Tesla Motors – Second Quarter 2015 Shareholder Letter
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Record quarterly deliveries of 11,532 vehicles
Produced a record 12,807 vehicles, exceeding plan while improving efficiency
Introduced new Model S variants that improve range, performance and value
Model X remains on track for start of deliveries in late Q3
Tesla Energy deliveries set to ramp in Q4

August 5, 2015
Dear Fellow Shareholders:Q2 marked the third anniversary of Model S. In this short period, Model S has redefined the standards for automotive safety,
performance, efficiency, upgradeability and innovation. Along the way it has earned many accolades including Motor Trend Carof the Year and Best Overall Car by Consumer Reports for two years in a row. Model S owners have driven in excess of one
billion miles in more than 30 countries and can enjoy free long distance road trips using our network of Supercharger stations.
Now in the first half of 2015, Model S has become the best-selling electric vehicle in the U.S.
The growing success of Model S has positioned us to offer even more customer choices and accelerate the advent ofsustainable transportation. The next few years at Tesla will be transformational from a product perspective, starting withsignificant new Autopilot features and the launch of Model X later this quarter. In Q4, we will ramp production and delivery ofTesla Energy products, and in Q1 2016 we plan to reveal the Model 3 design, with first deliveries expected in late 2017.

Winning Converts to Electric Drive
Globally, Model S orders increased following the launch of 85D
and 70D. In the U.S., Q2 Model S orders grew almost 30%
year-over-year. In Europe, Q2 Model S orders grew more than
50% year-over-year, despite two price increases in the past six
months. Finally in Asia, Q2 Model S orders nearly doubled
from last quarter, helped by the initial success of our revised
China strategy. Given this improvement, we are increasing ourinvestments in China by planning to grow this year from one to
five retail stores located in high foot traffic areas.
In July, we announced product enhancements to extend theappeal of Model S even further. For those wanting a more
affordable car, we introduced Model S 70 with a starting priceof only $70,000 before incentives and fuel savings that typically
The Next Billion Miles Test Drive Tour
take the starting net price down to about $50,000 in the U.S.
This car has all the content of our popular 70D, but costs $5,000 less as it comes with a single rear wheel drive motor. A new
90kWh battery pack option increases the range of our 85D by 6%, enabling almost 300 miles of range at 65 mph. Finally, forperformance enthusiasts, the new Ludicrous mode dramatically (and ludicrously) improves 0 to 60 mph acceleration to 2.8
seconds. Existing P85D customers also have the option of upgrading to Ludicrous mode – because sometimes Insane mode isjust not enough.
Our new referral and pre-owned car programs expose more people to the benefits of driving electric vehicles. The Tesla referralprogram is an experiment we recently introduced to see if there is a way to return the cost of our sales to our customers. If a
Tesla owner refers a friend to purchase a new Tesla, the friend will receive $1,000 off the purchase price of their Tesla, and theowner making the referral will receive a $1,000 credit to be used for Tesla service, accessories or another Tesla vehicle
purchase. We will see how this works and there are certain limits, but the cost of this program reflects our typical customer
acquisition costs, so it makes sense for everyone.

We launched our pre-owned program in North America in Q2 andrecognized revenue of $20 million from the sale of such cars.
These cars are trade-ins received from customers who upgradedto the latest Model S vehicles. Pre-owned sales activities are
driven by the listing of available inventory on our website, andthus have folded smoothly into our existing sales process. Our
pre-owned program benefits both the original owner and thebuyer of the used Model S. Model S is holding value very well,as confirmed by a recent study by the North American Dealer
Association, which showed that Model S retains the highest
residual value of any premium sedan in North America. A preowned Model S retains all its performance, upgradeability andlower operating costs, plus it comes with a new 4-year warranty
Model S – Refer A Friendthat starts on the re-purchase date, making it a compelling value
for those wanting a more affordable Model S. In fact, a pre-owned Model S appears to have a wider buyer base with a younger
demographic and broader geographic distribution across the U.S.

A Driving Experience That Improves Over Time
While many independent sources and our customers already consider Model S to be the world’s best car, we are committed tomaking Tesla cars and the related ownership experience even better over time. This starts with software updates, which
improve the vehicle itself, and also extends to the ease of charging and service. Over the air software updates continue toenhance the vehicle even after delivery. For example, these updates will significantly increase Autopilot functionality in properly
equipped cars later this year by adding new features such as lane keeping with automatic steering, parallel parking, as well asside collision warning and improved traffic aware cruise control.
Almost all Model S owners benefit from the growth and improvement of our Supercharger and service networks, which enhance
the broader Tesla ownership experience. We now have 487 Supercharger stations globally and have recently accelerated thepace of deployments such that one new Supercharger station is opening nearly every 24 hours. With the growth of our network,
it is easier than ever for our customers to find Superchargers. For example, drivers in California are on average never more than
42 miles away from a Supercharger, while drivers in Germany are on average never more than 33 miles away from a
Supercharger. We are also retrofitting sites with our new liquid-cooled charging cable to allow even faster Supercharging
capabilities that we plan to introduce over time. On the service side, we are building more locations to make servicing vehicles
even more convenient for our growing customer base. We are on track to grow the square footage of our service centers bymore than 60% in 2015 relative to the end of 2014.

Adding New Products & Production Capacity
In Q2, we produced 12,807 vehicles, exceeding our target of
12,500 vehicles. This represents a 15% sequential increase inproduction and a 46% increase from a year ago.
As we prepare to launch Model X in September, we arebuilding more validation vehicles, executing final engineeringand testing work, enabling our new manufacturing equipment
and finalizing arrangements with our suppliers. We have been
producing release candidate Model X bodies in our new body
shop equipped with more than 500 robots as we fine-tune andvalidate our production processes.
We just concluded a planned one-week Fremont
factory shutdown and made changes in stamping, Model S
New S/X Body Linebody center, drive unit production, battery module and packproduction and general assembly to allow for an elevated level of production and efficiency. Since Model S and Model X willboth share the general assembly line, we used the week to validate the newly installed equipment by completely building several
Model X test vehicles. This month, we plan to start painting Model X in our new paint shop well before transitioning Model S
painting there, to help de-risk this portion of our overall production ramp.

Q2 Results
Total non-GAAP revenue was $1.20 billion for the quarter, up nearly 40% from a year ago, and up 8.5% sequentially, while
GAAP revenue was $955 million. Total Q2 gross margin was 23.4% on a non-GAAP basis and 22.3% on a GAAP basis. Our
income statement reflects new classifications of revenues and costs of revenues. For details on these classifications and our
GAAP and non-GAAP financial information, please see the accompanying tables and footnotes.
Automotive revenue was $1.12 billion on a non-GAAP basis, and comprises GAAP Automotive revenue of $878 million plus a
net increase of $242 million in deferred revenue and other long-term liabilities as a result of lease accounting. We delivered
11,532 Model S vehicles in Q2, in line with our July announcement of approximately 11,507 deliveries. As expected, theaverage selling price of Model S declined during the quarter due to a product mix shift away from P85D. Q2 Automotive revenue
included $27 million of total regulatory credit revenue, of which $14 million came from the sale of ZEV credits. In Q2, Tesla
directly leased 631 cars to customers, worth $63 million of aggregate transaction value. To use our capital more efficiently, we
have increased bank partner leasing over the last quarter, thereby reducing the percentage of vehicles directly leased by Tesla.
Q2 Automotive gross margin excluding ZEV credits was 23.9% on a non-GAAP basis and 22.9% on a GAAP basis. Non-GAAP
gross margin was about 100 basis points below guidance, primarily due to higher manufacturing and part costs related to theramp of our small drive unit line and the deferral of revenue recognition for certain Autopilot features which are now scheduled
for release later this year.
Q2 Services and other revenue was $77 million, up 85% from a year ago. This includes about $32 million of powertrain sales toDaimler, $23 million of service revenue and $20 million of pre-owned Model S sales. Q2 Services and other gross margin was
2.2%, compared to negative 3.2% last quarter. The 540 basis points of sequential improvement was driven by production
efficiencies related to powertrain sales and improved margin from services and merchandise sales.
We improved our operational efficiency for the second quarter in a row, achieving record deliveries and developing new products
while managing to grow operating expenses at a slower rate than the growth in our non-GAAP revenue. Our operating
expenses in Q2 were $345 million on a non-GAAP basis, up 6.5% from Q1. GAAP basis operating expenses were $384 million
and include non-cash stock based compensation.
Our Q2 non-GAAP net loss was $61 million, or a loss of $0.48 per basic share based on 126.7 million basic shares, while our Q2
GAAP net loss was $184 million or a loss of $1.45 per basic share. Both figures include a $13.2 million gain, or $0.10 per basic
share, related to mostly unrealized gains from revaluation of our foreign currency holdings.
Cash and cash equivalents were $1.15 billion at the end of the quarter, down $359 million sequentially, as capital expenditures
were $405 million in the quarter. Capital expenditures were primarily for the capacity expansion and tooling associated with
Model X and all-wheel drive vehicles, as well as for the construction of the Gigafactory. We have historically been frugal with ourcapital spending, and our most recent capital spend per unit of incremental capacity is significantly more efficient than even ourprior performance.
In Q2, we closed a $500 million asset based credit line that can be expanded to $750 million. This line is collateralized by
selected inventory, equipment and accounts receivable, and is specifically designed to provide us both increased liquidity as we
ramp Model X deliveries and operating flexibility to expand all aspects of our business. We drew $50 million under this line in Q2.
Also during the quarter, we expanded our warehouse line for our direct leasing program from $100 million to $150 million. We
drew down another net $37 million during the quarter, for a cumulative draw of $114 million at quarter end.
Adjusting for the impact of our leasing and financing business, our core business was breakeven on cash generated in Q2 prior
to capital expenditures, despite a planned $79 million increase in inventory mostly from customer-configured cars that were intransit for deliveries in Q3. Our GAAP cash outflow from operations during the quarter was $160 million, but this does notinclude $119 million in cash inflows from vehicle sales to our bank leasing partners. Furthermore, $44 million of cash wasconsumed by our direct leasing business funded by Tesla, but is included in cash flow from operations.

Outlook
In Q3, we expect to produce just over 12,000 vehicles, representing a more than 60% increase from a year ago, and deliver
approximately the same number of vehicles as in Q2, despite having one week of planned shutdown in Q3. This includes asmall number of Model X deliveries.
We are now targeting deliveries of between 50,000 and 55,000 Model S and Model X cars in 2015. While our equipment
installation and final testing of Model X is going well, there are many dependencies that could influence our Q4 production anddeliveries. We are still testing the ability of many suppliers to deliver high quality production parts in quantities sufficient to meet
our planned production ramp. Since production ramps rapidly late in Q4, a one-week push out of this ramp due to an issue ateven a single supplier could reduce Model X production by approximately 800 units for the quarter. Furthermore, since Model S
and Model X are produced on the same general assembly line, Model X production challenges could slow Model S
production. Simply put, in a choice between a great product or hitting quarterly numbers, we will take the former. To build longterm value, our first priority always has been, and still is, to deliver great cars.
In addition, the timing of the Model X production ramp and high total deliveries in Q4 create operational challenges for ourdelivery organization towards the end of the year. This adds complexity in predicting our delivery rate with precision.
Looking ahead to next year, we are highly confident of a steady state production and demand of 1,600 to 1,800 vehicles per
week combined for Model S and Model X.
In Q3, we expect to directly lease about the same percentage of cars that we did in Q2. As always, we will use lease accounting
for these cars even in our non-GAAP financial results, as such treatment is consistent with the cash collected on thesetransactions. We expect to sell about $45 million of regulatory credits in Q3, including $30 million from ZEV credit sales.
We expect the Model S average selling price to decline by more than 100 basis points in Q3 as the dollar has continued tostrengthen against currencies in our key markets and our delivery mix shifts towards our lower priced 70 and 70D models. We
plan to partially offset this pressure with lower production costs, and as a result we expect non-GAAP automotive gross margin,excluding ZEV credits, to be just slightly below the Q2 level.
We are on track to start production of Tesla Energy products this quarter at our Fremont factory, with a plan to ramp up
production in Q4. As a result, we expect Q3 services and other revenue to grow modestly and gross margin to be comparable toQ2. We expect to further expand Tesla Energy battery module and pack production at the Gigafactory in Q1 2016 on a more
automated line, where construction remains on plan.
Our operating leverage is expected to improve, with revenue and gross profit both growing at a faster rate than operating
expenses during the next several quarters. Operating expenses should grow roughly 5-10% sequentially in Q3, and 45-50% for
the full year as we invest in product development, including Model 3, and expand our sales capability.
We still plan to invest about $1.5 billion in capital expenditures this year as we expand production capacity, purchase Model X
tooling, construct the Gigafactory, and expand our stores, service centers and Supercharger network.
In the coming months we are growing from a single product to a multi-product company. This is a milestone in the maturation ofTesla. We invite everyone to join us in getting to Tesla’s next billion miles and making Tesla Energy a part of our daily lives.

Elon Musk, Chairman & CEO

Deepak Ahuja, Chief Financial OfficerWebcast Information
Tesla will provide a live webcast of its second quarter 2015 financial results conference call beginning at 2:30 p.m. PT on August
5, 2015, at ir.teslamotors.com. This webcast will also be available for replay for approximately one year thereafter.

Forward-Looking Statements
Certain statements in this shareholder letter, including statements in “Outlook” section; statements relating to the progress Tesla
is making with respect to product development, including future Autopilot features and functionality and Model X development,
supplier readiness, delivery and launch plans; statements regarding growth in the number of Tesla store, service center andSupercharger locations; statements relating to the production and delivery timing of Tesla Energy products, as well as future
products such as Model 3; growth in demand and orders for Tesla vehicles and the catalysts for that growth; the ability to achieve
vehicle demand, volume, production, delivery, revenue, leasing, average sales price, gross margin, spending, capital expenditureand profitability targets; productivity improvements and capacity expansion plans; and Tesla Gigafactory timing, plans and output
expectations, including those related to battery module and pack production, are “forward-looking statements” that are subject torisks and uncertainties. These forward-looking statements are based on management’s current expectations, and as a result ofcertain 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 and delivery of Model S and Model X vehicles, and production and delivery of Model 3 vehicles; Tesla’s
future success depends on its ability to design and achieve market acceptance of Model S and its variants, as well as new
vehicle models, specifically Model X and Model 3; the ability of suppliers to meet quality and part delivery expectations atincreasing volumes; adverse foreign exchange movements; any failures by Tesla vehicles to perform as expected or if productrecalls occur; Tesla’s ability to continue to reduce or control manufacturing and other costs; consumers’ willingness to adopt
electric vehicles; competition in the automotive market generally and the alternative fuel vehicle market in particular; Tesla’s
ability to establish, maintain and strengthen the Tesla brand; Tesla’s ability to manage future growth effectively as we rapidly
grow, especially internationally; the unavailability, reduction or elimination of government and economic incentives for electricvehicles; Tesla’s ability to establish, maintain and strengthen its relationships with strategic partners such as Panasonic; potential
difficulties in finalizing, performing and realizing potential benefits under definitive agreements for the Tesla Gigafactory site,
obtaining permits and incentives, negotiating terms with technology, materials and other partners for Gigafactory, and maintaining
Gigafactory implementation schedules, output and costs estimates; and Tesla’s ability to execute on its retail strategy and for new
store, service center and Tesla Supercharger openings. 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 May 11, 2015. Tesla
disclaims any obligation to update information contained in these forward-looking statements whether as a result of new
information, future events, or otherwise.

Investor Relations Contact:
Jeff Evanson
Investor Relations – Tesla
ir@teslamotors.com

Press Contact:
Khobi Brooklyn
Communications – Teslapress@teslamotors.com

Tesla Motors, Inc.
Condensed Consolidated Statements of Operations(Unaudited)(In thousands, except per share data)

June 30,
2015
Revenues
Automotive (1A)
Services and otherTotal revenues$

Cost of revenues
Automotive (1B)
Services and otherTotal cost of revenues (2)Gross profit
Operating expenses
Research and development (2)Selling, general and administrative (2)Total operating expenses
Loss from operations
Interest income
Interest expense
Other income (expense), net
Loss before income taxes
Provision for income taxes
Net loss$

Net loss per common share, basic and diluted$

Shares used in per share calculation, basic and diluted

Three Months Ended
Mar 31,
2015

878,090
76,886954,976$

893,320
46,560939,880

Six Months Ended
June 30,
June 30,
2015
2014

June 30,
2014$

727,829
41,520769,349$

1,771,410
123,446
1,894,856$

1,316,701
73,1901,389,891

666,386
75,220741,606
213,370

631,745
48,062
679,807
260,073

519,81136,543556,354
212,995

1,298,131
123,282
1,421,413
473,443956,065
65,703
1,021,768
368,123

181,712201,846
383,558(170,188)247

167,154
195,365
362,519(102,446)
184

107,717
134,031
241,748(28,753)467

348,866
397,211746,077(272,634)431

189,261
251,582
440,843(72,720)608(24,352)
13,233(181,060)(26,574)(22,305)(151,141)(31,238)(1,228)(60,752)(50,926)(9,072)(332,201)(43,121)5,490(109,743)

3,167(184,227)$(1.45)$

126,689

3,040(154,181)$(1.22)$

125,947

1,150(61,902)$(0.50)$

124,250

6,207(338,408)$(2.68)$

126,320

1,959(111,702)(0.90)
123,864

Notes:(1) Due to the application of lease accounting for Model S vehicles with the resale value guarantee or similar buy-back terms, the following is supplemental information for theperiods presented:(A) Net increase in deferred revenue and other long-term liabilities asa result of lease accounting and therefore not recognized in
automotive sales$

242,147$

163,676$

88,162$405,823$

180,668(B) Net increase in operating lease vehicles as a result of leaseaccounting and therefore not recognized in automotive cost of
sales

$

174,242$

113,823$

68,752$

288,065$

138,495$

9,421
39,70437,23686,361$

7,018
28,36737,436
72,821

The table above excludes assumed net warranty and stock based compensation amounts included in non-GAAP cost of sales.

(2)

Includes stock-based compensation expense of the following for the periods presented:
Cost of revenues
Research and development
Selling, general and administrative
Total stock-based compensation expense

$

$

4,820
19,912
18,60343,335$$

4,601
19,792
18,63343,026$$

3,912
14,822
17,04935,783$$

Classification of Revenues and Costs of Revenues
Our income statement reflects the classifications of revenues and costs of revenues to segregate our new vehicle business from ourother business activities. “Automotive” revenue and related costs now reflect activities related to the sale or lease of new vehicles
including regulatory credits, data connectivity, Autopilot functionality and Supercharging. “Services and other” revenues and related
costs include activities such as powertrain sales, service revenue, Tesla Energy and pre-owned Tesla vehicle sales.

Tesla Motors, Inc.
Condensed Consolidated Balance Sheets(Unaudited)(In thousands)
June 30,
2015
AssetsCash and cash equivalents
Restricted cash and marketable securities - current
Accounts receivable
Inventory
Prepaid expenses and other current assets
Operating lease vehicles, net (1)Property and equipment, net
Restricted cash - noncurrent
Other assets
Total assets
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities
Deferred revenue (2)Customer deposits
Capital lease obligations
Long-term debt
Other long-term liabilities (3)Total liabilities
Mezzanine equity (4)Stockholders' equity
Total liabilities and stockholders' equity

$

$

$

Dec 31,2014

1,150,673
20,591
138,648
1,212,279
106,430
1,120,246
2,646,017
19,77453,527
6,468,185$

1,184,738
623,155
272,848$$

17,3672,620,250
983,620
5,701,97850,273$715,934
6,468,185

1,905,713
17,947
226,604
953,675
94,718766,744
1,829,267
11,374
43,2095,849,251

1,046,830
483,922
257,587
21,7992,408,084
661,123
4,879,345
58,196$

911,710
5,849,251

Notes:(1) Includes the following increase in operating lease vehicles related to deliveries of Model S and subject to lease accounting, net of
depreciation recognized in automotive cost of sales, for the following periods:
Resale value guarantee program (and other vehicles with similar buy-back terms)
Beginning balanceFirst quarter
Second quarter
Third quarter
Fourth quarter
Ending balance
Model S leasing program
Beginning balanceFirst quarter
Second quarter
Third quarter
Fourth quarter
Ending balance$

689,689
103,022
170,026$

376,979
69,74368,752
63,981
110,234$

962,737$

689,689$

81,63635,68739,587$$

156,910$

11,21423,824
46,59881,636(2) Includes the following increase in deferred revenue related to deliveries of Model S with the resale value guarantee and similar programs
and subject to lease accounting, net of revenue amortized to automotive sales, for the following periods:

Beginning balanceFirst quarter
Second quarter
Third quarter
Fourth quarter$

376,471
45,33460,767$

227,868
38,18833,58627,993
48,836

Ending balance$

482,572$

376,471(3) Includes the following increase in other liabilities related to deliveries of Model S with the resale value guarantee and similar programs andsubject to lease accounting for the following periods:
Beginning balanceFirst quarter
Second quarter
Third quarter
Fourth quarter$

487,879
118,341
186,957$

236,298
54,31854,57552,55190,137

Ending balance$

793,177$

487,879(4) Our common stock price exceeded the conversion threshold price of our convertible senior notes due 2018 (2018 Notes) issued in May
2013; therefore, the 2018 Notes are convertible at the holder’s option during the second quarter of 2015. As such, the carrying value of the2018 Notes was classified as a current liability as of June 30, 2015 and the difference between the principal amount and the carrying valueof the 2018 Notes was reflected as convertible debt in mezzanine equity on our condensed consolidated balance sheet as of June 30,2015.

Tesla Motors, Inc.
Supplemental Consolidated Financial Information(Unaudited)(In thousands)

June 30,
2015
Selected Cash Flow Information
Cash flows provided by (used in) operating activities (1)Cash flows used in investing activities$

Cash flows provided by financing activities
Other Selected Financial Information
Cash flows provided by (used in) operating activities (1)Capital expenditures
Free cash flow (cash flow from operations plus capital expenditures) (1)Depreciation and amortization

Three Months Ended
Mar 31,
2015(159,516)(422,837)$

218,351$

186,156(1,662)2,610$

281,491(291,310)(855,181)$

404,507

57,061(326,570)
2,098,051$(159,516)(405,165)$(131,794)(426,060)$(1,662)(175,685)$(291,310)(831,225)$

57,061(317,049)$(564,681)$(557,854)$(177,347)$(1,122,535)$(259,988)$

91,389$77,112$54,715$

168,501$

98,983June 30,
2015
Cash and Investments
Cash and cash equivalents
Short-term marketable securities
Restricted cash and marketable securities - current
Restricted cash - noncurrent(131,794)(432,344)

Six Months Ended
June 30,
June 30,
2015
2014

June 30,2014$

1,150,673
20,591
19,774

Mar 31,2015$

1,510,076
20,693
13,846

June 30,
2014$

2,674,910
11,714
7,247(1) During the three months ended June 30, 2014, we began separately presenting the effect of exchange rate changes on our cash and cash
equivalents in our condensed consolidated statement of cash flows due to our growing operations in foreign currency environments.
Prior period amounts have been reclassified to conform to the current period presentation.

Supplemental Model S Direct Leasing Program Information(in thousands, except for vehicle deliveries)

Vehicles delivered
Average per unit price of vehicles delivered
Aggregate value of vehicles delivered (1)$$Three Months Ended
Mar 31,
2015
631
592
100 $
107 $
63,127 $63,359 $Direct leasing revenue recognized

$

9,228

June 30,
2015

$

6,469

(1) Aggregate value is the product of multiplying vehicles delivered by the average per unit price of vehicles delivered$

June 30,
2014
158
102
16,046

$
$

170

$

Six Months Ended
June 30,
June 30,
2015
2014
1,223
158
103 $
102
126,486 $16,046
15,697$170

Non-GAAP Financial Information
This letter includes non-GAAP financial information because we plan and manage our business using such information. Our non-GAAP
measures align the recognition of revenues and costs related to a vehicle sale with the time when the customer take delivery of the car
and cash is received or owed to us. This contrasts with the approach of other automotive manufacturers who under GAAP accounting
recognize revenue when the vehicle is sold into dealership inventory rather than to end customers, even though in the case of a captive
finance lease they may not collect cash for several years on a consolidated basis.
Our non-GAAP revenue and gross profit is determined by adding back the deferred revenue and related costs for cars sold with resale
value guarantee and where we have collected, or will collect from a bank intermediary in a matter of days, the purchase price of the carin cash. For cars leased directly by Tesla, we recognize lease revenue and related costs over the lease term and the same way forboth GAAP and non-GAAP purposes. Our non-GAAP expense and per share information also exclude non-cash interest expense andstock-based compensation.

Tesla Motors, Inc.
Reconciliation of GAAP to Non-GAAP Financial Information(Unaudited)(In thousands, except per share data)
Three Months Ended
Mar 31,
2015

June 30,
2015
Net loss (GAAP)
Stock-based compensation expense
Non-cash interest expense related to convertible notes and other borrowing$(184,227)
43,335$

18,171(122,721)

Net loss (Non-GAAP) including lease accounting
Model S gross profit deferred due to lease accounting (1)(2)(154,181)
43,026Six Months Ended
June 30,
June 30,
2015
2014

June 30,
2014$

19,510(91,645)(61,902)35,783$23,639(2,480)(338,408)
86,361$$(111,702)
72,821

37,681(214,366)$

32,032(6,849)Net income (loss) (Non-GAAP)$

61,907(60,814)$

46,396(45,249)$

18,607
16,127$

108,303(106,063)$

39,99133,142Net loss per share, basic (GAAP)
Stock-based compensation expense
Non-cash interest expense related to convertible notes and other borrowing$(1.45)$(1.22)$(0.50)$

Model S gross profit deferred due to lease accounting (1)(2)
Net income (loss) per share, basic (Non-GAAP)$

Shares used in per share calculation, basic (GAAP and Non-GAAP)(2.68)$(0.90)

0.34

0.34

0.29

0.68

$

0.59

0.14

0.15

0.19

0.30

$

0.26

0.49
(0.48)

0.37(0.36)

0.15
0.13

0.86
(0.84)

$
$

0.32
0.27

$

126,689

Net loss per share, diluted (GAAP)
Stock-based compensation expense
Non-cash interest expense related to convertible notes and other borrowing
Net loss (Non-GAAP) including lease accounting
Model S gross profit deferred due to lease accounting (1)(2)$

Net income (loss) per share, diluted (Non-GAAP)
Shares used in per share calculation, diluted (Non-GAAP)$(1.45)
0.34
0.14(0.97)
0.49(0.48)
126,689$

125,947$$(1.22)
0.34
0.15(0.73)
0.37(0.36)
125,947$

124,250$$(0.44)
0.25
0.17(0.02)
0.13
0.11
140,948

126,320$$(2.68)
0.68
0.30(1.70)
0.86(0.84)
126,320

123,864$$$$(0.79)
0.52
0.23(0.04)
0.28
0.24
140,641(1) Includes deliveries of Model S with the resale value guarantee or similar buy-back terms and not deliveries under the Model S leasing program.
(2) Under GAAP, warranty costs are expensed as incurred for Model S vehicle deliveries with the resale value guarantee or similar buy-back terms and subject to lease accounting. For NonGAAP purposes, an estimated incremental warranty reserve of $10.2 million, $6.8 million and $3.4 million is included for the three months ended June 30, 2015, March 31, 2015 and June 30,
2014, respectively. For the six months ended June 30, 2015 and 2014, an estimated incremental warranty reserve of $17.0 million and $5.5 million is included, respectively. Additionally, stockbased compensation of $2.3 million, $1.7 million and $0.7 million is excluded for non-GAAP purposes for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014, respectively.
For the six months ended June 30, 2015 and 2014, stock-based compensation of $3.9 million and $1.4 million is excluded, respectively.

Reconciliation of GAAP to Non-GAAP Financial Information(Unaudited)(In thousands, except per share data)

June 30,
2015
Revenues (GAAP)
Model S revenue deferred due to lease accounting (1)Revenues (Non-GAAP)$

Gross profit (GAAP)
Model S gross profit deferred due to lease accounting (1)(2)
Stock-based compensation expense
Gross profit (Non-GAAP)

Three Months Ended
Mar 31,
2015$$

954,976
242,148
1,197,124$

213,370$

61,9074,820
280,097

Research and development expenses (GAAP)
Stock-based compensation expense
Research and development expenses (Non-GAAP)$

Selling, general and administrative expenses (GAAP)
Stock-based compensation expense
Selling, general and administrative expenses (Non-GAAP)

$

$

$

$

$

939,880
163,676
1,103,556$

260,073$

46,396
4,601
311,070

181,712(19,912)
161,800$

201,846(18,603)183,243$$$

Six Months Ended
June 30,
June 30,
2015
2014

June 30,
2014$$

769,349
88,162857,511$

212,995$

18,607
3,912
235,514167,154(19,792)
147,362$

195,365(18,633)
176,732

$

$

$

$

$

1,894,856
405,8242,300,680$

1,389,891
180,668
1,570,559$

473,443$

368,123$

108,303
9,421
591,167$

39,991
7,018
415,132

107,717(14,822)
92,895$134,031(17,049)
116,982$$$

348,866(39,704)
309,162$

397,211(37,236)
359,975$$$

189,261(28,367)
160,894
251,582(37,436)
214,145(1) Includes deliveries of Model S with the resale value guarantee or similar buy-back terms and not deliveries under the Model S leasing program.
(2) Under GAAP, warranty costs are expensed as incurred for Model S vehicle deliveries with the resale value guarantee or similar buy-back terms and subject to lease accounting. For NonGAAP purposes, an estimated incremental warranty reserve of $10.2 million, $6.8 million and $3.4 million is included for the three months ended June 30, 2015, March 31, 2015 and June 30,
2014, respectively. For the six months ended June 30, 2015 and 2014, an estimated incremental warranty reserve of $17.0 million and $5.5 million is included, respectively. Additionally, stockbased compensation of $2.3 million, $1.7 million and $0.7 million is excluded for non-GAAP purposes for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014, respectively.
For the six months ended June 30, 2015 and 2014, stock-based compensation of $3.9 million and $1.4 million is excluded, respectively.