TSLATesla, Inc.

We note your critical accounting estimate for income taxes and that significant judgment is required in determining your provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against your net deferred tax assets. We also note your disclosure on page 82 (Note 14 – Income Taxes) that you continue to monitor the realizability of the U.S.

Rest of the question

deferred tax assets, taking into account multiple objective and subjective factors. Please revise your future filings to address the following: • Expand your disclosure to provide greater insight into the quality and variability of information regarding financial condition and operating performance. While your accounting policy notes in the financial statements generally describe the method used to apply an accounting principle, the discussion here should present qualitative and quantitative information necessary to understand the estimation uncertainty and the impact the critical accounting estimate has had or is reasonably likely to have on financial condition or results of operations. • We note you reference numerous factors considered in your assessment of the realizability of your U.S. deferred tax assets, including but not limited to, a history of losses in prior years, excess tax benefits related to stock-based compensation, future reversal of existing temporary differences, and tax planning strategies. Revise to provide an analysis of the factors considered, such as how you arrived at the estimate, how accurate the estimate/assumption has been in the past, how much the estimate/assumption has changed in the past, and whether the estimate/assumption is reasonably likely to change in the future. Since critical accounting estimates and assumptions are based on matters that are highly uncertain, you should analyze their specific sensitivity to change, based on other outcomes that are reasonably likely to occur and would have a material effect. Where applicable, provide quantitative as well as qualitative disclosure when quantitative information is reasonably available and will provide material information for investors.

We acknowledge the Staff’s comment and as requested revised our disclosure (beginning with our Form 10-Q filing for the quarter ended September 30, 2023) to expand on the uncertain and variable nature of the information related to our financial condition, available tax deductions and the macroeconomic environment which could significantly impact our judgement regarding the realizability of our U.S. deferred tax assets.

Rest of the answer

Set forth below is our existing December 31, 2022, disclosure and our revised disclosure which is included with our Form 10-Q filing for the quarter ended September 30, 2023.

Disclosure as of

December 31, 2022

“We are subject to income taxes in the U.S. and in many foreign jurisdictions. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments about our future taxable income that are based on assumptions that are consistent with our future plans. Tax laws, regulations and administrative practices may be subject to change due to economic or political conditions including fundamental changes to the tax laws applicable to corporate multinationals. The U.S., many countries in the European Union and a number of other countries are actively considering changes in this regard. As of December 31, 2022, we had recorded a full valuation allowance on our net U.S. deferred tax assets because we expect that it is more-likely-than-not our U.S. deferred tax assets will not be realized. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted.”

Note 1--Summary of Significant Accounting Policies Disclosure as of September 30, 2023

“We are subject to income taxes in the U.S. and in many foreign jurisdictions. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets that are not more likely than not to be realized. The determination of the realizability of deferred tax assets requires significant judgment in assessing the likelihood of future tax consequences. In completing our assessment of realizability of our deferred tax assets, we consider our history of losses measured at pre-tax income (loss) adjusted for permanent book-tax differences on a jurisdictional basis, volatility in actual earnings, excess tax benefits related to stock-based compensation in recent prior years, and impacts of the timing of reversal of existing temporary differences. We also rely on our assessment of the Company’s projected future results of business operations, including uncertainty in future operating results relative to historical results, volatility in the market price of our common stock and its performance over time, variable macroeconomic conditions impacting our ability to forecast future taxable income, and changes in business that may affect the existence and magnitude of future taxable income. Our valuation allowance assessment is based on our best estimate of future results considering all available information.

We monitor the realizability of the U.S. deferred tax assets taking into account all relevant factors. As of September 30, 2023, we continued to maintain a full valuation allowance on our U.S. deferred tax assets. We will release the valuation allowance when there is sufficient positive evidence to support a conclusion that it is more likely than not the deferred tax assets will be realized. Depending on our operating results and the amount of stock-based compensation tax deductions available in the future, we may release the valuation allowance associated with the U.S. deferred tax assets within the next year. The timing and amount of the valuation allowance release could vary based on our assessment of all available evidence. Release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and may result in a material decrease to income tax expense for the period the release is recorded.”

The revised disclosure may change from time-to-time as we evaluate all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance on our U.S.

deferred tax assets is needed.

In respect of your the second bullet to your question 1, as noted above, our analysis regarding whether a valuation allowance on our U.S. deferred tax assets is required involves a mixture of both objective and subjective evidence and considerable judgment. Although the ability to utilize the U.S. deferred tax assets is generally positively correlated to increases in our U.S. taxable income1, as noted in detail below, such income is highly volatile. Tesla’s future U.S. taxable income is subject to a myriad of factors (many of which are subjective and do not lend themselves to

For purposes of this letter the term taxable income (or loss) means pre-tax income (or loss) adjusted for permanent book-tax differences on a jurisdictional basis.

quantitative analysis) as highlighted in our revised disclosure above, which was included in the Summary of Significant Accounting policies footnote of our

Form-10 Q filing for the quarter ended September 30, 2023. The relationships among these various factors are not linear, nor are they generally susceptible to conventional statistical correlation or sensitivity assessment. Most importantly, as explained in detail below we earned net U.S. taxable income for the first time in our year ended December 31, 2022, after a history of U.S. taxable loss in every prior year. Given the year ended

December 31, 2022, was our first year of net U.S. taxable income, there has previously not been a need for a formal retrospective review of prior estimates or changes to the prior valuation assessments. When considering the potential for changes to the future, the revised disclosure above (which was included in our Form10-Q filing for the quarter ended September 30, 2023) includes the potential timing for a release of the valuation allowance and that such release may result in a material decrease to our income tax expense for the period the release is recorded.

Read in the reply ↗

We note your earnings history, including significant pre-tax income in each of the three years presented within your consolidated statements of operations. We also note your disclosure on page 82 that you intend to continue maintaining a full valuation allowance on your U.S. deferred tax assets until there is sufficient evidence to support the reversal of all, or some portion, of your valuation allowance.

Rest of the question

Please tell us, and revise your disclosure in future filings to clarify, what you mean when you state “... we intend to continue maintaining a full valuation allowance on our U.S. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances." In this regard, reconcile your disclosure to the “more-likely-than-not” recognition threshold within ASC 740-10-30, or revise to eliminate the ambiguity.

We respectfully advise the Staff that we considered both positive and negative evidence in assessing whether a valuation allowance is required on our U.S. deferred tax assets. This assessment requires significant judgement in considering the relative impact of positive and negative evidence. Consistent with the requirements prescribed by ASC 740-10-30-23, the weight given to the potential effect of positive and negative evidence in our assessment is commensurate with the extent to which we can objectively verify the evidence.

Rest of the answer

Additionally, although we recorded pre-tax income in each of the three years presented within our most recent consolidated statements of operations, ASC 740 makes it clear that our analysis should look to taxable income (or loss).2 As discussed in detail below, the year ended December 31, 2022, was the first year in which we had net U.S. taxable income. Based on the weight of the available evidence as of December 31, 2022, and 2021, it was more-likely-than-not that these U.S. deferred tax assets would not be realized. We continue to maintain a full valuation allowance on our U.S. deferred tax assets until there is sufficient positive evidence to support a conclusion that our U.S. deferred tax assets are more-likely-than-not to be realized. We will release all or part of our valuation allowance if and when the positive evidence overcomes and outweighs the negative evidence to support a conclusion that our U.S. deferred tax assets are more-likely-than-not to be realized. We have revised our disclosure and included this in our Form 10-Q filing for the quarter ended September 30, 2023, as follows, shown in underline for additions and strike through for deletions:

“... We monitor the realizability of the U.S. deferred tax assets taking into account all relevant factors. As of

September 30, 2023, we intend to continued maintaining to maintain a full valuation allowance on our U.S. deferred tax assets. We will release the valuation allowance when until there is sufficient positive evidence to support the reversal of all or some portion of these allowances a conclusion that it is more likely than not the deferred tax assets will be realized.”

ASC

740-10-30-18.

Read in the reply ↗

Please provide to us supplementally your analysis of the factors you considered (i.e., those factors referenced on page 82) supporting your conclusions as of December 31, 2022, and 2021, that it is more likely than not that your U.S. deferred tax assets will not be realized.

We respectfully submit the following analysis regarding factors we considered in our assessment that as of December 31, 2022, and 2021 it is more-likely-than-not that our U.S. deferred tax assets will not be realized. ASC 740 stipulates that in assessing the valuation allowance “[a]ll available evidence, both positive and negative, shall be considered to determine whether, based on the weight of that evidence, a valuation allowance for deferred tax assets is needed.”3 Based upon our history of U.S.

Rest of the answer

taxable losses in every year of our corporate existence before 2022 as well as our 12 quarter cumulative U.S. taxable loss for the periods ending December 31, 2022 and 2021 we concluded that it was more-likely-than-not that we will not realize our U.S. deferred tax assets.

Consideration of Objective Evidence

Tesla incurred a significant rolling 12 quarter cumulative U.S. taxable loss in each of the 12 quarter periods ending December 31,

2021, and 2022. Although we recorded pre-tax income in our consolidated statements of operations for each of the years ended December 31, 2021, and December 31, 2022, ASC 740 makes it clear that it looks to taxable income.4 And as noted in footnote 1 above, for these purposes “taxable income (loss)” is measured by pre-tax income (loss) adjusted for permanent book-tax differences on a jurisdictional basis.

Focusing upon taxable income as prescribed by the guidance, ASC 740-10-30-21 expressly provides that a “cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome.”5 A cumulative loss may be overcome by evidence of a strong earnings history coupled with evidence that the loss is an aberration rather than a continuing condition.6 Although we earned U.S. taxable income in 2022 for the first time, we incurred a U.S. taxable loss in every year prior to 2022. When evaluated in light of this history Tesla’s positive U.S. taxable income for the year ended December 31, 2022, represents the only significant positive objective evidence and thus is insufficient to overcome the negative presumption of ASC 740-10-30-21.

Consideration of Subjective Evidence

ASC 740-10-30-17 provides that currently available information with respect to future years may “supplement” historical evidence. We therefore considered in our analysis various forecasts prepared in 2022 projecting 2023 U.S. taxable income (or taxable loss). Although these forecasts generally projected positive 2023 U.S. taxable income they were highly variable. This variability stemmed from numerous factors. As noted below, increasing interest rates had an impact on the affordability of our vehicles, leading us to institute some price cuts. To offset the impact to margin, we focused on achieving cost reductions; however, the amount and timing of cost reductions involve considerable uncertainty. While we continued ramping production at our factories in Berlin, Germany and Austin, Texas (each of which commenced operations in 2022), considerable uncertainty remained regarding the timing and extent of efficiencies to be gained from the ramps. Additionally, inflationary pressures on, and volatility of, key raw materials (such as lithium) introduced further uncertainty to our forecasts.

In addition, certain risk factors unique to the auto industry, the EV industry, and Tesla in particular (e.g., the detrimental impact of rising interest rates and the possibility of adverse legal guidance under the Inflation Reduction Act (“IRA”)) became considerably more acute in late 2022 and early 2023. These risks, which among other things caused us to reduce EV prices, added considerably more volatility to the already variable 2023 forecasts. We discuss some of these more specific risks in detail below.

Therefore, in considering the weight to afford the forecasts as of December 31, 2022, we considered the variability in the forecasts as noted above. This variability caused us to ascribe less weight to the 2023 subjective information than we did to the considerable objective negative evidence (i.e., the cumulative U.S. taxable losses and long history of taxable losses) described above, and this was particularly true given the ongoing macroeconomic outlook which continued to deteriorate late in 2022 and which we expected to negatively impact our operating margin.

740-10-30-17. [emphasis added].

740-10-30-16. [emphasis added]. See also ASC 740-10-30-21 (“forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years.”)

740-10-30-22

Rising Interest Rates—Negative Correlation with EV Demand in General and Specific

Illustration of Interest Rate Impact on Price of Tesla Products.

The impact of rising interest rates is particularly relevant to auto manufacturers. The vast majority of auto purchasers finance their purchase through either loans (which have an explicit annual percentage rate (“APR”) financing charge) or through leases which have an implicit APR financing charge.

Experian estimates that 80% of new car purchases are done with credit.7 Moreover, purchasers are often significantly more sensitive to the monthly payment amount than to the actual

“purchase price” when purchasing or leasing an automobile. As a result, automobile demand in general is extremely sensitive (and negatively correlated) to interest rates. Beginning in March of 2022, the U.S. Federal Reserve began significant interest rate increases in response to rising inflation. In particular, the U.S. Federal Reserve raised the Federal Funds Rate from 0.25%-0.50% in March of 2022 to

4.5-4.75% in February of 2023 with further rate increases anticipated during the year.8 These systemic interest rate increases have significantly increased the financing cost paid by customers purchasing or leasing Tesla’s automobiles. As noted above, because customers are extremely sensitive to monthly payments, the only way to maintain a similar monthly payment amount for a similar vehicle in a rising interest environment is to reduce the purchase price of the vehicle. Predictably, Tesla has reduced EV prices in response to higher interest rates in order to stimulate demand. For example, in January 2023, we took one of the largest price cuts in our history at that time reducing the price of the Model Y by up to $13,000 or 20%. This is consistent with our Q4 earnings call held on January 25, 2023, where we noted “that in 2022, rising interest rates alone had effectively increased the price of our cars in the U.S. by nearly 10%”.

Potential Loss of IRA Credits.

Included in the IRA’s passage in 2022 were possible EV tax credits to customers and certain manufactures which were meant to increase customer demand for EVs. As of December 31, 2022, and even today the IRA’s application has been subject to considerable uncertainty. For example, early IRS guidance excluded Tesla’s most popular 5 seat Model Y from qualification for the new clean vehicle credits which were up to $7,500 per EV (approximately 15% of the then-purchase price of our Model Y). Although the IRS modified this guidance in February of 2023 to include the 5 seat Model Y market confusion in the interim period between the original and modified guidance may have adversely affected demand. Similarly, it was not clear at the end of 2022 and into early 2023 whether certain Model 3 trims qualified for the full $7,500 EV credit. The language on our webpage from the January 2023 time frame (set forth in the first example below) described that uncertainty. If a portion of our EVs did not qualify for the EV credit it could result in a significant competitive disadvantage compared to other competitor’s EVs as the credit can be as much as 20% and 15% or more of the purchase price of a Model 3 and Y, respectively. Additional statutory rules enacted as part of the IRA in 2022 requiring certain levels of domestic content and critical minerals will become effective in 2024 and may cause some Tesla EVs (possibly including certain Models 3, Y and X) to be ineligible for the full credit. As of the date of this letter, a description of the impact that these rules will have on our vehicles going forward is contained on our webpage (set forth in the second example below). A loss (or decrease) of these EV credits effectively increases the cost to our customers which can potentially decrease demand.

This information is sourced from https://www.experian.com/blogs/ask-experian/research/auto-loan-debt- study/#:~:text=In%202022%2C%20most%20new%20car,research%20conducted%20by%20Experian%20Automotive.

In particular, the Federal Reserve signaled that it would continue to pursue an aggressive rate hike posture in its Summary of Economic Projections dated December 14, 2022 (“Minutes of the Federal Open Market Committee December 13-24, 2022” released on January 4, 2023).

Example 1 – January 2023

Example 2 – October 2023

Based on our careful consideration and weighting of the available evidence, we concluded that our positive taxable income for the one year ended December 31, 2022, does not carry sufficient weight to overcome the objective negative evidence of the cumulative losses, measured including permanent book-tax differences, and the inability to rely on future forecasts of taxable income is not sufficient to realize our U.S. deferred tax assets. Further, as of December 31, 2022, and December 31, 2021, we did not identify any available tax-planning strategies that are prudent and feasible and would result in realization of U.S. deferred tax assets. Accordingly, we maintained a valuation allowance on our U.S. deferred tax assets, after consideration of future reversals of existing taxable temporary differences, as of December 31, 2022, and December 31, 2021.

Read in the reply ↗

We note your response to our prior comment number three in your letter dated October 27, 2023. As previously requested, please provide us with your detailed and comprehensive quantitative analysis supporting your conclusions that it is more likely than not that your U.S. deferred tax assets will not be realized.

Rest of the question

In addition, please address the following: • Tell us what consideration you gave to future taxable income in years beyond 2023. If no other future periods were considered, explain why you believe a one year forecast is adequate in your assessment of deferred tax asset realization. It is unclear how you considered ASC 740-10-30-21b, which contemplates a multiple year forecast. • It appears the majority of your historical U.S. taxable losses were sustained during the development stage and that your business exited the development stage and transitioned to consolidated profitability in 2020. Please refer to ASC 740-10-30-17 and explain to us why you believe your facts did not change such that historical losses incurred in the development stage are more relevant than current substantial taxable income and forward looking forecasts in your realization analysis.

Tesla, Inc. (“Tesla” “us,” “we” or “our”), we acknowledge receipt of the letter dated November 22, 2023 (the “Comment Letter”) from the staff (the

“Staff”) of the Securities and Exchange Commission relating to the above-referenced filing.

We are working to respond to the Comment Letter. However, we will require additional time to fully consider and respond to the Staff’s comments. Accordingly, we respectfully request an extension of 6 business days to respond to the Comment Letter such that we would respond by December 15, 2023.

We are grateful for the Staff’s accommodation in this matter.

Rest of the answer

Please do not hesitate to call me at 512-516-8177 with any questions you may have.

Read in the reply ↗

We note your response in your letter dated April 27, 2021 to our prior comment. You disclose that you earn tradeable credits in the operation of your business for zero-emission vehicles, greenhouse gas, fuel economy and clean fuel.

Rest of the question

It appears the sales of regulatory credits may be a revenue stream that is distinct from your automotive sales and appears to have a material impact on your consolidated gross margin, automotive sales gross margin and net income. As such, it continues to be unclear why you have chosen to include regulatory credit sales in your presentation of automotive sales on the face of your financial statements and automotive gross margin disclosed outside your financial statements. Please address the following items regarding your sales of regulatory credits: • In your response to our comment you state that you “have chosen to combine regulatory credit sales in the “Automotive sales” financial statement line item because: The regulatory credit sales included in the automotive sales revenue line item relate solely to, and are the direct outcome of, the production and sale of our new vehicles”. Please provide us with a fulsome analysis that supports your choice to present the sale of regulatory credits within the Automotive sales line item. Specifically address and compare and contrast automotive sales and the sale of regulatory credits. Without limitation, address the nature of the underlying item sold, the timing of when the item is available for internal use and/ to be sold to a third party and the conditions and timing of when you recognize the sale. • Please quantify for us your sales of other regulatory credits or incentives (e.g. Solar/renewable energy) not included in your Automotive Sales line item of your Statement of Operations. In addition, clarify for us where sales of non-automotive credits and incentives are presented in the Statement of Operations. Without limitation, specifically address the Governmental Programs, Incentives and Regulations noted in your disclosures on page 9 and page 73. • In future filings, expand your Results of Operations in MD&A to separately address the impact the sale of all regulatory credits and incentives had on your gross profit and net income. You should emphasize that the sales of regulatory credits have no associated cost and the timing of such sales is not necessarily correlated to the actual sales of automobiles.

On behalf of Tesla,

Inc. (“Tesla” “us,” “we” or “our”), we acknowledge receipt of the letter dated December 23, 2021 (the “Comment Letter”) from the staff (the “Staff”) of the Securities and Exchange relating to the above-referenced filing.

We are working to respond to the Comment Letter. However, we will require additional time to consider and respond to the Staff’s comments. Accordingly, we respectfully request an extension of ten business days to respond to the Comment Letter such that we would respond by January 25, 2022.

We are grateful for the Staff’s accommodation in this matter.

Rest of the answer

Please do not hesitate to call me at 510-946-6441 with any questions you may have.

Read in the reply ↗

We note the sale of regulatory credits has increased substantially in 2020 and now exceeds your revenues from other activities such as automotive leasing. As regulatory credit sales represent sales of an intangible asset, it appears you should either present the revenues separately as their own source of revenue or present them in your "Services and other" category to avoid investor confusion.

Rest of the question

We further note your inclusion of the sales of regulatory credits in Automotive Sales is favorably impacting your gross profit metrics, which could lead to further investor confusion regarding the nature and quality of your automotive sales margins. This comment also applies to your tabular presentation within your Results of Operations discussion on page 40 of MD&A. Please refer to Rule 503(1) of Regulation S-X for guidance.

We respectfully advise the Staff that we evaluate our revenues for separate presentation on the face of our consolidated statements of operations in accordance with Rule 5-03 of Regulation

S-X, Statements of comprehensive income, which states in paragraph (b):

“If income is derived from more than one of the subcaptions described under §210.5-03.1, each class which is not more than 10 percent of the sum of the items may be combined with another class.

Rest of the answer

If these items are combined, related costs and expenses as described under §210.5-03.2 shall be combined in the same manner.”

Following such evaluation, we have chosen to combine regulatory credit sales in the “Automotive sales” financial statement line item because:

•

The regulatory credit sales included in the automotive sales revenue line item relate solely to, and are the direct outcome of, the production and sale of our new vehicles;

Such regulatory credit revenues represented approximately 6% of our automotive sales revenues and approximately

5% of our total revenues for the year ended December 31, 2020, and therefore did not exceed the 10% threshold specified above; and

We expect that regulatory credit sales will continue to constitute less than 10% of our revenues, and that they may in fact decrease, in the long term.

While we acknowledge that sales of automotive regulatory credits represent sales of intangible assets, we respectfully submit that it does not appear that Rule 5-03 of Regulation S-X prohibits combination with another class on that basis alone.

When considered with the factors above, we do not believe it would be more appropriate to present these sales as a standalone revenue category, because they are generated if and only to the extent we produce and deliver new vehicles and we therefore do not manage them as an independent line of business. We have also determined that the combination of automotive regulatory credits with our “Services and other” revenue category would be inconsistent with the nature of the credits, as that category does not include any items directly related to new vehicle production or deliveries and is instead defined as:

“Services and other revenue consists of non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, sales by our acquired subsidiaries to third party customers, and vehicle insurance revenue” (page 64).

In addition, we respectfully advise the Staff that we have been consistently transparent about this source of revenue as distinguished from new vehicle sales generally as well as its impact on profitability, which avoids any confusion by investors as to the trends and changes in our revenues and the resulting gross margins. In particular:

We present the sources of revenues in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements in a section entitled “Revenue by source,” which specifically lists “Automotive regulatory credits” as a separate item (page 61).

In “Management’s Discussion and Analysis of Financial Condition and Results of

Operations—Results of Operations,” the composition of the “Automotive sales” line item is clearly disclosed in the paragraph directly under the “Revenues” table:

“Automotive sales revenue includes revenues related to cash deliveries of new Model S, Model X, Model 3 and Model Y vehicles, including access to our Supercharger network, internet connectivity, FSD features and over-the-air software updates, as well as sales of regulatory credits to other automotive manufacturers. Cash deliveries are vehicles that are not subject to lease accounting. Our revenue from regulatory credits fluctuates depending on when a contract is executed with a buyer and when the credits are delivered” (page 40).

We also include in “Management’s Discussion and Analysis of Financial Condition and Results of

Operations—Results of Operations” any significant trends in revenues and profitability (relevant language shown in boldface below):

“There was also an increase of $986 million from additional sales of regulatory credits to $1.58 billion in the year ended December 31, 2020” (page 41); and

“Gross margin for total automotive increased from 21% to 26% in the year ended December 31, 2020 as compared to the year ended December 31, 2019, primarily due to an improvement of Model 3 gross margin primarily from lower material, manufacturing, freight and duty costs from localized procurement and manufacturing in China, partially offset by a decrease in the average selling price of Model 3 due to a higher proportion of Model 3 Standard Range variants in our sales mix compared to the prior year. Additionally, there was an increase of

$986 million in sales of regulatory credits and a positive impact from Model Y deliveries in 2020 as Model Y gross margin was higher than our prior year total automotive gross margin” (page 43).

Read in the reply ↗

Please quantify material factors to which changes in accounts are attributed. For example, we note your disclosure that the increase in cost of automotive sales revenue was primarily due to higher volume of Model 3 deliveries, partially offset by reductions in Model 3 average costs per unit and lower overall costs for Model S and Model X deliveries from fewer units delivered.

We respectfully advise the Staff that we believe we have provided information regarding any material factors that have impacted our accounts in our disclosures in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in the 2018 Form 10-K, in accordance with Item 303 of Regulation S-K.

Rest of the answer

We have quantified individual factors where they were material and where we believed it would be helpful to understand their relative impact, whether in their amount relative to a single material factor that was the clear and

3500 Deer Creek Road, Palo Alto, California 94304 predominant reason for a change in an account, or otherwise in their unique significance to the account or our business. Moreover, we have not quantified certain enumerated material factors where their amounts could be derived from the other values provided in the same discussion.

For example, with respect to our cost of automotive sales revenues, we respectfully submit that we delivered 245,506 total vehicles in 2018, a 138% increase over the 103,184 total vehicles we delivered in 2017. The single most significant factor in such increase was the ramp during 2018 of Model 3, which we launched and of which we delivered 1,764 units during the second half of 2017, compared to 146,094 units delivered during 2018 (the difference between which we disclosed in the 2018 Form 10-K in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Revenues” (page 56)). The fact that Model 3 deliveries increased from a negligible number to our highest-selling product accounted for the vast majority of the $6.96 billion increase in cost of automotive sales revenue between fiscal years 2017 and 2018. Accordingly, other than $969.8 million of additional cost of automotive sales revenue arising from a new accounting standard, we determined that it would not be meaningful to separately quantify any individual factors that were comparatively insignificant.

On the other hand, we respectfully submit that where we believed that it would be helpful to quantify material factors that significantly impacted changes in our cost of revenues between periods, or factors that were otherwise material in significance in a given period, we have done so. For example, in comparing the cost of revenues between applicable periods in the 2018 Form 10-K, we specified that: $969.8 million in additional cost of automotive sales revenue was recognized and $624.4 million in cost of automotive leasing revenue was no longer recognized in 2018 due to a new accounting standard (page 58); an increase of $23.4 million in cost of automotive leasing revenue was recognized in 2017 compared to 2016 due to early payoffs and expiration of resale value guarantees (page 59); and an increase of $72.5 million in cost of energy generation and storage revenues was recognized in 2018 compared to 2017 due to a specific commercial battery project (page 60). Likewise, in the 2019 Q2 Form 10-Q, we recently specified reductions in cost of automotive sales of $49.6 million and $458.4 million for the three months and six months ended June 30, 2019, respectively, owing to certain price adjustments we made in the first half of 2019 (pages 43 and 44).

Finally, we further respectfully advise the Staff that we have also quantified and/or compared factors that were material in amount or other significance in our discussion of our financial results other than our cost of revenues, such as in the following excerpts from the 2018 Form 10-K in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” (emphasis added):

“Automotive sales revenue increased $9.10 billion, or 107%, in the year ended December 31, 2018 as compared to the year ended December 31, 2017, primarily due to an increase of approximately 144,330 Model 3 deliveries from our significant production ramp in the year ended December 31, 2018, delivered at average selling prices that remained relatively consistent year-over-year. Additionally, we recognized $1.40 billion of additional automotive sales revenue due to the adoption of the new revenue standard and an increase of $58.3 million in sales of regulatory credits to $418.6 million in the year ended December 31, 2018. ZEV credits sales were $103.4 million and non-ZEV regulatory credits sales were $315.2 million in the year ended December 31, 2018, compared to $279.7 million ZEV credit sales and $80.6 million in non-ZEV regulatory credit sales in the year ended December 31, 2017. The growth in non-ZEV regulatory credits year-over-year was generally consistent with the delivery volume growth. The above increases in revenue were offset by a decrease of approximately 3,240 Model S and Model X deliveries during the year ended December 31, 2018, excluding the impact of adoption of the new revenue standard, at average selling prices that remained relatively consistent as compared to the year ended December 31, 2017.” (page 56)

“R&D expenses increased $82.3 million, or 6%, in the year ended December 31, 2018 compared to the year ended December 31, 2017. This increase was primarily due to an $84.2 million increase in employee and labor related expenses from headcount growth to support our business expansion and $45.2 million increase in stock-based compensation expense related to an increase in headcount and number of employee stock awards granted for new hire and refresher employee stock grants. Additionally, there was an increase of $16.0 million in facilities, freight, and depreciation expenses due to business expansion, offset by a $69.7 million decrease in expensed materials as there were higher costs in the year ended December 31, 2017 primarily related to Model 3 development.” (page 60)

“SG&A expenses increased $358.0 million, or 14%, in the year ended December 31, 2018 as compared to the year ended December 31, 2017. The increase was primarily due to a $193.1 million increase in stock-based compensation expense related to the 2018 CEO Performance Award and stock awards granted for new hires and refresher employee stock grants. Additionally, there was a $153.9 million increase in office, information technology and facilities-related expenses and sales and marketing activities to support our business expansion.” (page 61)

In future filings, we will continue to disclose where appropriate quantitative information about material factors to which changes in accounts are attributed.

Read in the reply ↗

We note that your services and other revenue consists of revenue from various sources including "sales by our acquired subsidiaries to third party customers." Please further clarify for us the nature of these sales.

We respectfully advise the Staff that certain companies that we acquired in previous fiscal years continued to provide services to third party customers following their acquisition pursuant to their remaining pre-acquisition contractual obligations, which has generated immaterial amounts of revenues to Tesla from time to time. We have classified such revenues within the “Services and other” line item in our consolidated financial statements.

Rest of the answer

If the resulting revenue from acquisitions lead to a material change or represents a meaningful factor in our Services and other revenue, we have disclosed such information in our Annual Reports on Form 10-K. For example, in the 2018 Form 10-K, information regarding the most significant of such acquisitions during the periods reported was discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Results of Operations–Revenues” as follows, and substantially identical disclosure was provided in the same section of our Annual Report on Form 10-K for the year ended December 31, 2017 (page 49):

“Service and other revenue increased $533.2 million, or 114%, in the year ended December 31, 2017 compared to the year ended December 31, 2016. This was primarily due to an increase in used vehicle sales as a result of increased automotive sales as well as from the expansion of our trade-in program. Additionally, there was a $41.1 million increase from the inclusion of engineering service revenue from Grohmann Engineering GmbH (now Tesla Grohmann Automation GmbH), which we acquired on January 3, 2017, and a $68.4 million increase in non-warranty maintenance services revenue as our fleet continued to grow during the year ended December 31, 2017.” (page 56)

Read in the reply ↗

We note your disclosure that the warranty reserve does not include projected warranty costs associated with your vehicles subject to lease accounting and your solar energy systems under lease contracts or PPAs, as the costs to repair these warranty claims are expensed as incurred. Please tell us the basis for recognizing these costs as incurred.

We respectfully advise the Staff that we have followed the guidance set forth by the Financial Accounting Standards Board within Accounting Standards Codification (“ASC”) Section 460-10-20, which defines “Warranty” as “[a] guarantee for which the underlying is related to the performance (regarding function, not price) of nonfinancial assets that are owned by the guaranteed party.” In the case of our vehicles subject to direct lease accounting and solar energy systems under lease contracts or Power Purchase Agreements (“PPAs”), the underlying non-financial assets (i.e., the vehicles and solar

Rest of the answer

energy systems) are not owned by the guaranteed parties (i.e., the customers). These vehicles and solar energy systems are recorded as assets within the “Operating lease vehicles, net” and “Solar energy systems leased and to be leased, net” financial statement line items in our consolidated balance sheet. Therefore, the leasing customers obtain the benefit from Tesla’s owned productive assets. The repairs and maintenance on such owned assets are incurred over the term of usage of the assets rather than as an upfront cost. Therefore, there are no warranty obligations to customers, and we expense the costs to repair as incurred.

Read in the reply ↗

We note your disclosure that you capitalize shipping costs and initial direct costs such as the incremental costs of contract administration, referral fees and sales commissions from the origination of automotive lease agreements as an element of operating lease vehicles, net, and subsequently amortize these costs over the term of the related lease agreement.

Rest of the question

Please explain to us the nature of the type of costs considered “contract administration” costs and how your policy for these costs complies with ASC 842-10-30-9 and 30-10. Note 12. Leases, page 25

We respectfully advise the Staff that we only capitalize initial direct costs that are incurred upon lease execution, such as sales commissions and referral fees from the origination of automotive lease agreements. In the 2019 Q2 Form 10-Q, we indicated that initial direct costs include contract administration costs. As a policy, incremental contract administration costs include fees payable upon execution of the leases, such as legal fees resulting from the execution of the lease and lease document preparation costs incurred upon execution of the lease.

Rest of the answer

We believe that this is consistent with the guidance provided in ASC 842-10-30-9 and 30-10.

We further respectfully submit that our current lease arrangements have not resulted in external and incremental contract administration costs as of June 30, 2019. Therefore, no contract administration costs have been capitalized in our consolidated financial statements as of June 30, 2019. However, we will continue to monitor our initial direct costs as we may incur these costs in the future with new product offerings, and accordingly we will continue to ensure that only eligible costs under ASC 842 are capitalized in our consolidated financial statements.

Read in the reply ↗

We note your disclosure in Note 12 that certain of your operating leases provide for annual increases to lease payments based on an index or rate. We also note that you disclose you estimate the annual increase in lease payments based on the index or rate at the lease commencement date, for both your historical leases and for new leases commencing after January 1, 2019.

Rest of the question

Please tell us how your accounting complies with the guidance in ASC 842-10-30-5(b). As part of your response, please explain the estimates used in your calculation of lease payments and tell us the nature and terms of any arrangements where the lease payments are not initially measured using the index or rate at the commencement date.

We respectfully advise the Staff that most of our lease arrangements do not provide for increases in lease payments based on an index, and instead provide for either no future increases in lease payments or increases in lease payments in fixed amounts specified in the respective lease agreements. Moreover, we have no lease arrangements where we use estimates to calculate any lease payments.

For each lease arrangement that provides for annual increases in lease payments based on a specific index or rate, we obtain the value of such index or rate at lease commencement and include it in the

Rest of the answer

lease payments schedule to calculate the right-of-use asset and corresponding liability. Subsequent to the lease commencement date, when the actual payments in the subsequent period are known based on changes in the specific rate or index, we do not re-measure the lease payments unless there is a re-measurement event. We believe that this is consistent with the guidance provided in ASC 842-10-30-5(b). If, however, the lease arrangement specifies that the increases in lease payments based on a specific rate or index are subject to a cap, we instead apply the capped increase to lease payments over the contracted lease term and we deem such capped increases to be, in substance, fixed increases to our lease payments schedule. Any future changes in lease payments due to the movements of such index or rate are reflected directly in our consolidated income statement as a period cost. Furthermore, any differences resulting from the application of any caps specified in our lease arrangements, as compared to the index or rate specified at lease commencement, are immaterial to our consolidated financial statements.

Read in the reply ↗

Please update the prospectus to include the information required by Item 19(a)(7) of Form S-4 for the most recently completed fiscal year, including the information required by Item 402 of Regulation S-K. Alternatively, amend your Form 10-K to provide such information. For guidance, refer by analogy to Securities Act Forms Compliance and Disclosure Interpretation 123.01.

to the Staff’s comment, the Company has revised its disclosure on page 28 of the associated prospectus filed with the Registration Statement on Form S-4 (the “Offer to Exchange”) to remove the reference to Section 27A of the Securities Act of 1933, as amended, and

Section 21E of the Securities Exchange Act of 1934, as amended.

AUSTIN BEIJING BOSTON BRUSSELS

HONG KONG LONDON LOS ANGELES NEW YORK PALO ALTO

SAN DIEGO SAN

FRANCISCO SEATTLE SHANGHAI WASHINGTON, DC WILMINGTON, DE

Securities and Exchange Commission

Page

Item 4. Read in the reply ↗

We note that your forum selection provision identifies a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) as the exclusive forum for certain litigation, including any “derivative action.” Please disclose whether this provision applies to actions arising under the Securities Act or

Rest of the question

Exchange Act. If so, please also state that there is uncertainty as to whether a court would enforce such provision. If the provision applies to Securities Act claims, please also state that stockholders will not be deemed to have waived the company’s compliance with the federal securities laws and the rules and regulations thereunder. In that regard, we note that Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

to the Staff’s comment, the Company has revised its disclosure on pages 49, 51 and 52 of the Offer to Exchange to clarify that stockholders can challenge the decisions made by the Company and Cambria Acquisition Corp. in a court of competent jurisdiction. Read in the reply ↗

It appears that the agreements described in your current report on Form 8-K filed on March 7, 2019 are material contracts, and should be filed in accordance with Item 601 of Regulation S-K. Please advise.

The Company respectfully advises the Staff that it has filed the agreements described in its

Current Report on Form 8-K filed on March 7, 2019 as Exhibit 10.68 and Exhibit 10.69 to Amendment No. 3. Read in the reply ↗

We note that you expect the phase-out of the $7,500 federal tax credit available in the U.S. for the purchase of qualified electric vehicles such as yours to begin at some point during 2018. If you believe this phase-out could impact the demand for electric vehicles and thus have a material impact on sales, please discuss this change in trend and uncertainty in MD&A in accordance with Item 303(a)(3)(ii) of

Rest of the question

Regulation S-K.

We respectfully advise the Staff that we have not expected, and currently do not expect, any impact of the scheduled phase-out of the federal tax credit over the course of 2019 on our vehicle demand or sales to be material. Nevertheless, in response to the Staff’s comment, we have included in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Management Opportunities, Challenges and Risks” in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018 (the “Q2 Form 10-Q”) the following discussion of the expected temporary impact on vehicle

Rest of the answer

sales:

“In July 2018, we delivered our 200,000th vehicle in the U.S. Under current regulations, the full $7,500 federal tax credit for the purchase of a qualified electric vehicle will continue to be available only for any of our new vehicles delivered by the end of 2018 in the U.S., and then will be reduced to $3,750 for each vehicle delivered by the end of the second quarter of 2019, then to $1,875 for each vehicle delivered by the end of 2019, then to $0 for each vehicle delivered thereafter. In the near term, we believe this phase-out will pull forward customer orders, before normalizing. In the long run, we do not expect a meaningful impact to our sales in the U.S., as we believe that our vehicles offer a compelling proposition at their full price.”

3500 Deer Creek Road, Palo Alto, California 94304

Moreover, in future filings, if we believe that the phase-out of the federal tax credit could negatively impact the demand for our electric vehicles and have a material impact on our sales in a manner that is different than such discussion, we will provide appropriate additional disclosure at that time.

Read in the reply ↗

We note that you plan to ramp up production of the Model 3 to produce 5,000 units per week. Please disclose an estimate of the amount of capital necessary to accomplish this goal. See Item 303(a)(1) of Regulation S-K.

We respectfully advise the Staff that we have disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources” in the Form 10-K as well as in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018 (the “Q1 Form 10-Q”) and the Q2 Form 10-Q our expectations for total capital expenditures in 2018, taking into account the capital costs incurred and to be incurred to produce Model 3 at a rate of 5,000 vehicles per week, which we achieved in the last week of June 2018.

Rest of the answer

Moreover, as of the end of each period covered by these reports, we had already incurred most of the capital costs to achieve such rate of production, and such capital costs were included in the capital expenditures for the applicable periods included in our consolidated financial statements and notes thereto.

Additionally, we have also disclosed in the same section of the Q2 Form 10-Q that we expect that a planned further expansion of Model 3 manufacturing capacity to rates of 6,000 vehicles per week by late August 2018, and eventually to 10,000 vehicles per week by sometime in 2019, will require limited additional capital expenditures. In future filings, to the best of our ability, we will continue to disclose information about the future capital needs of our business.

Read in the reply ↗

Please include a discussion of material planned capital expenditures, as well as the timing of such expenditures, associated with the expansion of Gigafactory 1, ramping production at Gigafactory 2, and tooling and manufacturing capital required to introduce new vehicles, energy storage products, and solar products. See Item 303(a)(2) of Regulation S-K and SEC Release No. 33-6835.

We respectfully advise the Staff that as disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources” in the Form 10-K, Q1 Form 10-Q and Q2 Form 10-Q, our expectations of our capital expenditures for 2018 at the times of filing such reports were: (i) slightly higher than 2017 (which, as disclosed in the Consolidated Statement of Cash Flows in the Form 10-K, was approximately $3.41 billion), (ii) slightly below $3 billion, and (iii) slightly below $2.5 billion, respectively.

Rest of the answer

Such disclosures reflect the best of our ability to project future material capital expenditures, which is generally limited to the near term at this still-early stage in our life cycle when we have just begun high-volume manufacturing. It is challenging to predict the magnitude and timing of capital expenditures beyond the current fiscal year, or at best, the next four fiscal quarters, because we are still focused on significantly ramping the production rate of our Model 3 vehicle, and the extent of our current operations is still such that the timing and capital-efficiency of our future initiatives will largely depend on the progress of our ongoing Model 3 vehicle production ramp. Furthermore, as such future initiatives are expected to grow the scale of our business by multiples and at a rate that we have not previously experienced, predictions are even more difficult to make at this time.

However, in response to the Staff’s comment, we have included the following disclosure in the Q2 Form 10-Q under “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources” to discuss our expectations for capital expenditures beyond 2018 to the best of our current ability:

“For the twelve-month period ending June 30, 2019, we expect total capital expenditures to be approximately $2.5 billion. As we continue to expand our existing manufacturing capacity, introduce new products, expand our retail stores, services centers, mobile repair services and Supercharging network, we are utilizing our increasing experience and learnings from past and current product ramps to do so at a level of capital efficiency per dollar of spend that we expect to be significantly greater than historical levels. Moreover, we expect that cash generated from our core operations will generally be sufficient for such future capital expenditures, although we may choose to seek alternative financing sources with respect to certain projects outside of the ordinary course of business. For example, we expect that much of our investment in our Gigafactory 3 to be constructed in Shanghai, China will be funded through indebtedness arranged through local financial institutions.”

In future filings, to the best of our ability, we will continue to disclose information about future material planned capital expenditures as well as the timing of such expenditures.

Read in the reply ↗

We note that some of the $2.04 billion of unused committed amounts as of December 31, 2017 and the $1.96 billion of unused committed amounts as of March 31, 2018 under your credit facilities and financing funds are subject to satisfying specific conditions prior to draw-down. Please describe the specific conditions that must be satisfied before the funds can be used.

Rest of the question

In addition, disclose any restrictions on the use of available funds. See Item 303(a)(1) of Regulation S-K.

We respectfully advise the Staff that with respect to our disclosure obligations pursuant to Item 303(a)(1) of Regulation S-K, there have not been, as of the filing of the Form 10-K, the Q1 Form 10-Q or the Q2 Form 10-Q, any known demands, commitments, events or uncertainties with respect to these facilities or funds that were or are likely to result in our liquidity thereunder increasing or decreasing in a material way.

Rest of the answer

However, in response to the Staff’s comment, we have included the following disclosure in the Q2 Form 10-Q under “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources”:

“In addition, we had $1.31 billion of unused committed amounts under our credit facilities and financing funds, some of which are subject to satisfying specified conditions prior to draw-down (such as pledging to our lenders sufficient amounts of qualified receivables, inventories, leased vehicles and our interests in those leases, solar energy systems and the associated customer contracts, our interests in financing funds or various other assets; and contributing or selling qualified solar energy systems and the associated customer contracts or qualified leased vehicles and our interests in those leases into the financing funds). Upon the draw-down of any unused committed amounts, there are no restrictions on the use of such funds for general corporate purposes.”

As appropriate, we will make similar disclosures regarding any material conditions that must be satisfied before any committed funds under our credit facilities or financing funds may be used, or any material restrictions on their use, in future filings.

Read in the reply ↗

We note that you will need significant capital to continue research and development projects, establish sales, delivery and service centers, and continue to significantly increase the number of Supercharger stations and connectors. Please provide an estimate of the amount of capital necessary to accomplish these goals as well as the timing of such costs. See Item 303(a)(2) of Regulation S-K.

We respectfully refer the Staff to our response to the Staff’s comment number 3 above, including the additional disclosure we included under “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources” in the Q2 Form 10-Q. Our future capital spend on research and development projects, sales, delivery and service centers, Supercharger stations and connectors will also depend in large part on the progress of our ongoing Model 3 ramp, and therefore making predictions as to timing and magnitude in any particular period other than the near

Rest of the answer

term is difficult at this time.

Read in the reply ↗

We note that the amounts reported in the table of contractual obligations for long-term debt and capital lease obligations due in 2018 do not agree to the corresponding amounts reported on the balance sheet as current portion of long-term debt and capital leases.

Rest of the question

Please reconcile the difference and to the extent deemed necessary, provide footnotes to the table to describe any pertinent data necessary for an understanding of the timing and amount of the specified contractual obligations. See Item 303(a)(5) of Regulation S-K.

to the Staff’s comment, the Company will append a footnote to all future reports that include a table of contractual obligations to describe the reconciling items noted above. Read in the reply ↗

We note in your response to the staff dated May 24, 2017 that future interest payments pertaining to long-term debt are included in the amounts disclosed in your contractual obligations table and that you would modify the the line caption as "Long-term debt, including scheduled interest" to clarify this point in future filings; however, we are unable to locate this revised presentation. Please revise.

We respectfully advise the Staff that this line caption was an unintentional omission, but the scheduled interest was in fact included in the long-term debt amounts. In future filings that include a table of contractual obligations, we will modify the line caption in accordance with your comment. Read in the reply ↗

We note reference to the report of other auditors with respect to the December 31, 2016 balance sheet. Please provide the separate audit report being referenced in accordance with Article 2-05 of Regulation S-X.

We respectfully advise the Staff that the separate audit report with respect to the December 31, 2016 balance sheet was filed as Exhibit 99.1, titled “Certain Excerpts from Annual Report on Form 10-K of SolarCity,” to the Form 10-K, incorporated by reference to Exhibit 99.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Read in the reply ↗

We note in your response to the staff dated May 24, 2017 that expanded disclosure would be provided on recalls if related costs are material to your financial statements. We note recalls occurred during 2017 and reports of an additional recall in 2018. Please tell us your consideration of including an accounting policy for recall costs.

We respectfully advise the Staff that all vehicle recalls to date have only resulted in immaterial costs to us. In response to the Staff’s comment, we have clarified that accrued warranty costs include estimated costs of recalls in our disclosure of our warranty accounting policy under the heading “Summary of Significant Accounting Policies—Warranties” in Note 2 to our consolidated financial statements included in the Q2 Form 10-Q. Read in the reply ↗

We note your response to prior comment 2 that further expansion of Model 3 manufacturing capacity to rates of 6,000 vehicles per week by late August 2018, and eventually to 10,000 vehicles per week by sometime in 2019, will require limited additional capital expenditures.

Rest of the question

However, we also note the risk factor disclosure on page 51 that Model 3 has "required significant investment and will require additional resources in connection with its ongoing ramp". If the risk factor disclosure is true, please provide a discussion of the related additional future expenditures in accordance with Item 303(a)(1) and (2) of Regulation S-K. Please advise or revise accordingly.

We respectfully advise the Staff that the referenced language and other similar language in our risk factors (e.g., “our Model 3 production plan has generally required significant investments of cash and management resources, and we expect to deploy additional resources as we further progress our ramp [emphasis added]” on page 47 of the Q2 Form 10-Q) refers to significant past investments, but does not

3500 Deer Creek Road, Palo Alto, California 94304 on its face, nor is it intended to, project the magnitude of our future expenditures.

Rest of the answer

Rather, we have included this language in our risk factors precisely because we are still in the middle of a key product ramp that will require some amount of additional spend to complete, but since it will be impossible to know the precise amount until we have completed the ramp, there is a potential risk that it could be greater than our expectations.

On the other hand, we have continued to discuss such expectations for future spend in other items of our periodic reports on a quarterly basis. We disclosed the following in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Management Opportunities, Challenges and Risks” in our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2018 (the “Q3 Form 10-Q”):

“We are continuing to work to increase Model 3 production to approximately 10,000 units per week in the most optimal manner from both a timing and capital expenditures perspective. At the Fremont Factory, we expect to continue to increase our Model 3 production rate to approximately 7,000 units per week with only limited additional capital expenditures, and we believe we can increase that rate to beyond 7,000 units per week with incremental capital expenditures. In China, which is the largest market for electric vehicles in the world, our Model S and Model X sales have been, and will likely continue to be, negatively impacted by recently-increased tariffs imposed by the Chinese government on U.S.-manufactured vehicles. We are seeking to alleviate the impact of such tariffs for Model 3 by developing plans to start producing approximately 3,000 Model 3 vehicles per week in Shanghai, China in the initial phase of our Gigafactory 3, which will have progressively increased levels of localization through local sourcing and manufacturing. However, the timeframe for that is subject to a number of uncertainties, including regulatory approval, supply chain constraints, and the pace of bringing the factory online.”

Moreover, in consideration of our updated manufacturing plans, including with respect to China, we updated our disclosure in the Q3 Form 10-Q to disclose our estimated capital expenditures for the current and next two fiscal years in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources,” as follows:

“We currently expect total 2018 capital expenditures to be slightly below $2.5 billion, including the acquisition of land use rights in Shanghai, China to build Gigafactory 3 and for its initial design and construction expenses.”

“Considering the pipeline of new products planned at this point, and consistent with our current strategy of using a partner to manufacture cells, as well as considering all other infrastructure growth and expansion of Gigafactories 1, 2 and 3, we currently estimate that capital expenditures will be between $2.5 to $3.0 billion annually for the next two fiscal years.”

In future filings, to the best of our ability and in accordance with our then-current expectations, we will continue to update our disclosures about the future capital needs of our business.

Read in the reply ↗

We note your response to prior comment 4 that some of the unused committed funds are subject to certain satisfying conditions such as pledging to the lenders sufficient amounts of qualified receivables, inventories, leased vehicles, etc.

Rest of the question

Please confirm that in future filings, if you are at risk of not satisfying these conditions, additional disclosure will be provided describing a known event or uncertainty that will result in or that is reasonably likely to affect your liquidity in a material way pursuant to Item 303(a)(1) of Regulation S-K. Additionally, we note the additional disclosure on page 43 that upon draw-down of any unused committed amounts, there are no restrictions on the use of such funds for general corporate purposes. However, we also note per the Form 8-K filed on August 23, 2017 that the Warehouse Agreements were established to support the Tesla Finance direct vehicle leasing program, therefore, it appears the unused committed funds cannot be used for general corporate purposes. Please advise.

We respectfully advise the Staff that our characterization of the Warehouse Agreements as “supporting” our direct vehicle leasing program is in reference to the fact that our direct vehicle leases and related vehicles (and only such assets) are eligible to be included in the borrowing base for these facilities. Once we have allocated the assets to the facilities, we may draw an amount of funds based on such assets, which allows us to receive a greater amount of cash upfront for our directly leased vehicles.

Rest of the answer

After funds are drawn, however, the Warehouse Agreements (which have been filed with the Commission) do not restrict the manner in which they may be used by us, including for general corporate purposes. Nevertheless, in future filings, if there is a known event or uncertainty that will result in or that is reasonably likely to affect our liquidity in a material way pursuant to Item 303(a)(1) of Regulation S-K, we will provide additional disclosures.

Read in the reply ↗

We note your response to prior comments 3 and 5. We continue to believe that a discussion of liquidity on a long term basis is required by Item 303 of Regulation S-K [see Instruction 5 to paragraph 303(a)] and SEC Release No. 33-6835.

Rest of the question

Therefore, please provide a discussion describing material planned capital expenditures affecting your initiatives and continued growth, their dependence on the progress of your ongoing Model 3 vehicle production ramp, and your current estimate of the required amounts resulting from expansion of Gigafactory 1, ramping production at Gigafactory 2, tooling and manufacturing capital required to introduce new vehicles and solar products, research and development projects, new delivery and service centers, and new Supercharger stations, for future periods beyond 2018. Similarly, if you decide not to incur such expenditures and therefore known uncertainty exists regarding continuation of your disclosed growth trends, and the adverse effect from the discontinuation of the growth trend is reasonably likely to be material, please revise your discussion in accordance with Item 303(a)(2) of Regulation S-K and SEC Release No. 33-6835.

We respectfully advise the Staff that we remain committed to disclosing our future capital expenditures to the extent we are able to estimate them. At this point of the Model 3 ramp and product roadmap, we are able to project our capital expenditures for a longer period of time than we were able to previously, and as noted above, have included in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources” in the Q3 Form 10-Q the following:

“Considering the pipeline of new products planned at this point, and consistent with our

Rest of the answer

current strategy of using a partner to manufacture cells, as well as considering all other infrastructure growth and expansion of Gigafactories 1, 2 and 3, we currently estimate that capital expenditures will be between $2.5 to $3.0 billion annually for the next two fiscal years.”

In future filings, to the best of our ability and in accordance with our then-current expectations, we will continue to update our disclosures about the future capital needs of our business.

Read in the reply ↗

We note your response to prior comment 6 that you included amounts voluntarily repaid within 12 months following December 31, 2017 within the contractual obligations table. Per Item 303(a)(5) of Regulation S-K, amounts are to be aggregated by time period in which payments are due, not according to the timing of planned payments.

Rest of the question

Therefore, it does not appear appropriate to categorize the $1.1 billion of voluntary early repayments under the Credit Agreement [notes (e) and (3)] under the 2018 column unless they are due in 2018, but instead they should be explained in a footnote to the table. Similarly, with regard to the voluntary early repayments under the Warehouse Agreements [notes (f) and (4)], we note that you included the excess principal amount repaid during 2018 prior to the filing of the Form 10-K in the 2018 column. It appears that you should narratively describe these excess repayments, along with their sources, in a footnote to the table as well. Please revise future presentations accordingly.

to the Staff’s comment, we confirm that in any future report that includes a table of contractual obligations, in addition to including in the table the information required by Regulation S-K Item 303(a)(5), we will use one or more explanatory footnotes to the extent we believe that additional information not required by Item 303(a)(5) would be useful to understand our contractual commitments. Read in the reply ↗