What changed in this filing

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Item 1A. Risk Factors

2021-10-25 compared with 2021-07-27 · 46 added, 42 removed, 415 unchanged (17% of the section changed)

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

In addition, labor shortages resulting from the pandemic may lead to increased difficulty in hiring and retaining manufacturing and service workers, as well as increased labor costs.

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.

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homes and workplaces and touchless deliveries, but there is no guarantee that such models will be scalable or be accepted globally.

Likewise, as we ramp Solar Roof, we are working to substantially increase installation personnel and decrease installation times.

Likewise, as we ramp Solar Roof, we are working to substantially increase installation capabilities and decrease installation times.

If we are not successful in matching such capabilities with actual production, or if we experience unforeseen production delays or inaccurately forecast demand for the Solar Roof, our business, financial condition and operating results may be harmed.

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If the market for electric vehicles in general and Tesla vehicles in particular does not develop as we expect, develops more slowly than we expect, or if demand for our vehicles decreases in our markets or our vehicles compete with each other, our business, prospects, financial condition and operating results may be harmed.

We are still at an earlier stage and have limited resources and production relative to established competitors that offer internal combustion engine vehicles.

We are still at an earlier stage of development and have limited resources and production relative to established competitors that offer internal combustion engine vehicles.

In addition, electric vehicles still comprise a small percentage of overall vehicle sales.

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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, 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’

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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.

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, as well as impact our capacity expansion.

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.

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While we believe that we will be able to secure additional or alternate sources or develop our own replacements for most of our components, there is no assurance that we will be able to do so quickly or at all.

Additionally, we may be unsuccessful in our continuous efforts to negotiate with existing suppliers to obtain cost reductions and avoid unfavorable changes to terms, source less expensive suppliers for certain parts and redesign certain parts to make them less expensive to produce.

Any of these occurrences may harm our business, prospects, financial condition and operating results.

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Currently, we rely on suppliers such as Panasonic for these cells.

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.

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, 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.

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 more 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.

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Increased competition could result in our lower vehicle unit sales, price reductions, revenue shortfalls, loss of customers and loss of market share, which may harm our business, financial condition and operating results.

We also face competition in our energy generation and storage business from other manufacturers, developers, installers and service providers of competing energy systems, as well as from large utilities.

We also face competition in our energy generation and storage business from other manufacturers, developers, installers and service providers of competing energy technologies, as well as from large utilities.

Decreases in the retail or wholesale prices of electricity from utilities or other renewable energy sources could make our products less attractive to customers and lead to an increased rate of residential customer defaults under our existing long-term leases and PPAs.

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We are subject to legal and regulatory requirements, political uncertainty and social, environmental and economic conditions in numerous jurisdictions, including markets in which we generate significant sales, over which we have little control and which are inherently unpredictable.

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;

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;

establishing, staffing and managing foreign business locations;

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As is true for other automakers, our vehicles have been involved and we expect in the future will be involved in accidents resulting in death or personal injury, and such accidents where Autopilot or FSD features are engaged are the subject of significant public attention.

We have experienced and we expect to continue to face claims arising from or related to misuse or claimed failures of such new technologies that we are pioneering.

We have experienced and we expect to continue to face claims and regulatory scrutiny arising from or related to misuse or claimed failures of such new technologies that we are pioneering.

In addition, the battery packs that we produce make use of lithium-ion cells.

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As we temporarily suspended most of our manufacturing operations at Gigafactory New York pursuant to a New York State executive order issued in March 2020 as a result of the COVID-19 pandemic, we were granted a one-year deferral of our obligation to be compliant with our applicable targets under such agreement on April 30, 2020, which was memorialized in an amendment to our agreement with the SUNY Foundation in July 2020.

In April 2021, we were granted an additional deferral through December 31, 2021 subject only to memorialization in writing by us and the SUNY Foundation, as our operations at Gigafactory New York have not yet fully ramped due to a number of factors related to the pandemic.

In April 2021, we were granted an additional deferral through December 31, 2021 which was memorialized in an amendment to our agreement with the SUNY Foundation in August 2021, as our operations at Gigafactory New York have not yet fully ramped due to a number of factors related to the pandemic.

While we expect to have and grow significant operations at Gigafactory New York and the surrounding Buffalo area, any failure by us in any year over the course of the term of the agreement to meet all applicable future obligations may result in our obligation to pay a “program payment”

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None of our key employees is bound by an employment agreement for any specific term and we may not be able to successfully attract and retain senior leadership necessary to grow our business.

Our future success also depends upon our ability to attract, hire and retain a large number of engineering, manufacturing, marketing, sales and delivery, service, installation, technology and support personnel, especially to support our planned high-volume product sales, market and geographical expansion and technological innovations.

future success also depends upon our ability to attract, hire and retain a large number of engineering, manufacturing, marketing, sales and delivery, service, installation, technology and support personnel, especially to support our planned high-volume product sales, market and geographical expansion and technological innovations.

Recruiting efforts, particularly for senior employees, may be time-consuming, which may delay the execution of our plans.

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functionality, user interface and performance characteristics or to gain access to data stored in or generated by our products.

We encourage reporting of potential vulnerabilities in the security of our products through our security vulnerability reporting policy, and we aim to remedy any reported and verified vulnerability.

We encourage reporting of potential vulnerabilities in the security of our products through our security vulnerability reporting policy, and we aim to remedy any reported

and verified vulnerability.

However, there can be no assurance that any vulnerabilities will not be exploited before they can be identified, or that our remediation efforts are or will be successful.

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We may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God and other claims against us, for which we may have no insurance coverage.

As a general matter, we do not maintain as much insurance coverage as many other companies do, and in some cases, we do not maintain any at all.

As a general matter, we do not maintain as much insurance

coverage as many other companies do, and in some cases, we do not maintain any at all.

Additionally, the policies that we do have may include significant deductibles or self-insured retentions, policy limitations and exclusions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us.

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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 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).

As of September 30, 2021, we and our subsidiaries had outstanding $6.70 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.

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Alternatively, as we ramp and mature the production of our products to higher levels, we may discontinue the use of already installed equipment in favor of different or additional equipment.

The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations may be harmed.

useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations may be harmed.

We hold and may acquire digital assets that may be subject to volatile market prices, impairment and unique risks of loss.

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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 Australian dollar.

dollar, currently primarily the Chinese yuan, euro, Norwegian krone and Canadian dollar.

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

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Accordingly, we may consider the entering into licensing agreements with respect to such rights, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur, and such licenses and associated litigation could significantly increase our operating expenses.

In addition, if we are determined to have or believe there is a high likelihood that we have infringed upon a third party’s intellectual property rights, we may be required to cease making, selling or incorporating certain components or intellectual property into the goods and services we offer, to pay substantial damages and/or license royalties, to redesign our products and services and/or to establish and maintain alternative branding for our products and services.

In addition, if we are determined to have or believe there is a high likelihood that we have infringed upon a third party’s intellectual property rights, we may

be required to cease making, selling or incorporating certain components or intellectual property into the goods and services we offer, to pay substantial damages and/or license royalties, to redesign our products and services and/or to establish and maintain alternative branding for our products and services.

In the event that we are required to take one or more such actions, our brand, business, financial condition and operating results may be harmed.

Our operations could be adversely affected by events outside of our control, such as natural disasters, wars or health epidemics.

We may be impacted by natural disasters, wars, health epidemics, weather conditions or other events outside of our control.

For example, our corporate headquarters, the Fremont Factory and Gigafactory Nevada are located in seismically active regions in Northern California and Nevada, and our Gigafactory Shanghai is located in a flood-prone area.

We may be impacted by natural disasters, wars, health epidemics, weather conditions, power outages or other events outside of our control.

For example, our current corporate headquarters, the Fremont Factory and Gigafactory Nevada are located in seismically active regions in Northern California and Nevada, and our Gigafactory Shanghai is located in a flood-prone area.

Moreover, the area in which our Gigafactory Texas is being built experienced severe winter storms in the first quarter of 2021 that had a widespread impact on utilities and transportation.

If major disasters such as earthquakes, floods or other events occur, or our information system or communications network breaks down or operates improperly, our headquarters and production facilities may be seriously damaged, or we may have to stop or delay production and shipment of our products.

If major disasters such as earthquakes, floods or other events occur, or our information system or communication breaks down or operates improperly, our headquarters and production facilities may be seriously damaged, or we may have to stop or delay production and shipment of our products.

In addition, the global COVID-19 pandemic has impacted economic markets, manufacturing operations, supply chains, employment and consumer behavior in nearly every geographic region and industry across the world, and we have been, and may in the future be, adversely affected as a result.

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and abroad, including certain tax exemptions, tax credits and rebates, may be reduced, eliminated or exhausted from time to time.

For example, a $7,500 federal tax credit that was available in the U.S.

for the purchase of our vehicles was reduced in phases during and ultimately ended in 2019.

We believe that this sequential phase-out likely pulled forward some vehicle demand into the periods preceding each reduction.

Moreover, previously available incentives favoring electric vehicles in areas including Ontario, Canada, Germany, Hong Kong, Denmark and California have expired or were cancelled or temporarily unavailable, and in some cases were not eventually replaced or reinstituted, which may have negatively impacted sales.

For example, previously available incentives favoring electric vehicles in areas including Ontario, Canada, Germany, Hong Kong, Denmark and California have expired or were cancelled or temporarily unavailable, and in some cases were not eventually replaced or reinstituted, which may have negatively impacted sales.

Certain government and economic incentives may also be implemented that provide disproportionate benefits to manufacturers who assemble domestically, have local suppliers or have other characteristics that may not apply to Tesla.

Any similar developments could have some negative impact on demand for our vehicles, and we and our customers may have to adjust to them.

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federal tax credits and certain state incentives in amounts based on independently appraised fair market values of our solar and energy storage systems.

Nevertheless, the relevant governmental authorities have audited such values and in certain cases have determined that these values should be lower, and they may do so again in the future.

Some governmental authorities have audited such values and in certain cases have determined that these values should be lower, and they may do so again in the future.

Such determinations may result in adverse tax consequences and/or our obligation to make indemnification or other payments to our funds or fund investors.

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The costs of compliance, including remediations of any discovered issues and any changes to our operations mandated by new or amended laws, may be significant, and any failures to comply could result in significant expenses, delays or fines.

We are also subject to laws and regulations applicable to the supply, manufacture, import, sale and service of automobiles both domestically and abroad.

as we have increased our employee headcount and operations, we are and may continue to be subject to increased scrutiny, including litigation and government investigations relating to allegations such as discrimination and workplace misconduct, that we will need to defend against.

If we are unable to successfully defend ourselves in such litigation or government investigations, it may harm our brand, ability to attract and retain qualified employees, business and financial condition.

We are also subject to laws and regulations applicable to the supply, manufacture, import, sale and service of our products both domestically and abroad.

For example, in countries outside of the U.S., we are required to meet standards relating to vehicle safety, fuel economy and emissions that are often materially different from requirements in the U.S., thus resulting in additional investment into the vehicles and systems to ensure regulatory compliance in those countries.

This process may include official review and certification of our vehicles

by foreign regulatory agencies prior to market entry, as well as compliance with foreign reporting and recall management systems requirements.

In particular, we offer in our vehicles Autopilot and FSD features that today assist drivers with certain tedious and potentially dangerous aspects of road travel, but which currently require drivers to remain fully engaged in the driving operation.

We are continuing to develop our FSD technology with the goal of achieving fully self-driving capability in the future.

This process may include official review and certification of our vehicles by foreign regulatory agencies prior to market entry, as well as compliance with foreign reporting and recall management systems requirements.

In particular, we offer in our vehicles Autopilot and FSD Capability features that today assist drivers with certain tedious and potentially dangerous aspects of road travel, but which currently require drivers to remain fully engaged in the driving operation.

We are continuing to develop our FSD Capability technology with the goal of achieving fully self-driving capability in the future.

There are a variety of international, federal and state regulations that may apply to the sale, registration and operation of fully self-driving vehicles, which include many existing vehicle standards that were not originally intended to apply to vehicles that may not have a driver.

Such regulations continue to rapidly change, which increases the likelihood of a patchwork of complex or conflicting regulations, or may delay products or restrict self-driving features and availability, which could adversely affect our business.

Finally, as a manufacturer, installer and service provider with respect to solar generation and energy storage systems, and a supplier of electricity generated and stored by certain of the solar energy and energy storage systems we install for customers, we are impacted by federal, state and local regulations and policies concerning electricity pricing, the interconnection of electricity generation and storage equipment with the electrical grid and the sale of electricity generated by third party-owned systems.

If regulations and policies that adversely impact the interconnection or use of our solar and energy storage systems are introduced, they could deter potential customers from purchasing our solar and energy storage products, threaten the economics of our existing contracts and cause us to cease solar and energy storage system sales and operations in the relevant jurisdictions, which may harm our business, financial condition and operating results.

Finally, as a manufacturer, installer and service provider with respect to solar generation and energy storage systems, a supplier of electricity generated and stored by certain of the solar energy and energy storage systems we install for customers, and a provider of grid services through virtual power plant models, we are impacted by federal, state and local regulations and policies concerning electricity pricing, the interconnection of electricity generation and storage equipment with the electrical grid and the sale of electricity generated by third party-owned systems.

If regulations and policies that adversely impact the interconnection or use of our solar and energy storage systems are introduced, they could deter potential customers from purchasing our solar and energy storage products and services, threaten the economics of our existing contracts and cause us to cease solar and energy storage system sales and services in the relevant jurisdictions, which may harm our business, financial condition and operating results.

Any failure by us to comply with a variety of U.S.

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Musk’s statement on August 7, 2018 that he was considering taking Tesla private.

Pursuant to the settlement, we, among other things, paid a civil penalty of $20 million, appointed an independent director as the chair of our board of directors, appointed two additional independent directors to our board of directors and made further enhancements to our disclosure controls and other corporate governance-related matters.

Pursuant to the settlement, we, among other things, paid a civil penalty of $20 million, appointed an independent director as the chair of our board of directors,

appointed two additional independent directors to our board of directors and made further enhancements to our disclosure controls and other corporate governance-related matters.

On April 26, 2019, this settlement was amended to clarify certain of the previously-agreed disclosure procedures, which was subsequently approved by the Court.

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The trading price of our common stock has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control.

Our common stock has experienced over the last 52 weeks an intra-day trading high of $900.40 per share and a low of $200.75 per share, as adjusted to give effect to the Stock Split.

Our common stock has experienced over the last 52 weeks an intra-day trading high of $910.00 per share and a low of $379.11 per share.

The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.

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Our guidance is based on certain assumptions such as those relating to anticipated production and sales volumes (which generally are not linear throughout a given period), average sales prices, supplier and commodity costs and planned cost reductions.

If our guidance varies from actual results due to our assumptions not being met or the impact on our financial performance that could occur as a result of various risks and uncertainties, the market value of our common stock could decline significantly.

If our guidance

varies from actual results due to our assumptions not being met or the impact on our financial performance that could occur as a result of various risks and uncertainties, the market value of our common stock could decline significantly.

Transactions relating to our convertible senior notes may dilute the ownership interest of existing stockholders, or may otherwise depress the price of our common stock.

The conversion of some or all of the convertible senior notes issued by us or our subsidiaries would dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of such notes by their holders, and we may be

required to deliver a significant number of shares.

Any sales in the public market of the common stock issuable upon such conversion could adversely affect their prevailing market prices.

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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