Tesla Motors – First Quarter 2015 Shareholder Letter
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Produced 11,160 vehicles, exceeding plan while improving efficiency
Record quarterly deliveries of 10,045 vehicles
Achieved gross margin target, despite strong dollar
Launched All-Wheel Drive Model S 85D and 70D
Introduced Tesla Energy products
Model X on track for start of deliveries in late Q3

May 6, 2015
Dear Fellow Shareholders:
In 2015, we have already expanded our product portfolio with exciting new products and features while continuing to execute on our long-term plans. We ramped the manufacturing and availability of All-Wheel Drive Model S 85D, introduced 70D, and are building release candidate prototypes of Model X. Last week, we also launched our new Tesla Energy business, introducing a suite of energy storage products with a vision that we believe will help to eventually transform the global energy paradigm. Both our vehicle and Tesla Energy businesses will benefit from our Gigafactory project, which should start producing initial quantities of battery packs in 2016.
We also significantly improved manufacturing efficiency and reduced per unit vehicle costs while achieving a higher average weekly production rate during Q1. These efforts, combined with a favorable product mix, helped us reach our Q1 non-GAAP automotive gross margin target, despite the significant negative impact of a strong dollar. We were also able to accelerate yearover-year revenue growth in Q1, while improving operational efficiency as reflected in lower than expected growth of operating expenses. Overall, these achievements represent a strong start to a very big year at Tesla.

Expanding the Market for Model S
We continue to see growing Model S demand. In Q1, both North American and European orders were much higher than Q1 last year, despite limited availability of 85D and before the announcement of 70D. While we still have work to do in China, we saw encouraging signs of a return to growth in orders there as well.
Recently, order rates have accelerated even further with greater availability of 85D and the launch of 70D. This is especially encouraging as potential customers in many markets have yet to experience these products first hand. 70D has only been shown in North America, and our all-wheel drive cars will not be available in right hand drive markets until Q3. We remain confident in our ability to deliver approximately 55,000 Model S and Model X vehicles combined in 2015, as increased availability of all our Model S variants continue to drive demand. To sustainably scale for increased deliveries, our inventory of in-transit customer-configured cars must increase, and in Q1 we added 1,100 such vehicles to the pipeline.
Our ability to continually innovate and reduce costs enabled us to recently launch the new Model S 70D. As a very compelling value in the premium sedan segment, the All-Wheel Drive 70D expands the market for Model S. 70D has 240 miles of EPA-rated range, superior all-weather performance, and a 0-60 mph time of 5.2 seconds. It also includes a comprehensive list of standard features such as Autopilot safety technology, access to our
Supercharger network, and turn-by-turn navigation for $75,000, before tax credits and fuel cost savings. So far we are pleased with the increased demand that has been created by the 70D and the little effect it has had on the demand for our other Model S variants. All-Wheel Drive Model S 85D

Model S customers benefit from our free data connectivity and unique over-the-air software updates, which allow us to improve customer cars over time. In March, we introduced our second significant software update of Q1, enabling new active safety capabilities, adding intelligent range and charge management features, and boosting performance by increasing acceleration and top speed. Additional software updates are scheduled in Q2 that will include more Autopilot safety and convenience features for appropriately equipped cars.
The expansion