Tesla Motors, Inc. – First Quarter 2013 Shareholder Letter
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GAAP profitable even without the benefit of a one-time gain
Cash balance increased, despite making DOE loan payment
Record sales of $562 million, up 83% from last quarter
4,900 vehicles delivered
Gross margin doubled from last quarter to 17%
U.S. demand expected to exceed 15,000/year; global demand likely
above 30,000/year

May 8, 2013

Dear Fellow Shareholders:Tesla reached profitability in the first quarter of 2013 for the first time in our ten year history. We exceeded our own
targets for deliveries, significantly expanded gross margin, and improved execution throughout the company.
Excluding non-cash warrant and stock option items, we generated a profit of $15 million. Including those factors,
our GAAP profit was $11 million. Importantly, we achieved profitability despite the benefit of a one-time accounting
gain related to the DOE warrant.
Production & Deliveries Up Over 80%, Exceeding Targets
During Q1, we consistently produced 400 or more Model S vehicles per week, for a total of over 5,000 during thequarter. We recognized 4,900 vehicles as revenue, exceeding our initial Q1 guidance of 4,500, despite physicallydelivering a higher number of vehicles, as the standard for revenue recognition was extremely high. Even if a car
was received, fully paid for and signed off as good by a customer, we did not recognize the revenue if thepaperwork was incorrect.
As our manufacturing processes stabilized
and our supply chain continued to mature,
we turned our attention to improving
execution. In the process, we reduced thehours required to build a car by almost 40%
from December to March.
We also improved our inventory
management. During Q1, raw materials
declined by almost 26%, while unit
production increased 80%. Better inventory
management contributed over $30 million in
cash and reduced our logistics costs during
the quarter.
Financing Product Expands Model S Market

The 10,000th Model S Body

Our goal has always been to make electric vehicles affordable to the mass market. The Model S is priced
substantially lower than the Roadster and our third generation vehicle will again be priced much lower than theModel S. However, in the near term, we believe that the right financing product can make a significant difference tothe affordability of the Model S.
Working with US Bank and Wells Fargo, we are able to offer many customers the ability to buy a Model S with nomoney down (net of reimbursement from federal & state incentives) and an effective cost as low as $580 per month,
taking into account savings from not using gasoline. When purchased for business use, the depreciation benefit
reduces the effective monthly cost even further to as low as $350.
Moreover, Tesla guarantees a resale price in three years that is the highest of any premium sedan brand made involume. We believe that this has the potential to make the Model S accessible to a much larger customer base.
Growing Rate of Worldwide Orders
We are pleased with the strong global demand for Model S and are currently receiving orders at a rate greater than
20,000 per year worldwide. Importantly, we are seeing orders in a particular region increase proportionate to thenumber of deliveries, which means that customers are selling other customers on the car. Given that we have notyet delivered any customer cars outside of North America, there would appear to be significant upside potential in
Europe and Asia.

Model S in the Alps

We continue to modify our sales processes to simplify andenhance the customer experience. As vehicle production
became more reliable during Q1, we realized that thereservation process was cumbersome and therefore
eliminated it. Customers in North America now order theircustomized Model S online in a simple three step process,rather than placing a generic reservation in a queue. As aresult, quarter-end reservation data is no longer ameaningful metric, nor is it comparable to prior quarters.
Going forward, we believe that the accepted automotive
industry approach of focusing on margin improvement,
profitability and deliveries are the more meaningful metrics
for measuring progress.

Building the Best Ownership Experience
The ideal service experience is, of course, never to need service, but when necessary, we now offer top of
the line Tesla vehicles as loaner cars. Through our valet service, which will be rolled out over the next threemonths, we deliver another Model S to the customer at their choice of location and pick up their car. Since
we also plan to offer these loaner cars for sale at a discount according to age and miles driven, the loaner
fleet is constantly refreshed, resulting in the loaner cars usually being newer and with more options than thecustomer car in service. For some additional fun, customers in most markets can opt to receive a Tesla
Roadster while their Model S is in for service.
Also, while we do recommend an annual checkup for optimal performance, Model S will also now no longer
require an annual service contract to maintain the vehicle warranty. Moreover, for customer peace of mind,
the battery pack now comes with a “no fault” warranty. Even if a customer never reads or follows the
manual, the Model S battery pack is always covered by Tesla.
Finally, to support the growing fleet of customer cars, in Q1 we opened 12 new service locations, bringing
our total network to 41 locations. We remain on plan to add approximately 30 service locations in total in
2013.

The expansion of our store and gallery
network is also continuing on plan. At
quarter end, we had 34 stores andgalleries around the world, and plan toopen about 15 more stores and galleries
this year with about half the openings in
Europe and Asia. This year we havealready opened a gallery in Austin, Texas,
and stores in Century City, California, andFrankfurt, Germany. We also moved our
location at Santana Row, California to anew, larger store to accommodate stronger
than expected visitor traffic levels. Global
store and gallery visitor traffic hasremained very strong.
We have been hard at work on improving
New Store at Santana Row, California
our Supercharger technology and inbuilding out new Supercharger stations, with a major announcement expected within the next few weeks. As
always, Tesla Supercharging is fast, convenient and free forever.
Improving the Car of the Year
Like we did with the Roadster, we continue to improve Model S for both new and existing customers. We recently
introduced a lower cost, 60 kWh battery pack for Model S. This Model S has outstanding 0-60 mph acceleration
and an EPA certified range of 208 miles on a single charge. We also introduced a Performance Plus option for our
85 kWh cars. Using a combination of wider tires andenhanced suspension components, we were able toimprove dynamic handling and ride quality while extending
range by about ten miles.
During Q1, we also started delivery of cars with standard
coil suspension (in addition to active air suspension), andin April, we introduced a new, red paint. We remotely
pushed software updates to our customer fleet, adding
incremental functionality such as voice activation of theinfotainment system. By holding down the voice buttonand saying “Play XX song by YY artist”, you can play
almost any song in the world on demand.

New RedQuarterly Results
Total revenues for Q1 rose 83% from Q4 to $562 million, a new record for Tesla. In addition to record Model S
deliveries in Q1, we continued to supply full electric powertrains and battery packs at a steady pace to Toyota for
their RAV4 EV program. We also completed various deliverables under the Mercedes Benz B-Class EV program
which contributed to total development services revenue of almost $7 million.
From Q4 to Q1, total gross margin rose from 8% to 17%, as a result of a higher Model S production rate,
manufacturing efficiencies, part cost reductions and regulatory credit sales. Zero emission vehicle (ZEV) credits
sold to other automakers amounted to approximately $68 million or 12% of revenues. We expect this to decline

significantly in future quarters, as ZEV credits will only apply to about 1/6 of worldwide deliveries, versus roughly
half of US deliveries, and the price per credit has declined.
However, an important point for investors to note is that we are reaffirming our prior guidance of a gross margin of
25% in Q4 2013, assuming zero ZEV credit revenue. This may turn out to be greater than zero, but we are notcounting on it. What really matters is improving fundamental automotive gross margin, excluding regulatory credits.
On this front, Tesla improved nine percentage points from the prior quarter and continues to improve every month.
Research and development (R&D) expenses were $47 million on a non-GAAP basis and $55 million on a GAAP
basis. R&D spending declined by 23% from Q4 on a non-GAAP basis, as very high expenses associated with theModel S launch declined substantially. Increasing production by over 3000% from Roadster to Model S was
extremely difficult and many mistakes were made, but now we are starting to get the hang of things.
Selling, general and administrative (SG&A) expenses were $41 million on a non-GAAP basis and $47 million on a
GAAP basis, up slightly from Q4. The increase was driven primarily by additional selling expenses related to the
expansion of our store network and service infrastructure, and by increased information technology costs.
Q1 non-GAAP net income was $15 million, and $11.2 million on a GAAP basis. Non-GAAP basic EPS was$0.13 and $0.10 on a GAAP basis, using 114.7 million weighted shares outstanding. On a fully diluted basis,
non-GAAP EPS was $0.12. GAAP diluted EPS was $0.00, as net income has been adjusted to exclude the
one-time non-cash gain of $10.7 million from the elimination of our Department of Energy (DoE) warrant liability
as required under GAAP.
Our total cash was $231 million at quarter end, an increase of $10 million from last quarter, despite making thesecond quarterly principal repayment of almost $13 million on our DoE loan. Total cash includes short term
restricted cash set aside primarily for the next DoE loan payment due in June 2013, and excludes noncurrent
restricted cash.

Outlook
While we expect to build about 5,000 Model S vehicles in Q2, some cars will be in transit to Europe for start ofdeliveries in Q3. As a result, we expect to deliver slightly over 4,500 vehicles during Q2, all in North America. For
the full year of 2013, we expect to exceed our prior target of 20,000 worldwide deliveries and feel comfortableraising guidance to about 21,000 deliveries.
Obviously, there is a huge amount of work ahead to improve the gross margin of Model S, but we have a clear
roadmap to achieve component cost reductions, as well as achieve additional manufacturing and logistics
efficiencies. As a result, we expect to achieve gross margin in the high teens in Q2. Importantly, this expectation
includes the impact from lower ZEV credit sales, a lower average selling price due to a higher mix of 60 kWh cars,
as well as limited sales of the now discontinued 40 kWh cars, which will have a range-limited 60 kWh battery pack.
As mentioned above, we expect that our gross margin will continue to rise into the second half of the year to ourtarget of 25%, assuming no contribution from ZEV credits.
The lease accounting treatment for cars sold through our new financing plan will have no impact on our cash flows,
and we expect to be roughly breakeven on cash flow from operations in Q2, despite launch costs in Europe and ahuge increase in service centers, stores and Supercharger stations. However, the deferred revenue recognition
required by GAAP for lease accounting will lead to a net loss on paper in Q2. We plan to provide information sothat investors can evaluate our results both with and without the impact of lease accounting, as we believe theactual effect on Tesla is positive.

Operating expenses are expected to increase moderately in Q2. R&D expenses are expected to increase slightly
from Q1 as the pace of product development starts to pick up. SG&A expenses will continue to rise moderately,
primarily due to the growth in our stores and service centers.
We plan to spend about $200 million on capital expenditures in 2013, as we conclude the majority of our investmentin the Tesla Factory and Model S tooling. Capital spending also includes the expansion of our service, store andSupercharger networks and new product development.
2013 is off to a strong start, and we look forward to seeing more of you on the road in a Model S this year.

Elon Musk, Chairman & CEO

Deepak Ahuja, Chief Financial OfficerWebcast Information
Tesla will provide a live webcast of its first quarter 2013 financial results conference call beginning at 2:30 p.m. PT on
May 8, 2013, 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 the “Outlook” section of this Shareholder Letter;statements regarding profitability in Q2 2013 and cost reduction efforts; statements relating to the progress Tesla ismaking with respect to the development, European and Asian launch expectations, schedule for the introduction of future
options and variants, quality improvements, delivery and volume expectations of Model S; the ability of our suppliers to
supply quality parts at reduced costs; the ability to achieve vehicle demand, volume, revenue, gross margin, spending,
profitability and cash flow targets; the expected growth rate in reservations and cancellations, and future store, service
center and Tesla Supercharger expected costs, openings and expansion plans 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: Tesla’s future success depends on its ability to design and achieve market acceptance of Model S and othernew vehicle models, specifically Model X; the risk of delays in the manufacture, production and delivery ramp of Model S
vehicles; the ability of suppliers to meet quality and part delivery expectations; consumers’ willingness to adopt electricvehicles and electric cars in particular; 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; the unavailability, reduction or
elimination of governmental and economic incentives for electric vehicles; Tesla’s ability to establish, maintain andstrengthen its relationships with strategic partners such as Daimler, Toyota and Panasonic; and Tesla’s ability to executeon its plans for its new interactive retail strategy and for new store, service center and Tesla Supercharger openings.
More information on potential factors that could affect the Company’s financial results is included from time to time in
Tesla’s Securities and Exchange Commission filings and reports, including the risks identified under the section
captioned “Risk Factors” in our quarterly report on Form 10-K filed on March 7, 2013. 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
VP Investor Relations – Tesla Motors
ir@teslamotors.com

For additional information, please visit ir.teslamotors.com.

Press Contact:
Sarah Meron
VP Communications – Tesla Motors
smeron@teslamotors.com

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

Mar 31,
2013
Revenues
Automotive sales
Development services
Total revenues$

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

Net income (loss) per common share, basic (3)$Shares used in per share calculation, basic (3)Net income (loss) per common share, diluted (3) (4)Three Months Ended
Dec 31,Mar 31,
2012
2012

555,203
6,589
561,792$

Shares used in per share calculation, diluted (3)$19,245
10,92230,167

461,818
3,654
465,472
96,320278,710
3,765
282,475
23,857

13,932
6,025
19,957
10,21054,85947,045
101,904(5,584)10(118)
17,091
11,399151
11,248 $68,83245,908
114,740(90,883)
85
(27)
746
(90,079)(147)(89,932) $68,39130,582
98,973(88,763)90(65)(1,076)(89,814)59(89,873)

0.10$

114,712$294,377
11,955306,332

0.00(0.79) $113,763$

124,265(0.86)
104,784(0.79) $113,763(0.86)
104,784

Notes:(1) Includes stock-based compensation expense of the follow ing for the periods presented:
Cost of revenues
Research and development
Selling, general and administrative
Total stock-based compensation expense

$

$

1,536
7,644
5,688
14,868

$

$

1,638
7,159
5,619
14,416

$

$

7
5,932
4,772
10,711(2) Other income, net, for the three months ended March 31, 2013 includes the gain from the eliminationof the $10.7 million DoE common stock w arrant liability and a $6.4 million favorable foreign currency
exchange impact.
(3) On October 3, 2012, the Company completed its follow -on public offering, pursuant to w hich theCompany sold 7,964,601 shares of common stock.
(4) For the purposes of calculating our diluted income per share for the three months ended March 31,
2013, net income has been adjusted to exclude the one-time non-cash gain of $10.7 million from theelimination of our DoE w arrant liability.

Tesla Motors, Inc.
Condensed Consolidated Balance Sheets(Unaudited)(In thousands)
March 31,
2013
AssetsCash and cash equivalents
Restricted cash - current
Accounts receivable
Inventory
Prepaid expenses and other current assets
Operating lease vehicles, net
Property and equipment, net
Restricted cash - noncurrent
Other assets
Total assets$$

Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities
Deferred revenue
Customer deposits
Common stock w arrant liability
Capital lease obligations
Long-term debt
Other long-term liabilities
Total liabilities
Stockholders' equity
Total liabilities and stockholders' equity$$

Decem ber 31,
2012

214,417
16,71946,139237,618
11,1009,060
581,997
5,044
21,684
1,143,778$

344,9159,024
130,714
15,912439,626
35,004
975,195
168,583
1,143,778$$$

201,890
19,094
26,842
268,504
8,438
10,071
552,229
5,159
21,963
1,114,190

343,180
4,964
138,817
10,692
14,330452,337
25,170989,490
124,700
1,114,190

Tesla Motors, Inc.
Supplem ental Consolidated Financial Inform ation(Unaudited)(In thousands)

Mar 31,
2013
Selected Cash Flow Inform ation
Cash flow s provided by (used in) operating activities
Cash flow s used in investing activities
Cash flow s provided by financing activities
Other Selected Financial Inform ation
Cash flow s provided by (used in) operating activities
Capital expenditures
Free cash flow (cash flow from operations plus capital expenditures)
Depreciation and amortization

Three Months Ended
Dec 31,Mar 31,
2012
2012

$

64,079 $(55,236)3,684(37,489) $(60,758)
214,444(63,300)(66,227)
92,831$$64,079 $(57,727)
6,352 $

(37,489) $(64,053)(101,542) $(63,300)(54,774)(118,074)$

17,85012,793

4,163$

Mar 31,
2013
Cash and Investm ents
Cash and cash equivalents
Restricted cash - current
Short-term marketable securities
Restricted cash - noncurrent$

214,417
16,7195,044$

Dec 31,
2012$

201,890
19,094
5,159

Mar 31,
2012$

218,570
39,19925,0093,805

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

Mar 31,
2013
Research and developm ent expenses(GAAP)
Stock-based compensation expense
Research and developm ent expenses(Non-GAAP)
Selling, general and adm inistrative
expenses (GAAP)
Stock-based compensation expense
Selling, general and adm inistrative
expenses (Non-GAAP)Net incom e (loss) (GAAP)
Stock-based compensation expense
Change in fair value of w arrant liability
Net incom e (loss) (Non-GAAP)Net incom e (loss) per com m on share, basic(GAAP)
Stock-based compensation expense
Change in fair value of w arrant liability
Net incom e (loss) per com m on share, basic(Non-GAAP)
Shares used in per share calculation,
basic (GAAP and Non-GAAP)

Three Months Ended
Dec 31,Mar 31,
2012
2012

$

54,859 $(7,644)

68,832 $(7,159)68,391(5,932)$

47,21561,673$62,459$47,045 $(5,688)45,908 $(5,619)30,582(4,772)$

41,35740,289$25,810$

11,248 $14,868(10,692)
15,424 $(89,932) $14,416
958(74,558) $(89,873)
10,711(155)(79,317)$0.10 $
0.13(0.09)(0.79) $0.13
0.01(0.86)
0.10(0.00)$

0.13(0.65) $(0.76)$$$$

114,712
11,248$

113,763

104,784(89,932) $(89,873)--

Net incom e (loss) (GAAP)
Adjustment for change in fair value of w arrant
liability
Net incom e (loss) used in calculation ofdiluted incom e (loss) per share (GAAP)

$

$

556

$

(89,932) $(89,873)

Net incom e (loss) per com m on share,
Stock-based compensation expense
Change in fair value of w arrant liability
Net incom e (loss) per com m on share,
diluted (Non-GAAP)
Shares used in per share calculation,
diluted (GAAP and Non-GAAP)

$

0.00
0.12
-

$

(0.79) $0.13
0.01(0.86)
0.10(0.00)$

0.12$(0.65) $(0.76)(10,692)

124,265

113,763

104,784

Non-GAAP Financial Inform ation
Consolidated financial information has been presented in accordance w ith GAAP as w ell as on a non-GAAP
basis. On a non-GAAP basis, financial measures exclude non-cash items such as stock-based compensation
as w ell as the change in fair value related to Tesla’s w arrant liability. Management believes that it is useful to
supplement its GAAP financial statements w ith 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 w ell ascomparisons to the operating results of other companies. Non-GAAP information is not prepared under acomprehensive set of accounting rules and therefore, should only be read in conjunction w ith financial
information reported under U.S. GAAP w hen understanding Tesla's operating performance. A reconciliation
betw een GAAP and non-GAAP financial information is provided above.