What changed in this filing

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Item 1A. Risk Factors

2021-07-27 compared with 2021-04-28 · 31 added, 36 removed, 426 unchanged (14% of the section changed)

6 unchanged sentences

Government regulations and shifting social behaviors have limited or closed non-essential transportation, government functions, business activities and person-to-person interactions.

In some cases, the relaxation of such trends has been followed by actual or contemplated returns to stringent restrictions on gatherings or commerce, including in parts of the U.S.

and a number of areas in Europe.

During 2020, we temporarily suspended operations at each of our manufacturing facilities worldwide, and certain of our suppliers also shut down operations temporarily or permanently.

In some cases, the relaxation of such trends has been followed by actual or contemplated returns to stringent restrictions on gatherings or commerce, including in parts of the U.S., and the rest of the world.

During 2020, we temporarily suspended operations at each of our manufacturing facilities worldwide, and certain of our suppliers also shut down operations temporarily or permanently, including during the recently re-imposed lockdowns in certain parts of the world.

We instituted temporary employee furloughs and compensation reductions while our U.S.

3 unchanged sentences

For example, pandemic-related issues have exacerbated port congestion and intermittent supplier shutdowns and delays, resulting in additional expenses to expedite delivery of critical parts.

Similarly, increased demand for personal electronics has created a shortfall of microchips, which has caused challenges in our supply chain and production.

Similarly, increased demand for personal electronics has created a shortfall of semiconductors, which has caused challenges in our supply chain and production.

Sustaining our production trajectory will require the ongoing readiness and solvency of our suppliers and vendors, a stable and motivated production workforce and government cooperation, including for travel and visa allowances.

5 unchanged sentences

We have previously experienced and may in the future experience launch and production ramp delays for new products and features.

For example, we encountered unanticipated supplier issues that led to delays during the initial ramp of Model X and experienced challenges with a supplier and with ramping full automation for certain of our initial Model 3 manufacturing processes.

For example, we encountered unanticipated supplier issues that led to delays during the initial ramp of our first Model X and experienced challenges with a supplier and with ramping full automation for certain of our initial Model 3 manufacturing processes.

In addition, we may introduce in the future new or unique manufacturing processes and design features for our products.

26 unchanged sentences

Moreover, because of our unique expertise with our vehicles, we recommend that our vehicles be serviced by us or by certain authorized professionals.

If we experience delays in adding such servicing capacity or servicing our vehicles efficiently, or experience unforeseen issues with the reliability of our vehicles, particularly higher-volume and newer additions to our fleet such as Model 3 and Model Y, it could overburden our servicing capabilities and parts inventory.

If we experience delays in adding such servicing capacity or servicing our vehicles efficiently, or experience unforeseen issues with the reliability of our vehicles, particularly higher-volume and relatively newer additions to our fleet such as Model 3 and Model Y, it could overburden our servicing capabilities and parts inventory.

Similarly, the increasing number of Tesla vehicles also requires us to continue to rapidly increase the number of our Supercharger stations and connectors throughout the world.

18 unchanged sentences

Our suppliers may fail to deliver components according to schedules, prices, quality and volumes that are acceptable to us, or we may be unable to manage these components effectively.

Our products contain thousands of parts that we purchase globally from hundreds of suppliers including single-source direct suppliers.

Our products contain thousands of parts purchased globally from hundreds of suppliers, including single-source direct suppliers.

This exposes us to multiple potential sources of component shortages, such as those that we experienced in 2012 and 2016 with our initial Model S and Model X ramps.

Unexpected changes in business conditions, materials pricing, labor issues, wars, governmental changes, tariffs, natural disasters such as the March 2011 earthquakes in Japan, health epidemics such as the global COVID-19 pandemic, trade and shipping disruptions and other factors beyond our or our suppliers’

Unexpected changes in business conditions, materials pricing, labor issues, wars, trade policies, natural disasters such as the March 2011 earthquakes in Japan, health epidemics such as the global COVID-19 pandemic, trade and shipping disruptions and other factors beyond our or our suppliers’

control could also affect these suppliers’

ability to deliver components to us or to remain solvent and operational.

For example, a global shortage of microchips has been reported since early 2021 and has caused challenges in our supply chain and production.

The unavailability of any component or supplier could result in production delays, idle manufacturing facilities, product design changes and loss of access to important technology and tools for producing and supporting our products.

For example, a global shortage of semiconductors has been reported since early 2021 and has caused challenges in the manufacturing industry and impacted our supply chain and production as well.

We have used alternative parts and programmed software to mitigate the challenges caused by these shortages, but there is no guarantee we may be able to continually do so as we scale production to meet our growth targets.

Moreover, significant increases in our production, such as for Model 3 and Model Y, or product design changes by us have required and may in the future require us to procure additional components in a short amount of time.

19 unchanged sentences

However, we have to date fully qualified only a very limited number of such suppliers and have limited flexibility in changing suppliers.

Any disruption in the supply of battery cells from our suppliers could limit production of our vehicles and energy storage products.

Any disruption in the supply of battery cells from our suppliers could limit production of our vehicles and energy

storage products.

In the long term, we intend to supplement cells from our suppliers with cells manufactured by us, which we believe will be more efficient, manufacturable at greater volumes and cost-effective than currently available cells.

However, our efforts to

develop and manufacture such battery cells have required and may require significant investments, and there can be no assurance that we will be able to achieve these targets in the timeframes that we have planned or at all.

However, our efforts to develop and manufacture such battery cells have required and may require significant investments, and there can be no assurance that we will be able to achieve these targets in the timeframes that we have planned or at all.

If we are unable to do so, we may have to curtail our planned vehicle and energy storage product production or procure additional cells from suppliers at potentially greater costs, either of which may harm our business and operating results.

26 unchanged sentences

Our operations in such jurisdictions, particularly as a company based in the U.S., create risks relating to conforming our products to regulatory and safety requirements and charging and other electric infrastructures;

organizing local operating entities;

organizing local

operating entities;

establishing, staffing and managing foreign business locations;

attracting local customers;

navigating foreign

government taxes, regulations and permit requirements;

navigating foreign government taxes, regulations and permit requirements;

enforceability of our contractual rights;

35 unchanged sentences

We also currently offer vehicle financing arrangements directly through our local subsidiaries in certain markets.

Depending on the country, such arrangements are available for specified models and may include operating leases directly with us

under which we typically receive only a very small portion of the total vehicle purchase price at the time of lease, followed by a stream of payments over the term of the lease.

Depending on the country, such arrangements are available for specified models and may include operating leases directly with us under which we typically receive only a very small portion of the total vehicle purchase price at the time of lease, followed by a stream of payments over the term of the lease.

We have also offered various arrangements for customers of our solar energy systems whereby they pay us a fixed payment to lease or finance the purchase of such systems or purchase electricity generated by them.

29 unchanged sentences

Employees may leave Tesla or choose other employers over Tesla due to various factors, such as a very competitive labor market for talented individuals with automotive or technology experience, or any negative publicity related to us.

In regions where we have or will have operations, particularly significant engineering and manufacturing centers, there is strong competition for individuals with skillsets needed for our business, including specialized knowledge of electric vehicles, software engineering, manufacturing engineering and electrical and building construction expertise.

In regions where we have or will have operations, particularly significant engineering and manufacturing centers, there is strong competition for individuals with skillsets needed for our business, including specialized knowledge of electric vehicles, engineering and electrical and building construction expertise.

Moreover, we may be impacted by perceptions relating to reductions in force that we have conducted in the past in order to optimize our organizational structure and reduce costs and the departure of certain senior personnel for various reasons.

38 unchanged sentences

In March 2021, the NLRB adopted a portion of the recommendation and overturned others.

We have filed a Notice of Appeal with the United States Circuit Court for the Fifth Circuit.

Tesla appealed the decision to the United States Circuit Court for the Fifth Circuit, which is currently pending.

Any unfavorable ultimate outcome for Tesla may have a negative impact on the perception of Tesla’s treatment of our employees.

3 unchanged sentences

As a manufacturing company, we must manage the risk of product recalls with respect to our products.

Recalls for our vehicles have resulted from, for example, industry-wide issues with airbags from a particular supplier, concerns of corrosion in Model S and Model X power steering assist motor bolts, certain suspension failures in Model S and Model X and issues with Model S and Model X media control units.

Recalls for our vehicles have resulted from, for example, industry-wide issues with airbags from a particular supplier, concerns of corrosion in Model S and Model X power steering assist motor bolts, certain suspension failures in Model S and Model X, issues with Model S and Model X media control units and improper torqueing of bolts to internal specifications on Model 3 and Model Y.

In addition to recalls initiated by us for various causes, testing of or investigations into our products by government regulators or industry groups may compel us to initiate product recalls or may result in negative public perceptions about the safety of our products, even if we disagree with the defect determination or have data that shows the actual safety risk to be non-existent.

8 unchanged sentences

As part of our energy generation and storage system contracts, we may provide the customer with performance guarantees that guarantee that the underlying system will meet or exceed the minimum energy generation or other energy performance requirements specified in the contract.

Under these performance guarantees, we bear the risk of electricity production or other performance shortfalls, even if they result from failures in components from third party manufacturers.

Under these performance guarantees, we generally bear the risk of electricity production or other performance shortfalls, even if they result from failures in components from third party manufacturers.

These risks are exacerbated in the event such manufacturers cease operations or fail to honor their warranties.

8 unchanged sentences

There is no guarantee that we will have sufficient cash flow from our business to pay our indebtedness or that we will not incur additional indebtedness.

As of March 31, 2021, we and our subsidiaries had outstanding $9.52 billion in aggregate principal amount of indebtedness (see Note 10, Debt , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

As of June 30, 2021, we and our subsidiaries had outstanding $8.03 billion in aggregate principal amount of indebtedness (see Note 10, Debt , to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Our consolidated indebtedness may increase our vulnerability to any generally adverse economic and industry conditions.

We and our subsidiaries may,

subject to the limitations in the terms of our existing and future indebtedness, incur additional debt, secure existing or future debt or recapitalize our debt.

We and our subsidiaries may, subject to the limitations in the terms of our existing and future indebtedness, incur additional debt, secure existing or future debt or recapitalize our debt.

Holders of convertible senior notes issued by us or our subsidiary may convert such notes at their option prior to the scheduled maturities of the respective convertible senior notes under certain circumstances pursuant to the terms of such notes.

Upon conversion of the applicable convertible senior notes, we will be obligated to deliver cash and/or shares pursuant to the terms of such notes.

For example, as our stock price has significantly increased recently, we have seen higher levels of early conversions of such “in-the-money”

For example, as our stock price has significantly increased, we have seen higher levels of early conversions of such “in-the-money”

convertible senior notes.

25 unchanged sentences

In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity, allowing us to invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future.

Thereafter, we invested certain of such cash in bitcoin and also began accepting bitcoin as a form of payment for certain of our products in specified regions, subject to applicable laws.

We generally intend to hold our bitcoin positions long-term regardless of the manner of acquisition.

Thereafter, we invested certain of such cash in bitcoin and also accepted bitcoin as a form of payment for sales of certain of our products in specified regions, subject to applicable laws, and suspended this practice in May 2021.

We believe in the long-term potential of digital assets both as an investment and also as a liquid alternative to cash.

As with any investment and consistent with how we manage fiat-based cash and cash equivalent accounts, we may increase or decrease our holdings of digital assets at any time based on the needs of the business and on our view of market and environmental conditions.

The prices of digital assets have been in the past and may continue to be highly volatile, including as a result of various associated risks and uncertainties.

9 unchanged sentences

We transact business globally in multiple currencies and have foreign currency risks related to our revenue, costs of revenue, operating expenses and localized subsidiary debt denominated in currencies other than the U.S.

dollar, currently primarily the Chinese yuan, euro, Canadian dollar and Swiss franc.

dollar, currently primarily the Chinese yuan, euro, Canadian dollar and Australian dollar.

To the extent we have significant revenues denominated in such foreign currencies, any strengthening of the U.S.

37 unchanged sentences

The benefit available under net metering has been or has been proposed to be reduced, altered or eliminated in several jurisdictions, and has also been contested and may continue to be contested before the Federal Energy Regulatory Commission.

Any reductions or terminations of such incentives may harm our business, prospects, financial condition and operating results by making our products less competitive for potential customers, increasing our cost of capital and adversely impacting our ability to attract investment partners and to form new financing funds for our solar and energy storage assets.

Any reductions or terminations of such incentives may harm our business, prospects, financial condition and operating results by making our products less competitive for customers, increasing our cost of capital and adversely impacting our ability to attract investment partners and to form new financing funds for our solar and energy storage assets.

Finally, we and our fund investors claim these U.S.

20 unchanged sentences

In addition, certain emerging privacy laws are still subject to a high degree of uncertainty as to their interpretation, application and impact, and may require extensive system and operational changes, be difficult to implement, increase our operating costs, adversely impact the cost or attractiveness of the products or services we offer, or result in adverse publicity and harm our reputation.

For example, in May 2018, the General Data Protection Regulation began to fully apply to the processing of personal information collected from individuals located in the European Union, and has created new compliance obligations and significantly increased fines for noncompliance.

Similarly, as of January 2020, the California Consumer Privacy Act imposes certain legal obligations on our use and processing of personal information related to California residents.

For example, the General Data Protection Regulation applies to the processing of personal information collected from individuals located in the European Union, and has created new compliance obligations and significantly increased fines for noncompliance.

Similarly, the California Consumer Privacy Act imposes certain legal obligations on our use and processing of personal information related to California residents.

Finally, new privacy and cybersecurity laws are coming into effect in China.

67 unchanged sentences

Any of the foregoing provisions and terms that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

DEFAULT UPON SENIOR SECURITIES

MINE SAFETY DISCLOSURES

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors