Tesla Motors, Inc. – Second Quarter 2014 Shareholder Letter
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Tesla and Panasonic announce Gigafactory agreement
Site preparation started in June for a potential Gigafactory location
Record Q2 Model S deliveries of 7,579 vehicles
Record Q2 Model S production of 8,763 vehicles
Net income of $16M and $0.11 EPS (non-GAAP), loss of $62M and $(0.50) EPS (GAAP)
New Model S/Model X assembly line planned to begin operation next week
On track for more than 35,000 deliveries in 2014

July 31, 2014
Dear Fellow Shareholders:
We have had an active first half of 2014, and the rest of the year is expected to be even busier. The development of ourlarge-scale battery manufacturing facility, known as the Tesla Gigafactory, is proceeding well. We have formalized ouragreement with Panasonic for cell manufacturing at the Gigafactory and remain on track with the site selection process.
In addition, we are adding new production capacity at our Fremont factory that will allow us to meet the growing
worldwide demand for our vehicles. The speed at which we are executing this capacity upgrade will allow us to exceed
35,000 Model S deliveries this year. Provided that we execute well and there are no serious macroeconomic shocks,
Tesla’s annualized delivery rate should exceed 100,000 units by the end of next year.

Laying the Groundwork for Future Growth
Earlier today, Panasonic and Tesla entered into a formal agreement to partner on the Gigafactory. Panasonic will invest
in production equipment that it will use to manufacture and supply Tesla with battery cells. Tesla will prepare andprovide the land, buildings and utilities for the Gigafactory, invest in production equipment for battery module and packproduction, and be responsible for the overall management of the Gigafactory. Additional Gigafactory partners for
production of cell precursor materials will be announced in the coming months to create a fully integrated industrial
complex. Processed ore from mines will enter by railcar on one side and finished battery packs will exit on the other.
In June, we broke ground just outside Reno, Nevada on a site that could potentially be the location for the Gigafactory.
Consistent with our strategy to identify and break ground on multiple sites, we continue to evaluate other locations in
Arizona, California, New Mexico and Texas. The final site for the first Gigafactory will be determined in the next few
months, once we have full visibility and agreement on the relevant incentives and processes for enabling the Gigafactory
to be fully operational to meet the timing for Model 3. We see these concurrent efforts as prudent. This vehicle will be
our third-generation product and will substantially broaden the addressable market for Tesla, helping to accelerate thetransition towards sustainable transportation. Any potentially duplicative investments are minor compared to the revenue
that could be lost if the launch of Model 3 were affected by any delays at our primary Gigafactory site.
At the Fremont factory, we set a new record for vehicles produced this quarter, which came in tandem with substantial
efforts underway to increase the factory’s capacity. Factory production reached 8,763 Model S vehicles during thequarter, up 16% from Q1. Recently, we have been producing about 800 cars per week. Panasonic’s increased cell
production capacity in Japan has begun to reduce this critical constraint on vehicle production.

To increase manufacturing capacity further, we arebuilding a new final assembly line and adding more
automation to our body shop. With advancements in
automation and efficiency, our new assembly line has
the capacity to produce more than 1,000 vehicles per
week and the flexibility to build both Model S and Model
X. Production on the new line begins next week after a
shutdown for the transition. As planned, the transition
will result in about 2,000 fewer units being produced in
Q3, while having no significant impact on scheduled
customer deliveries. After a short ramp up period in Q3,
we foresee average Q4 production of slightly more than
1,000 cars per week, enabling us to meet our 2014delivery guidance of more than 35,000 vehicles.
Model S/Model X Final Assembly Line – Fremont
Expanding Model S Demand
At Tesla, we see a clear distinction between demand and deliveries. We measure demand by the number of cars thathave been ordered. An order occurs when a customer selects their vehicle configuration and pays the nonrefundable
cash deposit. Deliveries, on the other hand, are the fulfillment of those orders. The number of deliveries in a quarter isinfluenced by three main factors: our ability to increase production; the allocation of that production among our North
American, European and Asian markets; and the need to fill the in-transit pipeline for future deliveries in each region.
This quarter, for example, we delivered 7,579 Model S vehicles, slightly ahead of guidance and up by more than 17%
sequentially. However, even though we increased both production and deliveries, average global delivery wait times
increased because our production growth was unable to keep pace with increased demand.
Model S orders, and thus demand, continue to grow even in our most established markets. In both North America andEurope, Q2 Model S orders increased sequentially at a much faster rate than for the rest of the automotive industry.
Accordingly, we believe these markets remain under-penetrated. We expect demand to continue to increase worldwide
as we continue to grow our customer support infrastructure and broaden the appeal of our products, and as consumerawareness improves.
This year, we are doubling our total global addressable market by entering China and right hand drive (RHD) markets.
Model S is off to a very encouraging start in China, especially considering that we are delivering cars only in the areas
around Beijing, Shanghai, Shenzhen and recently Hangzhou where we can assure customers of service coverage. We
are planning to launch service and deliveries in many additional cities in the upcoming months, including Chengdu andGuangzhou. China has almost 10 times as many
cities with more than 1 million people compared to theUnited States, so we believe the opportunity is
substantial.
RHD Model S is also being well received in the United
Kingdom where it launched in June and in Hong Kong
where it launched last week. Hong Kong is a uniquemarket because Model S is exempt from registration
tax that nearly doubles the cost of a comparable luxurycar. We plan to begin RHD Model S deliveries inJapan and Australia later this year. Our customers
have now driven the Model S for 394 million miles
globally, saving nearly 18 million gallons of gasoline.
RHD Model S – United Kingdom

We continue to open stores and service centers worldwide to support our global expansion. For the rest of 2014, therate of location openings will be fastest in China, followed by Europe, and then North America. We also continue toexpand our Supercharging network, with the introduction of our Superchargers in Canada and a substantial increase in
the rate of deployment in Europe and China. Globally, we just energized our 156th Supercharger, which makes our
network both the largest and the most rapidly growing fast charging network in the world. We measure the network’s
size by charging capacity because it represents
the ability to displace petrol-powered withelectricity powered miles. In June alone, theSupercharger network passed a milestone,delivering more than 1 GWh of energy to Model S
vehicles in the month, representing 2.7 million
miles of driving. Since inception, our customers
have driven for free nearly 32 million
Supercharged miles, the same distance as
traveling to the moon and back, sixty-five times!

RHD Model S – Hong Kong

Development efforts remain on track for
production of Model X in the spring of 2015. We
anticipate having operational Alpha prototypes
ready by next week in order to confirm design
intent and Beta prototypes to be ready later thisyear.

Q2 Results
As usual, this letter includes both GAAP and non-GAAP financial information because we plan and manage our businessusing such non-GAAP information. Non-GAAP financials exclude stock-based compensation and non-cash interest
expense, while adding back the deferred revenue and related costs for cars sold with a residual value guarantee orsimilar buy-back terms.
Non-GAAP revenue was $858 million for the quarter, up 55% from a year ago, while GAAP revenue was $769 million.
Compared to Q1, the average selling price of Model S was stable. Automotive revenue for Q2 includes $23 million of
powertrain sales to Daimler and Toyota, reflecting the start of production deliveries to Daimler for the Mercedes-Benz B
Class Electric Drive and the wind down of sales to Toyota for the RAV4 EV.
This quarter, we started business leasing for Model S in the United States. We recognize revenue for leased vehicles
over the term of the lease in both our GAAP and non-GAAP financials. By contrast, other automotive manufacturers
recognize full revenue for the price of the vehicle even if that vehicle is eventually leased, because the vehicle is first soldto an independent dealer. To facilitate comparisons with other automakers, we have disclosed in our supplemental
tables below that $16 million of aggregate sales value was related to the 158 vehicles leased to business customers in
Q2. We expect to recognize this amount in revenues over the next few years. Additionally, our balance sheet
disclosures summarize the cost of these operating lease vehicles, which we expect to recognize as cost of revenues
over the same period.
During Q2, we achieved a non-GAAP automotive gross margin of 26.8%, and 26.9% on a GAAP basis. These results
represent a 140 basis point improvement in non-GAAP automotive gross margin sequentially, excluding ZEV credits, andour warranty reserves are generally consistent with the prior quarter.
Research and development (R&D) expenses were $93 million on a non-GAAP basis and $108 million on a GAAP basis.
Non-GAAP R&D expenses were up 37% from Q1 as Model X engineering work continues to accelerate and as wedevelop processes for capacity expansion.

Selling, general and administrative (SG&A) expenses were $117 million on a non-GAAP basis and $134 million on a
GAAP basis. The 20% sequential increase in non-GAAP SG&A expenses was driven by the rapid pace of our global
growth and by the expansion of our customer support infrastructure.
Q2 non-GAAP net income was $16 million, or $0.11 per share based on 140.9 million diluted shares, while Q2 GAAP net
loss was $62 million or $(0.50) per share.
We had a $2 million net cash outflow from operations in Q2 primarily due to an $82 million increase in finished goods
inventory from cars in transit to Europe and China, and $15 million of cash used for leasing vehicles. Capital
expenditures in the quarter totaled $176 million.
Cash at quarter end, including cash equivalents, increased to almost $2.7 billion, in part because our underwriters
exercised the overallotment option on the Q1 convertible note financing, contributing an additional $267 million of cash in
Q2.

Q3 & 2014 Outlook
We plan to produce about 9,000 cars in Q3. This target takes into account the effect of the two-week production
shutdown related to the transition to the new final assembly line at the Fremont factory. If we had been able to avoid thisproduction down time, we would have been able to forecast Q3 quarterly production at about 11,000 units. Afterconsidering our planned production and the need to have more vehicles in transit (including the new RHD models), we
expect to be able to deliver about 7,800 Model S vehicles in Q3. Without the planned factory retooling shutdown, Q3
delivery expectations would have been approximately 9,500 vehicles.
We expect non-GAAP automotive gross margin in Q3 to be about consistent with the prior quarter. As manufacturing
efficiencies and part costs continue to improve, we continue to anticipate a 28% non-GAAP automotive gross margin,excluding ZEV credits, by Q4 of this year. We expect to lease about 300 cars in North America during Q3, and much
more in Q4.
Q3 operating expenses are expected to grow sequentially by about 20% for R&D and 15% for SG&A. Despite a higher
count of leased vehicles, investments in R&D, and geographic expansion, we expect to be marginally profitable in Q3 on
a non-GAAP basis. Based on our current stock price, we project between 141 million and 143 million diluted shares
outstanding in Q3.
We plan to invest between $750 million and $950 million in 2014, an increase of $100 million from prior guidance. We
continue to invest in additional production capacity, continued Model X and Model S development, Gigafactory
construction, and further expansion of our sales, service, and Supercharger footprints. We have also chosen to slightly
accelerate our investments in production capacity and the Gigafactory.
It will indeed be a busy second half of the year as we execute on the opportunities ahead.

Elon Musk, Chairman & CEO

Deepak Ahuja, Chief Financial OfficerWebcast Information

Tesla will provide a live webcast of its second quarter 2014 financial results conference call beginning at 2:30 p.m. PT on July 31, 2014,
at ir.teslamotors.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. On a non-GAAP
basis, financial measures exclude non-cash items such as stock-based compensation, the change in fair value related to Tesla’s
warrant liability, non-cash interest expense related to Tesla's convertible senior notes as well as one-time expenses associated with theearly repayment of the Department of Energy Loan. Non-GAAP financial measures also exclude the impact of lease accounting on
related revenues and cost of revenues associated with Model S deliveries with the resale value guarantee and similar buy-back terms,
as this perspective is useful in understanding the underlying cash flow activity and timing of vehicle deliveries. Management believes
that it is useful to supplement its GAAP financial statements with this non-GAAP information because management uses suchinformation 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 othercompanies. Non-GAAP information is not prepared under a comprehensive set of accounting rules and therefore, should only be readin 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 below.

Forward-Looking Statements
Certain statements in this shareholder letter, including statements in the “Q3 & 2014 Outlook” section; statements regarding grossmargin expansion and profitability; statements relating to the progress Tesla is making with respect to product development, including
Model X development and launch plans; the timing and pace of production and delivery expansion for Model S, including the production
volume, rate, and ramp expectation of our new production lines; growth and demand, in particular in China; right hand drive market
launch expectations; the ability to achieve vehicle demand, volume, production, revenue, leasing, gross margin, spending, andprofitability targets; future store, service center and Tesla Supercharger openings and expansion plans; and Tesla Gigafactory timing,site location, partnerships, plans and outut expectations, including those related to Model 3 and the ability for us to conclude futureagreements with Gigafactory partners, including Panasonic, 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 todiffer materially from those in the forward-looking statements: Tesla’s future success depends on its ability to design and achievemarket acceptance of Model S and other new vehicle models, specifically Model X and Model 3; the risk of delays in the manufacture,
production and delivery of Model S vehicles or the development, production and delivery of Model X vehicles; the ability of suppliers tomeet quality and part delivery expectations at increasing volumes; Tesla’s ability to continue to reduce or control manufacturing andother costs; consumers’ willingness to adopt electric vehicles; competition in the automotive market generally and the alternative fuelvehicle market in particular; Tesla’s ability to establish, maintain and strengthen the Tesla brand; Tesla’s ability to manage future growtheffectively as we rapidly grow, especially internationally; the unavailability, reduction or elimination of government and economic
incentives for electric vehicles; Tesla’s ability to establish, maintain and strengthen its relationships with strategic partners such as
Daimler, Toyota and Panasonic; potential difficulties in finding and finalizing details for the first 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 fromtime 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 9, 2014. 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:
Simon Sproule
Communications – Teslapress@teslamotors.com

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

June 30,
2014
Revenues
Automotive sales (1A)
Development services
Total revenues
Cost of revenues
Automotive sales (1B)
Development services
Total 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 (3)Loss before income taxes
Provision for income taxes
Net loss
Net loss per common share, basic and diluted$

Three Months Ended
Mar 31,
2014

768,242
1,107
769,349$

618,811
1,731
620,542

Six Months Ended
June 30,
June 30,20142013

June 30,2013$

401,535
3,604
405,139$

1,387,053
2,838
1,389,891$

956,738
10,193966,931554,104
2,250
556,354
212,995

462,471
2,943
465,414155,128

303,599
1,057
304,656
100,483

1,016,575
5,193
1,021,768
368,123

765,417
4,711
770,128
196,803$107,717
134,031
241,748(28,753)467(31,238)(1,228)(60,752)
1,150(61,902)$81,544
117,551
199,095(43,967)
141(11,883)
6,718(48,991)809(49,800)$

52,312
59,963112,275(11,792)
39(20,116)
1,668(30,201)301(30,502)$

189,261
251,582
440,843(72,720)608(43,121)5,490(109,743)
1,959(111,702)$

107,171
107,008
214,179(17,376)49(20,234)
18,759(18,802)452(19,254)$(0.50)$(0.40)$(0.26)$(0.90)$

Shares used in per share calculation, basic and diluted

124,250

123,473

118,194

123,864(0.17)
116,462

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 forthe periods presented:(A) Net increase in deferred revenue and other long-term liabilities
as a result of lease accounting and therefore not recognized in
automotive sales$

88,162$92,506$

146,812$

180,668$

146,812(B) Net increase in operating lease vehicles as a result of leaseaccounting and therefore not recognized in automotive cost of
sales

$

68,752$

69,743$

123,919$

138,495$

123,919

$

1,063
8,565
9,631
19,259$7,018
28,36737,436
72,821$

2,599
16,20915,31934,127

Under lease accounting, warranty costs are expensed as incurred instead of accrued at the time of sale.
(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

$

$

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

3,106
13,545
20,38737,038$$$(3) Other income, net, for the six months ended June 30, 2013 includes the gain from the elimination of the $10.7 million Department of Energy (DoE) common stock
warrant liability. Other income, net, for the three months ended March 31, 2014 and the six months ended June 30, 2014 include a $6.7 million favorable foreign
currency exchange impact.

Tesla Motors, Inc.
Condensed Consolidated Balance Sheets(Unaudited)(In thousands)
June 30,
2014
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 31,2013

2,674,910
11,71496,607596,927
61,536531,226
1,035,822
7,247
38,4755,054,464$

604,985
374,416228,017
23,7992,360,736
444,095
4,036,048
66,083
952,333
5,054,464$$$

845,889
3,012
49,109340,355
27,574382,425
738,494
6,435
23,6372,416,930

412,221273,062
163,153
20,577586,301
294,495
1,749,809
667,1212,416,930

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$

376,979
69,74368,752$

123,919
138,839
114,221$515,474$

376,979$

11,214$

11,214(2) Includes the following increase in deferred revenue related to deliveries of Model S with the resale value guarantee or similar buy-backterms 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$

227,868
38,18833,586$74,45584,577
68,836

Ending balance$

299,642$

227,868(3) Includes the following increase in other long-term liabilities related to deliveries of Model S with the resale value guarantee or similar buyback terms and subject to lease accounting for the following periods:
Beginning balanceFirst quarter
Second quarter
Third quarter
Fourth quarter$

236,298
54,31854,575$72,35786,65277,289Ending balance$

345,191$

236,298(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 third quarter of 2014. As such, the carrying value of the2018 Notes was classified as a current liability as of June 30, 2014 and the difference between the principal amount and the carrying
value of the 2018 Notes was reflected as convertible debt in mezzanine equity on our condensed consolidated balance sheet as of June30, 2014.

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

June 30,
2014
Selected Cash Flow Information
Cash flows provided by (used in) operating activities (1)Cash flows provided by (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 31,2014$(1,662)2,610
281,491$

58,723(329,180)
1,816,560$(36,351)(27,174)
597,007$

57,061(326,570)
2,098,051$

28,781(82,410)600,691$(1,662)(175,685)$

58,723(141,364)$(36,351)(40,514)$57,061(317,049)$

28,781(98,242)$(177,347)$(82,641)$(76,865)$(259,988)$(69,461)$

54,715$44,268$22,199$98,983$40,048June 30,
Cash and Investments
Cash and cash equivalents
Short-term marketable securities
Restricted cash and marketable securities - current
Restricted cash - noncurrent

Six Months Ended
June 30,
June 30,20142013

June 30,
2013$

2,674,910
11,714
7,247

Mar 31,$2,393,908
189,111
1,049
7,102

June 30,$

746,057
1,362
7,059

(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 Leasing Program Information(in thousands, except for vehicle deliveries)
Three Months
Ended
June 30,
2014

Six Months
Ended
June 30,
2014

Vehicles delivered
Average per unit price of vehicles delivered
Aggregate value of vehicles delivered (1)

$
$

158
102
16,046

$
$

158
102
16,046

Leasing revenue recognized for current period deliveries

$

170

$

170

(1) Aggregate value is the product of multiplying vehicles delivered by the average per unit price of vehicles deliveredTesla Motors, Inc.
Reconciliation of GAAP to Non-GAAP Financial Information(Unaudited)(In thousands, except per share data)

June 30,2014
Net loss (GAAP)
Stock-based compensation expense
Change in fair value of warrant liability
Non-cash interest expense related to convertible notes$(61,902)35,783-$23,639(2,480)

Early extinguishment of DoE loans
Net income (loss) (Non-GAAP) including lease accounting
Model S gross profit deferred due to lease accounting (1)(2)
Net income (loss) (Non-GAAP)$Net loss per share, basic (GAAP)
Stock-based compensation expense
Change in fair value of warrant liability
Non-cash interest expense related to convertible notes$

18,607
16,127(0.50)
0.29-$

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

0.15
0.13

$
$

$

Net income per share, diluted (Non-GAAP)
Shares used in per share calculation, diluted (Non-GAAP)$(0.44)
0.25
0.17(0.02)
0.13
0.11
140,948$

21,38417,015(0.40)
0.30
-

$

0.17
0.14

$
$

$

(0.36)
0.26
0.07(0.03)
0.15
0.12
140,221(30,502)
19,259-$19,34926,284(0.26)
0.16
-

$

0.16
0.22

$
$

$

(0.23)
0.15
0.01
0.13
0.05
0.15
0.20
130,503$

39,99133,142(0.90)
0.59
-

$

0.32
0.27

$
$

$

(0.79)
0.52
0.23(0.04)
0.28
0.24
140,641

19,34941,708(0.17)
0.29(0.09)
0.02
0.14

$

123,864$(19,254)
34,127(10,692)
1,791
16,38622,3580.26-

118,194$(111,702)
72,821
32,032(6,849)0.02
0.14

123,473$

Six Months Ended
June 30,
June 30,20142013

June 30,
2013

1,791
16,386
6,934

0.07
-

124,250

Net loss per share, diluted (GAAP)
Stock-based compensation expense
Change in fair value of warrant liability
Non-cash interest expense related to convertible notes
Early extinguishment of DoE loans
Net income (loss) (Non-GAAP) including lease accounting
Model S gross profit deferred due to lease accounting (1)(2)(49,800)
37,038
8,393(4,369)0.19-

Early extinguishment of DoE loans
Model S gross profit deferred due to lease accounting (1)(2)
Net income per share, basic (Non-GAAP)

Three Months Ended
Mar 31,
2014

0.17
0.36
116,462$$(0.15)
0.27(0.08)
0.01
0.13
0.18
0.15
0.33
127,035(1) 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
Non-GAAP purposes, an estimated incremental warranty reserve of $3.4 million, $2.1 million and $4.0 million is included for the three months ended June 30, 2014, March 31, 2014 andJune 30, 2013, respectively. For the six months ended June 30, 2014 and 2013, an estimated incremental warranty reserve of $5.5 million and $4.0 million is included, respectively.
Additionally, stock-based compensation of $0.7 million, $0.7 million and $0.5 million is excluded for non-GAAP purposes for the three months ended June 30, 2014, March 31, 2014 andJune 30, 2013, respectively. For the six months ended June 30, 2014 and 2013, stock-based compensation of $1.4 million and $0.5 million is excluded, respectively.

(2) Includes deliveries of Model S with the resale value guarantee or similar buy-back terms and not deliveries under the Model S leasing program.

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

June 30,
2014
Revenues (GAAP)
Model S revenue deferred due to lease accounting (2)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,
2014$$

769,349
88,162857,511$

212,995$

18,607
3,912
235,514

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)

$

$

$

$

$

620,542
92,506
713,048$

155,128$

21,384
3,106
179,618

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

Six Months Ended
June 30,
June 30,20142013

June 30,
2013$$

405,139
146,812551,951$

100,483$

19,3491,063
120,895

81,544(13,545)
67,999$117,551(20,387)
97,164

$

$

$

$

$

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

966,931
146,812
1,113,743$

368,123$

196,803$

39,991
7,018
415,132$

19,3492,599
218,751

52,312(8,565)43,747$59,963(9,631)50,332$$$

189,261(28,367)
160,894$

251,582(37,436)
214,145$$$

107,171(16,209)90,962
107,008(15,319)
91,689(1) 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
Non-GAAP purposes, an estimated incremental warranty reserve of $3.4 million, $2.1 million and $4.0 million is included for the three months ended June 30, 2014, March 31, 2014 andJune 30, 2013, respectively. For the six months ended June 30, 2014 and 2013, an estimated incremental warranty reserve of $5.5 million and $4.0 million is included, respectively.
Additionally, stock-based compensation of $0.7 million, $0.7 million and $0.5 million is excluded for non-GAAP purposes for the three months ended June 30, 2014, March 31, 2014 andJune 30, 2013, respectively. For the six months ended June 30, 2014 and 2013, stock-based compensation of $1.4 million and $0.5 million is excluded, respectively.

(2) Includes deliveries of Model S with the resale value guarantee or similar buy-back terms and not deliveries under the Model S leasing program.