tsla-8k_20191023.htm
false 0001318605 0001318605 2019-10-23 2019-10-23

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549 

 

FORM 8-K 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 23, 2019 

 

Tesla, Inc.

(Exact Name of Registrant as Specified in Charter) 

 

  

 

 

 

 

Delaware

 

001-34756

 

91-2197729

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

 

 

3500 Deer Creek Road

Palo Alto, California 94304

(Address of Principal Executive Offices, and Zip Code)

 

(650) 681-5000

Registrant’s Telephone Number, Including Area Code

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock

TSLA

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 


 

Item 2.02Results of Operations and Financial Condition.

 

On October 23, 2019, Tesla, Inc. released its financial results for the quarter ended September 30, 2019 by posting its Third Quarter 2019 Update on its website. The full text of the update is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

This information is intended to be furnished under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01Financial Statements and Exhibits.

 

(d)

Exhibits.

 

Exhibit No.

 

Description

 

 

99.1

 

Tesla, Inc. Third Quarter 2019 Update, dated October 23, 2019.

 

 


 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

TESLA, INC.

 

 

By:

 

/s/ Zachary J. Kirkhorn

 

 

Zachary J. Kirkhorn

Chief Financial Officer

Date: October 23, 2019

 

 

tsla-ex991_154.pptx.htm

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Q3 2019 Update Exhibit 99.1

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Highlights 03 Financial Summary04 Operational Summary06 Vehicle Capacity 07 Core Technology08 Other Highlights09 Outlook10 Photos & Charts11 Financial Statements22 Additional Information27

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Last year, our story was about ramping the Model 3.  While total volumes are expected to grow by approximately 50% in 2019, this year our focus has been cost control and preparing for our next phase of growth. Despite reductions in the average selling price (ASP) of Model 3 as global mix stabilizes, our gross margins have strengthened. Additionally, operating expenses are at the lowest level since Model 3 production started. As a result, we returned to GAAP profitability in Q3 while generating positive free cash flow. This was possible by removing substantial cost from our business.  We have also dramatically improved the pace of execution and capital efficiency of new production lines. Gigafactory Shanghai was built in 10 months and is ready for production, while it was ~65% less expensive (capex per unit of capacity) to build than our Model 3 production system in the US.  Continued volume growth and cost control are an important combination for achieving sustained, industry-leading profitability. 3 $383M increase in our cash and cash equivalents balance to $5.3B $371M operating cash flow less capex (free cash flow) Cash Gigafactory Shanghai ahead of schedule, trial production started Model Y ahead of schedule, production expected by summer 2020 Record vehicle production of 96k and deliveries of 97k Record storage deployment of 477 MWh and 48% solar growth QoQ Profitability $261M GAAP operating income; 4.1% operating margin $143M GAAP net income; $342M non-GAAP net income ex-SBC 22.8% GAAP Automotive Gross Margin Operations S U M M A R Y H I G H L I G H T S

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F I N A N C I A L   S U M M A R Y (Unaudited) 4 ($ in millions, except percentages and per share data) Q3-2018 Q4-2018 Q1-2019 Q2-2019 Q3-2019 QoQ YoY  Automotive revenues 6,099  6,323  3,724  5,376  5,353 0% -12%    of which regulatory credits 189  95  216  111  134 21% -29% Automotive gross profit 1,574  1,537  751  1,016  1,222 20% -22% Automotive gross margin 25.8% 24.3% 20.2% 18.9% 22.8%   393 bp   -297 bp Total revenues 6,824  7,226  4,541  6,350  6,303 -1% -8% Total gross profit 1,524  1,443  566  921  1,191 29% -22% Total GAAP gross margin 22.3% 20.0% 12.5% 14.5% 18.9%   439 bp   -344 bp Operating expenses 1,108  1,029  1,088  1,088  930  -15% -16% Income (loss) from operations 416  414  (522) (167) 261  256% -37% Operating margin 6.1% 5.7% -11.5% -2.6% 4.1%   677 bp    -196 bp EBITDA 942  897  (28) 371  876  136% -7% EBITDA margin 13.8% 12.4% -0.6% 5.8% 13.9%   806 bp   9 bp Net income (loss) attributable to common stockholders (GAAP) 311  139  (702) (408) 143  135% -54% Net income (loss) attributable to common stockholders (non-GAAP) 516  344  (494) (198) 342  273% -34% EPS attributable to common stockholders, basic (GAAP) 1.82  0.81  (4.10) (2.31) 0.80 135% -56% EPS attributable to common stockholders, basic (non-GAAP) 3.02  2.00  (2.90) (1.12) 1.91  271% -37% Net cash provided by (used in) operating activities 1,391  1,235  (640) 864  756  -13% -46% Capital expenditures (510) (325) (280) (250) (385) 54% -25% Operating cash flow less capital expenditures 881  910  (920) 614  371  -40% -58% Cash and cash equivalents 2,968  3,686  2,198  4,955  5,338 8% 80% EPS = Earnings per share

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5 F I N A N C I A L   S U M M A R Y Revenue Profitability Cash Compared to Q3 of 2018, the percentage of leased vehicles has tripled and alone has impacted revenue by the majority of the YoY decrease.  Model 3 mix has increased while we have taken actions leading to the reduction of the ASP of our products.  These ASP reductions are particularly impacted by the launch of the Standard Range trims of Model 3 and pricing actions earlier in the year. We are positioned to accelerate our growth further through Gigafactory Shanghai, Model Y and also through increasing build rates on our existing production lines.  These capacity increases will allow for higher total vehicle deliveries and associated revenue.  We also expect to gradually release nearly $500M of accumulated deferred revenue tied to Autopilot and Full Self Driving features.  GAAP Automotive gross margin improved by 393bp QoQ to 22.8% (improved by 366bp QoQ excluding regulatory credits).  Margin was impacted in part due to fundamental improvements in our operating efficiency, including higher fixed cost absorption, reductions in manufacturing and material costs and continued improvements in vehicle quality and in part due to Smart Summon-related deferred revenue recognition, FX and other non-recurring items.  Improved gross profit combined with a decline in operating expenses resulted in material improvement of GAAP net income.  Quarter end cash and cash equivalents increased to $5.3B, driven by positive free cash flow of $371M.  Note that operating cash flows are negatively impacted by increased automotive leasing mix.  Draws against our working capital facilities, including leases awaiting securitization, are included in financing cash flows.  Capex increased sequentially due to investments in Gigafactory Shanghai and Model Y preparations in Fremont.

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In Q3, we were able to deliver nearly as many Model 3 vehicles as we were able to produce.  Our Service network continued to expand in Q3. Reducing waiting times and improving service experience are our top priorities. We opened 11 new service centers in Q3 and added 68 Mobile Service vehicles to our fleet.  Our finished vehicle inventory levels reached just 17 days of sales(1) at the end of Q3, the lowest level of the past 3.5 years and 4x lower than industry average. Since our stated inventory levels include vehicles in transit and store vehicles, the true number of sellable inventory is materially lower. 6 O P E R A T I O N A L     S U M M A R Y (Unaudited) Q3-2018 Q4-2018 Q1-2019 Q2-2019 Q3-2019 QoQ YoY  Model S/X production 26,903 25,161 14,163 14,517 16,318 12% -39% Model 3 production 53,239 61,394 62,975 72,531 79,837 10% 50%               Model S/X deliveries 27,710 27,607 12,091 17,722 17,483 -1% -37%    of which subject to lease accounting 2,560 3,639 1,363 1,820 2,588 42% 1% Model 3 deliveries 56,065 63,359 50,928 77,634 79,703 3% 42%    of which subject to lease accounting — — — 4,322 6,498 50%   Global inventory (days of sales)(1) 31 19 30 18 17 -6% -45%               Solar deployed (MW) 93 73 47 29 43 48% -54% Storage deployed (MWh) 240 225 229 415 477 15% 99% Residential solar cash & loan (%) 76% 75% 73% 70% 69% -100 bp -700 bp               Store and Service locations 351 378 377 402 413 3% 18% Mobile service fleet 373 411 550 651 719 10% 93%               Supercharger stations 1,352 1,421 1,490 1,587 1,653 4% 22% Supercharger connectors 11,128 12,002 12,767 13,881 14,658 6% 32% Destination charging connectors 20,652 21,541 22,399 23,160 23,906 3% 16% 1 The industry reference for days of sales is calculated by dividing new car inventory by the trailing four quarters of deliveries and using 261 working days (source: Automotive News).

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Global mid-sized premium sedan sales 2018 7 V E H I C L E C A P A C I T Y Fremont Model Y equipment installation is underway in advance of the planned launch next year.  We are moving faster than initially planned, using learnings and efficiencies gained from our Gigafactory Shanghai factory design.   Capex per unit of capacity is forecasted to be about 50% lower than our current Model 3 production system in the United States.   Shanghai We are already producing full vehicles on a trial basis, from body, to paint and to general assembly, at Gigafactory Shanghai.  We have cleared initial milestones toward our manufacturing license and are working towards finalizing the license and meeting other governmental requirements before we begin ramping production and delivery of vehicles from Shanghai. China is by far the largest market for mid-sized premium sedans.  With Model 3 priced on par with gasoline powered mid-sized sedans (even before gas savings and other benefits), we believe China could become the biggest market for Model 3.  Europe We are in the final stages of our site selection process.  Our European Gigafactory is expected to produce both Model 3 and Model Y. Installed Annual Capacity Current Status Fremont Model S/X 90,000 Production Model 3 350,000 Production Model Y - Construction Shanghai Model 3 150,000 Pre-production Model Y - In development Europe Model 3 - In development Model Y - In development United States Tesla Semi - In development Roadster - In development Pickup truck - In development Source: IHS data & Tesla estimates

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8 C O R E   T E C H N O L O G Y Autopilot & Full Self Driving  In September, we launched Smart Summon in the US which has been used more than one million times to date. This functionality allows car owners to summon their cars from up to 200 feet in a parking lot or driveway. Our neural network learning approach enables us to continue to iterate and improve functionality over time.   During Q3, we registered one accident for every 4.34 million miles driven in which drivers had Autopilot engaged. This compares to the national average of one accident for every 0.5 million miles based on NHTSA's most recent US data. Vehicle Software In September, we released our latest and most significant vehicle software update yet, called V10.  This update introduced streaming video (i.e., YouTube, Netflix, Hulu, video tutorials), Spotify, Caraoke (i.e., in-car karaoke), additional games, improved search and other functionalities.  This version of our infotainment system continues to lead the industry and lays an important foundation for things to come. Powertrain In addition to launching longer-range versions of the Model S and Model X in April, we have been able to increase the EPA range of the Model 3 Standard Range Plus from 240 miles to 250 miles.  We accomplished these improvements by more efficient energy use rather than a costly increase to the battery size.  Our current shortest-range vehicle is on parity with the longest-range production EVs offered by other companies. Long-range models of each Model S, X and 3 continue to have 20-40% higher range than any other EV available.  V10 software update with Smart Summon EPA range in miles * EPA and Tesla estimates based on WLTP

Slide 9

9 O T H E R H I G H L I G H T S Energy Energy storage deployment reached an all-time high of 477 MWh in Q3.  Additionally, we have recently introduced Tesla Megapack — a 3 MWh battery pack, pre-assembled at the Gigafactory as a single unit.  Such packaging allows for faster deployment and lower overall installation cost.  First deliveries are planned to begin in Q4 2019. We also launched a commercial solar configurator for small and medium enterprises, with standardized and transparent pricing. Solar deployments have started to grow sequentially once again.  In Q3, we deployed 43 MW of solar, 48% more than in the prior quarter.  Tesla Insurance In August, we launched Tesla Insurance for California customers, enabling many customers to reduce insurance costs by up to 20-30%.  This total cost of ownership approach is an important step to make our cars more affordable.  Since launching this product, we have seen strong interest from our new and existing customers in California and are working to expand insurance into additional markets. Megapack - 3 MWh battery

Slide 10

10 O U T L O O K Vehicle Deliveries Trial production of Model 3 in Shanghai has begun, ahead of schedule. We are also ahead of schedule to produce Model Y and now expect to launch by summer 2020.  We are planning to produce limited volumes of Tesla Semi in 2020 and are hoping to announce soon the location of our European Gigafactory for production in 2021. Cash Flow Profitability Product Deliveries should increase sequentially and annually, with some expected fluctuations from seasonality. We are highly confident in exceeding 360,000 deliveries this year. Positive quarterly free cash flow going forward, with possible temporary exceptions, particularly around the launch and ramp of new products. We continue to believe our business has grown to the point of being self-funding. Positive GAAP net income going forward, with possible temporary exceptions, particularly around the launch and ramp of new products.  Continuous volume growth, capacity expansion, and cash generation remain the main focus.

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P H O T O S & C H A R T S 11

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12 G I G A F A C T O R Y S H A N G H A I S T A M P I N G P R E S S

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13 G I G A F A C T O R Y S H A N G H A I B O D Y S H O P

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14 G I G A F A C T O R Y S H A N G H A I B O D Y S H O P

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15 G I G A F A C T O R Y S H A N G H A I B O D Y S H O P

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16 G I G A F A C T O R Y S H A N G H A I P A I N T S H O P

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17 G I G A F A C T O R Y S H A N G H A I G E N E R A L A S S E M B L Y

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18 G I G A F A C T O R Y S H A N G H A I E X T E R I O R

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19 January 2019 October 2019 G I G A F A C T O R Y S H A N G H A I 1 0 M O N T H S F R O M G R O U N D B R E A K I N G T O P R O D U C T I O N R E A D Y

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20 Vehicle Deliveries (units) Operating cash flow ($B) Operating cash flow less capex ($B) Net Income ($B) K E Y   M E T R I C S   Q U A R T E R L Y  (Unaudited)

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21 K E Y   M E T R I C S   T R A I L I N G   1 2   M O N T H S   ( T T M ) (Unaudited) Vehicle Deliveries (units) Operating cash flow ($B) Operating cash flow less capex ($B) Net Income ($B)

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F I N A N C I A L S T A T E M E N T S 22

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Three months ended Nine months ended In millions of USD or shares as applicable, except per share data Sep 30, 2019 June 30, 2019 Sep 30, 2018 Sep 30, 2019 Sep 30, 2018 REVENUES Automotive sales 5,132  5,168  5,878  13,809  11,558  Automotive leasing 221  208  221  644  634  Total automotive revenue 5,353  5,376  6,099  14,453  12,192  Energy generation and storage 402  369  399  1,095  1,183  Services and other 548  605  327  1,646  860  Total revenues 6,303  6,350  6,824  17,194  14,235  COST OF REVENUES Automotive sales 4,014  4,254  4,406  11,124  9,027  Automotive leasing 117  106  119  340  361  Total automotive cost of revenues 4,131  4,360  4,525  11,464  9,388  Energy generation and storage 314  326  330  956  1,036  Services and other 667  743  445  2,096  1,212  Total cost of revenues 5,112  5,429  5,300  14,516  11,636  Gross profit 1,191  921  1,524  2,678  2,599  OPERATING EXPENSES Research and development 334  324  351  998  1,104  Selling, general and administrative 596  647  730  1,947  2,167  Restructuring and other              —  117  27  161  130  Total operating expenses 930  1,088  1,108  3,106  3,401  INCOME (LOSS) FROM OPERATIONS 261  (167) 416  (428) (802) Interest income 15  10  7  34  17  Interest expense (185) (172) (175) (515) (488) Other income (expense), net 85  (41) 23  70  36  INCOME (LOSS) BEFORE INCOME TAXES 176  (370) 271  (839) (1,237) Provision for income taxes 26  19  17  68  36  NET INCOME (LOSS) 150  (389) 254  (907) (1,273) Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 7  19  (57) 60  (157) NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS 143  (408) 311  (967) (1,116) Net income (loss) per share of common stock attributable to common stockholders Basic 0.80  (2.31) 1.82  (5.54) (6.56) Diluted 0.78  (2.31) 1.75  (5.54) (6.56) Weighted average shares used in computing net income (loss) per share of common stock Basic 179 177 171 176 170 Diluted 184 177 178 176 170 23 S T A T E M E N T O F O P E R A T I O N S (Unaudited)

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24 B A L A N C E   S H E E T (Unaudited) In millions of USD Sep 30, 2018 Dec 31, 2018 March 31, 2019 June 30, 2019 Sep 30, 2019 ASSETS Current assets Cash and cash equivalents 2,968 3,686 2,198 4,955 5,338 Restricted cash  159 193 131 128 233 Accounts receivable, net 1,155 949 1,047 1,147 1,128 Inventory 3,314 3,113 3,837 3,382 3,581 Prepaid expenses and other current assets 324 366 465 570 660 Total current assets 7,920 8,307 7,678 10,182 10,940 Operating lease vehicles, net 2,186 2,090 1,973 2,070 2,253 Solar energy systems, net 6,302 6,271 6,242 6,201 6,168 Property, plant and equipment, net 11,246 11,330 9,851 10,082 10,190 Operating lease right-of-use assets — — 1,253 1,248 1,234 Goodwill and intangible assets, net 357 350 348 481 537 MyPower customer notes receivable, net of current portion 423 422 413 400 398 Restricted cash, net of current portion 397 398 354 366 255 Other assets 432 572 801 843 820 Total assets 29,263 29,740 28,913 31,873 32,795           LIABILITIES AND EQUITY           Current liabilities           Accounts payable 3,597 3,405 3,249 3,134 3,468 Accrued liabilities and other 1,990 2,094 2,277 2,623 2,497 Deferred revenue 571 630 763 884 1,045 Resale value guarantees 605 503 480 527 441 Customer deposits 906 793 768 631 665 Current portion of long-term debt and finance leases (1) 2,107 2,568 1,706 1,791 2,030 Total current liabilities 9,776 9,993 9,243 9,590 10,146 Long-term debt and finance leases, net of current portion (1) 9,673 9,404 9,788 11,235 11,313 Deferred revenue, net of current portion 950 991 1,157 1,182 1,140 Resale value guarantees, net of current portion 456 329 211 61 38 Other long-term liabilities 2,555 2,710 2,476 2,656 2,676 Total liabilities 23,410 23,427 22,875 24,724 25,313 Redeemable noncontrolling interests in subsidiaries 551 556 570 580 600 Total stockholders' equity 4,509 4,923 4,606 5,715 6,040 Noncontrolling interests in subsidiaries 793 834 862 854 842 Total liabilities and equity 29,263 29,740 28,913 31,873 32,795           (1) Breakdown of our debt is as follows:           Recourse debt 7,251 7,081 6,517 7,813 7,882 Non-recourse debt 3,248 3,552 3,486 3,553 3,857

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Three months ended         Nine months ended In millions of USD Sep 30, 2019 June 30, 2019 Sep 30, 2018 Sep 30, 2019 Sep 30, 2018 Cash Flows from Operating Activities Net income (loss) 150  (389) 254  (907) (1,273) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, amortization and impairment 530  579  503  1,577  1,404  Stock-based compensation 199  210  205  617  544  Operating cash flow related to repayment of discounted convertible notes              —                —  — (188)              —  Other 68  177  78  461  329  Changes in operating assets and liabilities, net of effect of business combinations (191) 287  351  (580) (141) Net cash provided by operating activities 756  864  1,391  980  863  Cash Flows from Investing Activities Capital expenditures (385) (250) (510) (915) (1,776) Payments for the cost of solar energy systems, net (25) (18) (50) (68) (189) Purchase of intangible assets              —  (5)              —  (5)              —  Business combinations, net of cash acquired (76) 32  (1) (45) (7) Net cash used in investing activities (486) (241) (561) (1,033) (1,972) Cash Flows from Financing Activities Net cash flows from debt activities (19) 1,349  (195) 812  221  Collateralized lease repayments (83) (85) (143) (302) (343) Net borrowings under Warehouse Agreements and automotive asset-backed notes 147  35  115  149  403  Net cash flows from noncontrolling interests - Auto 30  19  17  16  74  Net cash flows from noncontrolling interests - Solar (28) (41) 27  (82) 111  Proceeds from issuances of common stock in public offerings              —  848  — 848               —  Other 71  18  95  167  220  Net cash provided by (used in) financing activities 118  2,143  (85) 1,608  686  Effect of exchange rate changes on cash and cash equivalents and restricted cash (12) 1  (6) (6) (19) Net increase (decrease) in cash and cash equivalents and restricted cash 376  2,767  740  1,549  (442) Cash and cash equivalents and restricted cash at beginning of period 5,450  2,683  2,783  4,277  3,965  Cash and cash equivalents and restricted cash at end of period 5,826  5,450  3,523  5,826  3,523  25 S T A T E M E N T   O F   C A S H   F L O W S  (Unaudited)

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          Three months ended         Nine months ended In millions of USD or shares as applicable, except per share data Sep 30, 2019 June 30, 2019 Sep 30, 2018 Sep 30, 2019 Sep 30, 2018 Net income (loss) attributable to common stockholders – GAAP 143  (408) 311  (967) (1,116) Stock-based compensation expense 199  210  205  617  544  Net income (loss) attributable to common stockholders – non-GAAP 342  (198) 516  (350) (572) Net income (loss) per share attributable to common stockholders, basic – GAAP 0.80  (2.31) 1.82  (5.54) (6.56) Stock-based compensation expense 1.11  1.19  1.20  3.51  3.20  Net income (loss) per share attributable to common stockholders, basic – non-GAAP 1.91  (1.12) 3.02  (2.03) (3.36) Shares used in per share calculation, basic – GAAP and non-GAAP 179  177  171  176  170  Net income (loss) per share attributable to  common stockholders, diluted – GAAP 0.78  (2.31) 1.75  (5.54) (6.56) Stock-based compensation expense 1.08  1.19  1.15  3.51  3.20  Net income (loss) per share attributable to common stockholders, diluted - non-GAAP 1.86  (1.12) 2.90  (2.03) (3.36) Shares used in per share calculation, diluted - GAAP and non-GAAP 184  177  178  176  170  Net income (loss) – GAAP 150  (389) 254  (907) (1,273) Interest income (15) (10) (7) (34) (17) Interest expense  185  172  175  515  488  Provision for income taxes 26  19  17  68  36  Depreciation, amortization and impairment 530  579  503  1,577  1,404  EBITDA - non-GAAP 876  371  942  1,219  638  Total revenues 6,303  6,350  6,824  17,194  14,235  EBITDA margin - non-GAAP (1) 13.9% 5.8% 13.8% 7.1% 4.5% Automotive gross margin – GAAP 22.8% 18.9% 25.8% 20.7% 23.0% Total regulatory credit revenue recognized -2.0% -1.7% -2.4% -2.6% -5.4% Automotive gross margin excluding regulatory credits – non-GAAP 20.8% 17.2% 23.4% 18.1% 17.6% 26 R e c o n c I l I a t I o n   o f   G A A P   t o   N o n – G A A P   F I n a n c I a l   I n f o r m a t I o n (Unaudited) In millions of USD 4Q-2016 1Q-2017 2Q-2017 3Q-2017 4Q-2017 1Q-2018 2Q-2018 3Q-2018 4Q-2018 1Q-2019 2Q-2019 3Q-2019 Net cash (used in) provided by operating activities – GAAP (448) (70) (200) (301) 510 (398) (130) 1,391 1,235 (640) 864 756 Capital expenditures (522) (553) (959) (1,116) (787) (656) (610) (510) (325) (280) (250) (385) Operating cash flow less capital expenditures – non-GAAP (970) (623) (1,159) (1,417) (277) (1,054) (740) 881 910 (920) 614 371                           Net cash (used in) provided by operating activities - TTM – GAAP (124) 56 (294) (1,019) (61) (389) (319) 1,373 2,098 1,856 2,850 2,215 Capital expenditures – TTM (1,282) (1,618) (2,282) (3,150) (3,415) (3,518) (3,169) (2,563) (2,101) (1,725) (1,365) (1,240) Operating cash flow less capital expenditures - TTM – non-GAAP (1,406) (1,562) (2,576) (4,169) (3,476) (3,907) (3,488) (1,190) (3) 131 1,485 975 EBITDA margin is EBITDA as a percentage of Total revenues 1

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27 A D D I T I O N A L   I N F O R M A T I O N WEBCAST INFORMATION Tesla will provide a live webcast of its third quarter 2019 financial results conference call beginning at 3:30 p.m. PT on October 23, 2019, at ir.tesla.com. This webcast will also be available for replay for approximately one year thereafter.   NON-GAAP FINANCIAL INFORMATION Consolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis to supplement our consolidated financial results. Our non-GAAP financial measures include non-GAAP automotive gross margin, non-GAAP net income (loss) attributable to common stockholders, non-GAAP net income (loss) attributable to common stockholders on a per share basis, earnings before interest, tax, depreciation, and amortization (“EBITDA”) , EBITDA margin, and operating cash flows less capital expenditures (free cash flow). Management believes that it is useful to supplement its GAAP financial statements with this non-GAAP information because management uses such information internally for its operating, budgeting and financial planning purposes. These non-GAAP financial measures also facilitate management’s internal comparisons to Tesla’s historical performance as well as comparisons to the operating results of other companies. Management also believes that presentation of the non-GAAP financial measures provides useful information to our investors regarding our financial condition and results of operations because it allows investors greater transparency to the information used by Tesla management in its financial and operational decision-making so that investors can see through the eyes of Tesla management regarding important financial metrics that Tesla management uses to run the business as well as allows investors to better understand Tesla’s performance. Non-GAAP information is not prepared under a comprehensive set of accounting rules and therefore, should only be read in conjunction with financial information reported under U.S. GAAP when understanding Tesla’s operating performance. A reconciliation between GAAP and non-GAAP financial information is provided above.   FORWARD-LOOKING STATEMENTS Certain statements in this update, including statements in the “Outlook” section; statements relating to the development, production, volumes, demand, deliveries, market share, features and/or timing of existing and future Tesla products and technologies such as Model 3, Model Y, Tesla Semi, Tesla pickup truck, Tesla Roadster, Autopilot and Full Self Driving features, our energy products such as Megapack, and our financial services such as Tesla Insurance; statements regarding growing market opportunities and market share for Tesla products and services and the catalysts for that growth; statements regarding growth in service and repair capabilities; statements regarding revenue, cash availability and generation, cash flow, gross margin, spending, capital expenditure and profitability targets; statements regarding productivity improvements, cost reductions and capacity expansion plans; statements regarding expansion and ramp at the Tesla Factory, Gigafactory Shanghai and a future Gigafactory in Europe, including cost, project financing, regulatory clearance and timing, plans and output expectations, are “forward-looking statements” that are subject to risks and uncertainties. These forward-looking statements are based on management’s current expectations, and as a result of certain risks and uncertainties, actual results may differ materially from those projected. The following important factors, without limitation, could cause actual results to differ materially from those in the forward-looking statements: the risk of delays in the manufacture, production, delivery and/or completion of our vehicles and energy products and product features, including Model 3 and our autonomous driving features; our ability to grow our production, sales, delivery and servicing capabilities, and manage future growth effectively, especially internationally; consumers’ willingness to adopt electric vehicles generally and our ability to design and grow simultaneous and separate market acceptance of and demand for our vehicles, including future vehicle models such as Model Y; the ability of suppliers to meet quality and part delivery expectations at increasing volumes, especially with respect to our high-volume models; our ability to sustain and further grow our ramp of battery cell, energy product and product component production at Gigafactory1; our ability to ramp Gigafactory Shanghai in accordance with our plans; any failures by Tesla products to perform as expected or if product recalls occur; our ability to continue to reduce or control manufacturing and other costs; competition in the automotive and energy product markets generally and the alternative fuel vehicle market and the premium vehicle markets in particular; our ability to execute on our evolving strategy for product sales, service, charging and other customer infrastructure; the unavailability, reduction or elimination of government and economic incentives for electric vehicles and energy products; potential difficulties in performing and realizing potential benefits under definitive agreements for our existing and future manufacturing facilities; our ability to attract and retain key employees and qualified personnel; our ability to maintain the security of our information and product systems; our compliance with various regulations and laws applicable to our operations and products, which may evolve from time to time; risks relating to our indebtedness and financing strategies; and adverse foreign exchange movements. More information on potential factors that could affect our financial results is included from time to time in our Securities and Exchange Commission filings and reports, including the risks identified under the section captioned “Risk Factors” in our quarterly report on Form 10-Q filed with the SEC on July 29, 2019. Tesla disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events, or otherwise.

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