small but has grown from the previous year which shows Tesla Motors’ intention of investing in itself instead of borrowing. Key figures from the analysis of the income and expense sheets are shown in Table 4 for the past 3 years. Table 4: Key figures for Income and Expenses (in thousands)
Gross Margin % Gross Profit EBIT Net Income 2010 26.32 30,731 -146,838 -154,328 2009 8.52 9,535 -51,897 -55,740 2008 -7.74 -1,141 -78,504 -82,782
Although Tesla Motors has been losing money each year, improvement is seen with positive gross margin percentage. The increasing net loss is mainly due to the large amount of cash which Tesla Motors invests in operating expenses and research and development. The breakdown of operations data is shown in the following figure.
Percentages of Net Sale 0.09%
0.37%
2.42%
0.06% COGS R&D
31.67%
31.14%
SG&A Interest Income Interest expense Other Expense
34.24%
Income Taxes
Figure 4: Percentages of Net Sales for 2010
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The majority of revenue is split into COGS, R&D, and SG&A. Tesla Motors has been spending an even amount of its revenue on purchasing and assembling the electric vehicles and powertrain technology, researching and developing new technologies, and on selling the vehicles. Reducing the cost of COGS, R&D, and SG&A would provide the most yield to the net income. Their unique product, technology, and selling strategy have led to their success so changes in these areas will be difficult to implement, but are the critical to the success of Tesla Motors. Key statistics for the past 2 years from the income and expense sheets are shown below in Table 5. Table 5: Return Percentages and Cash to Cash Cycle
ROA
ROE
Days of Accounts Receivable
Day of Accounts Payable
Days of Inventory
Cash to Cash Days
2010
-38.03%
-74.54%
14
84
131
61
2009
-39.79%
21.99%
7
36
56
27
The negative ROA and ROE show the extent to which Tesla Motors has struggled as a new business in the automotive industry. These numbers are due to the negative EBIT and net income for the two year span. From 2009 to 2010 the Cash to Cash days have more than doubled, however large cash to cash cycles are relatively common in the auto industry since most automotive vehicles are bought on loans. Tesla Motors’ cash flow is split into operating, investing, and financing activities. They continue to experience negative cash flow from operations as they expand their business and build infrastructure in the United States and internationally. They cash flow from operating activities is significantly affected by the cash investment to support the growth in areas such and research and development and selling, general, and administrative. They continue to experience 19 | P a g e
negative cash flow from investing activities as they expand their business and develop the Model S. Cash flow from financing activities is mainly from loans under the DOE Loan Facility and net proceeds from IPO and private placements. A summary of cash flows is presented in the table below. Table 6: Summary of Cash Flows 2010
2009
2008
(in thousands)
Net cash used in operating activities
$(127,817)
$ (80,825)
$(52,412)
Net cash used in investing activities
(180,297)
(14,244)
(11,590)
338,045
155,419
56,068
Net cash provided by financing activities
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Appendix A: Balance Sheets Tesla Motors, Inc. Consolidated Balance Sheets (in thousands, except share and per share data)
Assets Current assets Cash and cash equivalents Restricted cash Accounts receivable Inventory Prepaid expenses and other current assets Total current assets Operating lease vehicles, net Property, plant and equipment, net Restricted cash Other assets Total assets Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit) Current liabilities Accounts payable Accrued liabilities Deferred development compensation Deferred revenue Capital lease obligations, current portion Reservation payments Total current liabilities Common stock warrant liability Convertible preferred stock warrant liability Capital lease obligations, less current portion Deferred revenue, less current portion Long-term debt Other long-term liabilities Total liabilities Commitments and contingencies (Note 14) Convertible preferred stock; $0.001 par value; 221,903,982 shares authorized Series A convertible preferred stock; 0 and 7,213,000 shares issued and outstanding as of December 31, 2010 and 2009, respectively (Liquidation value: $3,556) Series B convertible preferred stock; 0 and 17,459,456 shares issued and outstanding as of December 31, 2010 and 2009, respectively (Liquidation value: $12,920) Series C convertible preferred stock; 0 and 35,242,290 shares issued and outstanding as of December 31, 2010 and 2009, respectively (Liquidation value: $40,000) Series D convertible preferred stock; 0 and 18,440,449 shares issued and outstanding as of December 31, 2010 and 2009, respectively (Liquidation value: $45,000) Series E convertible preferred stock; 0 and 102,776,779 shares issued and outstanding as of December 31, 2010 and 2009, respectively (Liquidation value: $258,175) Series F convertible preferred stock; 0 and 27,785,263 shares issued and outstanding as of December 31, 2010 and 2009, respectively (Liquidation value: $82,500) Total convertible preferred stock Stockholders’ equity (deficit) Common stock; $0.001 par value; 2,000,000,000 and 106,666,667 shares authorized as of December 31, 2010 and 2009, respectively; 94,908,370 and 7,284,200 shares issued and outstanding as of December 31, 2010 and 2009, respectively Additional paid-in capital Accumulated deficit Total stockholders’ equity (deficit) Total liabilities, convertible preferred stock and stockholders’ equity (deficit)
December 31, 2010
December 31, 2009
$
99,558 73,597 6,710 45,182 10,839 235,886 7,963 114,636 4,867 22,730 386,082
$
28,951 20,945 — 4,635 279 30,755 85,565 6,088 — 496 2,783 71,828 12,274 179,034
$
$
$
$
$
69,627 — 3,488 23,222 4,222 100,559 — 23,535 3,580 2,750 130,424
15,086 14,532 156 1,377 290 26,048 57,489 — 1,734 800 1,240 — 3,459 64,722
—
3,549
—
12,899
—
39,789
—
44,941
—
135,669
— —
82,378 319,225
95 621,935 (414,982) 207,048 386,082
$
7 7,124 (260,654) (253,523) 130,424
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Appendix B: Cash Flow Statements Tesla Motors, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2010 2009 2008 Cash flows from operating activities Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization Change in fair value of warrant liabilities Gain on extinguishment of convertible notes and warrants Stock-based compensation Excess tax benefits from stock-based compensation Loss on abandonment of fixed assets Inventory write-downs Interest on convertible notes Changes in operating assets and liabilities Accounts receivable Inventory Prepaid expenses and other current assets Operating lease assets Other assets Accounts payable Accrued liabilities Deferred development compensation Deferred revenue Reservation payments Other long-term liabilities Net cash used in operating activities Cash flows from investing activities Payments related to acquisition of Fremont manufacturing facility and related assets Purchases of property and equipment excluding capital leases Transfer of restricted cash into our dedicated Department of Energy account Withdrawals out of our dedicated Department of Energy account Increase in other restricted cash Net cash used in investing activities Cash flows from financing activities Proceeds from issuance of common stock in initial public offering Proceeds from issuance of common stock in Toyota private placement Proceeds from issuance of common stock in Panasonic private placement Proceeds from issuance of Series F convertible preferred stock, net of issuance costs of $122 Proceeds from issuance of Series E convertible preferred stock, net of issuance costs of $556 Principal payments on capital leases and other debt Proceeds from long-term debt and other long-term liabilities Proceeds from issuance of convertible notes and warrants Proceeds from exercise of stock options Excess tax benefits from stock-based compensation Common stock and loan facility issuance costs Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental Disclosures Interest paid Income taxes paid Supplemental noncash investing and financing activities Conversion of preferred stock to common stock Issuance of common stock upon net exercise of warrants Issuance of convertible preferred stock warrant Issuance of common stock warrant Conversion of notes payable to Series E convertible preferred stock Exchange of convertible notes payable Exchange of accrued interest for convertible notes payable Property and equipment acquired under capital lease
$(154,328) $ (55,740) $(82,782) 10,623 5,022 — 21,156 (74) 8 951 —
6,940 1,128 (1,468) 1,434 — 385 1,353 2,686
4,157 2,800 (1,245) 437 — — 4,297 3,692
(3,222) (20,115) (4,977) (8,398) (463) (212) 13,345 (156) 4,801 4,707 3,515 (127,817)
(168) (7,925) (2,042) — (445) 902 3,387 (10,017) (1,456) (21,971) 2,192 (80,825)
(3,261) (18,839) 750 — 12 8,815 2,633 10,173 4,073 10,684 1,192 (52,412)
(65,210) (40,203) (100,000) 26,403 (1,287) (180,297)
— (11,884) — — (2,360) (14,244)
— (10,630) — — (960) (11,590)
188,842 — 50,000 — 30,000 — — 82,378 — 49,444 (315) (322) 71,828 — — 25,468 1,350 497 74 — (3,734) (2,046) 338,045 155,419 29,931 60,350 69,627 9,277 $ 99,558 $ 69,627 $ $
1,138 9 319,225 6,962 6,294 1,701 — — — —
$
70 171 — — — — 86,225 19,073 1,791 183
$
— — — — — (191) 1,000 54,782 477 — — 56,068 (7,934) 17,211 9,277 41 — — — — — — 16,751 1,328 322
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Appendix C: Operations Data Statements Years Ended December 31, 2009 2008 2007 (in thousands, except share and per share data)
2010
Consolidated Statements of Operations Data: Revenues: Automotive sales Development services Total revenues Cost of revenues (1): Automotive sales Development services Total cost of revenues Gross profit (loss) Operating expenses (1): Research and development (net of development compensation of $23,249 for the year ended December 31, 2009) Selling, general and administrative Total operating expenses Loss from operations Interest income Interest expense Other income (expense), net (2) Loss before income taxes Provision for income taxes Net loss Net loss per share of common stock, basic and diluted (3) Weighted average shares used in computing net loss per share of common stock, basic and diluted (3)
$
97,078 19,666 116,744
$ 111,943 — 111,943
79,982 6,031 86,013 30,731
102,408 — 102,408 9,535
$
14,742 — 14,742
$
15,883 — 15,883 (1,141)
2006
73 — 73
$
— — — — — — —
9 — 9 64
92,996 84,573 177,569 (146,838) 258 (992) (6,583) (154,155) 173 $ (154,328)
19,282 42,150 61,432 (51,897) 159 (2,531) (1,445) (55,714) 26 $ (55,740)
53,714 23,649 77,363 (78,504) 529 (3,747) (963) (82,685) 97 $ (82,782)
62,753 17,244 79,997 (79,933) 1,749 — 137 (78,047) 110 $ (78,157)
24,995 5,436 30,431 (30,431) 938 (423) 59 (29,857) 100 $ (29,957)
$
$
$
$
$
(3.04)
50,718,302
(7.94)
7,021,963
(12.46)
6,646,387
(22.69)
3,443,806
(10.18)
2,941,411
23 | P a g e