TSLA 10-K & 10-Q changes, risk factors and insider trading

We may experience issues or delays in developing, launching and ramping the production of our productsproducts, services and features, or we may be unable to control our manufacturing costs.

In particular, our future business depends inon largedevelopment partof onour driver assistance systems and autonomous driving solutions and increasing the production of mass-market vehicles.vehicles, including Cybercab, our purpose-built Robotaxi product. In order to be successful, we will need to further advance our capabilities in AI, and implement, maintain and ramp efficient and cost-effective manufacturing capabilities, processes and supply chains and achieve the design tolerances, high quality and output rates we have planned at our manufacturing facilities in California, Nevada, Texas, China, Germany and any future sites such as Mexico.facilities. We will also need to hire, train and compensate skilled employees to operate these facilities. Bottlenecks and other unexpected challenges such as those we experienced in the past may arise during our production ramps, and we must address them promptly while continuing to improve manufacturing processes and reducing costs. If we are not successful in achieving these goals, we could face delays in establishing and/or sustaining our product ramps or be unable to meet our related cost and profitability targets. Similarly, we are also developing Bots for future commercialization, and we may experience delays in launching and ramping the production of this product.

Our products contain thousands of parts purchased globally from hundreds of suppliers, including single-source direct suppliers, which exposes us to multiple potential sources of component shortages. Unexpected changes in business conditions, materials pricing, including inflation of raw material costs, labor issues, wars, trade policies, natural disasters, health epidemics, trade and shipping disruptions, port congestions, cyberattacks and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver technologies or components to us or to remain solvent and operational. U.S. trade policy alterations in 2025, including heightened import tariffs and subsequent retaliatory measures, have impacted our supply chain costs, and may impact the availability of certain technologies or components, depending on the exact scope of the tariffs ultimately implemented and retaliatory export controls. Additionally, if our suppliers do not accurately forecast and effectively allocate production or if they are not willing to allocate sufficient production to us, or face other challenges such as insolvency, it may reduce our access to components and require us to search for new suppliers. The unavailability of any component or supplier could result in production delays, idle manufacturing facilities, product design changes and loss of access to important technology and tools for producing and supporting our products, as well as impact our capacity expansion and our ability to fulfill our obligations under customer contracts. For example, as companies, including Tesla, have made rapid advancements in AI in recent years, such innovation demands exponentially greater compute, memory, energy and thermal resources, which may prove insufficient in scale or affordability to meet our requirements. Moreover, significant increases in our production or product design changes by us have required and may in the future require us to procure additional components in a short amount of time. We have faced in the past, and may face suppliers who are unwilling or unable to sustainably meet our timelines or our cost, quality and volume needs, which may increase our costs or require us to replace them with other sources. Finally, as we construct new manufacturing facilities and add production lines to existing facilities, we may experience issues in correspondingly increasing the level of localized procurement at those facilities. While we believe that we will be able to secure additional or alternate sources or develop our own replacements for most of our components, there is no assurance that we will be able to do so quickly or at all. Additionally, we may be unsuccessful in our continuous efforts to negotiate with existing suppliers to obtain cost reductions and avoid unfavorable changes to terms, source less expensive suppliers for certain parts and redesign certain parts to make them less expensive to produce, especially in the case of increases in materials pricing. Any of these occurrences may harm our business, prospects, financial condition and operating results.

As the scale and variants of our vehicle production increases, we will also need to accurately forecast, purchase, warehouse and transport components at high volumes to our manufacturing facilities and servicing locations internationally. If we are unable to accurately match the timing and quantities of component purchases to our actual needs or successfully implement automation, inventory management and other systems to accommodate the increased complexity in our supply chain and parts management, we may incur unexpected production disruption, storage, transportation and write-off costs, which may harm our business and operating results.

We may be unable to meet our projected construction timelines, costs and production ramps at new factories, or we may experience difficulties in generating and maintaining demand for products manufactured there.there and related services.

Our ability to increase production of our vehicles and energy products on a sustained basis, make them affordable globally by accessing local supply chains and workforces and streamline delivery logistics is dependent on the construction and ramp of our current and future factories. The construction of and commencement and ramp of production at these factories are subject to a number of uncertainties inherent in all new manufacturing operations, including ongoing compliance with regulatory requirements, procurement and maintenance of construction, environmental and operational licenses and approvals for additional expansion,permitting, supply chain constraints, hiring, training and retention of qualified employees and the pace of bringing production equipment and processes online with the capability to manufacture high-quality units at scale. Moreover, we will have to establish and ramp production of our proprietary battery cells and packs at our new factories, and we additionally intend to incorporate sequential design and manufacturing changes into vehicles and energy products manufactured at each new factory. If we experience any issues or delays in meeting our projected timelines, costs, capital efficiency and production capacity for our new factories, expanding and managing teams to implement iterative design and production changes there, maintaining and complying with the terms of any debt financing that we obtain to fund them or generating and maintaining demand for the vehicles and energy products we manufacture there, our business, prospects, operating results and financial condition may be harmed. Such delays could also in turn affect our ability to meet demand for our services, such as Robotaxi, which are dependent upon the production and deployment of Tesla vehicles.

Our success will depend on our ability to continue to expand our sales capabilities. We are targeting a global mass demographic with a broad range of potential customers, in which we have relatively limited experience projecting demand and pricing our products. We currently produce numerous international variants at a limited number of factories, and if our specific demand expectations for these variants prove inaccurate, we may not be able to timely generate deliveries matched to the vehicles that we produce in the same timeframe or that are commensurate with the size of our operations in a given region. Likewise, as we develop and grow our energy products and services worldwide, our success will similarly depend on our ability to correctly forecast demand in various markets.

Moreover, because of our unique expertise with our vehicles, we recommend that our vehicles be serviced by us or by certain authorized professionals. If we experience delays in adding servicing capacity or servicing our vehicles efficiently, or experience unforeseen issues with the reliability of our vehicles, particularly higher-volume additions to our fleet such as Model 3 and Model Y, it could overburden our servicing capabilities and parts inventory. Similarly, the increasing number of Tesla vehicles also requires us to continue to rapidly increase the number of our Supercharger stations and connectors throughout the world. As we seek to expand our Robotaxi and Semi business we must also accurately forecast, develop and optimize our service and charging capabilities to ensure service quality.

We are dependent on the continued supply of lithium-ion battery cells for our vehicles and energy storage products, and we will require substantially more cells to grow our business according to our plans. Currently, we rely on suppliers such as Panasonic and Contemporary Amperex Technology Co. Limited (CATL) for these cells. We have to date fully qualified only a very limited number of such suppliers and have limited flexibility in changing suppliers. Any disruption in the supply of battery cells from our suppliers could limit production of our vehicles and energy storage products. In the long term, we intend to supplement cells from our suppliers with cells manufactured by us, which we believe will be more efficient, manufacturable at greater volumes and more cost-effective than currently available cells. However, our efforts to develop and manufacture such battery cells have required, and may continue to require, significant investments, and there can be no assurance that we will be able to achieve these targets in the timeframes that we have planned or at all. If we are unable to do so, we may have to curtail our planned vehicle and energy storage product production or procure additional cells from suppliers at potentially greater costs, either of which may harm our business and operating results.

In addition, the cost and mass production of battery cells, whether manufactured by our suppliers or by us, depends in part upon the prices and availability of raw materials such as lithium, nickel, cobaltnickel and/or other metals. The prices for these materials fluctuate and their available supply may be unstable, depending on market conditionsconditions, trade policies, refining capacity and global demand for these materials. For example, as a result of increased global production of electric vehicles and energy storage products, suppliers of these raw materials may be unable to meet our volume needs. Additionally, our suppliers may not be willing or able to reliably meet our timelines or our cost and quality needs, which may require us to replace them with other sources. Any reduced availability of these materials may impact our access to cells and our growth, and any increases in their prices may reduce our profitability if we cannot recoup such costs through increased prices. Moreover, our inability to meet demand and any product price increases may harm our brand, growth, prospects and operating results.

Our future growth and success are dependent upon consumers’ demand for our electric vehicles and specificallyadoption ourof vehiclesautonomous indriving an automotive industry that is generally competitive, cyclical and volatile.solutions.

Though we continue to see increased interest and adoption of electric vehicles, ifIf the market for electric vehicles in general and Tesla vehicles in particular does not develop as we expect, develops more slowly than we expect, or if demand for our vehicles decreases in our markets or our vehicles compete with each other, our business, prospects, financial condition and operating results may be harmed.

The worldwide automotive market is highly competitive today and we expect it will become even more so in the future. A significant and growing number of established and new automobile manufacturers, as well as other companies, have entered, or are reported to have plans to enter, the market for electric and other alternative fuel vehicles, including hybrid, plug-in hybrid and fully electric vehicles, as well as the market for self-driving technology and services and other vehicle applications and software platforms. In some cases, our competitors offer or will offer electric vehicles in important markets such as China and Europe, and/or have announced an intention to produce electric vehicles exclusively at some point in the future. In addition, certain government and economic incentives which provide benefits to manufacturers who assemble domestically or have local suppliers, may provide a greater benefit to our competitors, which could negatively impact our profitability. Many of our competitors have significantly more or better-established resources than we do to devote to the design, development, manufacturing, distribution, promotion, sale and support of their products.products and services, and may achieve additional cost efficiencies owing to location and economic environments. Increased competition could result in our lower vehicle unit sales, price reductions, revenue shortfalls, loss of customers and loss of market share, which may harm our business, financial condition and operating results.

Our plan to grow the volume and profitability of our vehicles and energy storage products depends on significant lithium-ion battery cell production, including by our partner Panasonic at Gigafactory Nevada.production. We also produce several vehicle components at our Gigafactories, such as battery modules and packs and drive units, and manufacture energy storage products. If we are unable to or otherwise do not maintain and grow our respective operations, or if we are unable to do so cost-effectively or hire and retain highly-skilled personnel there, our ability to manufacture our products profitably would be limited, which may harm our business and operating results.

We are subject to legal and regulatory requirements, political uncertainty and social, environmental and economic conditions in numerous jurisdictions, including markets in which we generate significant sales,sales. over which weWe have little control andover these matters which are inherently unpredictable. Our operations in such jurisdictions, particularly as a company based in the U.S., with additional manufacturing operations in China and Europe, create risks relating to conforming our products to regulatory and safety requirements and charging and other electric infrastructures; organizing local operating entities; establishing, staffing and managing foreign business locations; attracting local customers; navigating U.S. and foreign government taxes, regulations and permit requirements; enforceability of our contractual rights; trade restrictions, customs regulations, tariffs and price or exchange controls; and preferences in foreign nations for domestically manufactured products. For example, we monitor tax legislation changes on a global basis, including changes arising as a result of the Organization for Economic Cooperation and Development’s multi-jurisdictional plan of action to address base erosion and profit shifting. SuchFurther, the United States has recently announced changes to U.S. trade policy, including increasing tariffs on imports, in many cases significantly, and potentially renegotiating or terminating existing trade agreements. The exact scope of any such tariffs that will ultimately be implemented is not known at this time, and the impacts on our business and costs of our products is uncertain. Retaliatory tariffs imposed by other countries on U.S. exports, further increases in U.S. tariffs, and the uncertainties surrounding domestic and foreign tariffs have impacted the pricing for our products, which could adversely impact demand. We cannot predict whether, and to what extent, there may be changes to international trade agreements, such as those with China, or whether, or to what extent, quotas, duties, additional tariffs, export controls or other restrictions will be changed or imposed by the United States or by other countries. Historically, U.S. special tariff actions have increased our costs for vehicles manufactured in the United States and increased costs for those same vehicles when exported from the United States. Further, as it pertains to electric vehicles and lithium-ion batteries for our energy storage products, while the Company has continuously aimed for a strong domestic supply chain, certain parts and components are difficult or impossible to source within the United States. A change on any of these conditions may increase our costs, impact our ability to sell our products and require significant management attention, and may harm our businessbusiness, prospects, financial condition and operating results if we are unable to manage them effectively.

If our products contain design or manufacturing defects, whether relating to our software or hardware, that cause them not to perform as designed or intended or that require repair, or certain features of our vehicles such as new Autopilot or FSD (Supervised)assistance features take longer than expected to become enabled, are legally restricted or become subject to onerous regulation, our ability to develop, market and sell our products and services may be harmed, and we may experience delivery delays, product recalls, allegations of product liability, breach of warranty and related consumer protection claims and significant warranty and other expenses. While we are continuously working to develop and improve our products’ capability and performance, there is no guarantee that any incremental changes in the specific software or equipment we deploy in our vehicles over time will not result in initial functional disparities from prior iterations or will perform as forecast in the timeframe we anticipate, or at all. Although we attempt to remedy any issues we observe in our products as effectively and rapidly as possible, such efforts may not be timely, may hamper production or may not completely satisfy our customers. We have performed, and continue to perform, extensive internal testing on our products and features, though, like the rest of the industry, we currently have a limited frame of reference by which to evaluate certain aspects of their long-term quality, reliability, durability and performance characteristics, including exposure to or consequence of external attacks. While we attempt to identify and address or remedy defects we identify pre-production and sale, thereover may be latenttime-in-use, defects that we may bewere unable to detect or control for inmay ourmanifest products,that andcould therebynot address,have reasonably been addressed prior to theiroriginal sale to or installation for customers.installations.

The automobile industry generally experiences significant product liability claims, and as such we face the risk of such claims in the event our vehicles do not perform or are claimed to not have performedperform as expected. As is true for other automakers, our vehicles have been involved and we expect in the future will be involved in accidentscollisions resulting in death or personal injury,injury. andSuch suchcollisions, accidentswhether whereinvolving Autopilot,Robotaxi Enhanced Autopilotvehicles or FSDcustomer (Supervised)vehicles with driver assistance features are engagedengaged, are theoften subject of significant public attention, especially in light of NHTSA’s Standing General Order requiring reports regarding certain crashes involving vehicles with advanced driver assistance or autonomous driving systems. We have experienced, and we expect to continue to face, claims and regulatory scrutiny arising from or related to misuse or claimed failures or alleged misrepresentations of such newthe technologies that we are pioneering. An unfavorable outcome in some or all of these proceedings could have a material adverse impact on results of operations or cash flows for a particular period. Our view of these matters is subject to inherent uncertainties and may change in the future. In addition, the battery packs that we produce make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While we have designed our battery packs to passively contain any single cell’s release of energy without spreading to neighboring cells, there can be no assurance that a field or testing failure of our vehicles or other battery packs that we produce will not occur, in particular due to a high-speed crash. Likewise, as our solar energy systemsgeneration and energy storage products generate and store electricity, they have the potential to fail or cause injury to people or property. Any product liability claim may subject us to lawsuits and substantial monetary damages, product recalls or redesign efforts, and even a meritless claim may require us to defend it, all of which may generate negative publicity and be expensive and time-consuming. In most jurisdictions, we generally self-insure against the risk of product liability claims for vehicle exposure, meaning that any product liability claims will likely have to be paid from company funds and not by insurance.

In order to maintain and grow our business, we must maintain credibility and confidence among customers, suppliers, analysts, investors, ratings agencies and other parties in our long-term financial viability and business prospects. Maintaining such confidence may be challenging due to our limited operating history relative to established competitors; customer unfamiliarity with our products and services; any delays we may experience in scaling manufacturing, delivery and service operations to meet demand; competition and uncertainty regarding the future of electric vehiclesvehicles, autonomous solutions or our other products and services; our quarterly production and sales performance compared with market expectations; and other factors including those over which we have no control. In particular, Tesla’s products, business, results of operations, and statements and actions of Tesla and its management are subject to significant amounts of commentary by a range of third parties. Such attention can include criticism, which may be exaggerated or unfounded, such as speculation regarding the sufficiency or stability of our management team.team, and has incited protests, some escalating to violence targeting our operations, products and personnel. Any such negative perceptions, whether caused by us or not, may harm our brand and our business (including sales) and make it more difficult to raise additional funds if needed.

We offer financing arrangements for our vehicles in North America, Europe and Asia primarily ourselves and through various financial institutions. We also currently offer vehicle financing arrangements directly through our local subsidiaries in certain markets. Depending on the country, such arrangements are available for specified models and may include operating leases directly with us under which we typically receive only a very small portion of the total vehicle purchase price at the time of lease, followed by a stream of payments over the term of the lease. We have also offered various arrangements for customers of our solar energy systems whereby they pay us a fixed payment to lease or finance the purchase of such systems or purchase electricity generated by them. If we do not successfully monitor and comply with applicable national, state and/or local financial regulations and consumer protection laws governing these transactions, we may become subject to enforcement actions or penalties.

Similarly, we have provided residual value guarantees to vehicle customers and partners for certain financing programs, under which such counterparties may sell their vehicles through various remarketing channels.channels, including back to Tesla. However, actual resale values are subject to fluctuations over the term of the financing arrangements, such as from one or more of the factors discussed above. If the actual resale values of any vehicles resold by our vehicle customers and partners are lower than the residual values we have agreed to with them, the residual value guarantees may be triggered and, as a result, our financial condition and operating results may be harmed.

Finally, our vehiclefinancing and solar energy system financing programs and our energy storage sales programs also expose us to customer credit risk. In the event of a widespread economic downturn or other catastrophic event, our customers may be unable or unwilling to satisfy their payment obligations to us on a timely basis or at all. If a significant number of our customers default, we may incur substantial credit losses and/or impairment charges with respect to the underlying assets.

Employees may leave Tesla or choose other employers over Tesla due to various factors, such as a very competitive labor market for talented individuals with automotive or technologytechnology, including AI, experience, or any negative publicity related to us. In regions where we have or will have operations, particularly significant engineering and manufacturing centers, there is strong competition for individuals with skillsets needed for our business, including specialized knowledge of electric vehicles, engineering and electrical and building construction expertise. We also compete with both mature and prosperous companies that have far greater financial resources than we do and start-ups and emerging companies that promise short-term growth opportunities.

Finally, our compensation philosophy for all of our personnel reflects our startup origins, with an emphasis on equity-based awards and benefits in order to closely align their incentives with the long-term interests of our stockholders.shareholders. We periodically seek and obtain approval from our stockholdersshareholders for future increases to the number of awards available under our equity incentive and employee stock purchase plans. If we are unable to obtain the requisite stockholdershareholder approvals for such future increases, we may have to expend additional cash to compensate our employees and our ability to retain and hire qualified personnel may be harmed.

We are highly dependent on the services of Elon Musk, Technoking of Tesla and our Chief Executive Officer. Although Mr. Musk spends significant time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla. For example: Mr. Musk also currently holds management positions at Space Exploration Technologies Corp., X Corp., X.AI Corp.,Holdings Corp. (“xAI”), Neuralink Corp. and The Boring Company, and is involved in other ventures and with the Department of Government Efficiency.ventures.

We continue to expand our information technology systems as our operations grow, such as product data management, procurement, inventory management, production planning and execution, sales, service and logistics, dealer management, financial, tax and regulatory compliance systems. This includes the implementation of new internally developed systems and the deployment of such systems in the U.S. and abroad. While,While we maintain information technology measures designed to protect us against intellectual property theft, data breaches, sabotage and other external or internal cyber-attacks or misappropriation, our systems and those of our service providers are potentially vulnerable to malware, ransomware, viruses, denial-of-service attacks, phishing attacks, social engineering, computer hacking, unauthorized access, exploitation of bugs, defects and vulnerabilities, breakdowns, damage, interruptions, system malfunctions, power outages, terrorism, acts of vandalism, security breaches, security incidents, inadvertent or intentional actions by employees or other third parties, and other cyber-attacks.

To the extent any security incident results in unauthorized access or damage to or acquisition, use, corruption, loss, destruction, alteration or dissemination of our data, including intellectual property and personal information, or our productsproducts, vehicles or vehicles,service offerings, or for it to be believed or reported that any of these occurred, it could disrupt our business, harm our reputation, compel us to comply with applicable data breach notification laws, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs to us and result in significant legal and financial exposure and/or reputational harm.

It is not uncommon for employees of certain trades at companies such as ours to belong to a union, which can result in higher employee costs and increased risk of work stoppages. Moreover, regulations in some jurisdictions outside of the U.S. mandate employee participation in industrial collective bargaining agreements and work councils with certain consultation rights with respect to the relevant companies’ operations. Although we work diligently to provide the best possible work environment for our employees, they may still decide to join or seek recognition to form a labor union, or we may be required to become a union signatory. From time to time, labor unions have engaged in campaigns to organize certain parts of our operations, as part of which such unions have filed unfair labor practice charges against us with the National Labor Relations Board (the “NLRB”),Board, and they may do so in the future. Any unfavorable ultimate outcome for Tesla may have a negative impact on the perception of Tesla’s treatment of our employees. Furthermore, we are directly or indirectly dependent upon companies with unionized work forces, such as suppliers and trucking and freight companies. Any work stoppages or strikes organized by such unions could delay the manufacture and sale of our products and may harm our business and operating results.

As a manufacturing company, we must manage the risk of product recalls with respect to our products. Recalls for our vehicles have resulted from various hardware and software-related safety or non-compliance determinations.investigations. In addition to recalls initiated by us for various causes, testing of or investigations into our products by government regulators or industry groups may compel us to initiate product recalls or may result in negative public perceptions about the safety of our products, even if we disagree with the defect determination or have data that contradicts it. In the future, we may voluntarily or involuntarily initiate recalls or field actions if any of our products are determined by us or a regulator to contain a safety defect or be noncompliant with applicable laws and regulations, such as U.S. Federal Motor Vehicle Safety Standards, or provide certain functionalities. Such recalls or field actions, whether voluntary or involuntary or caused by systems or components engineered or manufactured by us or our suppliers, could result in significant expense, supply chain complications and service burdens, and may harm our brand, business, prospects, financial condition and operating results.

We provide a manufacturer’s warranty on all new and used Tesla vehicles we sell directly to customers. We also provide certain warranties with respect to the energy generation and storage systems we sell, including on their installation and maintenance. For components not manufactured by us, we generally pass through to our customers the applicable manufacturers’ warranties, but may retain some warranty responsibilities for some or all of the life of such components. As part of our energy generation and storage system contracts, we may provide the customer with availability or performance guarantees that guarantee that the underlying system will meet or exceed thecertain availability or minimum energy generation or other energy performance requirements specified in the contract. Under these performance guarantees, we generallymay bear the risk of electricity production or other performance shortfalls, including in some cases shortfalls caused by failures in components from third party manufacturers. These risks are exacerbated in the event such manufacturers cease operations or fail to honor their warranties.

Our business and our future plans for expansionexpansion, supporting infrastructure for our businesses, and AI innovations, including growth in our fleet of AI-enabled company-operated assets and new businesses, such as our development and production of Bots, are capital-intensive, and the specific timing of cash inflows and outflows may fluctuate substantially from period to period. We may need or want to raise additional funds through the issuance of equity, equity-related or debt securities or through obtaining credit from financial institutions to fund, together with our principal sources of liquidity, the costs of developing and manufacturing our current or future products, to pay any significant unplanned or accelerated expenses or for new significant strategic investments, or to refinance our significant consolidated indebtedness, even if not required to do so by the terms of such indebtedness. We cannot be certain that additional funds will be available to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our financial condition, results of operations, business and prospects could be materially and adversely affected.

We may be negatively impacted by any early obsolescence of our manufacturing and other equipment.

We depreciate the cost of our manufacturing and other equipment over their expected useful lives. However, product cycles or manufacturing technology may change periodically, and we may decide to update our products or manufacturing processes more quickly than expected. Moreover, improvements in engineering and manufacturing expertise and efficiency may result in our ability to manufacture our products using less of our currently installed equipment. Alternatively, as we ramp and mature the production of our products and services to higher levels, we may discontinue the use of already installed equipment in favor of different or additional equipment. The useful life of any equipment that would be retired early as a result would be shortened, causing thesuch depreciation on such equipment to be accelerated, and our results of operations may be harmed.

We transact business globally in multiple currencies and have foreign currency risks related to our revenue, costs of revenue, operating expenses and localized subsidiary debt denominated in currencies other than the U.S. dollar. To the extent we have significant revenues denominated in such foreign currencies, any strengthening of the U.S. dollar would tend to reduce our revenues as measured in U.S. dollars, as we have historically experienced, and are currently experiencing.experienced. We have also experienced, and will continue to experience, fluctuations in our net income as a result of gains (losses) on the settlement and the re-measurement of monetary assets and liabilities denominated in currencies that are not the local currency (primarily consisting of our intercompany and cash and cash equivalents balances). In addition, a portion of our costs and expenses have been, and we anticipate will continue to be, denominated in foreign currencies. If we do not have fully offsetting revenues in these currencies and if the value of the U.S. dollar depreciates significantly against these currencies, our costs as measured in U.S. dollars as a percent of our revenues will correspondingly increase and our margins will suffer. As a result, our operating results may be harmed.

We may be impacted by natural disasters, wars,wars and other geopolitical conflicts, health epidemics, weather conditions, the long-term effects of climate change, power outages or other events outside of our control. For example, our Fremont Factory and Gigafactory Nevada are located in seismically active regions in Northern California and Nevada, and our Gigafactory Shanghai is located in a flood-prone area. Moreover, the area in which our Gigafactory Texas is located experienced severe winter storms in the first quarter of 2021 that had a widespread impact on utilities and transportation. If major disasters such as earthquakes, floods or other climate-related events occur, or our information system or communication breaks down or operates improperly, our headquarters and production facilities may be seriously damaged, or we may have to stop or delay production and shipment of our products. Also, the broader consequences in the current conflict between Russia and Ukraine, which may include further embargoes, regional instability and geopolitical shifts; airspace bans relating to certain routes, or strategic decisions to alter certain routes; and potential retaliatory action by the Russian government against companies, and the extent of the conflict on our business and operating results cannot be predicted. We may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, operating results and financial condition.

Government and economic incentives that support the development and adoption of electric vehicles in the U.S. and abroad, including certain tax exemptions, tax credits and rebates, may be reduced, eliminated, amended or exhausted from time to time. For example, previously available incentives favoring electric vehicles in certain areas have expired or were cancelled or temporarily unavailable, and in some cases were not eventually replaced or reinstituted, which may have negatively impacted sales. Specifically, recent governmental and regulatory actions have repealed and/or restricted consumer, manufacturing and charging infrastructure tax credits, and certain regulatory credit programs tied to our products. These, and any similar actions in the future, may affect demand for our vehicles, and harm our growth, prospects and operating results, and the loss of previously available tax credits and carbon offset mechanisms may further negatively impact our financial results. In addition, certain government and economic incentives may also be implemented or amended to provide benefits to manufacturers who assemble domestically, have local suppliers or have other characteristics that may not apply to Tesla. Such developments could negatively impact demand for our vehicles, and we and our customers may have to adjust to them, including through pricing modifications.

In addition, certain governmental rebates, tax credits and other financial incentives that are currently available with respect to our solar and energy storage product businesses allow us to lower our costs and encourage customers to buy our products and investors to invest in our solar financing funds. However, these incentives may expire when the allocated funding is exhausted, reduced or terminated as renewable energy adoption rates increase, sometimes without warning. Likewise,For example, provisions of the OBBBA could affect battery cell expenses and impact costs for our consumers, negatively impacting demand. Compliance with evolving legislation, such as the OBBBA, also requires rigorous traceability of raw materials. If we or our suppliers are unable to provide sufficient documentation to verify the origin of critical minerals, our products may lose eligibility for tax credits and incentives, directly increasing the effective price for our customers and potentially reducing demand. In addition, in jurisdictions where net metering is currently available, our customers receive bill credits from utilities for energy that their solarenergy energygeneration systems generate and export to the grid in excess of the electric load they use. The benefit available under net metering has been or has been proposed to be reduced, altered or eliminated in several jurisdictions, and has also been contested and may continue to be contested before the Federal Energy Regulatory Commission. Any reductions or terminations of such incentives may harm our business, prospects, financial condition and operating results by making our products less competitive for customers, increasing our cost of capital and adversely impacting our ability to attract investment partners and to form new financing funds for our solar and energy storage assets.

Our business operations are and will continue to be subject to complex environmental, occupational, health and safety laws and regulations at numerous jurisdictional levels in the U.S., China, Germany and other locations abroad, including laws relating to the use, handling, storage, recycling, disposal and/or human exposure to hazardous materials, product material inputs and post-consumer products and with respect to constructing, expanding and maintaining our facilities.facilities and other infrastructure. New, or changes in, environmental and climate change laws, regulations or rules could also lead to increased costs of compliance, including remediations of any discovered issues, and changes to our operations, which may be significant, and any failures to comply could result in significant expenses, delays or fines. In addition, as we have increased our operations, we are and may continue to be subject to increased scrutiny, including litigation and government investigations, that we will need to defend against. If we are unable to successfully defend ourselves in such litigation or government investigations, it may harm our brand, ability to attract and retain qualified employees, business and financial condition. We are also subject to laws and regulations applicable to the supply, manufacture, import, sale, service and performance of our products both domestically and abroad. For example, in countries outside of the U.S., we are required to meet standards relating to vehicle safety, fuel economy and emissions that are often materially different from equivalent requirements in the U.S., thus resulting in additional investment into the vehicles and systems to aim to ensure regulatory compliance in all countries. This process may include official review and certification of our vehicles by foreign regulatory agencies prior to market entry, as well as compliance with foreign reporting and recall management systems requirements.

In particular, we offer in our customer vehicles in certain markets Autopilotdriver and FSD (Supervised)assistance features that today assist drivers with certain tedious and potentially dangerous aspects of road travel, but which currently require drivers to remain fully engaged in the driving operation. We arealso continuing to developlaunched our Autopilotautonomous andride-hailing FSDservice (Supervised)in technology.2025. There are a variety of international, federal and state regulations that may apply to, and may adversely affect,inhibit, the design and performance,capabilities, sale, marketing, registration and operation of Autopilotdriver andassistance FSD (Supervised), andfeatures, future capability, including autonomous vehiclescapability thaton maycustomer notvehicles, beas operatedwell byas aour humanRobotaxi driver.business. This includes many existing vehicle standards that were notdrafted originallyassuming intendedthe topresence apply to vehicles that may not be operated byof a human driver. Such regulations, including their enforcement or the enforcement policy associated with the regulations, continue to rapidly change, which increases the likelihood of a patchwork of complex or conflicting regulations, or may delay, restrict or prohibit the availability of certain functionalities and vehicle designs, or affect the pace at which we expand our Robotaxi business, which could adversely affect our business.business, prospects, financial condition and operating results.

Finally, as a manufacturer, installer and service provider with respect to solarenergy generation and energy storage systems, a supplier of electricity generated and stored by certain of the solar energy generation and energy storage systems we install for customers, and a provider of grid services through virtual power plant models, we are impacted by federal, state and local regulations and policies concerning the import or export of components, electricity pricing, the interconnection of electricity generation and storage equipment with the electrical grid and the sale of electricity generated by third party-owned systems. If regulations and policies are introduced that adversely impact the import or export of components, or the interconnection, maintenance or use of our solar and energy storage systems, they could deter potential customers from purchasing our solar and energy storage products and services, threaten the economics of our existing contracts and cause us to cease solar and energy storage system sales and services in the relevant jurisdictions, which may harm our business, financial condition and operating results.

Any failure by us or our vendors or other business partners to comply with our public privacy notice or with federal, state or international privacy, data protection, artificial intelligence or security laws or regulations relating to the processing, collection, use, retention, security and transfer of personally identifiable information could result in regulatory or litigation-related actions against us, legal liability, fines, damages, ongoing audit requirements and other significant costs. Substantial expenses and operational changes may be required in connection with maintaining compliance with such laws, and even an unsuccessful challenge by customers or regulatory authorities of our activities could result in adverse publicity and could require a costly response from and defense by us. In addition, certain privacy laws are still subject to a high degree of uncertainty as to their interpretation, application and impact, and may require extensive system and operational changes, be difficult to implement, increase our operating costs, adversely impact the cost or attractiveness of the products or services we offer, or result in adverse publicity and harm our reputation. For example, the General Data Protection Regulation applies to the processing of personal information collected from individuals located in the European Union requiring certain data protection measures when handling, with a significant risk of fines for noncompliance. Similarly, our North American operations are subject to complex and changing federal and USU.S. state-specific data privacy laws and regulations, such as the California Consumer Privacy Act which imposes certain legal obligations on our use and processing of personal information related to California residents. Many other U.S. states have enacted their own distinct privacy laws and regulations, which often impose different, overlapping, and sometimes conflicting requirements across multiple jurisdictions. Finally, additional privacy and cybersecurity laws have come into effect in the Asia-Pacific region, including China, and other jurisdictions where Tesla has a market presence.

In addition to the risks related to general privacy regulation, we may also be subject to specific vehicle manufacturer obligations relating to cybersecurity, data privacy and data localization requirements which place additional risks to our international operations. Risks and penalties could include ongoing audit requirements, data protection authority investigations, legal proceedings by international governmental entities or others resulting in mandated disclosure of sensitive data or other commercially unfavorable terms. Notwithstanding our efforts to protect the security and integrity of our customers’ personal information, we may be required to expend significant resources to comply with data breach requirements if, for example, third parties improperly obtain and use the personal information of our customers or we otherwise experience a data loss with respect to the personal information we process and handle. A major breach of our network security and systems may occur despite defensive measures, and may result in fines, penalties and damages and harm our brand, prospects and operating results.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. For further discussion of our products and services, technology and competitive strengths, refer to Item 1- Business. For discussion related to changes in financial condition and the results of operations for fiscal year 2023-related2024-related items, refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year 2023,2024, which was filed with the Securities and Exchange CommissionSEC on January 29,30, 2024.2025.

In 2024,2025, we produced approximately 1,773,0001.66 million consumer vehicles and delivered approximately 1,789,0001.64 million consumer vehicles. We are focused on profitable growth,growth includingvia bya leveragingdifferentiated and efficiently managed product portfolio that leverages our existing factories and production lines to introduce new and more affordable products,lines, further improving and deploying our FSD (Supervised) capabilities, including future autonomous capabilities through our purpose-built Robotaxi product, Cybercab, reducing costs, increasing vehicle production, utilized capacity and delivery capabilities, improving and developing our vehiclesvehicles, battery and batteryAI compute technologies, vertically integrating and localizing our supply chain, and expanding our global infrastructure, including our service and charging infrastructure. We have continued to expand and refine our Robotaxi service after its June 2025 launch, capitalizing on our AI investments and scalable mobility infrastructure to advance a service-driven business model.

In 2024,2025, we deployed 31.446.7 GWh of energy storage products. We are focused on ramping the production andproduction, increasing the market penetration of our energy storage products.products, developing our battery technologies and vertically integrating, localizing and expanding our supply chain.

In 2024,2025, we recognized total revenues of $97.69$94.83 billion, representing ana increasedecrease of $917$2.86 millionbillion compared to the prior year. In 2024,2025, our net income attributable to common stockholders was $7.09$3.79 billion, representing a decrease of $7.91$3.30 billion compared to the prior year,year. primarily due to the impact of releasing $6.54 billion of our valuation allowance associated with U.S. federal and state deferred tax assets in the fourth quarter of 2023.WeWe continue to ramp production and build and optimize our manufacturing capacity, expand our operations while focusing on further cost reductions and operational efficiencies to enable increased deliveries and deployments of our products, and invest in research and development to accelerate our AI, software,software and fleet-based profits for further revenue growth.

We ended 20242025 with $36.56$44.06 billion in cash and cash equivalents and investments, representing an increase of $7.47$7.50 billion from the end of 2023.2024. Our cash flows provided by operating activities were $14.75 billion in 2025 compared to $14.92 billion in 2024 compared to $13.26 billion in 2023,2024, representing ana increasedecrease of $1.67$176 billion.million. Capital expenditures amounted to $8.53 billion in 2025 compared to $11.34 billion in 2024 compared to $8.90 billion in 2023,2024, representing ana increasedecrease of $2.44$2.82 billion. Overall growth has allowed our business to generally fund itself, and we will continue investingto inmake critical high-value investments while maintaining a numberstrong ofbalance capital-intensive projects and research and development in upcoming periods.sheet.

Automotive and AI Enabled Products—Production

We are focused on growing and optimizing our manufacturing capacity, which includes capacity for manufacturing newer vehicle models such as our Cybertruck, Tesla Semi and future vehicles utilizing aspects of our next generation platform, andwhile ramping the production at our Gigafactories to their installed production capacities as well as increasingmaximizing production rate and efficiency at our currentGigafactories. factories.In 2025, we completed the refresh of our vehicle lineup with the launch of the new Model Y and additional variants for Model 3 and Model Y. The next phase of production growth will depend on the continued ramp at our factories and be initiated by advances in autonomy and the introduction of new products, including those built on our next generation vehicle platform, as well as our ability to addefficiently to our available sources of battery cell supply by manufacturingmanufacture our own cells that we are developing to have high-volume output, lower capital and production costs and longer range. Our goals are to improve vehicle performance, decrease production costs and increase affordability and customer awareness. We are also capitalizing on our strengths in real-world AI data to advance the development of Optimus, a general purpose, autonomous humanoid robot.

These plans are subject to uncertainties inherent in establishing and ramping manufacturing operations, which may be exacerbated by new product and manufacturing technologies we introduce, the number of concurrent international projects, any industry-wide component constraints, labor shortages and any future impact from events outside of our control. For example, duringchanges theto firstfiscal quarterand oftrade 2024,policy wewith experiencedrespect ato sequentialtariffs, declineexport incontrols productionand volumesother partiallyrestrictions causedmay by the early phase of the production ramp of the updated Model 3 atimpact our Fremontglobal factory,supply chain cost structure and factoryavailability, shutdownsaffecting atnot Gigafactoryonly Berlin-Brandenburgvehicle resultingproduction, frombut shippingalso diversionsfacility caused by the Red Sea conflict and an arson attack. In the first quarter of 2025, as we launch our New Model Y worldwide, we may similarly experience delays or declines in production volumes due to simultaneous manufacturing ramps in facilities on three continents.expansions. Moreover, we have set ambitious technological targets with our plans for battery cells as well as for iterative manufacturing and design improvements for our vehicles with each new factory.vehicles.

Automotive and AI Enabled Products—Demand, Sales, Deliveries and Infrastructure

Our cost reduction efforts, cost innovation strategies, and additional localized procurement and manufacturing are key to our vehicles’ affordability and have allowed us to competitively price our vehicles. We will also continue to generate demand by improving our vehicles’ performance and functionality, including through product offerings and features based onutilizing artificial intelligence such as Autopilot, FSD (Supervised), and other software, and delivering new vehicles and vehicle options,options. suchIn asaddition, ourwe believe the launch of our Robotaxi service unlocks the updatedpotential Modelfor 3significant inbusiness 2024,growth to advance a service-driven business model. We will continue to improve safety and theprofitability Newwhile Model Y inscaling the first quarter of 2025.network. In addition, we have been increasing awareness, and expanding our vehicle financing programs, including attractive leasing terms for our customers. We will also continue to work on developing our robotics offerings.

However, we operate in a cyclical industry that is sensitive to shifting consumer trends, political and regulatory uncertainty, including with respect to trade and the environment, all of which can be compounded by inflationary pressures, rising energy prices, interest rate fluctuations and the liquidity of enterprise customers. For example, as inflationary pressures increased across the markets in which we operate, central banks in developed countries raised interest rates rapidly and substantially, which impacted the affordability of vehicle lease and finance arrangements. Further, sales of vehicles in the automotive industry also tend to be cyclical in many markets, which may expose us to increased volatility as we expand and adjust our operations. Moreover, as additional competitors enter the marketplace and help bring the world closer to sustainable transportation, we will have to adjust and continue to execute well to maintain our momentum. Additionally, our suppliers’ liquidity and allocation plans may be affected by current challenges in the North American automotive industry, which could reduce our access to components or result in unfavorable changes to cost. These macroeconomic and industry trends have had, and will likely continue to have, an impact on the pricing of, and order rate for our vehicles, and in turn our operating margin. Changes in government and economic policies, incentives or tariffs may also impact our production, sales, cost structure and the competitive landscape. We will continue to adjust accordingly to such developments, and we believe our ongoing cost reduction, including improved production innovation and efficiency at our newest factories and lower logistics costs, and focus on operating leverage will continue to benefit us in relation to our competitors, while our new products will help enable future growth.

As our vehicle production increases, we must work constantly to similarly increase vehicle delivery capability so that it does not become a bottleneck on our total deliveries. We are also committed to reducing the percentage of vehicles delivered in the third month of each quarter, which will help to reduce the cost per vehicle. As we expand our manufacturing operations globally, we will also have to continue to increase and staff our delivery, servicing and charging infrastructure accordingly, maintain our vehicle reliability and optimize our Supercharger locations to ensure cost effectiveness and customer satisfaction. In particular, as other automotive manufacturers have announced their adoption of the North American Charging Standard (“NACS”) and agreements with us to utilize our Superchargers, we must correspondingly expand our network in order to ensure adequate availability to meet customer demands. We also remain focused on continued enhancements of the capability and efficiency of our servicing operations. In tandem with the launch of our Robotaxi business, we are focused on developing and optimizing dedicated infrastructure, including in relation to vehicle cleaning and maintenance, charging, security, teleoperations and fleet management, to ensure service quality as we continue to scale.

The long-term success of this business is dependent upon incremental volume growth. We continue to increase the production and capabilities of our energy storage products to meet high levels of demand, including the introduction of Powerwall 3 in 2024, and the ramps of our Megafactories in Shanghai and Lathrop, California.California, and the construction of a new Megafactory near Houston, Texas. In 2025, we introduced Megapack 3 and Megablock, our next-generation industrial storage product, and began manufacturing a new residential retrofit solar panel. For Megapack, energy storage deployments can vary meaningfully quarter to quarter depending on the timing of specific project milestones and logistics. As these product lines grow, we will have to maintain adequate battery cell supply for our energy storage products. At the same time, changes in government and economic incentives or tariffs may also impact our sales, cost structure and the competitive landscape. For instance, import tariffs by the US government and the provisions of the OBBBA could significantly increase battery cell expenses and impact costs for our consumers, negatively impacting consumer demand. Despite these challenges, as AI infrastructure drives rapid load growth, we see opportunities for our energy storage products to stabilize the grid, shift energy when it is needed most and provide additional power capacity.

Our capital expenditures are typically difficult to project beyond the short-term given the number and breadth of our core projects at any given time, and may further be impacted by uncertainties in future global market conditions.conditions and shifting global trade and fiscal policy. We are simultaneously developing and ramping new products, building or ramping manufacturing facilities on three continents, piloting the development and manufacture of new battery cell technologies, expanding our Supercharger network and investing in autonomyautonomy, robotics and other artificial intelligence enabled training and products,products and its supporting infrastructure, and the pace of our capital spend may vary depending on overall priority among projects, the pace at which we meet milestones, production adjustments to and among our various products, increased capital efficiencies and the addition of new projects. OwingWe andare subjectfocused toon the foregoing as well as the pipeline of announced projects under development, all other continuing infrastructurelong-term growth andopportunities varyingthrough levelscritical, ofhigh-value inflation,investments. weWe currently expect our capital expenditures to exceedbe $11.00in excess of $20 billion in 20252026, driven by our AI initiatives, including investments in compute infrastructure and indata eachcenters, the expansion and ramp of theour followingmanufacturing twoand fiscalR&D years.production lines and facilities, and growth in our fleet of company-operated AI-enabled assets and our retail, service and charging footprint. We believe this strategy will position our Company for further growth as we make investments in a capital efficient manner.

Our business has generally been consistently generating cash flow from operations in excess of our level of capital spend, and with better working capital management resulting in shorter days sales outstanding than days payable outstanding, our sales growth is also generally facilitating positive cash generation. We have and will continue to utilize such cash flows, among other things, to invest in autonomy,autonomy doand morerobotics, verticalfurther integration,vertically integrate our supply chain, expand our product roadmap and provide financing options to our customers. At the same time, weperiods are likely to seeof heightened levels of capital expenditures duringdue certain periods depending on the specific pace of ourto capital-intensive projects and other potential variables such as rising material prices and increases in supply chain and labor expenses resulting from changes in global trade conditions and labor availability.availability, Overall,will wenecessitate expectadditional funding beyond our abilityoperating tocash be self-funding to continue as long as macroeconomic factors support current trends in our sales.flow.

The estimates used for, but not limited to, determining significant economic incentive for resale value guarantee arrangements, sales return reserves, resale value guarantee liabilities, income tax, the collectability of accounts and finance receivables, fair value and probability assessments of stock-based awards, inventory valuation, warranties, fair value of long-lived assets, goodwill, fair value of financial instruments, fair value and residual value of operating lease vehicles and solarenergy energygeneration and storage systems subject to leases could be impacted. We have assessed the impact and are not aware of any specific events or circumstances that required an update to our estimates and assumptions or materially affected the carrying value of our assets or liabilities as of the date of issuance of this Annual Report on Form 10-K. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Automotive sales revenue includes revenues related to cash and financing deliveries of new vehicles, and specific other features and services that meet the definition of a performance obligation under Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), including access to our internet connectivity, access to our FSD (Supervised) features and their ongoing maintenance, internet connectivity, free Supercharging programs and over-the-air software updates. We recognize revenue on automotive salessales, net of any discounts or financial subsidies, upon delivery to the customer, which is when the control of a vehicle transfers. Payments are typically received at the point control transfers or in accordance with payment terms customary to the business, except sales we finance for which payments are collected over the contractual loan term. We also recognize a sales return reserve based on historical experience plus consideration for expected future market values,values when we offer resale value guarantees or similar buyback terms. Other features and services such as access to our internet connectivity, unlimited free Supercharging and over-the-air software updates are provisioned upon transfer of control transfer of a vehicle and recognized over time on a straight-line basis as we have a stand-ready obligation to deliver such services to the customer. Other limited free Supercharging incentives are recognized based on actual usage or expiration, whichever is earlier. We recognize revenue related to these other features and services over the performance period, which is generally the expected ownership life of the vehicle. Revenue related to FSD (Supervised) features is recognized when functionality is delivered to the customer and their ongoing maintenance is recognized over time. For our obligations related to automotive sales, we estimate standalone selling price by considering costs used to develop and deliver the service, third-party pricing of similar options and other information that may be available. Customers may purchase subscriptions, including FSD (Supervised) and premium connectivity, after taking delivery of their vehicles. Revenue from subscriptions is recognized either over time or point in time depending on the nature of contractual terms.

We provide a manufacturer’s warranty on all new and used vehicles and a warranty on the installation and components of the energy generation and storage systems we sell for periods typically between 101 to 25 years. We accrue a warranty reserve for the products sold by us, which includes our best estimate of the projected costs to repair or replace items under warranties and recalls if identified. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain and changes to our historical or projected warranty experience may cause material changes to the warranty reserve in the future. The warranty reserve does not include projected warrantyservice costs associated with our vehicles subject to operating lease accounting and our solarenergy energygeneration and storage systems under lease contracts or PPAs, as thethese service costs to repair these warranty claims are expensed as incurred. The portion of the warranty reserve expected to be incurred within the next 12 months is included within Accrued liabilities and other, while the remaining balance is included within Other long-term liabilities on the consolidated balance sheets. For liabilities that we are entitled to receive indemnification from our suppliers, we record receivables for the contractually obligated amounts on the consolidated balance sheets as a component of Prepaid expenses and other current assets for the current portion and as Other non-current assets for the long-term portion. Warranty expense is recorded as a component of Cost of revenues in the consolidated statements of operations. Due to the magnitude of our automotive business, our accrued warranty balance is primarily related to our automotive segment.

We use the fair value method of accounting for our stock options and restricted stock units (“RSUs”) granted to employees and for our employee stock purchase plan (the “ESPP”) to measure the cost of employee services received in exchange for the stock-based awards. The fair value of stock option awards with only service and/or performance conditions and the ESPP is estimated on the grant or offering date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs such as the risk-free interest rate, expected award term and expected share price volatility. These inputs are subjective and generally require significant judgment. The fair value of RSUs with service and/or performance conditions is measured on the grant date based on the closing fair market value of our common stock. The resulting coststock-based compensation expense for stock options, RSUs and the ESPP is recognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period, which is generally four years for stock options and RSUs and six months for the ESPP. Stock-based compensation expense is recognized on a straight-line basis, net of actual forfeitures in the period.

Automotive sales revenue includes revenues related to cash and financing deliveries of new vehicles, including internet connectivity, access to our FSD (Supervised) features and their ongoing maintenance, internet connectivity, free Supercharging programs and over-the-air software updates. These deliveries are vehicles that are not subject to lease accounting.

Automotive leasing revenue includes the amortization of revenue for vehicles under direct operating lease agreements.agreements and lease buyout revenue. Additionally, automotive leasing revenue includes direct sales-type leasing programs where we recognize all revenue associated with the sales-type lease upon delivery to the customer.

Services and other revenue consists of sales of used vehicles, non-warranty maintenance services and collision, part sales, paid Supercharging,Supercharging sessions, automotive insurance servicesbusiness revenuerevenue, part sales and retail merchandise sales.

Automotive regulatory creditssales revenue increaseddecreased $973$6.66 million,billion, or 54%,9%, in the year ended December 31, 20242025 as compared to the year ended December 31, 2023,2024, due a decrease of approximately 8% in cash deliveries and a lower average selling price per unit driven by demandsales formix creditsand inhigher Northcustomer Americaincentives such as otherattractive automobilefinancing manufacturers scale back on their battery electric vehicle plans.options.

Services and other revenue increased $2.22$2.00 billion, or 27%,19%, in the year ended December 31, 20242025 as compared to the year ended December 31, 2023,2024, primarily due to increases in salespaid ofSupercharging used vehicles,sessions, non-warranty maintenance services and collision revenue, paidused Superchargingvehicle revenue,sales volume and automotive insurance services revenue and part salesbusiness revenue.

Energy generation and storage revenue includes salessales, leasing, and leasingfinancing of solar energy generation and energy storage products, financing of solar energy generation products, services related to such products and sales of solar energy systemsgeneration incentives.

Energy generation and storage revenue increased $4.05$2.69 billion, or 67%,27%, in the year ended December 31, 20242025 as compared to the year ended December 31, 2023,2024 primarily due to a 16.7 GWh increaseincreases in Megapack and Powerwall deploymentsdeployments, comparedpartially tooffset theby priora year.decrease in average selling price of Megapack.

Cost of automotive sales revenue includes direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, shipping and logistic costs, vehicletariffs, connectivityreserves costs,for estimated warranty expenses, FSD (Supervised) ongoing maintenance costs, vehicle connectivity costs, and allocations of electricity and infrastructure costs related to our Superchargerfree networkSupercharging and reserves for estimated warranty expenses.programs. Cost of automotive sales revenues also includes adjustments to warranty expense and charges to write down the carrying value of our inventory when it exceeds its estimated net realizable value and to provide for obsolete and on-hand inventory in excess of forecasted demand. Additionally, cost of automotive sales revenue benefits from manufacturing credits earned.recognized.

Cost of automotive leasing revenue includes the depreciation of operating lease vehicles, cost of goods sold associated with lease buyouts and direct sales-type leasesleases, and warrantyservicing expense related toof leased vehicles.

Costs of services and other revenue includes cost of used vehicles including refurbishment costs, labor and material costs associated with providing non-warranty after-salesmaintenance services,services and collision, operating costs of paid Supercharging sessions, claim costs associated with providing automotive insurance, and costs associated with our bodypart shopssales and part sales, costs of paid Supercharging, costs to provide vehicle insurance and costs of retail merchandise sales.

Cost of energyautomotive generation and storagesales revenue increaseddecreased $2.55$5.60 billion, or 52%,9%, in the year ended December 31, 20242025 as compared to the year ended December 31, 2023, primarily2024 due to increasesthe decrease in Megapackdeliveries year over year as discussed above and Powerwalllower deployments,average cost per unit due to sales mix and lower material costs, partially offset by increaseslower fixed cost absorption and an increase in IRA manufacturing credits recognized astariffs compared to the prior year.

Gross margin for energytotal generationautomotive and storage increaseddecreased from 18.9%18.4% to 26.2%17.8% in the year ended December 31, 20242025 as compared to the year ended December 31, 2023,2024 primarily due to margina improvementsdecrease forin ourregulatory energycredits storagerevenue productsas drivenwell byas the changes in automotive sales revenue and cost reductions, including benefits from IRA manufacturing credits, and a higher proportion of ourautomotive storagesales business, which operated at a higher gross margin, within the segmentrevenue, as compareddiscussed to the prior periods.above.

As a result of rapidly evolving trade and fiscal policy and geopolitical conflicts, uncertainty in the automotive and energy markets continues, posing risks to our global supply chain and cost structure which could have a meaningfully adverse impact on demand for our products and our profitability. The current tariff regime will have a relatively larger impact on our energy generation and storage business compared to our automotive business. While we prepare for near-term challenges to our business under current policies, we are focused on long-term growth opportunities as we continue to further vertically integrate and localize our supply chain and make prudent investments.investments in infrastructure.

In 2026, we produced approximately 408860 thousand consumer vehicles and delivered approximately 358838 thousand consumer vehicles through the firstsecond quarter. We are focused on profitable growth,growth and scale, further improving and deploying our FSD (Supervised) capabilities, including future autonomous capabilities through our purpose-built Robotaxi product, Cybercab, advancing our battery and AI compute technologies, vertically integrating and localizing our supply chain,technologies and expanding our global infrastructure. We have continued to expand and refine our Robotaxi service after its June 2025 launch, capitalizing on our AI investments and scalable mobility infrastructure to advance a service-driven business model.

In 2026, we deployed 8.822.3 GWh of energy storage products through the firstsecond quarter. We are focused on ramping the production, increasing the market penetration of our energy storage products,products and developing our batterysolar technologiesmanufacturing and verticallybattery integrating, localizing and expanding our supply chain.technologies.

During the three and six months ended MarchJune 31,30, 2026, we recognized total revenues of $22.39$28.24 billion and $50.62 billion, respectively, representing an increaseincreases of $3.05$5.74 billion and $8.79 billion, respectively, compared to the same periodperiods in the prior year. During the three and six months ended MarchJune 31,30, 2026, our net income attributable to common stockholders was $477$1.11 million,billion and $1.59 billion, respectively, representing a decrease of $58 million and an increase of $68$10 millionmillion, respectively, compared to the same periodperiods in the prior year. We continue to ramp production and build and optimize our manufacturing capacity, expand our operations while focusing on further cost reductions and operational efficiencies, including through vertical integration of our battery and semiconductor supply chains, to enable increased deliveries and deployments of our products,products. andWe investare also investing heavily in research and development to accelerate our AI, software and fleet-based profits for further revenue growth.growth, which will negatively impact our profitability during this phase.

We ended the firstsecond quarter of 2026 with $44.74$43.52 billion in cash and cash equivalents and short-term investments, representing ana increasedecrease of $684$535 million from the end of 2025. Our cash flows provided by operating activities were $3.94$8.63 billion during the threesix months ended MarchJune 31,30, 2026, compared to $2.16$4.70 billion during the same period ended MarchJune 31,30, 2025, representing an increase of $1.78$3.94 billion. Capital expenditures amounted to $2.49$8.28 billion during the threesix months ended MarchJune 31,30, 2026, compared to $1.49$3.89 billion during the same period ended MarchJune 31,30, 2025, representing an increase of $1.00$4.40 billion. Overall growth has allowed our business to generally fund itself. As we make critical high-value investments in our AI initiatives and expand manufacturing capabilities, including for our semiconductorsemiconductor, Optimus and Optimussolar businesses,operations, we intend to manage the business such that we maintain a strong balance sheet and sufficient liquidity.liquidity, which may include additional funding.

We are focused on growing and optimizing our manufacturing capacity, which includes capacity for manufacturing newer vehicle models and future vehicles utilizing aspects of our next generation platform, while maximizing production rate and efficiency at our Gigafactories. The next phase of production growth will be initiated by advances in autonomy and the introduction of new products, including those built on our next generation vehicle platform, as well as our ability to efficiently manufacture and rapidly scale our own cells that we are developing to have high-volume output, lower capital and production costs and longer range. In the first quarterhalf of 2026, we made significant progress towards these objectives as we began pilot production of Cybercab, as well as ramps across our new battery and material factories, including cathode material and lithium refining in Texas. Our goals are to improve vehicle performance, decrease production costs and increase affordability and customer awareness. We are also capitalizing on our strengths in real-world AI data to advance the development of Optimus, a general purpose, autonomous humanoid robot, as we make preparations and investments in large-scale production.

Changes in government and economic policies, incentives or tariffs may also impact our production, cost structure and the competitive landscape. For instance, while the final scope and application of recently announced changes in trade policy remain uncertain at this time, tariffs on imports and subsequent retaliatory tariffs could impact consumer spending and demand for durable goods and related services. Furthermore, certain provisions of the OBBBA, including the removal of tax credits for electric vehicles, may also impact consumer demand for electric vehicles in general. We will continue to adjust accordingly to such developments, and we believe our ongoing cost reduction efforts, including through production innovation, process improvements and logistics optimization, and focus on operating leverage, vertical integration and supply chain localization will continue to benefit us in relation to our competitors. Our new productsproducts, production capacity, infrastructure investments and our advances in autonomy and robotics, position us for future growth.

As our vehicle production increases, we must work constantly to similarly increase vehicle delivery capability so that it does not become a bottleneck on our total deliveries. As we expand our manufacturing operations and vehicle lineup globally, we will also have to continue to increase and staff our delivery, servicing and charging infrastructure accordingly, maintain our vehicle reliability and optimize our Supercharger locations to ensure cost effectiveness and customer satisfaction. In particular, as other automotive manufacturers have announced their adoption of NACS and agreements with us to utilize our Superchargers, we must correspondingly expand our network in order to ensure adequate availability to meet customer demands. We have also begun deploying public Megachargers in preparation for the rampproduction of Tesla Semi. In addition, we remain focused on continued enhancements of the capability and efficiency of our servicing operations. In tandem with the launch of our Robotaxi business, we are focused on developing and optimizing dedicated infrastructure, including in relation to vehicle cleaning and maintenance, charging, security, teleoperations and fleet management, to ensure service quality as we continue to scale.

To support our businesses in clean energy and transport and autonomous robots, we are investing in and developing the necessary infrastructure. We continue to expand Cortex, our onsite training clusters at Gigafactory Texas, to provide sufficient compute resources for the development of our AI products and services, and are expanding our scope of manufacturing to include semiconductor and solar fabrication. We are focused on exploring opportunities independently and with strategic partners to develop bespoke and scalable solutions, including through vertical integration, to optimize for cost, functionality, efficiency and safety.

ServicesAutomotive and othersales revenue increased $1.11$4.22 billion, or 42%,27%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to increasesan increase of approximately 25% in usedcash vehicle sales volume, non-warranty maintenance services and collision revenue, paid Supercharging sessions and automotive insurance business revenue.deliveries.

Energy generation and storage revenue decreasedincreased $322$350 million, or 12%,13%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to decreasesan increase in Megapack deployments, partially offset by a lower average selling price per Megapack unit and a decrease in Powerwall deployments.

GrossCost margin for totalof automotive &sales services and other segmentrevenue increased from$3.30 14.3%billion, toor 18.9%24%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to the changesincrease in automotivedeliveries salesyear grossover margin,year as discussed above.

Cost of energy generation and storage revenue decreasedincreased $489$556 million, or 25%,29%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to decreasesthe deployment fluctuations as discussed above, as well as an increase in average cost per unitMWh for Megapack and Powerwallprimarily driven by lowersales materials costsmix and one-timeunfavorable benefitswarranty related to tariffs. Additionally, there were decreases in cost of energy generation and storage revenue from decreases in Megapack and Powerwall deployments.adjustments.

Gross margin for energy generation and storage increaseddecreased from 28.8%30.3% to 39.5%20.4% in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025,2025. The decrease was primarily due to the changes in energy generation and storage revenue and cost of energy generation and storage revenue, as discussed above.

Research and development (“R&D”) expenses increased $537$782 million, or 38%,49%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025,2025. R&D expenses increased $1.32 billion, or 44%, in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. These increases were primarily due to increases in costs related to AI and other programs as we continue to expand our product roadmap and technologies and an increaseincreases in stock-based compensation of $145$189 million.million and $334 million, respectively.

R&D expenses as a percentage of revenue increased from 7% to 8% in the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. R&D expenses as a percentage of revenue increased from 7% to 9% in the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months ended MarchJune 31,30, 2025,2025. These increases were primarily due to higher R&D expenseexpenses and an increaseincreases in total revenues as compared toin the priorcurrent period.periods.

Selling, general and administrative (“SG&A”) expenses increased $582$616 million, or 47%,45%, in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, driven by a $294$283 million increase in stock-based compensation,compensation primarily related to the 2025 CEO Performance Award, a $139$134 million increase in employee and labor costs, including professional services, anda an $87$109 million increase in operating expenses including legallitigation charges.related expenses and a $68 million increase in facilities related expenses.

Interest income increased $34$30 million, or 9%,8%, in the three months ended MarchJune 31,30, 2026 and increased $64 million, or 8%, in the six months ended June 30, 2026 as compared to the three and six months ended MarchJune 31,30, 2025, respectively. The increases were primarily due to higher interest earned on our cash and cash equivalents and short-term investments due to an increase in our average portfolio balance, partially offset by a lower average interest rate.

Other Expense,Income, Net

Other expense,income, net, changed unfavorablyfavorably by $416$270 million in the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025,2025. Other income, net, changed unfavorably by $146 million in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The changes were primarily due to a mark-to-market gain on our SpaceX equity investment, which we entered into in March 2026, and adjustments on our bitcoin digital assets, as well as fluctuations in foreign currency exchange rates on our intercompany balances and mark-to-market adjustments on our bitcoin digital assets.balances. As our intercompany balances are significant in nature and we do not typically hedge foreign currency risk, we can experience significant fluctuations in foreign currency exchange rate gains and losses from period to period.

Our provision for income taxes increaseddecreased by $88$158 million in the three months ended MarchJune 31,30, 2026 and by $70 million in the six months ended June 30, 2026 as compared to the three and six months ended MarchJune 31,30, 2025, primarily due to the change in our pre-tax income year over year.respectively. Our effective tax rate increaseddecreased from 29%23% to 34%15% in the three months ended MarchJune 31,30, 2026 and from 25% to 22% in the six months ended June 30, 2026 as compared to the three and six months ended MarchJune 31,30, 2025, respectively. The decreases in our provision for income taxes and effective tax rates were primarily due to the release of the valuation allowance on our California deferred tax assets other than research and development tax credits and changes in the mix of our jurisdictional earningsearnings, andpartially offset by the non-deductibility of stock-based compensation expense related to the 2025 CEO Performance Award.

In addition, because a large portion of our future expenditures will be to fund our growth, we expect that if needed we will be able to adjust our capital and operating expenditures by operating segment. For example, if our near-term manufacturing operations decrease in scale or ramp more slowly than expected, including due to global economic, tax, trade or business conditions, we may choose to correspondingly slow the pace of our capital expenditures. Finally, we continually evaluate our cash needs and the evolving nature of our business and may decide it is best to raise additional capital or seek alternative financing sources to fund the rapid growth of our business, including through drawdowns on existing or new debt facilities or financing funds. Conversely, we may also from time to time determine that it is in our best interests to voluntarily repay certain indebtedness early.

Accordingly, we believe that our current and potential sources of fundsfunding will provide us with adequate liquidity during the 12-month period following MarchJune 31,30, 2026, as well as in the long-term.

As discussed in and subject to the considerations referenced in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations—Management Opportunities, Challenges and Uncertainties and 2026 Outlook—Cash Flow and Capital Expenditure Trends in this Quarterly Report on Form 10-Q, we currently expect our capital expenditures to exceedbe in excess of $25 billion in 2026 driven by our AI initiatives, including investments in compute infrastructure and data centers, the expansion and ramp of our manufacturing and R&D production lines and facilities, and growth in our fleet of company-operated AI-enabled assets and our retail, service and charging footprint. Changes in trade policy may necessitate adjustments to our project timelines, potentially impacting our capital expenditure expectations.

As of MarchJune 31,30, 2026, we and our subsidiaries had outstanding $9.04$9.08 billion in aggregate principal amount of indebtedness, of which $1.38$1.35 billion is current. For details regarding our indebtedness, refer to Note 7,8, Debt, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

As of MarchJune 31,30, 2026, we had $16.60$15.22 billion and $28.14$28.31 billion of cash and cash equivalents and short-term investments, respectively. Balances held in foreign currencies had a U.S. dollar equivalent of $4.11$3.80 billion and consisted primarily of euros and Chinese yuan. We had $5.00 billion of unused committed credit amounts as of MarchJune 31,30, 2026. For details regarding our indebtedness, refer to Note 7,8, Debt, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Net cash provided by operating activities increased by $1.78$3.94 billion to $3.94$8.63 billion during the threesix months ended MarchJune 31,30, 2026 from $2.16$4.70 billion during the threesix months ended MarchJune 31,30, 2025. This increase was primarily due to favorable changes in net operating assets and liabilities of $929$3.01 millionbillion and an increase in net income excluding non-cash expenses, gains and losses of $852$933 million.

Net cash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $2.49$8.28 billion and $1.49$3.89 billion for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively, mainly for global AI and operational infrastructure and factory expansion, as well as machinery and equipment as we expand and enhance our product roadmap. We also purchased $528$660 million and $159$709 million of short-term investments, net of proceeds from maturities and sales, for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Additionally, we invested $2.00 billion in SpaceX common stock during the threesix months ended MarchJune 31,30, 2026. Refer to Note 12,13, Related Party Transactions, for additional information regarding the equity investment.

Net cash flows from financing activities changed by $1.50$1.76 billion to $1.17$1.21 billion net cash inflows during the threesix months ended MarchJune 31,30, 2026 from $332$554 million net cash outflows during the threesix months ended MarchJune 31,30, 2025. The change was primarily due to a $3.71$1.63 billion increase in proceeds from issuances of debt,debt partially offset byand a $2.23$207 billionmillion increasedecrease in repayments of debt. See Note 7,8, Debt, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details regarding our debt obligations. The increase was partially offset by a $60 million decrease in proceeds from exercises of stock options and other stock issuances, net of issuance costs.