Tesla Second Quarter 2017 Update
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Model 3 production on track to achieve previously announced targets
Expecting positive Model 3 gross margin in Q4; targeting 25% margin in 2018
Deliveries grew 53% compared to Q2’16 in flat luxury vehicle market
Projecting Model S and Model X deliveries to increase in 2H’17 vs 1H’17
Q2 Automotive gross margin at 27.9% GAAP and 25.0% non-GAAP
Q2 GAAP loss from operations improved sequentially, two quarters in a row
More than $3 billion cash on-hand at the end of Q2

On July 28, 2017, we started delivering the “even more affordable car” from our original Master Plan. This was a huge milestone for Tesla
and is very exciting for our entire team.
During Q2, our engineering, manufacturing and supply chain teams were focused on the final stages of Model 3 product development andbuilding the “machine-that-makes-the-machine” for the start of production. Model 3 has been designed to be affordably priced and toprovide compelling customer value, even without government incentives, while achieving a target gross margin comparable to Model S andModel X as production scales into 2018. With no advertising, paid endorsements or guerilla marketing campaigns, Model 3 net
reservations have still steadily climbed every month, and have even accelerated further in recent weeks.
Orders for Model S and Model X have also been increasing, both leading up to and following the Model 3 handover event. In July, ourweekly net order rate for these vehicles was about 15% higher than our Q2 average weekly order rate. In addition, although too early todraw strong conclusions, we are seeing an even further increase in net Model S orders since the July 28th event. This growing demand
gives us even more reason to expect increased deliveries of Model S and Model X in the second half of this year.
Development of our other new products continues as well. The first Solar Roof installations have been completed recently at the homes ofour employees, who we chose to be our first customers to help perfect all aspects of Solar Roof customer experience. By pairing either
Solar Roof or our existing retrofit solar panels with a Powerwall, our customers can enjoy sustainable energy independence.
Having started production of Model 3 on schedule in July, and having installed the first Solar Roofs, our teams are now focused on ramping
the production rate of these products to support our mission of accelerating the world’s transition to sustainable energy.

ADVANCING SUSTAINABLE TRANSPORT
In addition to the increased orders for Model S and Model X,
customer response to Model 3 has been overwhelming. Since
the handover event last week, we are averaging over 1,800 net
Model 3 reservations per day. We opened the Model 3
configurator to the thousands of our employees withreservations so they could begin ordering their vehicles. Soon,
non-employee customers will begin receiving invitations toorder their cars in small groups based on when they placed
their reservations, with existing Tesla owners receiving firstpriority. Deliveries to non-employees will begin in Q4.
Our first production vehicles are pre-configured with rear-wheel
drive, a long-range battery starting at $44,000, with premium
upgrades for an additional $5,000. This vehicle will offer a
range of 310 miles and a 0-60 mph time of 5.1 seconds. The
standard Model 3, starting at $35,000 with 220 miles of range
and a 0-60 mph time of 5.6 seconds, should be available in the
U.S. in November. Dual Motor All-Wheel Drive configurations
will be available in the U.S. early next year. International
Model 3 deliveries will begin in late 2018, contingent uponregulatory approvals, starting with left-hand drive markets,
followed by right-hand drive markets in 2019.

Model 3 Handover Event, July 28, 2017

We have learned many valuable lessons from designing andmanufacturing Model S and Model X. Consequently, Model 3 isdesigned with greater simplicity and fewer components to reduce cost,
improve ease of manufacturability and further enhance reliability. Early
Model 3 builds will have fewer than 100 permutations due tostandardized content and packaged options as compared to over 1,500
permutations for Model S. This significantly reduces manufacturing
complexity and streamlines the purchasing process for our customers.
At our Fremont factory, the new Model 3 body welding line and multilevel general assembly line are highly dense and automated. Thisdensification sets the stage for us to produce over 500,000 Model 3
vehicles annually. Model 3 drive units as well as battery packs madewith our proprietary 2170 form factor cells are being built on new lines
at Gigafactory 1. We are now fine-tuning these manufacturing lines tosignificantly increase the production rate.

Model 3 Body Welding LineWe wish we could do all of this faster and get everyone’s Model 3 to them right away. It’s important to understand that our production
ramp will follow an S-Curve, meaning that it will begin slowly, grow exponentially, then start to tail off once we achieve full production. As
we move through that ramp, our rate of production will move only as fast as the least successful part of our entire supply chain andproduction process. Based on our preparedness at this time, we are confident we can produce just over 1,500 vehicles in Q3, and achievea run rate of 5,000 vehicles per week by the end of 2017. We also continue to plan on increasing Model 3 production to 10,000 vehicles
per week at some point in 2018.
Model S and Model X remain our highest-performance and most capable vehicles, with greater range and acceleration, more premiumfeatures, more cargo space and extra options for customization. Both Model S and Model X are available now with Dual Motor All Wheel
Drive, smart air suspension, and for customers referred by an existing Tesla owner, free unlimited Supercharging for as long as you own
your car.
We continue to improve all Model S and Model X vehicles. In June, through a combination of new hardware and software updates, weenhanced the performance of new Model S and Model X 75D and 100D vehicles, with improved 0-60 mph times for each. We also
recently pushed a new over-the-air update for Autopilot that added automatic perpendicular parking, and enhanced Autosteer andautomatic emergency braking capabilities.
In June, the National Highway Traffic Safety Administration (NHTSA) awarded Model X a 5-star safety rating, the first such achievement forany sport utility vehicle. Significantly, Model X achieved a 5-star rating across the board on all nine subcategories covering frontal, side,and pole impacts for the driver-side, passenger-side, and rollover tests. This is the second-best set of test results for any car ever tested
by NHTSA, behind only Model S, which received the lowest probability of injury score ever.
During Q2, we opened 29 new store and service locations, bringing us to a total of 300 locations globally. Ahead of scaling deliveries
for Model 3, we have also broadened our distribution capabilities with the launch of new delivery hubs. We are also continuing to
expand our service capability and build out our Supercharger network to achieve our goal of doubling the number of connection points
in 2017.
We produced 25,708 vehicles in Q2, 40% more cars than we built in the same period a year ago, despite a production shortfall of 100 kWhbattery packs through early June. During Q2, we added more Model X cars to our test drive and display fleet because our stores had been
operating with far less than what was needed and, in some cases, none at all. In addition, we increased our service loaner fleet with fully
loaded cars to provide the best customer experience. This additional visibility was likely a factor in helping Model X net orders in Q2, whichgrew by over 20% both sequentially and as compared to Q2 2016.
We delivered 22,026 Model S and Model X vehicles in Q2, for a total of 47,077 in the first half of the year. Model S and Model X combineddeliveries in Q2 grew almost 53% globally versus the prior year, even though the luxury vehicle market was essentially flat. The combined
Model S and Model X market share grew in the U.S. premium luxury vehicle market during Q2 2017.

ADVANCING SUSTAINABLE ENERGY
Our energy generation and storage business are strategically important long-term growth initiatives.
We officially began taking orders for Solar Roof in Q2 and have recently started installations. Adopting solar has historically required adegree of aesthetic compromise, but Solar Roof provides clean energy from a better-looking roof. Furthermore, Solar Roof is more
affordable than conventional roofs because in most cases, it ultimately pays for itself by reducing or eliminating a home’s electricity bill.
Solar Roof is built with tempered glass that is more than three times stronger than standard roof tiles, and with less weight. In June, Solar
Roof was certified by Underwriters Laboratories with its highest Class A fire rating. It has also been awarded ASTM International’s best
Class F wind rating. We are so confident in the superior durability of our Solar Roof tiles that we offer the best warranty in the roofing
industry—the lifetime of your house, or infinity, whichever comes first.

We are building pilot Solar Roof products at our Fremont facility now andplan to start production at our Gigafactory 2 in Buffalo, New York before
the end of the year.
Last month, Tesla was selected from among 90 initial bidders to provide a
100 MW/129 MWh Powerpack system in South Australia. This system willbe the largest lithium-ion battery storage project in the world, with threetimes more power than the world’s next most powerful battery storage
installation. The system will provide enough power for more than 30,000
homes and has been designed to help solve power shortages, reduce
intermittencies, and manage summertime peak load to both improve thereliability and reduce the operational costs of South Australia's electricalinfrastructure.
In Q2, we deployed 176 MW of solar energy generation systems and 97
MWh of energy storage systems, including the 52 MWh Kauai, Hawaii,
energy storage project that was installed in Q1 and passed inspection in
Q2. Energy storage deployments increased from Q2 last year, whileenergy generation deployments declined from Q2 last year as we continue
to focus on more profitable projects that generate positive cash flow. Also,
to improve customer experience and further lower unit costs, we made thestrategic decision to stop offering solar through the door-to-door sales
channel, instead focusing on sales through Tesla stores and online
channels. As a result, residential solar deployment will be impacted overthe short-term but is expected to resume growing in Q4 compared to Q3.
The upfront cash generation of the energy generation business continues
to improve. The portion of residential customers who elected to purchaserather than lease a solar system grew to 37% of deployments in Q2 (upfrom 6% a year ago), and we expect this trend to continue in Q3.
Additionally, in Q2, we monetized a portfolio of already deployed solar
leases by selling an equity interest in those leases for gross proceeds of$313 million.

First Solar Roof Installations Completed

Q2 2017 RESULTS
Revenue & Gross Margin

Automotive revenue ($000)
Automotive gross margin - GAAP
Automotive gross margin excluding SBC
and ZEV credit - Non-GAAP

25.0 %

27.8 %

23.6 %

Change
QoQ
YoY
0%
93 %
55 bp 486 bp-285 bp

136 bpAutomotive revenue grew 93% as compared to Q2 2016 largely due to 53% growth in total vehicle deliveries, and a smaller
percentage of vehicles sold with residual value risk that were subject to lease accounting. Compared to the prior quarter, automotive
revenue was flat despite a decline in vehicle deliveries due to lower mix of deliveries subject to lease accounting and the sale of $100
million of ZEV credits in Q2.
About 19% of Q2 deliveries were subject to lease accounting, down from about 25% in Q1, as we retained residual risk on fewer
vehicle deliveries. When we do retain residual risk through a Resale Value Guarantee, or direct or indirect leasing, our vehicles areholding value better than estimated. Thus, we expect to be break even when re-selling them.
In line with our guidance, Q2 non-GAAP automotive gross margin was 25.0%, representing a sequential decline of about 285 basis
points primarily due to the absence of the one-time benefit of Autopilot software recognized in Q1 and fluctuations in product mix.

Energy generation and storage revenue ($000)
Energy generation and storage gross margin

Three Months Ended
June 30,
March 31,
June 30,
2017
2017
2016
$ 2,286,616 $ 2,289,600 $ 1,181,852
27.9 %
27.4 %
23.1 %

Three Months Ended
June 30,
March 31,
June 30,
2017
2017
2016
$
286,780 $
213,944 $3,947
28.9 %
29.1 %-106.7 %ChangeQoQ
YoY
34 %7166 %-11 bp 13,566 bp

Q2 Energy generation and storage revenue increased 34% sequentially primarily because of a seasonal increase in solar lease
revenue resulting from higher energy production versus the prior quarter, a greater percentage of cash sales and higher deployment ofenergy storage systems.

Other HighlightsTotal Q2 operating expenses declined sequentially primarily due to the absence of $67 million of non-recurring charges related toacquisitions that were recognized in Q1.
GAAP and non-GAAP loss from operations improved in Q2 as compared to Q1 due to lower operating expenses, despite increased
costs related to the launch of Model 3.
GAAP and non-GAAP net loss increased slightly in Q2 as compared to Q1 due largely to higher FX-related non-cash revaluations of
the balance sheet, and mark-to-market of interest rate swaps.
Basic shares outstanding at the end of Q2 were approximately 167 million.

Cash Flow and Liquidity($000)Cash flows (used in) provided by operating activities
Change in collateralized lease borrowing
Operating cash flows plus change in collateralized
lease borrowingThree Months Ended
June 30,
March 31,
June 30,
2017
2017
2016
$
(200,172 ) $(69,811 ) $150,336
149,320
186,355
142,762$(50,852 ) $116,544$

293,098

ChangeQoQ
YoY-187 %-233 %
-20 %
5%
144 %

-117 %Cash consumed in operating activities during Q2 was higher than Q1 primarily due to higher inventory and receivables. Including the
cash received for vehicle sales to our leasing partners that is classified in the financing section of our statement of cash flows, weconsumed $51 million of cash in Q2.
Capital expenditures were $959 million in Q2, as we invested in Model 3 capacity in Fremont, in Gigafactory 1, and in the expansion of
our customer support infrastructure. Total capital expenditures of $1.5 billion in the first half of 2017 were lower than expectedprimarily due to the timing of milestone-based cash payments.
Cash balance of slightly over $3.0 billion at the end of Q2, plus expected cash generated from operations in the second half of 2017,provide sufficient liquidity to fund our capex projections, and provide flexibility through the Model 3 ramp.
During Q2, we increased the capacity of our revolving asset-backed credit line by $625 million to $1.83 billion (with the ability to
expand capacity by another $175 million to $2 billion).

OUTLOOKIn addition to the 2017 Model 3 production guidance provided above, we expect Model S and Model X deliveries to increase in the second
half of 2017, as compared to the first half of the year.
Several factors will influence our non-GAAP automotive gross margin for the rest of this year. The combined non-GAAP gross margin for
Model S and Model X in Q3 will decline slightly from Q2, driven primarily by mix shift. Additionally, during the initial phase of the Model 3
ramp in Q3, the volume produced will be tiny relative to the installed production capacity. As a result, Model 3 gross margin in Q3 will betemporarily impacted by the excessive allocation of labor and overhead costs and depreciation over this tiny volume. In the absence of
these one-time elevated cost allocations, Model 3 gross margin in Q3 would already be positive, resulting in a positive cash contribution.
As capacity utilization improves, Model 3 non-GAAP gross margin is expected to be positive in Q4, and should improve rapidly in 2018 toour target of 25%. Consequently, we expect non-GAAP automotive gross margin to temporarily dip below 20% in Q3, before recovering in
Q4 and beyond.
For the second half of 2017, we expect strong improvement in operating leverage as revenue should significantly increase in the second
half of the year as compared to the first half, while operating expenses should remain essentially flat. Capital expenditures should be
about $2 billion during the second half of 2017, as we make milestone-based payments for Model 3 equipment, continue with Gigafactory 1
construction, and expand our Supercharger, store, delivery hub, and service networks.
While delivering the first Model 3 cars was a major company milestone, we are now focused on the critical steps to ramp Model 3
production. We remain confident in our plans and look forward to the upcoming unveiling of the next exciting addition to our portfolio ofelectric vehicles – Semi Truck.

Elon Musk, Chairman & CEO

Deepak Ahuja, Chief Financial Officer

WEBCAST INFORMATION
Tesla will provide a live webcast of its second quarter 2017 financial results conference call beginning at 2:30 p.m. PT on August 2,
2017, at ir.tesla.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 to supplement ourconsolidated financial results. Our non-GAAP financial measures include non-GAAP gross margin, non-GAAP net income (loss)
attributable to common stockholders, non-GAAP net income (loss) attributable to common stockholders on a per share basis, andoperating cash flows plus change in collateralized lease borrowing. Management believes that it is useful to supplement its GAAP
financial statements with this non-GAAP information because management uses such information internally for its operating, budgetingand 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 other companies. Management also believes that presentationof the non-GAAP financial measures provides useful information to our investors regarding our financial condition and results ofoperations because it allows investors greater transparency to the information used by Tesla management in its financial andoperational decision-making so that investors can see through the eyes of Tesla management regarding important financial metrics that
Tesla management uses to run the business as well as allows investors to better understand Tesla’s performance. Non-GAAP
information is not prepared under a comprehensive set of accounting rules and therefore, should only be read in conjunction withfinancial information reported under U.S. GAAP when understanding Tesla’s operating performance. A reconciliation between GAAPand non-GAAP financial information is provided below.

FORWARD-LOOKING STATEMENTS
Certain statements in this shareholder letter, including statements in the “Outlook” section; statements relating to the progress Tesla ismaking with respect to product development, such as Model 3 and Solar Roof; statements regarding growth in the number of Teslastore, service center, delivery hub, Supercharger and destination charger locations and in other service and repair capabilities;
statements relating to the production, production rate and delivery timing of products such as Model 3 and Solar Roof and completion ofenergy generation and storage projects; statements regarding growth of our energy business and means to achieve such growth;
growth in demand and orders for Tesla products and the catalysts for that growth; the ability to achieve product demand, volume,
production, delivery, deployment, revenue, cash generation, cash flow, leasing, gross margin, spending, capital expenditure andprofitability targets; productivity improvements and capacity expansion plans, such as for Gigafactory 1; and statements regarding
Gigafactory 1 and Gigafactory 2 timing, plans and output expectations, including those related to battery and photovoltaic cell and otherproduction, 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 thoseprojected. The following important factors, without limitation, could cause actual results to differ materially from those in the forwardlooking statements: the risk of delays in the manufacture, production, delivery and/or completion of our vehicles and energy products,
particularly Model 3; the ability to design and achieve and grow simultaneous and separate market acceptance of Model S, Model X
and their variants, as well as new vehicle models, specifically Model 3; the ability of suppliers to meet quality and part delivery
expectations at increasing volumes, especially with respect to Model 3 parts; adverse foreign exchange movements; any failures by
Tesla products to perform as expected or if product recalls occur; Tesla’s ability to continue to reduce or control manufacturing andother costs; consumers’ willingness to adopt electric vehicles; competition in the automotive and energy product markets generally andthe alternative fuel vehicle market and the premium sedan, premium SUV and small to medium-sized sedan markets 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 electric vehicles
and energy products; 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 Gigafactory 1 andGigafactory 2, maintaining Gigafactory 1 and Gigafactory 2 implementation schedules, output and cost estimates; and Tesla’s ability to
execute on its strategy for new store, delivery hub, service center, Supercharger and other locations and capabilities. 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 filedwith the SEC on May 10, 2017. 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
ir@tesla.com

Press Contact:
David Arnold
Communications
press@tesla.com

Tesla, Inc.
Condensed Consolidated Statements of Operations(Unaudited)(In thousands, except per share data)
Three Months Ended
June 30,
March 31,
June 30,
2017
2017
2016
Revenues
Automotive sales
Automotive leasing
Total automotive revenue
Energy generation and storage
Services and otherTotal revenues
Cost of revenues
Automotive sales
Automotive leasing
Total automotive cost of revenues
Energy generation and storage
Services and otherTotal 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 (2)(3)
Other (expense) income, net
Loss before income taxes
Provision for income taxes
Net loss
Net loss attributable to noncontrolling interests andredeemable noncontrolling interests
Net loss attributable to common stockholders
Net loss per share of common stock attributable tocommon stockholders - basic and diluted
Weighted average shares used in computing net loss
per share of common stock - basic and diluted

Six Months Ended
June 30,
June 30,20172016$ 2,013,852 $ 2,035,060 $ 1,030,224 $ 4,048,912 $ 1,932,116
272,764
254,540
151,628
527,304
275,800
2,286,616 2,289,600
1,181,852 4,576,216 2,207,916
286,780
213,9443,947
500,724
26,675
216,161
192,726
84,218408,887
182,474
2,789,557 2,696,270
1,270,017 5,485,827 2,417,065
1,472,578
175,433
1,648,011
203,762
271,169
2,122,942
666,615

1,496,649
166,026
1,662,675
151,773
213,876
2,028,324
667,946827,231
82,051
909,282
8,159
77,800995,241
274,776

2,969,227
341,459
3,310,686
355,535
485,045
4,151,266
1,334,561

1,540,380
148,218
1,688,598
26,272
174,951
1,889,821
527,244369,774
537,757
907,531(240,916 )
4,785(108,441 )(41,208 )(385,780 )
15,647(401,427 )

322,040
603,455
925,495(257,549 )
3,090(99,346 )(18,098 )(371,903 )
25,278(397,181 )

191,664
691,814374,146
321,152 1,141,212
639,362
512,816 1,833,026 1,013,508(238,040 ) (498,465 ) (486,264 )
2,242
7,875
3,493
(46,368 ) (207,787 )(86,993 )(7,373 )(59,306 )1,804(289,539 ) (757,683 ) (567,960 )
3,649
40,925
7,495(293,188 ) (798,608 ) (575,455 )——(65,030 )(66,904 )(131,934 )$ (336,397 ) $ (330,277 ) $ (293,188 ) $ (666,674 ) $ (575,455 )$(2.04 ) $165,212(2.04 ) $162,129(2.09 ) $139,983(4.07 ) $163,679(4.22 )
136,330

Notes:(1) Includes stock-based compensation expense of
the following for the periods presented:
Cost of revenue
Research and development
Selling, general and administrative
Total stock-based compensation expense(2) Interest expense includes non-cash interest expense
related to convertible notes and other borrowing
for the periods presented:(3) Interest expense includes the following as a resultof the assumed debt from SolarCity:
Interest expense (excluding amortization of debt discount andfees) - recourse debt
Interest expense (excluding amortization of debt discount andfees) - non-recourse debt$

7,466 $ 10,031 $
57,79449,19250,78244,494$ 116,042 $ 103,717 $

6,495 $ 17,497 $ 12,898
33,506
106,986
73,10827,311
95,27670,96367,312 $ 219,759 $ 156,969$

65,682 $51,196 $31,823 $ 116,878 $$

12,093 $12,183 $— $24,276 $—$23,69435,787 $24,08436,267 $—— $47,77872,054 $——60,725

Tesla, Inc.
Condensed Consolidated Balance Sheets(Unaudited)(In thousands)
June 30,
2017
AssetsCurrent assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Total current assets
Operating lease vehicles, net
Solar energy systems, leased and to be leased, net
Property, plant and equipment, net
Goodwill and intangible assets, net
MyPower customer notes receivable, net of current portion
Restricted cash, net of current portion
Other assets
Total assets
Liabilities and Equity
Current liabilities
Accounts payable
Accrued liabilities and other
Deferred revenue
Resale value guarantees
Customer deposits
Current portion of long-term debt and capital leases (1)Total current liabilities
Long-term debt and capital leases, net of current portion (1)Deferred revenue, net of current portion
Resale value guarantees, net of current portion
Other long-term liabilities
Total liabilities
Redeemable noncontrolling interests in subsidiaries
Convertible senior notes (1)(2)
Total stockholders' equity
Noncontrolling interests in subsidiaries
Total liabilities and equity(1)Breakdown of our debt is as follows:
Recourse debt
Non-recourse debt$

December 31,
2016

3,035,924 $
118,369
453,5392,438,111
313,501
6,359,444
3,600,821
6,218,504
8,399,229
424,613472,663
358,445
209,986
26,043,705 $

3,393,216
105,519
499,1422,067,454
194,4656,259,796
3,134,080
5,919,880
5,982,957
376,145506,302
268,165
216,751
22,664,076$

2,359,316 $
1,510,744
913,398
342,824
603,540
816,533
6,546,355
7,125,406
1,035,579
2,493,024
2,259,538
19,459,902
367,377
1,688
5,105,752
1,108,986
26,043,705 $

1,860,341
1,210,028
763,126
179,504
663,859
1,150,147
5,827,005
5,969,500
851,790
2,210,423
1,891,449
16,750,167
367,039
8,784
4,752,911
785,175
22,664,076$$

5,062,399 $2,453,448 $

4,630,886
2,375,782$$(2) 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 2017. As such, the carrying
value of the 2018 Notes was classified as a current liability as of June 30, 2017 and the difference between the principal amountand the carrying value of the 2018 Notes was reflected as convertible debt in mezzanine equity on our condensed consolidatedbalance sheet as of June 30, 2017.

Tesla, Inc.
Condensed Consolidated Statement of Cash Flows(Unaudited)(In thousands)

June 30,
2017
Cash Flows From Operating Activities
Net loss
Adjustments to reconcile net loss to net cashused in operating activities:
Depreciation and amortization
Stock-based compensation
Losses related to the SolarCity acquisition
Other
Changes in operating assets and liabilities,
net of effect of business combinations
Net cash (used in) provided byoperating activities
Cash Flows From Investing Activities
Capital expenditures
Payments for the cost of solar energy systems,leased and to be leased
Business combinations, net of cash acquired
Maturities of short-term marketable securities
Change in restricted cash and otherNet cash used in investing activities
Cash Flows From Financing Activities
Proceeds from debt activities, net
Collateralized borrowing
Net cash flows from noncontrolling interests
Proceeds from issuance of common stock
in a public offering, net of underwriting fees
Other
Net cash provided by financing activities
Effect of exchange rate changes oncash and cash equivalents
Net (decrease) increase in cash andcash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period$

Six Months Ended
June 30,
June 30,
2017
2016

Three Months Ended
March 31,
June 30,
2017
2016(401,427 ) $(397,181 ) $(293,188 ) $(798,608 ) $(575,455 )

389,171
116,042
177,135

376,602103,717
11,571
98,260183,232
67,31133,497765,773
219,759
11,571
275,395

339,692
156,969
91,070(481,093 )(262,780 )

159,484(743,873 )(111,545 )(200,172 )(69,811 )

150,336(269,983 )(99,269 )(959,068 )(552,624 )(294,720 )(1,511,692 )(511,579 )(198,844 )(219,948 )-(418,792 )-(57,304 )(1,215,216 )(109,147 )(45,224 )(926,943 )

16,667(41,801 )(319,854 )(109,147 )(102,528 )(2,142,159 )

16,667(58,761 )(553,673 )(203,412 )
149,320
381,253858,547
186,355
78,30799,317
142,762-

655,135
335,675
459,560

529,317384,525--

400,175

1,701,734

400,175

1,701,734

101,606
428,767

75,365
1,598,749

32,771
1,976,584

176,9712,027,516

76,443
2,692,019

15,952

11,382(2,554 )27,334

10,316(970,669 )

613,377

1,804,512(357,292 )2,049,393

1,441,789
3,246,301

3,393,216$ 3,035,924

4,006,593$ 3,035,924$

3,393,216
4,006,593$$

1,196,908
3,246,301

Supplemental Consolidated Financial Information

Free Cash Flow ($000)
Cash flows (used in) provided byoperating activities
Capital expenditures
Free cash flow

June 30,
2017$

Three Months Ended
March 31,
June 30,20172016(200,172 )(959,068 )$ (1,159,240 )$$(69,811 ) $(552,624 )(622,435 ) $Six Months Ended
June 30,
June 30,20172016

150,336 $(269,983 ) $(294,720 )(1,511,692 )(144,384 ) $ (1,781,675 ) $(99,269 )(511,579 )(610,848 )Tesla, Inc.
Reconciliation of GAAP to Non-GAAP Financial Information(Unaudited)(In thousands, except per share data)

Automotive gross profit - GAAP
Stock-based compensation expense
ZEV credit revenue recognized
Automotive gross profit excluding SBC and
ZEV credit - Non-GAAP

Three Months Ended
June 30,
March 31,
June 30,
2017
2017
2016
$ 638,605$ 626,925$ 272,570
7,466
10,031
6,495—(100,000 )(64 )Six Months Ended
June 30,
June 30,20172016$ 1,265,530$ 519,318
17,497
12,898(100,000 )(57,051 )$$ 1,183,027

Automotive gross margin - GAAP
Stock-based compensation expense
ZEV credit revenue recognized
Automotive gross margin excluding SBC
and ZEV credit - Non-GAAP
Net loss attributable to common
stockholders - GAAP
Stock-based compensation expense
Acquisition related transaction costs
Gains related to the acquisition of SolarCity
Net loss attributable to common
stockholders - Non-GAAP
Net loss per share attributable to common
stockholders, basic and diluted - GAAP
Stock-based compensation expense
Acquisition related transaction costs
Gains related to the acquisition of SolarCity
Net loss per share attributable to common
stockholders, basic and diluted - Non-GAAP
Shares used in per share calculation, basic anddilutive - GAAP and Non-GAAP

546,071$

636,956$

279,001$

475,165

27.9 %
0.3 %-3.3 %

27.4 %
0.4 %0.0 %23.1 %
0.5 %0.0 %27.7 %
0.4 %-1.6 %

23.5 %
0.6 %-2.0 %

25.0 %

27.8 %

23.6 %

26.4 %

22.1 %$ (336,397 )$ (330,277 )$ (293,188 )$ (666,674 )$ (575,455 )

116,042——

103,717—
11,571

67,312——219,759—
11,571

156,969——$ (220,355 )$ (214,989 )$ (225,876 )$ (435,344 )$ (418,486 )$$(2.04 )
0.64
—
0.07

$

(2.09 )
0.48
—
—

$

(4.07 )
1.34
—
0.07

$

(4.22 )
1.15
—
—

$

(1.33 )$

(1.61 )$

(2.66 )$

(3.07 )

(2.04 )
0.71—$

(1.33 )
165,212

162,129

139,983

163,679

136,330