Tesla Motors, Inc. – First Quarter 2012 Shareholder Letter
Model S deliveries to start ahead of schedule in June
Model S reservations top 10,000
Daimler Mercedes powertrain agreement signed
Toyota RAV4 powertrain shipments begin ahead of schedule
Solid Roadster demand & gross margin

May 9, 2012
Dear Fellow Shareholders,
We are pleased to report that we have nearly completed all regulatory approvals and certifications required to
begin delivery of Model S to our customers in the United States. Thus, we anticipate that initial deliveries will
begin in June, ahead of our announced schedule of July.
On the Powertrain side of our business, we completed the Toyota RAV4 EV development program in Q1 andstarted deliveries of production components, also ahead of schedule. The RAV4 EV marries the efficiency of an
EV with the versatility of an SUV – in fact it is the only electric SUV on the market. With the largest battery pack of
any non-premium EV, it is expected to have a city range of almost 170 miles, more than 60% above the Nissan
Leaf. The electric RAV4 is a high performance version of the RAV4 with outstanding acceleration and excellent
handling due to the low center of gravity afforded by the floor mounted battery pack.
We recently signed an agreement with Daimler to create an entire electric powertrain for a new Mercedes-Benz
EV, thus formalizing the joint effort kicked off in Q4 last year. This program is expected to exceed in value the sumof all powertrain agreements signed in Tesla history. Producing at this expected volume will allow for economies
of scale that give the resulting vehicle a cost of ownership that is on par with its gasoline equivalent.

Model S Deliveries to Begin in June
All aspects of the Model S program remain on track to commence deliveries in June. The Tesla Factory is
producing vehicles at a steadily increasing rate, and so far this year we have built about 50 Beta and about 30
Release Candidate prototypes. All these vehicles are dedicated to a comprehensive testing program, including
crash and safety testing, systems integration, reliability testing, and quality audits.
Model S has now been fully certified by the
U.S. Environmental Protection Agency (EPA)
and the State of California. We have also
successfully completed almost all of the crashtesting required under the National Trafficand Motor Vehicle Safety Act using our
Release Candidate prototypes. Once wecomplete and document the tests, we will beable to sell our vehicles in the United States.
This leaves us confident we can begin Model
S customer deliveries in June, ahead of ourannounced schedule of July.
We expect the safety rating of Model S will be
Robotic Installation of Panoramic Roof
independently determined by the National
Highway Traffic Safety Administration (NHTSA) and other groups. Under NHTSA’s New Car Assessment Program(NCAP), selected cars are independently purchased and crash tested. NHTSA then assigns “star ratings” totested cars using the NCAP standards. Based on our internal crash tests and consistent with these publishedstandards, we believe Model S will achieve NHTSA’s top, 5-star, rating. Compliance testing for global markets
continues and will be announced as achieved.
Delivering the first few customer cars in June highlights the fact that Model S will be fully compliant and available
for purchase in the U.S. These cars will carry customer, rather than manufacturer, license plates, signifying thatthey are fully homologated and completely street legal. We plan to continue making customer deliveries on a slow,
methodical ramp, and remain confident in our target of 5,000 vehicle deliveries by year end.

Strong Reservations; Model S Marketing to Accelerate
We had over 9,800 Model S reservations at quarter end, and shortly thereafter topped 10,000. Our growth inreservations during the quarter is particularly significant given that we did not add any new stores during that
period. In addition, we also took about 1,000 Model X reservations during the quarter, after its successful
introduction in February. We don’t plan to make quarterly Model X reservation updates until next year, when
Model X becomes a greater focus of our marketing activities.
During the quarter, we completed an agreementwith Athlon Car Lease to introduce Model S tocorporate customers across Europe. This
comes on top of our existing Roadster leaseagreement with Athlon. As part of thisagreement, Athlon Car Lease reserved 150
Model S sedans to ensure early availability of
the car for its customers. This is the first Model
S fleet reservation made worldwide by a leasing
company. Our lease program with Athlon
covers several major countries on the European
continent, including Germany, France, Italy,
Spain, Belgium and the Netherlands.

Tesla Model S – Signature Series Colors
We have recently started contacting our Signature Series reservation holders to lock in exterior color, interior decor
and other options as we prepare to begin deliveries. All customers will receive Tesla Personal Delivery and havethe option to pick up their car at the Tesla Factory in Fremont, California or have their Model S delivered to any
location of their choice, including at home.
Our stores continue to see very strong visitor traffic. In the first quarter we had over 410,000 visitors at our six
New Design stores and galleries in North America. The pace of marketing the Model S is beginning to accelerate.
In April, we opened a store in Oslo, Norway, and plan to open ten additional stores this year at strategic locations
domestically, several of which will be in the northeast corridor of the United States. Our reservation holders andthe general public will be able to test drive Model S in North America for the first time this summer. These store
openings and test drive events should build consumer interest, brand awareness and store visitor traffic as more
people experience Model S firsthand.

Solid Roadster Demand & Gross Margin, Increased R&D Expenses and Strong Cash Position
Q1 revenue was $30.2 million, reflecting sequential quarterly growth in Roadster deliveries in Europe and Asia,and the end of Roadster sales in North America. We delivered 99 Roadsters in the quarter, with unit deliveries up
10% from a year ago in Europe and Asia, combined. This solid growth reflects continued demand for Roadster,
despite global economic challenges. Total Roadster deliveries now exceed 2,250, with only about 250 Roadsters
remaining for sale in Europe and Asia.
We also delivered the first powertrains to Toyota for the RAV4 EV, and a small number of extra battery packs andchargers to Daimler. Development services revenue reflects our successful achievement of the final milestones on
the Toyota RAV4 EV development contract.
Automotive gross margin was very healthy at 28%, as Roadsters are selling at prices consistent with those of lastquarter. This is impressive given that this is our last year for Roadster sales. Development services gross margin
was also very strong at 45%, and achieved the sequential recovery we communicated last quarter. In total, Q1gross margin was 34%, representing the highest level in a year.
Research and development (R&D) expenses were $62.5 million on a non-GAAP basis. This 10% sequential
increase in R&D expenses is due to our increasing investments in Model S manufacturing preparedness, processvalidation, prototype builds and extensive testing at both the car and component levels. Our manufacturing teamhas grown substantially in this quarter, in order to be well trained and prepared to produce high quality cars. Thus,
a substantial portion of our R&D expenses are one-time investments in preparation for Model S production. We
have consciously chosen to invest more when needed to reach our safety, quality and performance goals for
Model S. This has enabled us to deliver our first customer cars ahead of the announced schedule.
Selling, general and administrative (SG&A) expenses rose 10% sequentially on a non-GAAP basis, primarily due
to a full quarter of marketing expense for the stores we opened in Q4.
Our non-GAAP net loss for the quarter was $79 million, or $(0.76) per share, based on 104.8 million weighted
common shares outstanding. This includes a $1 million non-cash impact in other expenses, related primarily tothe revaluation of our foreign currency denominated assets and liabilities, as a result of the significant weakeningof the dollar during the quarter. Capital expenditures were about $68 million in Q1 as we continued to build out theTesla Factory and invest in tooling for Model S.
We concluded the quarter with $387 million in cash resources. This reflects $283 million in total cash on hand,including our DoE dedicated account, and the additional $104 million we had left to draw on our loan facility with
the Department of Energy (DoE). We drew down $84 million from our DoE loan facility in Q1 as our projects
remain on track with the DoE under the terms of the loan agreement. Our relationship with the DoE remains
strong and we plan to draw down all remaining funds over the next two quarters. We continue to believe that wehave adequate liquidity to reach profitability in 2013, based on our current plans.

Updated 2012 Financial Guidance
Given that Model S deliveries are set to begin ahead of our announced July timing, we are raising the bottom endof our prior 2012 revenue guidance by $10 million, to $560-600 million, up from $550-600 million. We expect Q2revenue will be comparable to the Q1 level, and consistent with our prior guidance that 1H revenue will be about
10% of our full year revenue guidance.
We also reiterate the guidance provided in the Q4 2011 shareholder letter for capital expenditures and grossmargin trends. We anticipate our R&D spending should increase sequentially in Q2, by about 20-25% as we
continue to grow the manufacturing team prior to launch and incur expenses to complete our final activities related
to the development of Model S and the Tesla Factory. With the start of Model S production, one-time development
related expenses will decline, and manufacturing expenses will be reflected in cost of goods sold rather than in
R&D. Q3 R&D spending should therefore decline substantially.

In Closing
We are excited to begin deliveries of Model S. Stay tuned for opportunities to see and test drive Model S. We
want you to experience for yourselves how electric vehicles can surpass their internal combustion counterparts inevery way.
In closing, one of our customers in Europe let us know he recently drove his Roadster past the 200,000 kilometer
mark. At Tesla, we are going the distance, one customer at a time.

Thank you for your interest in Tesla Motors.

Sincerely,

Elon Musk, Chairman, Product Architect and CEO

Deepak Ahuja, Chief Financial OfficerWebcast Information
Tesla will provide a live webcast of its first quarter 2012 financial results conference call beginning at 2:30 p.m. PDT on May 9,2012, at ir.teslamotors.com. This webcast will also be available for replay for approximately two weeks thereafter.
Forward-Looking Statements
Certain statements in this shareholder letter, including statements in the “Updated 2012 Financial Guidance” section of thisShareholder Letter, statements relating to the progress Tesla is making with respect to the development, testing, performance,
attributes, safety expectations, schedule of development, launch, test drives and volume expectations of Model S; the schedule,
development, features, anticipated performance, safety expectations, volume expectations and pricing of, and the ability ofTesla to leverage the Model S platform for, Model X; the ability to achieve revenue, gross margin, spending and profitability
targets; the ability of Tesla to produce vehicles at the Tesla Factory in Fremont, California as well as the plans and schedule for
the Tesla Factory and the equipment there; the schedules related to, the financial results, including the total value, expectedfrom Tesla’s development programs with Daimler and Toyota; performance characteristics of the Toyota RAV4 EV; expected
benefits from working with partner companies such as Diamler, such as a lower vehicle cost of ownership that result from suchpartnerships; our ability to execute multiple product development programs simultaneously; the sufficiency of current available
funds to reach profitability in 2013; and the ability of Tesla to execute on its new interactive retail strategy and future store
opening 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 materiallyfrom those in the forward-looking statements: Tesla’s future success depends on its ability to design and achieve market
acceptance of new vehicle models, specifically Model S and Model X; the risk of delays in the design, manufacture, launch andfinancing of Model S, including the build-out of its Model S manufacturing facility and the ability of its suppliers to meet quality
and part delivery expectations; the risk of a decline in revenues prior to the launch of Model S; consumers’ willingness to adopt
electric vehicles and electric cars in particular; Tesla’s ability to fully draw down on its facility from the U.S. Department ofEnergy; risks associated with the ability to achieve the expected financial results from the production of powertrain systems for
the Toyota RAV4 EV; 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 andeconomic incentives for electric vehicles; Tesla’s ability to establish, maintain and strengthen its relationships with strategic
partners such as Daimler, Toyota and Panasonic; and Tesla’s ability to execute on its plans for its new interactive retail strategy
and for new store 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 thesection captioned “Risk Factors” in its annual report on Form 10-K filed on February 27, 2012. Tesla disclaims any obligation to
update information contained in these forward-looking statements whether as a result of new information, future events, orotherwise.
Non-GAAP Financial Information
Consolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis. On a nonGAAP basis, financial measures exclude non-cash items such as stock-based compensation as well as the change in fair value
related to Tesla’s warrant liability. Management believes that it is useful to supplement its GAAP financial statements with thisnon-GAAP information because management uses such information internally for its operating, budgeting and financial
planning purposes. These non-GAAP financial measures also facilitate management’s internal comparisons to Tesla’s historicalperformance as well as comparisons to the operating results of other companies. In addition, Tesla believes these non-GAAP
financial measures are useful to investors because they allow for greater transparency into the indicators used by management
as a basis for its financial and operational decision making. Non-GAAP information is not prepared under a comprehensive setof accounting rules and therefore, should only be read in conjunction with financial information reported under U.S. GAAP when
understanding Tesla's operating performance. A reconciliation between GAAP and non-GAAP financial information is provided
below.

Investor Relations Contact:
Jeff Evanson
650-681-5050
ir@teslamotors.com

Press Contact:
KC Simon
Tesla Motors
ksimon@teslamotors.com

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

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

Mar 31,
2012
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 expense, net
Loss before income taxes
Provision for income taxes
Net loss
Net loss per common share, basic and diluted (2)Shares used in per share calculation, basic anddiluted (2)$Three Months Ended
Dec 31,Mar 31,
2011
2011

19,245
10,92230,167$32,677
6,698
39,375$33,62815,402
49,03013,932
6,025
19,957
10,21025,241
6,299
31,540
7,835

26,961
4,041
31,002
18,028$68,39130,582
98,973(88,763)90(65)(1,076)(89,814)59(89,873) $61,20627,556
88,762(80,927)
89
(43)
(495)
(81,376)
112(81,488) $41,162
24,21265,374(47,346)40(1,485)(48,791)
150(48,941)$(0.86) $(0.78) $(0.51)

104,784

104,392

95,187

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

$

$

7
5,932
4,772
10,711

$

$

164
4,473
4,045
8,682

$

$

154
2,299
3,473
5,926

(2) On June 8, 2011, the Company completed its follow -on public offering, pursuant to w hich theCompany sold 6,095,000 shares of common stock. Concurrent w ith the closing of the offering, theCompany issued 1,416,000 shares of common stock to Elon Musk and 637,475 shares of common
stock to an affiliate of Daimler AG in a private placement.

Tesla Motors, Inc.
Condensed Consolidated Balance Sheets(Unaudited)(In thousands)
March 31,
2012
AssetsCash and cash equivalents
Short-term marketable securities
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
Reservation payments
Common stock w arrant liability
Capital lease obligations
Long-term debt
Other long-term liabilities
Total liabilities
Stockholders' equity
Total liabilities and stockholders' equity$$

218,570
25,00939,19913,58955,427
7,103
12,046364,128
3,805
22,224
761,100$

97,946
5,666
113,318
8,683
5,391
360,517
15,705607,226
153,874
761,100$

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

Mar 31,
2012

Three Months Ended
Dec 31,Mar 31,
2011
2011

Selected Cash Flow Inform ation
Cash flow s used in operating activities$
Cash flow s provided by (used in) investing activities
Cash flow s provided by financing activities

50,087 $(79,440)
92,831

27,08815,25453,772$

43,297
10,111
34,283

Other Selected Financial Inform ation
Capital expenditures$

67,987$54,262$

20,476

Depreciation and amortization

$

4,163

$

4,804

$

3,517

Mar 31,
2012
Cash and Investm ents
Cash and cash equivalents
Restricted cash - current
Short-term marketable securities
Restricted cash - noncurrent$

218,570
39,19925,0093,805

Dec 31,
2011$

255,266
23,47625,061
8,068

Decem ber 31,
2011

$

$

255,266
25,061
23,476
9,539
50,082
9,414
11,757
298,414
8,068
22,371
713,448

88,2505,491
91,761
8,838
3,897
276,251
14,915
489,403
224,045
713,448

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

Mar 31,
2012
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 loss (GAAP)
Stock-based compensation expense
Change in fair value of w arrant liability
Net loss (Non-GAAP)Net loss per com m on share, basic anddiluted (GAAP)
Stock-based compensation expense
Change in fair value of w arrant liability
Net loss per com m on share, basic anddiluted (Non-GAAP)

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

Three Months Ended
Dec 31,Mar 31,
2011
2011

$

68,391 $(5,932)

61,206 $(4,473)

41,162(2,299)$62,45956,733$38,863$30,582 $(4,772)

27,556 $(4,045)24,212(3,473)$25,81023,511$

20,739$(89,873) $10,711(155)(79,317) $(81,488) $
8,682
649
(72,157) $(48,941)
5,926
1,421
(41,594)$(0.86) $0.10(0.00)(0.78) $0.08
0.01(0.51)
0.06
0.01

$

(0.76) $(0.69) $(0.44)$

104,784$$

104,392

95,187

Non-GAAP Financial Inform ation
Consolidated financial information has been presented in accordance w ith GAAP as w ell as on a nonGAAP 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 such information internally for its operating, budgeting and financial
planning purposes. These non-GAAP financial measures also facilitate management’s internal
comparisons to Tesla’s historical performance as w ell 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 read in conjunction w ith financial information reported under U.S. GAAPw hen understanding Tesla's operating performance. A reconciliation betw een GAAP and non-GAAP
financial information is provided above.