Tesla Motors, Inc. – Third Quarter 2012 Shareholder Letter
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Over 250 Model S deliveries in Q3, exceeding target upper boundSuccessful transition to volume production
Supercharger network launched, enabling convenient long distance driving
Store & service center openings accelerate
Model S named AUTOMOBILE Magazine’s Automobile of the Year, Yahoo! Autos
Car of the Year and a TIME Magazine Invention of the Year
Record new Model S reservations

November 5, 2012

Dear Fellow Shareholders,
The third quarter was a fundamental turning point for Tesla as we successfully transitioned to a mass production
car company, growing from manufacturing 5 cars per week at the beginning of the quarter to 100 cars per week by
the end. That rate has doubled since last month and is now at over 200 cars per week or 10,000 cars per year,
which is at the critical threshold needed for Tesla to generate positive operating cash flow. One month from now,
we expect Tesla to double production again and achieve the target rate of 400 cars per week or 20,000 per year.
Despite many short term costs associated with the ramp, Tesla nonetheless expects to get approximately halfway
to the 25% gross margin target by end of year.
During the quarter, we also increased the number of showrooms and service centers in the United States by almost
30% and launched the Supercharger network. Our breakthrough charging technology fundamentally changes the
traditional notions of recharging, making it easy and convenient to travel long distances. By placing solar panels
over existing highway rest stop parking spaces where we pay little to no rent, our Supercharger operating costs are
so low that we are able to offer free, sustainably powered long distance travel to Model S customers. This system
makes long distance trips in an electric car better than, not merely on par with a gasoline car. All it takes is one
road trip where you didn’t have to stop at a gas station, immerse yourself in fumes and pay $100 to fill your tank toappreciate the difference.

Ramping High Quality Production
In Q3, we produced almost 350 and delivered
over 250 Model S sedans to our customers, allwhile maintaining very high build quality levels.
Every review of the Model S has been positive,
and there have been no recalls. We also
resolved a myriad of supply chain issues in Q3
and are continuing to work with our suppliers to
improve the timely and efficient delivery ofparts.
As our supply chain and internal manufacturing
processes improved, production has continued
to ramp into Q4, with over 200 cars produced
this past week. Absent short term costinefficiencies, such as expediting parts delivery

General Assembly Trim Lineand the learning curve of new employees, we are now at a production rate capable of generating positive operating
cash flow. Given Tesla’s rate of progress over the past few months, we are confident of being able to deliver 2,500
to 3,000 Model S vehicles in Q4 and over 20,000 in 2013.

A Great Car That Improves Over Time
Model S continues to accumulate accolades from automotive reviewers. Numerous publications took Model S for
extended drives and conducted independent performance tests. Automobile Magazine and Yahoo! Autos were so
impressed that they recently named Model S as their Car of the Year for 2013. Others independently verified (orsurpassed) our claims about Model S. Edmunds achieved a 0 – 60 mph time of 4.3 seconds from Model S
Performance, which was faster than our advertised time, and The New York Times was able to achieve a 300.1
mile range during its test drive. Automobile Magazine also drag raced a Model S Performance against a 2013
BMW M5 (Model S won). Multiple objective critics are saying that the Model S is not simply the best electric car,but the best car of any kind. We are at a turning point in history where, for the first time, a purely electric car is abetter product than any gasoline car.

Model S captures AUTOMOBILE Magazine’s Automobile of the Year for 2013
and Yahoo! Autos Car of the Year!

As good as these reviews are today, we believe they are likely to get even better. Unlike any car before it, Model S
is upgradeable. Tesla drivers experience a vehicle that offers enhanced user functionality over time.
For example, in response to customer ideas, our October software release introduced an optional creep feature forthose who prefer the feel of slight movement once the brake is released. We also released driver configuration
settings which store almost 20 different settings for multiple drivers, added functionality to the entertainment system
and introduced a beta version of a mobile phone application. Since Model S has been designed to permit over-theair software updates, existing customers
improved their Model S simply by selecting
the “install now” button. With upgradability
like this, Model S is truly a great car that
improves over time.

Easy to Update Software

While our software teams are dreaming up
even more functionality, other Tesla teams
are working to enhance Model S andintroduce it to the global market. Our
Canadian and European homologation
efforts are progressing according to plan,with EU regulatory approval expected earlynext year. We are preparing for deliveriesof the 60 kWh car later this year andexpect EPA certification shortly. Deliveries

of the 40 kWh battery version should begin in Q1 next year.

Tesla’s Supercharger Network: Changing the Game
In September, we unveiled our Supercharger network. Our internally developed and manufactured Supercharger issubstantially more powerful than any charging technology to date, providing almost 100 kilowatts of direct DC
power to Model S. This enables Model S owners to regain up to 165 miles of range in 30 minutes with the 85 kWhcar, about the time needed for travelers to refresh or grab a meal. This marks an inflection point in electric vehicle
convenience for long distance traveling. Our initial Supercharger network already covers all common long-distanceroutes in California, enabling convenient and free driving throughout the state, as well as to Las Vegas or Lake
Tahoe. East coast travel all the way from Boston to Washington, DC, will be enabled next month. Recently, one of
our Los Angeles based customers was so excited to take delivery of his Model S that he hopped on a plane to ourfactory in the San Francisco Bay area, took delivery of his car and used the Supercharger network to cover almost
400 miles needed to get back home, all in the same day!
Over time, all Superchargers will be equipped with a solar panel
canopy, enabling Tesla to provide electricity for long distance travelat negligible marginal cost. This enables us to offer free, unlimitedaccess to the network. For the first time, recharging our cars canbe done at zero cost to the driver and the environment! This cansave a Model S owner thousands of dollars over their ownership
period.

Supercharger in Hawthorne, CA

We are planning to methodically expand the Supercharger network.
By the end of next year, we plan to install Superchargers in hightraffic corridors across the continental United States, enabling fast,
free, purely electric travel from Vancouver to San Diego, Miami toMontreal and Los Angeles to New York.

Building for the Future
We continue to open showrooms and service centers to put infrastructure in place to support a broader base ofModel S customers. Since the beginning of Q3, we have opened up showrooms in seven new locations, including
Long Island, New York, Paramus, New
Jersey, and Boston, Massachusetts.
There are now 29 showrooms around theworld. We plan to open five more
showrooms this year at strategic locationsin North America, including Miami,
Florida, Morristown, New Jersey, andMcLean, Virginia. This year, we havewelcomed over 1.8 million visitors to oureighteen showrooms across the UnitedStates.
In addition, we continue to aggressively
expand our network of service centers,
and are on plan to nearly double ourservice locations around the world. By
the end of this year, over 85% of all

Garden State Mall – New Jersey

Model S reservation holders in North America will be within 50 miles of a Tesla Service Center, and 92% will bewithin 100 miles. Offering outstanding service is a top priority at Tesla.
The EU press drive event in October kicked off official marketing of the Model S outside of the United States.
Increasing international marketing efforts will pave the way for an acceleration of store and service center openings.
As occurred in the United States, Tesla will start deliveries in Europe during the first half of next year with the
Signature Series, all of which have been reserved for months.
With growing public exposure of Model S, we continue to set records for new reservations. In Q3, we received
almost 2,900 new reservations, over 30% more than the prior record in Q2. As we began converting our earlyreservations into firm, non-refundable orders, cancellations increased as well. The net effect still demonstrated acontinued growth in our net reservation count to over 13,200, up from 11,500 at the end of Q2. We expect Q4 to
set a new high water mark in net reservations.

Quarterly Results
Our Q3 revenues were $50 million, an 88% increase from the prior quarter, which reflects ramping deliveries ofModel S, continued sales of the remaining Roadsters internationally, and an increase in powertrain component
sales to Toyota for the RAV4 EV. We delivered 253 Model S and 68 Roadsters in the quarter. Limited
development services revenue was recognized in the quarter; however, progress on the full electric powertrain for
the Mercedes Benz EV continues on schedule.
Gross margin for Q3 was negative 17%, in line with previous guidance, primarily because the cost of automotive
sales reflects the full burden of operating our Tesla factory allocated over a limited number of vehicles produced,
along with launch-related variable cost inefficiencies.
Research and development (R&D) expenses were $55 million on a non-GAAP basis and $62 million on a GAAP
basis. The 19% sequential decrease in non-GAAP R&D expenses was primarily due to the shift of manufacturing
expenses from R&D into cost of revenues as the Tesla Factory became fully operational.
Selling, general and administrative (SG&A) expenses were $32 million on a non-GAAP basis and $38 million on a
GAAP basis. A modest increase in expenses for the expansion of our store network and service infrastructure waspartially offset by a decline in general and administrative expenses.
Our non-GAAP net loss for the quarter was $97 million, or $(0.92) per share, and GAAP net loss was $111 million,or $(1.05) per share, based on 105.6 million weighted common shares outstanding.
Capital expenditures were about $69 million in Q3, as we continued to build out the Tesla Factory and made final
tooling payments to suppliers of Model S components. Most of the remaining tooling payments are expected to bemade in Q4 based on our supplier terms.
We concluded the quarter with total cash of $109 million. This includes short term restricted cash, primarily toprefund the first DoE loan payment due in December 2012. Just after quarter end, we raised $222 million in net
proceeds in a follow-on offering. This brought total available cash to $330 million heading into Q4.
We completed our draw down of the $465 million DoE loan facility in Q3. In October, we pre-funded our second
loan payment, related to principal and interest due in March of next year. We continue to maintain a strong
relationship with the DoE.

Updated 2012 Financial Guidance
We are maintaining our 2012 revenue guidance of $400 - $440 million, including our expectation of approximately
2,500 – 3,000 Model S deliveries to customers in Q4. Towards the end of the quarter, we expect to achieve
positive free cash flow (cash flow from operations, inclusive of capital expenditures) in spite of short term costinefficiencies.
Automotive sales gross margin is expected to improve significantly in Q4 due to higher volumes and planned cost
reductions. We are also reaffirming our gross margin target of 25% in 2013 upon achieving the manufacturing
efficiencies and planned cost reductions associated with our objective of 20,000 deliveries in 2013.
We expect that R&D spending will be flat in Q4, as we continue with further vehicle development, including
introduction of smaller battery packs, and homologation for EU and Asian markets. Selling, general andadministrative expenses should rise moderately on a quarterly basis as we continue to increase our vehicle sellingand servicing capabilities. We remain on plan for about $240 million of capital expenditures for the year.
Sincerely,

Elon Musk, Chairman, Product Architect and CEO

Deepak Ahuja, Chief Financial OfficerWebcast Information
Tesla will provide a live webcast of its third quarter 2012 financial results conference call beginning at 5:00 a.m. PT on
November 5, 2012, 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 “Updated 2012 Financial Guidance” section of thisShareholder Letter; statements relating to the progress Tesla is making with respect to the development, testing, performance,
homologation expectations, including European and Canadian homologation expectations, attributes, schedule for the
introduction of future options and variants, quality improvements, schedule of development, production ramp and volume
expectations of Model S; the ability of our suppliers to supply quality parts consistent with our production ramp of Model S; theability to achieve vehicle volume, revenue, gross margin, spending, profitability and cash flow targets; the ability of Tesla toproduce vehicles in volume at the Tesla Factory in Fremont, California; the schedules related to, the financial results, including
the total value expected from, and the expected benefits from working on, the development programs with Daimler and Toyota;
our ability to execute multiple product development programs simultaneously; the ability of Tesla customers to save substantial
amounts over the duration of their ownership period; the expected growth rate in reservations, and future store, service center
and Tesla Supercharger expected costs, openings and expansion plans are “forward-looking statements” that are subject torisks and uncertainties. These forward-looking statements are based on management’s current expectations, and as a result ofcertain risks and uncertainties actual results may differ materially from those projected. The following important factors, without
limitation, could cause actual results to differ materially from those in the forward-looking statements: Tesla’s future successdepends on its ability to design and achieve market acceptance of new vehicle models, specifically Model S and Model X; therisk of delays in the manufacture, production and delivery ramp of Model S; the ability of suppliers to meet quality and partdelivery expectations; consumers’ willingness to adopt electric vehicles and electric cars in particular; risks associated with theability to achieve the expected financial results from the production of powertrain systems for the Toyota RAV4 EV and vehicles
for Daimler; competition in the automotive market generally and the alternative fuel vehicle market in particular; Tesla’s ability toestablish, 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 and strengthen its relationships with strategic partners suchas Daimler, Toyota and Panasonic; and Tesla’s ability to execute on 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 therisks identified under the section captioned “Risk Factors” in Exhibit 99.1 in our current report on Form 8-K filed on September
25, 2012. Tesla disclaims any obligation to update information contained in these forward-looking statements whether as aresult of new information, future events, or otherwise.

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

Press Contact:
Christina Ra
Tesla Motors
cra@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)

Sept 30,
2012
Revenues
Automotive sales
Development services
Total revenues
Cost of revenues
Automotive sales
Development services
Total cost of revenues (1)Gross profit (loss)
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
Loss before income taxes
Provision for income taxes
Net loss
Net loss per common share, basic and diluted
Shares used in per share calculation, basic anddiluted$Three Months Ended
June 30,
Sept 30,2012
2011

50,023
81
50,104$22,054
4,599
26,653$

43,235
14,431
57,666Nine Months Ended
Sept 30,
Sept 30,
2012
2011
$

91,323
15,601
106,924$

115,891
48,976
164,867

58,86558,865(8,761)

20,1501,741
21,891
4,762

32,752
7,690
40,442
17,22492,947
7,767
100,714
6,210

90,241
20,866111,10753,760$61,90137,79899,699(108,460)
38(78)(2,188)(110,688)
116(110,804) $74,85436,083110,937(106,175)
74
(84)
691
(105,494)
109(105,603) $54,083
27,61881,701(64,477)80(594)(64,991)87(65,078)$

205,146
104,464
309,610(303,400)
203(228)(2,573)(305,998)
284(306,282) $147,776
76,545
224,321(170,561)
166(2,150)(172,545)
377(172,922)$(1.05) $(1.00) $(0.63)$(2.91) $(1.75)

105,556

105,242

104,077

105,196

99,040Notes:(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

$

$

471
6,356
5,648
12,475

$

$

78
7,133
5,332
12,543

$

$

171
3,588
4,127
7,886

$

556
19,421
15,75235,729

$

$

506
8,904
11,327
20,737

Tesla Motors, Inc.
Condensed Consolidated Balance Sheets(Unaudited)(In thousands)
Septem ber 30, Decem ber 31,
2012
2011
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$

85,693
22,861
9,164
159,048
7,775
11,789486,248
4,688
21,911
809,177$

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 (deficit)
Total liabilities and stockholders' equity

$

$

$

$

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

190,535 $
5,381
138,3389,734
9,466
465,048
18,550837,052(27,875)
809,177 $

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

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

Sept 30,
2012
Selected Cash Flow Inform ation
Cash flow s used in operating activities
Cash flow s used in investing activities
Cash flow s provided by financing activities

Three Months Ended
June 30,
Sept 30,20122011

Nine Months Ended
Sept 30,
Sept 30,
2012
2011

$

94,95270,08840,179$60,981
19,21572,180$21,491
178,170
93,609$206,020
168,743
205,190$87,276
191,181392,227

Other Selected Financial Inform ation
Capital expenditures$

68,472$

61,286$

68,844$

197,745$

143,634

Depreciation and amortization

$

7,521

$

4,348

$

4,280

$

16,033

Sept 30,
2012
Cash
Cash and cash equivalents
Restricted cash - current
Restricted cash - noncurrent$

85,693
22,861
4,688

June 30,2012$

210,554
21,960
3,973

12,115

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

Sept 30,
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
June 30,
Sept 30,20122011

Nine Months Ended
Sept 30,
Sept 30,
2012
2011

$

61,901 $(6,356)74,854 $(7,133)54,083(3,588)$205,146 $(19,421)

147,776(8,904)$55,54567,721$50,495$

185,725$

138,872$

37,798 $(5,648)36,083 $(5,332)

27,618(4,127)$

104,464 $(15,752)

76,545(11,327)$

32,15030,751$

23,491$

88,712$

65,218$(110,804) $12,475
1,205(97,124) $(105,603) $12,543(154)(93,214) $(65,078)
7,886
340(56,852)$(306,282) $35,729896(269,657) $(172,922)
20,7372,101(150,084)$(1.05) $0.12
0.01(1.00) $0.11(0.00)(0.63)
0.08
0.00

$

(2.91) $0.34
0.01(1.75)
0.21
0.02

$

(0.92) $(0.89) $(0.55)$(2.56) $(1.52)$

105,556$$

105,242

104,077$

105,196

99,040Non-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 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 other companies. 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. GAAP w hen understanding Tesla's operating performance. A
reconciliation betw een GAAP and non-GAAP financial information is provided above.