Tesla
Annual Report 2019

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2019 OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number: 001-34756 Tesla, Inc.(Exact name of registrant as specified in its charter) Delaware 91-2197729(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 3500 Deer Creek RoadPalo Alto, California 94304(Address of principal executive offices) (Zip Code)(650) 681-5000(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon stockTSLAThe Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act:None Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during thepreceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of“large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act: Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards providedpursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒The aggregate market value of voting stock held by non-affiliates of the registrant, as of June 30, 2019, the last day of the registrant’s most recently completed second fiscal quarter, was $31.54 billion (basedon the closing price for shares of the registrant’s Common Stock as reported by the NASDAQ Global Select Market on June 30, 2019). Shares of Common Stock held by each executive officer, director, andholder of 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determinationfor other purposes.As of February 7, 2020, there were 181,341,586 shares of the registrant’s Common Stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s Proxy Statement for the 2020 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Suchproxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2019.  TESLA, INC.ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2019INDEX PagePART I. Item 1. Business 1Item 1A. Risk Factors 15Item 1B. Unresolved Staff Comments 34Item 2. Properties 35Item 3. Legal Proceedings 35Item 4. Mine Safety Disclosures 35 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 36Item 6. Selected Consolidated Financial Data 38Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39Item 7A. Quantitative and Qualitative Disclosures About Market Risk 60Item 8. Financial Statements and Supplementary Data 61Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 127Item 9A. Controls and Procedures 127Item 9B. Other Information 128 PART III. Item 10. Directors, Executive Officers and Corporate Governance 129Item 11. Executive Compensation 129Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 129Item 13. Certain Relationships and Related Transactions, and Director Independence 129Item 14. Principal Accountant Fees and Services 129 PART IV. Item 15. Exhibits and Financial Statement Schedules 129Item 16. Summary 155 Signatures 156 i Forward-Looking StatementsThe discussions in this Annual Report on Form 10-K contain forward-looking statements reflecting our current expectations that involve risks anduncertainties. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financialposition, future revenues, projected costs, profitability, expected cost reductions, capital adequacy, expectations regarding demand and acceptance for ourtechnologies, growth opportunities and trends in the market in which we operate, prospects and plans and objectives of management. The words “anticipates,”“believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions orexpectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or eventscould differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-lookingstatements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including,without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K and in our other filings with the Securities andExchange Commission. We do not assume any obligation to update any forward-looking statements.  PART IITEM 1.BUSINESS OverviewWe design, develop, manufacture, sell and lease high-performance fully electric vehicles and energy generation and storage systems, and offer servicesrelated to our products. We are the world’s first vertically integrated sustainable energy company, offering end-to-end clean energy products, including generation,storage and consumption. We generally sell our products directly to customers, including through our website and retail locations. We also continue to grow ourcustomer-facing infrastructure through a global network of vehicle service centers, Mobile Service technicians, body shops, Supercharger stations and DestinationChargers to accelerate the widespread adoption of our products. We emphasize performance, attractive styling and the safety of our users and workforce in thedesign and manufacture of our products, and are continuing to develop full self-driving technology for improved safety. We also strive to lower the cost ofownership for our customers through continuous efforts to reduce manufacturing costs and by offering financial services tailored to our vehicles. Our sustainableenergy products, engineering expertise, intense focus to accelerate the world’s transition to sustainable energy and achieve the benefits of autonomous driving, andbusiness model differentiate us from other companies. We currently offer or are planning to introduce electric vehicles to address a wide range of consumer and commercial vehicle markets, including Model 3,Model Y, Model S, Model X, Cybertruck, Tesla Semi and a new Tesla Roadster. In order to meet customers’ range, functionality and performance expectations,we have employed our considerable design and vehicle engineering capabilities to overcome the design, styling and performance issues that have historicallylimited broad adoption of electric vehicles. Combined with technical advancements in our powertrain system, Autopilot and Full Self-Driving (“FSD”) hardware,and neural net, our electric vehicles boast advantages such as leading range and recharging flexibility; superior acceleration, handling and safety characteristics; aunique suite of user convenience and infotainment features; the ability to have additional features enabled through over-the-air updates; and savings in charging,maintenance and other costs of ownership.In furtherance of our mission to accelerate the world’s transition to sustainable energy, we have also developed an expertise in solar energy systems. Wesell and lease retrofit solar energy systems for residential and commercial customers, and alternatively provide certain customers with access to our solar energysystems through power purchase or subscription-based arrangements. We also offer the Solar Roof, which features attractive and durable glass roof tiles integratedwith solar energy generation. Our approach to the solar business emphasizes simplicity, standardization and accessibility to make it easy and cost-effective forcustomers to adopt clean energy, while reducing our customer acquisition costs.Finally, we have leveraged our technological expertise in batteries, energy management, power electronics, and integrated systems from our vehiclepowertrain systems to develop and manufacture energy storage products, including Powerwall, Powerpack and Megapack. These scalable systems may be used inhomes, commercial facilities and on the utility grid, and are capable of numerous applications including backup or off-grid power, peak demand reduction, demandresponse, reducing intermittency of renewable energy generation, facilitation of the use of renewable energy generation over fossil fuel generation, and other gridservices and wholesale electric market services. Drawing on our solar business expertise, we can also offer integrated systems combining energy generation andstorage. Like our vehicles, our energy storage products can be remotely updated over-the-air with software or firmware improvements.Segment InformationWe operate as two reportable segments: (i) automotive and (ii) energy generation and storage.The automotive segment includes the design, development, manufacturing, sales, and leasing of electric vehicles as well as sales of automotive regulatorycredits. Additionally, the automotive segment is also comprised of services and other, which includes non-warranty after-sales vehicle services, sales of usedvehicles, retail merchandise, sales by our acquired subsidiaries to third party customers, and vehicle insurance revenue. The energy generation and storage segmentincludes the design, manufacture, installation, sales, and leasing of solar energy generation and energy storage products, services related to such products, and salesof solar energy system incentives.1 Our Products and ServicesAutomotiveModel 3Model 3 is a four-door mid-size sedan that we designed for manufacturability with a base price for mass-market appeal, which we began delivering in July2017. We currently manufacture Model 3 at the Fremont Factory as well as at Gigafactory Shanghai, where we are ramping production with an installed annualproduction capacity for 150,000 Model 3 vehicles. We currently offer Model 3 in rear-wheel drive and dual motor all-wheel drive variants, including aPerformance version of the latter.Model YModel Y is a compact sport utility vehicle (“SUV”) built on the Model 3 platform with the capability for seating for up to seven adults, which we beganproducing in January 2020 and expect to commence delivering in the first quarter of 2020. We currently manufacture Model Y at the Fremont Factory, and arefurther ramping production there and making preparations for production next at Gigafactory Shanghai. We currently offer Model Y in dual motor all-wheel driveLong Range and Performance versions.Model S and Model XModel S is a four-door full-size sedan that we began delivering in June 2012. Model S introduced Tesla vehicle mainstays such as a large touchscreendriver interface, Autopilot hardware, over-the-air software updates, and fast charging through our Supercharger network.Model X is a mid-size SUV with seating for up to seven adults, which we began delivering in September 2015. Model X introduced features includingunique falcon wing doors for easy access to passenger seating and an all-glass panoramic windshield.Model S and Model X feature the highest performance characteristics and longest ranges that we offer in a sedan and SUV, respectively. These vehiclesare equipped with a standard dual motor all-wheel drive powertrain, and are also available in Performance versions with enhanced acceleration and/or top speedand styling. We manufacture Model S and Model X at the Fremont Factory.Future Consumer and Commercial Electric VehiclesIn addition, we have unveiled a number of planned electric vehicles to address a broader cross-section of the vehicle market, including specializedconsumer electric vehicles in Cybertruck and the new Tesla Roadster and a commercial electric vehicle in Tesla Semi.Energy Generation and StorageEnergy Storage ProductsWe began deliveries of the current generations of our Powerwall and Powerpack products in late 2016 and 2017, respectively, and of our Megapackproduct in late 2019. Powerwall is a 13.5 kilowatt hour (“kWh”) rechargeable lithium-ion battery with integrated inverter, designed to store energy at a home orsmall commercial facility. Powerpack and Megapack are fully integrated energy storage solutions for commercial, industrial, utility and energy generationcustomers, comprised of up to 232kWh (AC) battery packs and up to 700 kilovolt-ampere (at 480V) inverters for Powerpack and up to 3 megawatt hour (“MWh”)(AC) battery packs and up to 1.54 megavolt-ampere inverters for Megapack, multiple units of which may be grouped together to form larger installations, capableof reaching gigawatt hours (“GWh”) or greater. Powerpack and Megapack can also be combined with renewable energy generation sources to create microgridsthat provide communities with clean, resilient and affordable power.We also develop and advance our software capabilities for the control and optimal dispatch of energy storage systems across a wide range of markets andapplications, which can be sent to our systems through over-the-air updates.2 Solar Energy OfferingsThe major components of our retrofit solar energy systems include solar panels that convert sunlight into electrical current, inverters that convert theelectrical output from the panels to a usable current compatible with the electric grid, racking that attaches the solar panels to the roof or ground, electricalhardware that connects the solar energy system to the electric grid, and our monitoring device. We purchase the majority of these components, and we do so frommultiple sources to ensure competitive pricing and adequate supply. We also design and manufacture certain components for our solar energy products. In additionto selling retrofit solar energy systems to customers and certain channel partners, we also make them available through lease and power purchase agreement(“PPA”) arrangements, currently with 20-year terms and typically with renewal options, and a subscription-based sale of solar power, which is currently availablein California.In 2019, we commenced direct customer and channel partner sales of the third generation of our Solar Roof, which features aesthetically pleasing anddurable glass roofing tiles designed to complement the architecture of homes and commercial buildings while turning sunlight into electricity. We are ramping thevolume production of this version of the Solar Roof at Gigafactory New York, and are increasing our installation capabilities by training our personnel and thirdparty partners.TechnologyAutomotiveOur core vehicle technology competencies include battery and powertrain engineering and manufacturing, as well as our ability to design vehicles thatutilize the unique advantages of an electric powertrain. Our core intellectual property includes our electric powertrain and our work on developing self-drivingtechnologies. Our powertrain consists of our battery pack, power electronics, motor, gearbox, and control software. We offer several powertrain variants for ourvehicles that incorporate years of research and development. In addition, we have designed our vehicles to incorporate the latest advances in consumertechnologies, such as mobile computing, sensing, displays, and connectivity.Battery and PowertrainWe optimize the design of the lithium-ion cells we use and of our battery packs to achieve high energy density at decreasing costs while also maintainingsafety, reliability and long life in the rigors of an automotive environment. Our proprietary technology includes systems for high density energy storage, cooling,safety, charge balancing, structural durability, and electronics management. We have also pioneered advanced manufacturing techniques to manufacture largevolumes of battery packs with high quality at low cost. Moreover, we maintain extensive testing and R&D capabilities for battery cells, packs and systems, andhave built an expansive body of knowledge on lithium-ion cell vendors, chemistry types and performance characteristics. We believe that the flexibility that wehave built into our designs, combined with our research and real-world performance data, will enable us to continue to evaluate new battery cells and optimizebattery pack system performance and cost for our current and future vehicles.The power electronics in our electric powertrain govern the flow of electrical current throughout our vehicles as needed, convert direct current from thebattery pack into alternating current to drive our vehicles’ motors (and vice versa from an external electricity source to charge the battery pack), and provideregenerative braking functionality. The primary technological advantages to our proprietary power electronics designs include the ability to drive large amounts ofelectrical current in a small physical package with high efficiency and low cost, and to recharge on a wide variety of electricity sources at home, at the office or onthe road, including at our Superchargers.We offer dual motor powertrain vehicles, which use two electric motors to maximize traction and performance in an all-wheel drive configuration. Tesla’sdual motor powertrain digitally and independently controls torque to the front and rear wheels. The near-instantaneous response of the motors, combined with lowcenters of gravity, provides drivers with controlled performance and increased traction control. We are also developing vehicle powertrain technology featuringthree electric motors for further increased performance.3 Vehicle Control and Infotainment SoftwareThe performance and safety systems of our vehicles and their battery packs require sophisticated control software. There are numerous processors in ourvehicles to control these functions, and we write custom firmware for many of these processors. Software algorithms control traction, vehicle stability, theacceleration and regenerative braking of the vehicle, climate control and thermal management, and are also used extensively to monitor the charge state of thebattery pack and to manage all of its safety systems. Drivers use the information and control systems in our vehicles to optimize performance, customize vehiclebehavior, manage charging modes and times and control all infotainment functions. We develop almost all of this software, including most of the user interfaces,internally.Self-Driving DevelopmentWe have expertise in developing technologies, systems and software to achieve self-driving vehicles. We are equipping all new Tesla vehicles withhardware needed for full self-driving in the future, including a new powerful and proprietary on-board computer that we introduced in 2019. This hardware suiteenables field data from the on-board camera, radar, ultrasonics, and GPS to continually train and improve our neural network for real-world performance.Currently, we offer in our vehicles certain advanced driver assist systems under our Autopilot and FSD options, including auto-steering, traffic awarecruise control, automated lane changing, automated parking, driver warning systems, and a Smart Summon feature that enables vehicles to be remotely summonedover short distances in parking lots and driveways. These systems relieve our drivers of the most tedious and potentially dangerous aspects of road travel, and thefield data feedback loops from the on-board hardware, as well as over-the-air firmware updates, allow us to improve them over time. Although at present thedriver is ultimately responsible for controlling the vehicle, our systems provide safety and convenience functionality that allows our customers to rely on themmuch like the system that airplane pilots use when conditions permit.Energy Generation and StorageEnergy Storage ProductsWe are leveraging many of the component-level technologies from our vehicles to advance our energy storage products, including high density energystorage, cooling, safety, charge balancing, structural durability, and electronics management. By taking a modular approach to the design of battery systems, weare able to maximize manufacturing capacity to produce our Powerwall, Powerpack and Megapack products. Additionally, we are making significant strides in thearea of bi-directional, grid-tied power electronics that enable us to interconnect our battery systems seamlessly with global electricity grids while providing fast-acting systems for power injection and absorption.Solar Energy SystemsWe are continually innovating and developing new technologies to facilitate the growth of our solar energy business. For example, we have developedproprietary software to reduce solar energy system design and installation timelines and costs, and the Solar Roof is designed to work seamlessly with Powerwall.Design and EngineeringAutomotiveWe have created significant in-house capabilities in the design and test engineering of electric vehicles and their components and systems. We design,engineer and test bodies, chassis, exteriors, interiors, heating and cooling and low voltage electrical systems in-house, and to a lesser extent, in conjunction withour suppliers. Our team has core competencies in computer aided design and crash test simulations, which reduces the product development time of new models.We continue to grow our capabilities, including for on-site crash testing, durability testing and component validation.4 Additionally, our team has expertise in selecting and working with various materials. For example, given the impact of mass on range, which is veryimportant for passenger vehicles, Model S and Model X are built with lightweight aluminum bodies and chassis which incorporate a variety of materials andproduction methods that help optimize vehicle weight, and Model 3 and Model Y are built with a mix of materials to be lightweight and safe while also increasingcost-effectiveness for these mass-market vehicles. On the other hand, to accommodate the durability required of work vehicles, we plan to use a thick cold-rolledstainless steel alloy and ultra-strong glass for Cybertruck while employing our expertise in battery engineering to maintain excellent range.Energy Generation and StorageEnergy Storage ProductsWe have an in-house engineering team that both designs our energy storage products themselves, and works with our residential, commercial and utilitycustomers to design bespoke systems incorporating our products. Our team’s expertise in electrical, mechanical, civil and software engineering enables us to createintegrated energy storage solutions that meet the various and particular needs of our customers.Solar Energy SystemsWe also have an in-house team that designs a customized solar energy system or Solar Roof for each of our customers, including an integrated energystorage system when requested by the customer. We have developed software that simplifies and expedites the design process and optimizes the design tomaximize the energy production of each system. This team completes a structural analysis of each building and produces a full set of structural design andelectrical blueprints that contain the specifications for all system components. Additionally, this team specifies complementary mounting and grounding hardwarewhere required.Sales and MarketingHistorically, we have been able to generate significant media coverage of our company and our products, and we believe we will continue to do so. Suchmedia coverage and word of mouth are the current primary drivers of our sales leads and have helped us achieve sales without traditional advertising and atrelatively low marketing costs.AutomotiveDirect SalesWe market and sell our vehicles directly to customers using means that we believe will maximize our reach, improve the overall customer experience andmaximize capital efficiency. Currently, our sales channels include our website and an international network of company-owned stores. In some states, we havealso opened galleries to educate and inform customers about our products, but such locations do not actually transact in the sale of vehicles. We believe thisinfrastructure enables us to better control costs of inventory, manage warranty service and pricing, educate consumers about electric vehicles and charging,maintain and strengthen the Tesla brand, and obtain rapid customer feedback.We reevaluate our sales strategy both globally and at a location-by-location level from time to time to optimize our current sales channels. Sales ofvehicles in the automobile industry also tend to be cyclical in many markets, which may expose us to volatility from time to time.Used Vehicle SalesOur used vehicle business supports new vehicle sales by integrating the sale of a new Tesla vehicle with a customer’s trade-in needs for their existing Teslaand non-Tesla vehicles. The Tesla and non-Tesla vehicles we acquire through trade-ins are subsequently remarketed, either directly by us or through third-parties.We also receive used Tesla vehicles to resell through lease returns and other sources.5 Public ChargingWe continue to build out our global Supercharger network for our customers’ convenience, including to enable long-distance travel and urban ownership,which is a part of our strategy to remove a barrier to the broader adoption of electric vehicles caused by the perception of limited range. Each Tesla Supercharger isan industrial grade, high-speed charger designed to recharge a Tesla vehicle significantly more quickly than other charging options, and we continue to evolve ourtechnology to allow for even faster charging times at lower cost to us. Where possible, we are co-locating Superchargers with our solar and energy storage systemsto further reduce costs and promote renewable power. Supercharger stations typically are strategically placed along well-traveled routes and in dense city centersto allow Tesla vehicle owners the ability to enjoy quick, reliable and ubiquitous charging with convenient, minimal stops. Use of the Supercharger network iseither free under certain sales programs or requires a competitive fee.We also work with a wide variety of hospitality, retail, and public destinations, as well as businesses with commuting employees, to offer additionalcharging options for our customers. These Destination Charging and workplace locations deploy Tesla Wall Connectors to provide charging to Tesla vehicleowners who patronize or are employed at their businesses. We also work with single-family homeowners and multi-family residential entities to deploy homecharging solutions in our communities.Energy Generation and StorageWe market and sell our solar and energy storage products to individuals, commercial and industrial customers and utilities through a variety of channels.In the U.S., we offer residential solar and energy storage products directly through our website, stores and galleries, as well as through our network ofchannel partners. Outside of the U.S., we use our international sales organization and a network of channel partners to market and sell these products for theresidential market. We also sell Powerwall directly to utilities. In the case of products sold to such utilities or channel partners, such partners typically sell andinstall the product in customer homes.We sell Powerpack and Megapack systems to commercial and utility customers through our international sales organization, which consists of experiencedenergy industry professionals in all of our target markets, as well as through our channel partner network. In certain jurisdictions, we also sell installed solarenergy systems (with or without energy storage) to commercial customers through cash, lease and PPA transactions.Service and WarrantyAutomotiveServiceWe provide service for our electric vehicles at our company-owned service locations and through an expanding fleet of Tesla Mobile Service technicianswho provide services that do not require a vehicle lift remotely at customers’ homes or other locations. Performing vehicle service ourselves provides us with thecapability to identify problems, find solutions, and incorporate improvements faster, and optimize logistics and inventory for service parts better, than traditionalautomobile manufacturers. Our vehicles are also designed with the capability to wirelessly upload data to us via an on-board system with cellular connectivity,allowing us to diagnose and remedy many problems before ever looking at the vehicle.Vehicle Limited Warranty and Extended Service PlansWe provide a manufacturer’s warranty on all new and used Tesla vehicles. Each new vehicle has a four year or 50,000 mile New Vehicle LimitedWarranty, subject to separate limited warranties for the supplemental restraint system, battery and drive unit, and body rust perforation. For the battery and driveunit on our current new Model S and Model X vehicles, we offer an eight year, 150,000 mile limited warranty, with minimum 70% retention of battery capacityover the warranty period. For the battery and drive unit on our current new Model 3 and Model Y vehicles, we offer an eight year or 100,000 mile limited warrantyfor our Standard or Standard Range Plus battery and an eight year or 120,000 mile limited warranty for our Long Range or Performance battery, with minimum70% retention of battery capacity over the warranty period.6 In addition to the New Vehicle Limited Warranty, we currently offer for Model S and Model X Extended Service plans for new vehicles in specifiedregions. The Extended Service plans cover the repair or replacement of vehicle parts for up to an additional four years or up to an additional 50,000 miles after theexpiration of the New Vehicle Limited Warranty.Energy Generation and StorageEnergy Storage SystemsWe generally provide a 10-year “no defect” and “energy retention” warranty with every current Powerwall and a 15-year “no defect” and “energyretention” warranty with every current Powerpack or Megapack system. Pursuant to these energy retention warranties, we guarantee that the energy capacity of theapplicable product will be at least a specified percentage (within a range up to 80%) of its nameplate capacity during specified time periods, depending on theproduct, battery pack size and/or region of installation, and subject to specified use restrictions or kWh throughputs caps. In addition, we offer certain extendedwarranties, which customers are able to purchase from us at the time they purchase an energy storage system, including a 20 year extended protection plan forPowerwall and a selection of 10 or 20 year performance guarantees for Powerpack and Megapack. In circumstances where we install a Powerwall or Powerpacksystem, we also provide certain warranties on our installation workmanship. All of the warranties for our energy storage systems are subject to customarylimitations and exclusions.Solar Energy SystemsFor retrofit solar energy systems, we provide a workmanship warranty for up to 20 years from installation and a separate warranty against roof leaks. Wealso pass-through the inverter and module manufacturer warranties (typically 10 years and 25 years respectively). When we lease a retrofit solar energy system, wecompensate the customer if their system produces less energy than guaranteed over a specified period. For the Solar Roof, we provide a warranty against defectsfor 25 years, a 25 year weatherization warranty and a power output warranty. For all systems (retrofit and Solar Roof) we also provide service and repair (eitherunder warranty or for a fee) during the entire term of the customer relationship.Financial ServicesAutomotivePurchase Financing and LeasesWe offer leasing and/or loan financing arrangements for our vehicles in certain jurisdictions in North America, Europe and Asia through various financialinstitutions. In certain international markets, we offer resale value guarantees to customers who purchase and finance their vehicles through one of our specifiedcommercial banking partners, under which those customers have the option of selling their vehicles back to us at preset future dates, generally at the end of theterms of the applicable loans or financing programs, for pre-determined resale values. In certain markets, we also offer vehicle buyback guarantees to financialinstitutions, which may obligate us to repurchase the vehicles for pre-determined prices.We also currently offer leasing directly through our local subsidiaries for Model S, Model X and Model 3 in the U.S. and for Model S and Model X inCanada.InsuranceIn August 2019, we launched an insurance product designed for our customers, which offers rates that are often better than other alternatives. This productis currently available in California, and we plan to expand both the markets in which we offer insurance products and our ability to offer such products, as part ofour ongoing effort to decrease the total cost of ownership for our customers.7 Energy Generation and StorageEnergy Storage SystemsWe currently offer a loan product to residential customers who purchase Powerwall together with a new solar energy system, and lease and PPA optionsto commercial customers who purchase a Powerpack system together with a new solar energy system. We intend to introduce financial services offerings forcustomers who purchase standalone energy storage products in the future.Solar Energy SystemsWe are an industry leader in offering innovative financing alternatives that allow our customers to take direct advantage of available tax credits andincentives to reduce the cost of owning a solar energy system through a solar loan, or to make the switch to solar energy with little to no upfront costs under a leaseor PPA. Our solar loan offers third-party financing directly to a qualified customer to enable the customer to purchase and own a solar energy system. We are not aparty to the loan agreement between the customer and the third-party lender, and the third-party lender has no recourse against us with respect to the loan. Oursolar lease offers customers a fixed monthly fee, at rates that typically translate into lower monthly utility bills, and an electricity production guarantee. Our solarPPA charges customers a fee per kWh based on the amount of electricity produced by our solar energy systems. We monetize the customer payments we receivefrom our leases and PPAs through funds we have formed with investors. We also intend to introduce financial services offerings for our Solar Roof customers inthe future.ManufacturingWe manufacture our products and related components primarily at the Fremont Factory and at nearby facilities in the Bay Area, California; GigafactoryNevada near Reno, Nevada; Gigafactory New York in Buffalo, New York; and Gigafactory Shanghai in China. We have also selected a site near Berlin, Germanyto build a factory for the European market, which we refer to as Gigafactory Berlin.Manufacturing Facilities in the Bay Area, CaliforniaWe manufacture our vehicles, and certain parts and components that are critical to our intellectual property and quality standards, at our manufacturingfacilities in the Bay Area in California, including the Fremont Factory, and other local manufacturing facilities. Our Bay Area facilities contain severalmanufacturing operations, including stamping, machining, casting, plastics, body assembly, paint operations, seat assembly, final vehicle assembly and end-of-linetesting for our vehicles, as well as production of battery packs and drive units for Model S and Model X. Some major vehicle component systems are purchasedfrom suppliers; however, we have a high level of vertical integration in our manufacturing processes at our Bay Area facilities.Gigafactory NevadaGigafactory Nevada is a facility where we work together with our suppliers to integrate battery material, cell, module and battery pack production in onelocation. We use the battery packs manufactured at Gigafactory Nevada for Model 3, Model Y and our energy storage products. We also manufacture Model 3 andModel Y drive units at Gigafactory Nevada. Finally, the assembly of Megapack systems takes place at Gigafactory Nevada, allowing us to ship deployment-readysystems directly to customers.We have designed Gigafactory Nevada to allow us access to high volumes of lithium-ion battery cells while achieving a significant reduction in the cost ofour battery packs, and we have an agreement with Panasonic to partner with us on Gigafactory Nevada with investments in production equipment that it is using tomanufacture and supply us with battery cells. Given its importance to the production of our vehicle and energy storage products, in particular Model 3, Model Yand Megapack, we continue to invest in Gigafactory Nevada to achieve additional production output there.8 Gigafactory New YorkWe have primarily used our manufacturing facility in Buffalo, New York, which we refer to as Gigafactory New York, for the development andproduction of our Solar Roof and other solar products and components, energy storage components, and Supercharger components, and for other lessor-approvedfunctions. In particular, our manufacturing operations at Gigafactory New York are increasing significantly as we ramp the production of the third generation ofour Solar Roof there.Gigafactory ShanghaiIn December 2019, we commenced production of Model 3 vehicles at Gigafactory Shanghai, which we have established in order to increase theaffordability of our vehicles for customers in local markets by reducing transportation and manufacturing costs and eliminating certain tariffs on vehicles importedinto China from the U.S. At Gigafactory Shanghai, we have installed annual production capacity for 150,000 Model 3 vehicles that we believe we will eventuallybe able to push to actual rates of production in excess of such number, subject to local production of battery packs, which we began ramping there later than otherprocesses. We have also commenced construction of the next phase of Gigafactory Shanghai to add Model Y manufacturing capacity at least equivalent to that forModel 3. Much of the investment in Gigafactory Shanghai has been and is expected to continue to be provided through local debt financing, including a RMB 9.0billion (or the equivalent amount in U.S. dollars) fixed asset term facility and a RMB 2.25 billion (or the equivalent amount in U.S. dollars) working capitalrevolving facility that our subsidiary entered into in December 2019. We are supplementing such financing with limited direct capital expenditures by us, at alower cost per unit of production capacity than that of Model 3 production at the Fremont Factory.Other ManufacturingGenerally, we continue to expand production capacity at our existing facilities. We also intend to further increase cost-competitiveness in our significantmarkets by strategically adding local manufacturing, including at our planned Gigafactory Berlin.Supply ChainOur products use thousands of purchased parts that are sourced from hundreds of suppliers across the world. We have developed close relationships withvendors of key parts such as battery cells, electronics and complex vehicle assemblies. Certain components purchased from these suppliers are shared or are similaracross many product lines, allowing us to take advantage of pricing efficiencies from economies of scale. As is the case for most automotive companies, most of our procured components and systems are sourced from single suppliers. Certain key componentswe use have multiple available sources, and we work to qualify multiple suppliers for each such component where it is sensible to do so, in order to minimizeproduction risks owing to disruptions in their supply. We also mitigate risk by maintaining safety stock for key parts and assemblies and die banks for componentswith lengthy procurement lead times. Our products use various raw materials including aluminum, steel, cobalt, lithium, nickel and copper. Pricing for these materials is governed by marketconditions and may fluctuate due to various factors outside of our control, such as supply and demand and market speculation. We currently believe that we haveadequate access to raw materials supplies in order to meet the needs of our operations.Governmental Programs, Incentives and RegulationsGlobally, both the operation of our business by us and the ownership of our products by our customers are impacted by a number of government programs,incentives and other arrangements. Our business and products are also subject to a number of governmental regulations that vary among jurisdictions.9 Programs and IncentivesCalifornia Alternative Energy and Advanced Transportation Financing Authority Tax IncentivesWe have entered into multiple agreements over the past few years with the California Alternative Energy and Advanced Transportation FinancingAuthority (“CAEATFA”) that provide multi-year sales tax exclusions on purchases of manufacturing equipment that will be used for specific purposes, includingthe expansion and ongoing development of Model S, Model X, Model 3, Model Y and future electric vehicles and the expansion of electric vehicle powertrainproduction in California.Gigafactory Nevada—Nevada Tax IncentivesIn connection with the construction of Gigafactory Nevada, we have entered into agreements with the State of Nevada and Storey County in Nevada thatprovide abatements for sales, use, real property, personal property and employer excise taxes, discounts to the base tariff energy rates and transferable tax credits.These incentives are available for the applicable periods beginning on October 17, 2014 and ending on either June 30, 2024 or June 30, 2034 (depending on theincentive). Under these agreements, we were eligible for a maximum of $195.0 million of transferable tax credits, subject to capital investments by us and ourpartners for Gigafactory Nevada of at least $3.50 billion, which we exceeded during 2017, and specified hiring targets for Gigafactory Nevada, which we exceededduring 2018. As a result, as of December 31, 2018, we had earned the maximum amount of credits.Gigafactory New York—New York State Investment and LeaseWe have a lease through the Research Foundation for the State University of New York (the “SUNY Foundation”) for Gigafactory New York, which wasconstructed on behalf of the SUNY Foundation. Under the lease and a related research and development agreement, there continues to be, on behalf of the SUNYFoundation, installation of certain utilities and other improvements and acquisition of certain manufacturing equipment designated by us to be used at GigafactoryNew York. The terms of such agreement require us to comply with a number of covenants, including required hiring and cumulative investment targets, which wehave met to date as of the applicable measurement dates.Gigafactory Shanghai—Lease and Land Use RightsWe have a lease arrangement with the local government of Shanghai for land use rights at Gigafactory Shanghai. Under the terms of the arrangement, weare required to meet a cumulative capital expenditure target and an annual tax revenue target starting at the end of 2023, which we believe will be attainable evenif our actual vehicle production at Gigafactory Shanghai were far lower than the volumes we are forecasting.Tesla Regulatory CreditsIn connection with the production, delivery, placement into service and ongoing operation of our zero emission vehicles, charging infrastructure and solarsystems in global markets, we have earned and will continue to earn various tradable regulatory credits. We have sold these credits, and will continue to sell futurecredits, to automotive companies and other regulated entities who can use the credits to comply with emission standards and other regulatory requirements. Forexample, under California’s Zero Emission Vehicle Regulation and those of states that have adopted California’s standard, vehicle manufacturers are required toearn or purchase credits, referred to as ZEV credits, for compliance with their annual regulatory requirements. These laws provide that automakers may bank or sellto other regulated parties their excess credits if they earn more credits than the minimum quantity required by those laws. Tesla also earns other types of saleableregulatory credits in the United States and abroad, including greenhouse gas, fuel economy, renewable energy, and clean fuels credits. Likewise, several U.S. stateshave adopted procurement requirements for renewable energy production. These requirements enable companies deploying solar energy to earn tradable creditsknown as Solar Renewable Energy Certificates (“SRECs”).10 Energy Storage Systems—IncentivesThe regulatory regime for energy storage projects is still under development. Nevertheless, there are various policies, incentives and financial mechanismsat the federal, state and local levels that support the adoption of energy storage. For example, energy storage systems that are charged using solar energy areeligible for the 26% tax credit in 2020 with a ramp down in 2021 and beyond under Section 48(a)(3) of the Internal Revenue Code, or the IRC, as described below.In addition, California and a number of other states have adopted procurement targets for energy storage, and behind the meter energy storage systems qualify forfunding under the California Self Generation Incentive Program.The Federal Energy Regulatory Commission (“FERC”) has also taken steps to enable the participation of energy storage in wholesale energy markets. Forexample, in late 2016, FERC issued a final rule, Order No. 821, to further break down barriers preventing energy storage from fully participating in wholesaleenergy markets. Order 821 is currently under review before the U.S. Court of Appeals for the D.C. Circuit.Solar Energy Systems—Government and Utility Programs and IncentivesU.S. federal, state and local governments have established various policies, incentives and financial mechanisms to reduce the cost of solar energy and toaccelerate the adoption of solar energy. These incentives include tax credits, cash grants, tax abatements and rebates.The federal government currently provides an uncapped investment tax credit (“ITC”) under two sections of the IRC: Section 48 and Section 25D. Section48(a)(3) of the IRC allows a taxpayer to claim a credit of 26% of qualified expenditures for a commercial solar energy system that commences construction byDecember 31, 2020. The credit then declines to 22% in 2021 and a permanent 10% thereafter. We claim the Section 48 commercial credit when available for bothour residential and commercial projects, based on ownership of the solar energy system. The federal government also provides accelerated depreciation for eligiblecommercial solar energy systems. Section 25D of the IRC allows a homeowner-taxpayer to claim a credit of 26% of qualified expenditures for a residential solarenergy system owned by the homeowner that is placed in service by December 31, 2020. The credit then declines to 22% in 2021 and is scheduled to expirethereafter. Customers who purchase their solar energy systems for cash or through our solar loan offering are eligible to claim the Section 25D investment taxcredit.In addition to the federal ITC, many U.S. states offer personal and corporate tax credits and incentives for solar energy systems.RegulationsVehicle Safety and TestingOur vehicles are subject to, and comply with or are otherwise exempt from, numerous regulatory requirements established by the National HighwayTraffic Safety Administration (“NHTSA”), including all applicable United States Federal Motor Vehicle Safety Standards (“FMVSS”). Our vehicles fully complywith all applicable FMVSSs without the need for any exemptions, and we expect future Tesla vehicles to either fully comply or comply with limited exemptionsrelated to new technologies. Additionally, there are regulatory changes being considered for several FMVSS, and while we anticipate compliance, there is noassurance until final regulation changes are enacted.As a manufacturer, we must self-certify that our vehicles meet all applicable FMVSS, as well as the NHTSA bumper standard, or otherwise are exempt,before the vehicles can be imported or sold in the U.S. Numerous FMVSS apply to our vehicles, such as crash-worthiness requirements, crash avoidancerequirements, and electric vehicle requirements. We are also required to comply with other federal laws administered by NHTSA, including the CAFE standards,Theft Prevention Act requirements, consumer information labeling requirements, Early Warning Reporting requirements regarding warranty claims, field reports,death and injury reports and foreign recalls, and owner’s manual requirements.The Automobile Information and Disclosure Act requires manufacturers of motor vehicles to disclose certain information regarding the manufacturer’ssuggested retail price, optional equipment and pricing. In addition, this law allows inclusion of city and highway fuel economy ratings, as determined by EPA, aswell as crash test ratings as determined by NHTSA if such tests are conducted.11 Our vehicles sold outside of the U.S. are subject to similar foreign safety, environmental and other regulations. Many of those regulations are differentfrom those applicable in the U.S. and may require redesign and/or retesting. The European Union has established new rules regarding additional complianceoversight that are scheduled to commence in 2020, and there is also regulatory uncertainty related to the United Kingdom’s withdrawal from the EuropeanUnion. These changes could impact the rollout of new vehicle features in Europe.Self-DrivingThere are no federal U.S. regulations pertaining to the safety of self-driving vehicles; however, NHTSA has established recommended guidelines. CertainU.S. states have legal restrictions on self-driving vehicles, and many other states are considering them. This patchwork increases the legal complexity for ourvehicles. In Europe, certain vehicle safety regulations apply to self-driving braking and steering systems, and certain treaties also restrict the legality of certainhigher levels of self-driving vehicles. Self-driving laws and regulations are expected to continue to evolve in numerous jurisdictions in the U.S. and foreigncountries, and may create restrictions on self-driving features that we develop.Automobile Manufacturer and Dealer RegulationState laws regulate the manufacture, distribution, sale and service of automobiles, and generally require motor vehicle manufacturers and dealers to belicensed in order to sell vehicles directly to consumers in the state. As we open additional Tesla stores and service centers, we secure dealer licenses (or theirequivalent) and engage in sales activities to sell our vehicles directly to consumers. Certain states do not permit automobile manufacturers to be licensed as dealersor to act in the capacity of a dealer, or otherwise restrict a manufacturer’s ability to deliver or service vehicles. To sell vehicles to residents of states where we arenot licensed as a dealer, we generally conduct the transfer of title out of the state. In such states, we have opened “galleries” that serve an educational purpose andwhere the title transfer may not occur.As we expand our retail footprint in the U.S., some automobile dealer trade associations have both challenged the legality of our operations in court andused administrative and legislative processes to attempt to prohibit or limit our ability to operate existing stores or expand to new locations. We expect that thedealer associations will continue to mount challenges to our business model. In addition, we expect the dealer associations to actively lobby state licensing agenciesand legislators to interpret existing laws or enact new laws in ways not favorable to Tesla’s ownership and operation of its own retail and service locations, and weintend to actively fight any such efforts to limit our ability to sell and service our own vehicles.Battery Safety and TestingOur battery pack conforms to mandatory regulations that govern transport of “dangerous goods,” defined to include lithium-ion batteries, which maypresent a risk in transportation. The regulations vary by mode of shipping transportation, such as by ocean vessel, rail, truck, or air. We have completed theapplicable transportation tests for our battery packs, demonstrating our compliance with applicable regulations.We use lithium-ion cells in our high voltage battery packs in our vehicles and energy storage products. The use, storage, and disposal of our battery packsis regulated under federal law. We have agreements with third party battery recycling companies to recycle our battery packs and we are also developing our ownrecycling technology. Solar Energy—GeneralWe are not a “regulated utility” in the U.S., although we are subject to certain state and federal regulations applicable to solar and battery storageproviders. To operate our systems, we obtain interconnection agreements from the utilities. In most cases, interconnection agreements are standard formagreements that have been pre-approved by the public utility commission or other regulatory body. Sales of electricity and non-sale equipment leases by third parties, such as our leases, PPAs and subscription agreements, face regulatory challenges insome states and jurisdictions.12 Solar Energy—Net MeteringMost states in the U.S. have a regulatory policy known as net energy metering, or net metering, available to solar customers. Net metering typically allowssolar customers to interconnect their on-site solar energy systems to the utility grid and offset their utility electricity purchases by receiving a bill credit for excessenergy generated by their solar energy system that is exported to the grid. In certain jurisdictions, regulators or utilities have reduced or eliminated the benefitavailable under net metering, or have proposed to do so.Solar Energy—Mandated Renewable CapacityMany states also have adopted procurement requirements for renewable energy production, such as an enforceable renewable portfolio standard, or RPS,or other policies that require covered entities to procure a specified percentage of total electricity delivered to customers in the state from eligible renewable energysources, such as solar energy systems. In SREC state markets, the RPS requires electricity suppliers to secure a portion of their electricity from solar generators.The SREC program provides a means for the generation of SRECs, which can then be sold separately from the energy produced to covered entities who surrenderthe SRECs to the state to prove compliance with the state’s renewable energy mandate.CompetitionAutomotiveThe worldwide automotive market is highly competitive and we expect it will become even more competitive in the future as we introduce additionalvehicles in a broader cross-section of the passenger and commercial vehicle market and expand our vehicles’ capabilities.We believe that our vehicles compete in the market both based on their traditional segment classification as well as based on their propulsion technology.For example, Model S and Model X compete primarily with premium sedans and premium SUVs and Model 3 and Model Y compete with small to medium-sizedsedans and compact SUVs, which are extremely competitive markets. Competing products typically include internal combustion vehicles from more establishedautomobile manufacturers; however, many established and new automobile manufacturers have entered or have announced plans to enter the alternative fuelvehicle market. Overall, we believe these announcements and vehicle introductions promote the development of the alternative fuel vehicle market by highlightingthe attractiveness of alternative fuel vehicles, particularly those fueled by electricity, relative to the internal combustion vehicle. Many major automobilemanufacturers have electric vehicles available today in major markets including the U.S., China and Europe, and other current and prospective automobilemanufacturers are also developing electric vehicles. In addition, several manufacturers offer hybrid vehicles, including plug-in versions. Our vehicles also compete in the market based on the compelling user experience that they offer. We believe that a key factor in our success will be ourAutopilot and FSD technologies that currently enable the driver-assistance features in our vehicles, and in which we are making significant strides through ourproprietary and powerful FSD computer and remotely updateable artificial intelligence software. Ultimately, while we are subject to regulatory constraints overwhich we have no control, our goal is a fully autonomously-driven future that improves safety and provides our customers with convenience and additional incomethrough participation in an autonomous Tesla ride-hailing network. This network, which will also include our own fleet of vehicles, will also allow us to access anew customer base even as modes of transportation evolve. Finally, our vehicles offer unparalleled in-vehicle entertainment features, currently including Internetsearch, music services, passenger karaoke, and parked video streaming and gaming.13 Energy Generation and StorageEnergy Storage SystemsThe market for energy storage products is also highly competitive. Established companies, such as AES Energy Storage, Siemens, LG Chem andSamsung, as well as various emerging companies, have introduced products that are similar to our product portfolio. There are several companies providingindividual components of energy storage systems (such as cells, battery modules, and power electronics) as well as others providing integrated systems. Wecompete with these companies based on price, energy density and efficiency. We believe that the specifications of our products, our strong brand, and the modular,scalable nature of our Powerpack and Megapack products give us a competitive advantage when marketing our products.Solar Energy SystemsThe primary competitors to our solar energy business are the traditional local utility companies that supply energy to our potential customers. We competewith these traditional utility companies primarily based on price, predictability of price and the ease by which customers can switch to electricity generated by oursolar energy systems. We also compete with solar energy companies that provide products and services similar to ours. Many solar energy companies only installsolar energy systems, while others only provide financing for these installations. In the residential solar energy system installation market, our primary competitorsinclude Vivint Solar Inc., Sunrun Inc., Trinity Solar, SunPower Corporation, and many smaller local solar companies.The electricity produced by solar installations still represents a small fraction of total U.S. electricity generation. With tens of millions of single-familyhomes and businesses in our primary service territories, and many more in other locations, we have a large opportunity to expand and grow this business as wemake our retrofit installations more accessible and ramp our innovative Solar Roof. We also believe that residential solar energy generation is gaining favorableregulatory momentum, as exemplified in part by the state of California recently requiring that new homes be built with solar generation starting in 2020.Intellectual PropertyWe place a strong emphasis on our innovative approach and proprietary designs which bring intrinsic value and uniqueness to our product portfolio. Aspart of our business, we seek to protect the underlying intellectual property rights of these innovations and designs such as with respect to patents, trademarks,copyrights, trade secrets and other measures, including through employee and third party nondisclosure agreements and other contractual arrangements. Forexample, we place a high priority on obtaining patents to provide the broadest and strongest possible protection to enable our freedom to operate our innovationsand designs within our products and technologies in the electric vehicle market as well as to protect and defend our product portfolio. We have also adopted apatent policy in which we irrevocably pledged that we will not initiate a lawsuit against any party for infringing our patents through activity relating to electricvehicles or related equipment for so long as such party is acting in good faith. We made this pledge in order to encourage the advancement of a common, rapidly-evolving platform for electric vehicles, thereby benefiting ourselves, other companies making electric vehicles, and the world. EmployeesAs of December 31, 2019, Tesla, Inc. had 48,016 full-time employees. To date, we have not experienced any work stoppages, and we consider ourrelationship with our employees to be good.Available InformationWe file or furnish periodic reports and amendments thereto, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q andCurrent Reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”). In addition, the SEC maintains awebsite (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically. Our website islocated at www.tesla.com, and our reports, amendments thereto, proxy statements and other information are also made available, free of charge, on our investorrelations website at ir.tesla.com as soon as reasonably practicable after we electronically file or furnish such information with the SEC. The information posted onour website is not incorporated by reference into this Annual Report on Form 10-K. 14 ITEM 1A.RISK FACTORSYou should carefully consider the risks described below together with the other information set forth in this report, which could materially affect ourbusiness, financial condition and future results. The risks described below are not the only risks facing our company. Risks and uncertainties not currently knownto us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.Risks Related to Our Business and IndustryWe have experienced in the past, and may experience in the future, delays or other complications in the design, manufacture, launch, and productionramp of our vehicles, energy products, and product features, or may not realize our manufacturing cost targets, which could harm our brand,business, prospects, financial condition and operating results.We have previously experienced launch and production ramp delays or other complications in connection with new vehicle models such as Model S,Model X and Model 3, and new vehicle features such as the all-wheel drive dual motor drivetrain on Model S and the second version of our Autopilot hardware.For example, we encountered unanticipated supply chain constraints that led to initial delays in producing Model X and an isolated supplier limitation in themanufacture of Model 3. Similarly, during our initial Model 3 production ramp, we had challenges ramping fully automated processes, such as portions of thebattery module assembly line, material flow system and the general assembly line, which we addressed by reducing the levels of automation and introducing semi-automated or manual processes. In addition, we have used a number of new manufacturing technologies, techniques and processes for our vehicles, such asaluminum spot welding systems and high-speed blow forming of certain difficult to stamp vehicle parts, and we may introduce new processes in the future. Wehave also introduced unique design features in our vehicles with different manufacturing challenges, such as large display screens, dual motor drivetrain, hardwarefor our Autopilot and FSD features and falcon-wing doors. There is no guarantee that we will be able to successfully and timely introduce and scale any such newprocesses or features.In particular, our future business depends in large part on the high-volume production of Model 3 and Model Y, which we believe are our vehicles with thelargest markets. We have limited experience to date in manufacturing Model 3 at high volumes and continuously increasing its production rates, particularly acrossmultiple vehicle manufacturing facilities, which we commenced in the fourth quarter of 2019 with Gigafactory Shanghai coming online. In order to be successful,we will need to implement, maintain and/or ramp efficient and cost-effective manufacturing capabilities, processes and supply chains and achieve the designtolerances, high quality and maximum output rates we have planned, including at Gigafactory Shanghai, and for Model Y, which we commenced manufacturing atthe Fremont Factory in the first quarter of 2020. Bottlenecks such as those we have experienced in the past with new product ramps and other unexpectedchallenges may also arise as we ramp production, and it will be important that we address them promptly while continuing to reduce our manufacturing costs. If weare not successful in doing so, or if we experience issues with our ongoing manufacturing process improvements and cost-down efforts, we could face delays inestablishing and/or sustaining our Model 3 and Model Y ramps or be unable to meet our related cost and profitability targets.Moreover, we will need to hire, train and compensate skilled employees to operate high-volume production facilities to support our vehicle ramp at theFremont Factory and Gigafactory Shanghai, as well as at Gigafactory Nevada to support the manufacture of battery packs and drive units for certain of ourvehicles. Finally, because our vehicle models, in particular Model 3 and Model Y, may share certain parts, suppliers or production facilities with each other, thevolume or efficiency of production with respect to one model may impact also the production of other models or lead to bottlenecks that impact the production ofall models. We may also experience similar future delays or other complications in launching and/or ramping production of new vehicles, such as Tesla Semi,Cybertruck and the new Tesla Roadster, our energy storage products and the Solar Roof, as well as future features and services such as new Autopilot or FSDfeatures and the autonomous Tesla ride-hailing network. Likewise, we may encounter delays with the design, construction and regulatory or other approvalsnecessary to build and bring online future manufacturing facilities, including our planned Gigafactory Berlin in Germany.15 Any significant delay or other complication in the production ramp of our current products or the development, manufacture, launch and production rampof our future products, features and services, including complications associated with expanding our production capacity and supply chain or obtaining ormaintaining related regulatory approvals, or inability to manage such ramps cost-effectively, could materially damage our brand, business, prospects, financialcondition and operating results.We may be unable to meet our growing product sales, delivery and installation plans and vehicle servicing and charging network needs, or accuratelyproject and manage this growth internationally, any of which could harm our business and prospects.Concurrent with developing, launching and ramping our products, our success will depend on our ability to continue to significantly increase their sales,deliveries, installations and servicing worldwide, while allocating our available resources among multiple products simultaneously. As we expand globally, we willalso need to ensure we are in compliance with any regulatory requirements applicable to the sale, installation and service of our products, the sale of electricitygenerated through our solar energy systems and operation of Superchargers in various jurisdictions, which could take considerable time and expense. These plansrequire significant cash investments and management resources and there is no guarantee that they will ultimately generate additional sales or installations of ourproducts.We continuously evaluate, and as appropriate evolve, our retail operations and product offerings in order to maximize our reach and optimize our costs,vehicle line-up and model differentiation, and purchasing experience. However, there is no guarantee that each step in our evolving strategy will be perceived asintended by prospective customers accustomed to more traditional sales models. In particular, we are targeting with Model 3 and Model Y a global massdemographic with a broad range of potential customers, in which we have limited experience projecting demand and pricing our products. Until we ramp localproduction at Gigafactory Shanghai and in the future at Gigafactory Berlin, we will have to contend with predominantly single-factory vehicle production at theFremont Factory for numerous international variants. If our specific demand expectations for these variants prove inaccurate, we may not be able to timelygenerate sales matched to the specific vehicles that we produce in the same timeframe or that are commensurate with our operations in a given region, which maynegatively impact our deliveries and operating results in a particular period. Likewise, as we develop and grow our energy storage product and solar businessworldwide, our success will depend on our ability to correctly forecast demand for our products in different markets.Moreover, because we do not have independent dealer networks, we are responsible for delivering all of our vehicles to our customers and meeting theirvehicle servicing needs. While we have substantially implemented and improved many aspects of our delivery and service operations, we still have relativelylimited experience with, and may face difficulties in, such deliveries and servicing at high volumes, particularly in international markets as we expand. Forexample, significant transit time may be required to transport vehicles in volume into international markets, and we also saw challenges in initially ramping ourlogistical channels in China and Europe as we delivered Model 3 there for the first time in the first quarter of 2019. To accommodate growing volumes, we havedeployed a number of delivery models, such as deliveries to customers’ homes and workplaces, some of which have not been previously tested at scale and indifferent geographies and may not ultimately be successful. Likewise, because of our unique expertise with our vehicles, we recommend that our vehicles beserviced by our service centers, Mobile Service technicians or certain authorized professionals that we have specifically trained and equipped. If we experiencedelays in adding such servicing capacity or experience unforeseen issues with the reliability of our vehicles, particular higher-volume and newer additions to ourfleet such as Model 3 and Model Y, it could overburden our servicing capabilities and parts inventory. Finally, the increasing number of Tesla vehicles alsorequires us to continue to rapidly increase the number of our Supercharger stations and connectors throughout the world.We are also expanding our installation capabilities for the Solar Roof as we continue its manufacturing ramp by training both our own personnel and thirdparty installers. If we are not successful in growing this overall installation capability to keep pace with our increasing production, or if we experience unforeseendelays in the production ramp or inaccurately forecast demand for the Solar Roof, our operating results may be negatively impacted.16 There is no assurance that we will be able to ramp our business to meet our sales, delivery, servicing, charging and installation targets globally, that ourprojections on which such targets are based will prove accurate, or that the pace of growth or coverage of our customer infrastructure network will meet customerexpectations. Moreover, we may not be successful in undertaking this global expansion if we are unable to avoid cost overruns and other unexpected operatingcosts, adapt our products and conduct our operations to meet local requirements and regulations, implement required local infrastructure, systems and processes,and find and hire a significant number of additional sales, service, electrical installation, construction and administrative personnel. If we fail to manage our growtheffectively, it could result in negative publicity and damage to our brand and have a material adverse effect on our business, prospects, financial condition andoperating results.Our future growth and success is dependent upon consumers’ willingness to adopt electric vehicles and specifically our vehicles. We operate in theautomotive industry, which is generally susceptible to cyclicality and volatility.Our growth is highly dependent upon the worldwide adoption by consumers of alternative fuel vehicles in general and electric vehicles in particular.Although we have successfully grown demand for our vehicles thus far, there is no guarantee of such future demand, or that our vehicles will not compete with oneanother in the market. Moreover, the target demographics for our vehicles, in particular the mass market demographic for Model 3 and Model Y, are highlycompetitive. If 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 ifdemand for our vehicles decreases in our markets, our business, prospects, financial condition and operating results could be harmed.We have only relatively recently achieved high-volume production of vehicles, and are still at an earlier stage and have limited resources relative to ourcompetitors. Moreover, the market for alternative fuel vehicles is rapidly evolving. As a result, the market for our vehicles could be affected by numerous factors,such as: •perceptions about electric vehicle features, quality, safety, performance and cost; •perceptions about the limited range over which electric vehicles may be driven on a single battery charge; •competition, including from other types of alternative fuel vehicles, plug-in hybrid electric vehicles and high fuel-economy internal combustionengine vehicles; •volatility in the cost of oil and gasoline; •government regulations and economic incentives; •access to charging facilities; and •concerns about our future viability.In addition, sales of vehicles in the automotive industry tend to be cyclical in many markets, which may expose us to increased volatility, especially as weexpand and adjust our operations and retail strategies. Specifically, it is uncertain as to how such macroeconomic factors will impact us as a company that hasbeen experiencing growth and increasing market share in an industry that has globally been experiencing a recent decline in sales.17 We are dependent on our suppliers, the majority of which are single-source suppliers, and the inability of these suppliers to deliver necessarycomponents of our products according to our schedule and at prices, quality levels and volumes acceptable to us, or our inability to efficiently managethese components, could have a material adverse effect on our financial condition and operating results.Our products contain thousands of purchased parts that we source globally from hundreds of direct suppliers. We attempt to mitigate our supply chainrisk by entering into long-term agreements where it is practical and beneficial to do so, including agreements we entered into with Panasonic to be ourmanufacturing partner and supplier; qualifying and obtaining components from multiple sources where sensible, such as the PV panels for our retrofit solarinstallations that we purchase from a variety of suppliers; and maintaining safety stock for key parts and assemblies and die banks for components with lengthyprocurement lead times. However, our limited, and in most cases single-source, supply chain exposes us to multiple potential sources of delivery failure orcomponent shortages for our production, such as those which we experienced in 2012 and 2016 in connection with our slower-than-planned Model S and Model Xramps. Furthermore, unexpected changes in business conditions, materials pricing, labor issues, wars, governmental changes, tariffs, natural disasters such as theMarch 2011 earthquakes in Japan, health epidemics, and other factors beyond our and our suppliers’ control could also affect these suppliers’ ability to delivercomponents to us on a timely basis. The loss of any supplier, particularly a single- or limited-source supplier, or the disruption in the supply of components fromour suppliers, could lead to product design changes, production delays of key revenue-generating products, idle manufacturing facilities, and potential loss ofaccess to important technology and parts for producing, servicing and supporting our products, any of which could result in negative publicity, damage to ourbrand and a material and adverse effect on our business, prospects, financial condition and operating results.We may also be impacted by changes in our supply chain or production needs. We have experienced in the past, and may experience in the future, costincreases from certain of our suppliers in order to meet our quality targets and development timelines as well as due to our design changes. Likewise, anysignificant increases in our production, such as for Model 3 and our expectations for Model Y, has required and/or may in the future require us to procureadditional components in a short amount of time. Our suppliers may not ultimately be able to sustainably and timely meet our cost, quality and volume needs,requiring us to replace them with other sources. While we believe that we will be able to secure additional or alternate sources of supply for most of ourcomponents in a relatively short time frame, there is no assurance that we will be able to do so or develop our own replacements for certain highly customizedcomponents. Additionally, we continuously negotiate with existing suppliers to obtain cost reductions and avoid unfavorable changes to terms, seek new and lessexpensive suppliers for certain parts, and attempt to redesign certain parts to make them less expensive to produce. If we are unsuccessful in our efforts to controland reduce supplier costs, our operating results will suffer.Outside of the U.S., we have limited manufacturing experience and we may experience issues or delays increasing the level of localized procurement atour Gigafactory Shanghai and in the future at our Gigafactory Berlin. Furthermore, as the scale of our vehicle production increases, we will need to accuratelyforecast, purchase, warehouse and transport components to our manufacturing facilities and servicing locations internationally and at much higher volumes. If weare unable to accurately match the timing and quantities of component purchases to our actual needs or successfully implement automation, inventory managementand other systems to accommodate the increased complexity in our supply chain, we may incur unexpected production disruption, storage, transportation andwrite-off costs, which could have a material adverse effect on our financial condition and operating results.Any problems or delays in expanding Gigafactory Nevada or ramping and maintaining operations there could negatively affect the production andprofitability of our products, such as Model 3, Model Y and our energy storage products. In addition, the battery cells produced there store largeamounts of energy.To lower the cost of cell production and produce cells in high volume, we have vertically integrated the production of lithium-ion cells at GigafactoryNevada, where we also manufacture battery packs and drive units for certain vehicles and energy storage products and assemble our Megapack product.Production of lithium-ion cells at Gigafactory Nevada began in 2017, and we have no other direct experience in the production of lithium-ion cells. Given the sizeand complexity of this undertaking, it is possible that future events could result in issues or delays in further ramping our products and expanding productionoutput at Gigafactory Nevada.18 In order to achieve our volume and gross margin targets for our vehicles and energy storage products, we must continue to sustain and ramp significantcell production at Gigafactory Nevada, which, among other things, requires Panasonic to successfully operate and further ramp its cell production lines atsignificant volumes. Although Panasonic has a long track record of producing high-quality cells at significant volume at its factories in Japan, it has relativelylimited experience with cell production at Gigafactory Nevada. In addition, we produce several components for Model 3 and Model Y, such as battery modulesincorporating the lithium-ion cells produced by Panasonic and drive units (including to support Gigafactory Shanghai production), at Gigafactory Nevada. Some ofthe manufacturing lines for such components took longer than anticipated to ramp to their full capacity. While we have largely overcome this bottleneck afterdeploying multiple semi-automated lines and improving our original lines, additional bottlenecks may arise as we continue to increase the production rate andintroduce new lines. If we are unable to maintain Gigafactory Nevada production, ramp output additionally over time as needed, and do so cost-effectively, or if weor Panasonic are unable to hire and retain a substantial number of highly skilled personnel, our ability to supply battery packs or other components for Model 3,Model Y and our other products could be negatively impacted, which could negatively affect our brand and harm our business, prospects, financial condition andoperating results.In addition, the high volumes of lithium-ion cells and battery modules and packs manufactured at Gigafactory Nevada are stored and recycled at ourvarious facilities. Any mishandling of battery cells may cause disruption to the operation of such facilities. While we have implemented safety procedures relatedto the handling of the cells, there can be no assurance that a safety issue or fire related to the cells would not disrupt our operations. Such disruptions or issuescould negatively affect our brand and harm our business, prospects, financial condition and operating results.Any issues or delays in meeting our projected timelines, costs and production at or funding the ramp of Gigafactory Shanghai, or any difficulties ingenerating and maintaining local demand for vehicles manufactured there, could adversely impact our business, prospects, operating results andfinancial condition.As part of our continuing work to increase production of our vehicles on a sustained basis, and in order to make them affordable in international marketsby accessing local supply chains and workforces, we have established Gigafactory Shanghai in China. Currently, we have installed annual production capacity for150,000 Model 3 vehicles there that we believe we will eventually be able to push to actual rates of production in excess of such number, and we have commencedconstruction of the next phase of Gigafactory Shanghai to add Model Y manufacturing capacity at least equivalent to that for Model 3. The ramp and furtherexpansion of Gigafactory Shanghai are subject to a number of uncertainties inherent in all new manufacturing operations, including ongoing compliance withregulatory requirements, maintenance of operational licenses and approvals for additional expansion, potential supply chain constraints, hiring, training andretention of qualified employees, and the pace of bringing production equipment and processes online with the capability to manufacture high-quality units at scale.We have limited experience to date with operating manufacturing facilities abroad, and only recently began to sell Model 3 in China. If we experience any issues ordelays in meeting our projected timelines, costs, capital efficiency and production capacity for Gigafactory Shanghai, or in maintaining and complying with theterms of local debt financing that we intend will largely fund it, or in generating and maintaining demand locally for the vehicles we manufacture at GigafactoryShanghai, our business, prospects, operating results and financial condition could be adversely impacted.In particular, local manufacturing is critical to our expansion and sales in China, which is the largest market for electric vehicles in the world. Our vehiclesales in China have been negatively impacted in the past by certain tariffs on automobiles manufactured in the U.S., such as our vehicles, and our costs forproducing our vehicles in the U.S. have also been affected by import duties on certain components sourced from China. If we are not able to successfully andtimely ramp Gigafactory Shanghai, we may continue to be exposed to the impact of such unfavorable tariffs, duties or costs to our detriment compared to locally-based competitors.19 We face risks associated with our international operations, including unfavorable and uncertain regulatory, political, economic, tax and laborconditions, and with establishing ourselves in new markets, all of which could harm our business.We have a global footprint with domestic and international operations and subsidiaries. Accordingly, we are subject to a variety of legal, political andregulatory requirements and social, environmental and economic conditions over which we have little control. For example, we may be impacted by trade policies,environmental conditions, political uncertainty and economic cycles involving geographic regions where we have significant operations, which are inherentlyunpredictable. We are subject to a number of risks associated in particular with international business activities that may increase our costs, impact our ability tosell our products and require significant management attention. These risks include conforming our products to various international regulatory and safetyrequirements as well as charging and other electric infrastructures, organizing local operating entities, difficulty in establishing, staffing and managing foreignoperations, challenges in attracting customers, foreign government taxes, regulations and permit requirements, our ability to enforce our contractual rights, traderestrictions, customs regulations, tariffs and price or exchange controls, and preferences of foreign nations for domestically manufactured products.Increases in costs, disruption of supply or shortage of materials, in particular for lithium-ion cells, could harm our business.We may experience increases in the cost of or a sustained interruption in the supply or shortage of materials. Any such increase, supply interruption orshortage could materially and negatively impact our business, prospects, financial condition and operating results. We use various materials in our businessincluding aluminum, steel, lithium, nickel, copper and cobalt, as well as lithium-ion cells from suppliers. The prices for these materials fluctuate, and theiravailable supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased production of electricvehicles and energy storage products by our competitors, and could adversely affect our business and operating results. For instance, we are exposed to multiplerisks relating to lithium-ion cells. These risks include: •an increase in the cost, or decrease in the available supply, of materials used in the cells; •disruption in the supply of cells due to quality issues or recalls by battery cell manufacturers or any issues that may arise with respect to cellsmanufactured at our own facilities; and •fluctuations in the value of any foreign currencies in which battery cell and related raw material purchases are or may be denominated, such as theJapanese yen, against the U.S. dollar. Our business is dependent on the continued supply of battery cells for the battery packs used in our vehicles and energy storage products. While webelieve several sources of the battery cells are available for such battery packs, and expect to eventually rely substantially on battery cells manufactured at our ownfacilities, we have to date fully qualified only a very limited number of suppliers for the cells used in such battery packs and have very limited flexibility inchanging cell suppliers. Any disruption in the supply of battery cells from such suppliers could disrupt production of our vehicles and of the battery packs weproduce for energy products until such time as a different supplier is fully qualified. Furthermore, fluctuations or shortages in petroleum and other economicconditions may cause us to experience significant increases in freight charges and material costs. Substantial increases in the prices for our materials or pricescharged to us, such as those charged by battery cell suppliers, would increase our operating costs, and could reduce our margins if we cannot recoup the increasedcosts through increased vehicle prices. Any attempts to increase product prices in response to increased material costs could result in cancellations of orders andreservations and therefore materially and adversely affect our brand, image, business, prospects and operating results.20 If our vehicles or other products that we sell or install fail to perform as expected, our ability to develop, market and sell our products and servicescould be harmed.If our vehicles or our energy products contain defects in design and manufacture that cause them not to perform as expected or that require repair, orcertain features of our vehicles such as new Autopilot or FSD features take longer than expected to become enabled, are legally restricted or become subject toonerous regulation, our ability to develop, market and sell our products and services could be harmed. For example, the operation of our vehicles is highlydependent on software, which is inherently complex and may contain latent defects and errors or be subject to external attacks. Issues experienced by vehiclecustomers have included those related to the software for the 17 inch display screen, as well as the panoramic roof and the 12-volt battery in the Model S and theseats and doors in the Model X. Although we attempt to remedy any issues we observe in our products as effectively and rapidly as possible, such efforts may notbe timely, may hamper production or may not be to the satisfaction of our customers. While we have performed extensive internal testing on the products wemanufacture, we currently have a limited frame of reference by which to evaluate detailed long-term quality, reliability, durability and performance characteristicsof our battery packs, powertrains, vehicles and energy storage products. There can be no assurance that we will be able to detect and fix any defects in ourproducts prior to their sale to or installation for customers.Any product defects, delays or legal restrictions on product features, or other failure of our products to perform as expected, could harm our reputation andresult in delivery delays, product recalls, product liability claims, breach of warranty claims, and significant warranty and other expenses, and could have a materialadverse impact on our business, financial condition, operating results and prospects.We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend orinsure against such claims.Although we design our vehicles to be the safest vehicles on the road, product liability claims, even those without merit, could harm our business,prospects, operating results and financial condition. The automobile industry in particular experiences significant product liability claims and we face inherent riskof exposure to claims in the event our vehicles do not perform or are claimed to not have performed as expected. As is true for other automakers, our vehicles havebeen involved and we expect in the future will be involved in crashes resulting in death or personal injury, and such crashes where Autopilot or FSD features areengaged are the subject of significant public attention. We have experienced and we expect to continue to face claims arising from or related to misuse or claimedfailures of new technologies that we are pioneering, including Autopilot and FSD features in our vehicles. In addition, the battery packs that we produce make useof 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 ignitenearby materials as well as other lithium-ion cells. While we have designed the battery pack to passively contain any single cell’s release of energy withoutspreading 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, inparticular due to a high-speed crash, which could subject us to lawsuits, product recalls or redesign efforts, all of which would be time consuming and expensive.Moreover, as our solar energy systems and energy storage products generate and store electricity, they have the potential to cause injury to people orproperty. A successful product liability claim against us could require us to pay a substantial monetary award. Our risks in this area are particularly pronouncedgiven the relatively limited number of vehicles and energy storage products delivered to date and limited field experience of our products. Moreover, a productliability claim could generate substantial negative publicity about our products and business and could have a material adverse effect on our brand, business,prospects and operating results. In most jurisdictions, we generally self-insure against the risk of product liability claims for vehicle exposure, meaning that anyproduct liability claims will likely have to be paid from company funds, not by insurance.21 The markets in which we operate are highly competitive, and we may not be successful in competing in these industries. We currently facecompetition from new and established domestic and international competitors and expect to face competition from others in the future, includingcompetition from companies with new technology.The worldwide automotive market, particularly for alternative fuel vehicles, is highly competitive today and we expect it will become even more so in thefuture. There is no assurance that our vehicles will be successful in the respective markets in which they compete. A significant and growing number ofestablished and new automobile manufacturers, as well as other companies, have entered or are reported to have plans to enter the alternative fuel vehicle market,including hybrid, plug-in hybrid and fully electric vehicles, as well as the market for self-driving technology and applications. In some cases, such competitorshave announced an intention to produce electric vehicles exclusively at some point in the future. Most of our current and potential competitors have significantlygreater financial, technical, manufacturing, marketing, vehicle sales resources and networks than we do and may be able to devote greater resources to the design,development, manufacturing, distribution, promotion, sale and support of their products. In particular, some competitors have also announced plans to competewith us in important and large markets for electric vehicles, such as China and in Europe. Increased competition could result in lower vehicle unit sales, pricereductions, revenue shortfalls, loss of customers and loss of market share, which could harm our business, prospects, financial condition and operating results. Inaddition, Model 3 and Model Y face competition from existing and future automobile manufacturers in the extremely competitive entry-level premium sedan andcompact SUV market, including BMW, Ford, Lexus, Mercedes and Volkswagen Group.The solar and energy storage industries are highly competitive. We face competition from other manufacturers, developers and installers of solar andenergy storage systems, as well as from large utilities. Decreases in the retail prices of electricity from utilities or other renewable energy sources could make ourproducts less attractive to customers and lead to an increased rate of customer defaults under our existing long-term leases and PPAs. Moreover, prices for solarproduct components and prices per kWh for lithium-ion battery cells have declined and may continue to decline, which may adversely impact our ability to cost-effectively manufacture such components ourselves.If we are unable to establish and maintain confidence in our long-term business prospects among consumers, analysts and within our industries, orare subject to negative publicity, then our financial condition, operating results, business prospects and access to capital may suffer materially.Consumers may be less likely to purchase our products if they are not convinced that our business will succeed or that our service and support and otheroperations will continue in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing businessrelationships with us if they are not convinced that our business will succeed. Accordingly, in order to build and maintain our business, we must maintainconfidence among customers, suppliers, analysts, ratings agencies and other parties in our long-term financial viability and business prospects. Maintaining suchconfidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited operating history,customer unfamiliarity with our products, any delays in scaling manufacturing, delivery and service operations to meet demand, competition and uncertaintyregarding the future of electric vehicles or our other products and services, and our quarterly production and sales performance compared with market expectations.In particular, Tesla’s products, business, results of operations, statements and actions are well-publicized by a range of third parties. Such attentionincludes frequent criticism, which is often exaggerated or unfounded, such as speculation regarding the sufficiency or stability of our management team. Any suchnegative perceptions, whether caused by us or not, could harm our business and make it more difficult to raise additional funds if needed.22 If we fail to effectively grow and manage the residual, financing and credit risks related to our vehicle financing programs, our business may suffer.We offer financing arrangements for our vehicles in North America, Europe and Asia primarily through various financial institutions. We also currentlyoffer leasing directly through our local subsidiaries for Model S, Model X and Model 3 in the U.S. and for Model S and Model X in Canada. Under a lease helddirectly by us, 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 termof the lease. The profitability of any vehicles returned to us at the end of their leases depends on our ability to accurately project our vehicles’ residual values at theoutset of the leases, and such values may fluctuate prior to the end of their terms depending on various factors such as supply and demand of our used vehicles,economic cycles and the pricing of new vehicles. For example, we made certain adjustments to our vehicle prices during 2019 to reflect anticipated changes to ourcost structure from periodically optimizing our retail strategy, and as a limited accommodation to customers in consideration of a reduction in the electric vehiclefederal tax credit. Such pricing changes may impact the residual values of our vehicles. The leasing program also relies on our ability to secure adequate financingand/or business partners to fund and grow this program, and screen for and manage customer credit risk. We expect the availability of leasing and other financingoptions will be important for our vehicle customers. If we are unable to adequately fund our leasing program with internal funds, or partners or other externalfinancing sources, and compelling alternative financing programs are not available for our customers, we may be unable to grow our deliveries. Furthermore, if ourleasing business grows substantially, our business may suffer if we cannot effectively manage the greater levels of residual and credit risks resulting from growth.Finally, if we do not successfully monitor and comply with applicable national, state and/or local financial regulations and consumer protection laws governinglease transactions, we may become subject to enforcement actions or penalties, either of which may harm our business.Moreover, we have provided resale value guarantees to customers and partners for certain financing programs, under which such counterparties may selltheir vehicles back to us at certain points in time at pre-determined amounts. However, actual resale values, as with residual values for leased vehicles, are subjectto similar fluctuations over the term of the financing arrangements, such as from the vehicle pricing changes discussed above. If the actual resale values of anyvehicles resold or returned to us pursuant to these programs are materially lower than the pre-determined amounts we have offered, our operating results,profitability and/or liquidity could be negatively impacted.The unavailability, reduction or elimination of, or unfavorable determinations with respect to, government and economic incentives in the U.S. andabroad supporting the development and adoption of electric vehicles, energy storage products or solar energy could have some impact on demand forour products and services.We and our customers currently benefit from certain government and economic incentives supporting the development and adoption of electric vehicles.In the U.S. and abroad, such incentives include tax credits or rebates that encourage the purchase of electric vehicles. Specific policies in place around the worldinclude exempting the purchase of electric vehicles from import taxes, value added taxes, or carbon dioxide and weight-based purchase taxes. Such programs couldbe reduced, eliminated or exhausted. For example, under current regulations, a $7,500 federal tax credit that was available in the U.S. for the purchase of ourvehicles was reduced in phases during 2019 and ended on December 31, 2019. We believe that this sequential phase-out likely pulled forward some vehicledemand into the periods preceding each reduction. Moreover, in July 2018, a previously available incentive for purchases of Model 3 in Ontario, Canada wascancelled and Tesla buyers in Germany lost access to electric vehicle incentives for a short period of time beginning late 2017. In April 2017 and January 2016,respectively, previously available incentives in Hong Kong and Denmark that favored the purchase of electric vehicles expired, negatively impacting sales.Effective March 2016, California implemented regulations phasing out a $2,500 cash rebate on qualified electric vehicles for high-income consumers. Suchdevelopments could have some negative impact on demand for our vehicles, and we and our customers may have to adjust to them.23 In addition, certain governmental rebates, tax credits and other financial incentives that are currently available with respect to our solar and energy storageproduct businesses allow us to lower our costs and encourage customers to buy our products and investors to invest in our solar financing funds. However, theseincentives may expire on a particular date when the allocated funding is exhausted, reduced or terminated as renewable energy adoption rates increase, sometimeswithout warning. For example, the U.S. federal government currently offers an investment tax credit (ITC) for the installation of solar power facilities and energystorage systems that are charged from a co-sited solar power facility; however, the ITC is currently scheduled to decline in phases, from 26% for qualifying solarsystems for which construction began by December 31, 2020, to 10% for commercial and utility systems and to 0% for customer-owned residential systems forwhich construction begins after December 31, 2021. Likewise, in jurisdictions where net energy metering is currently available, our customers receive bill creditsfrom utilities for energy that their solar energy systems generate and export to the grid in excess of the electric load they use. Several jurisdictions have reduced,altered or eliminated the benefit available under net energy metering, or have proposed to do so. Such reductions in or termination of governmental incentivescould adversely impact our results by making our products less competitive for potential customers, increasing our cost of capital and adversely impacting ourability to attract investment partners and to form new financing funds for our solar and energy storage assets.Moreover, we and our fund investors claim the ITC and certain state incentives in amounts based on the fair market value of our solar and energy storagesystems. Although we obtain independent appraisals to support the claimed fair market values, the relevant governmental authorities have audited such values andin certain cases have determined that they should be lower, and they may do so again in the future. Such determinations may result in adverse tax consequencesand/or our obligation to make indemnification or other payments to our funds or fund investors.Any failure by us to comply with the terms of our agreement with the Research Foundation for the State University of New York relating to ourGigafactory New York, could result in negative consequences for our business.We are party to an operating lease and a research and development agreement through the SUNY Foundation. These agreements provide for theconstruction and use of our Gigafactory in Buffalo, New York, which we have primarily used for the development and production of our Solar Roof and othersolar products and components, energy storage components, and Supercharger components, and for other lessor-approved functions. Under this agreement, we areobligated to, among other things, directly employ specified minimum numbers of personnel in the State of New York and spend or incur $5.0 billion in combinedcapital, operational expenses, costs of goods sold and other costs in the State of New York during the 10-year period beginning April 30, 2018. While we expectsignificant operations at Gigafactory New York and the surrounding Buffalo area to continue, including with our ramp and manufacture of the Solar Roof, if wefail in any year over the course of the term of the agreement to meet these obligations, we would be obligated to pay a “program payment” of $41.2 million to theSUNY Foundation for such year. Any inability on our part to comply with the requirements of this agreement may result in the payment of significant amounts tothe SUNY Foundation, the termination of our lease at Gigafactory New York, and/or the need to adjust certain of our operations, in particular our production rampof the Solar Roof or Supercharger components. Any of the foregoing events could have a material adverse effect on our business, prospects, financial conditionand operating results.If we are unable to attract and/or retain key employees and hire qualified personnel, our ability to compete could be harmed.The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our vehicles and services,and negatively impact our business, prospects and operating results. In particular, we are highly dependent on the services of Elon Musk, our Chief ExecutiveOfficer.None of our key employees is bound by an employment agreement for any specific term and we may not be able to successfully attract and retain seniorleadership necessary to grow our business. Our future success depends upon our ability to attract and retain executive officers and other key technology, sales,marketing, engineering, manufacturing and support personnel, especially to support our high-volume manufacture of vehicles, expansion plans and technologicalinnovation, and any failure or delay in doing so could adversely impact our business, prospects, financial condition and operating results.24 Key talent may leave Tesla due to various factors, such as a very competitive labor market for talented individuals with automotive or technologyexperience, or any negative publicity related to us. In California, Nevada and other regions where we have operations, including outside of the U.S., there isincreasing competition for individuals with skillsets needed for our business, including specialized knowledge of electric vehicles, software engineering,manufacturing engineering, and other skills such as electrical and building construction expertise. This competition affects our ability to retain and hire keyemployees. Moreover, we have in the past conducted reductions in force in order to optimize our organizational structure and reduce costs, and certain seniorpersonnel have also departed for various reasons. Our continued success depends upon our continued ability to hire new employees in a timely manner, especiallyto support our expansion plans, and to retain current employees or replace departed senior employees with qualified and experienced individuals, which is typicallya time-consuming process. Additionally, we compete with both mature and prosperous companies that have far greater financial resources than we do and start-upsand emerging companies that promise short-term growth opportunities. Difficulties in retaining or recruiting employees could have an adverse effect on ourperformance and results.Finally, our compensation philosophy for all of our personnel reflects our startup origins, with an emphasis on equity-based awards and benefits in orderto closely align their incentives with the long-term interests of our stockholders. We have to periodically seek and obtain approval from our stockholders for futureincreases to the number of awards that may be granted and shares that may be purchased under our equity incentive and employee stock purchase plans. If we areunable to obtain the requisite stockholder approvals to obtain future increases to the number of awards that may be granted and shares that may be purchasedunder such plans, and compensate our personnel in accordance with our compensation philosophy, our ability to retain and hire qualified personnel would benegatively impacted.We are highly dependent on the services of Elon Musk, our Chief Executive Officer.We are highly dependent on the services of Elon Musk, our Chief Executive Officer and largest stockholder. Although Mr. Musk spends significant timewith Tesla and is highly active in our management, he does not devote his full time and attention to Tesla. Mr. Musk also currently serves as Chief ExecutiveOfficer and Chief Technical Officer of Space Exploration Technologies Corp., a developer and manufacturer of space launch vehicles, and is involved in otheremerging technology ventures.We are continuously expanding and improving our information technology systems and use security measures designed to protect our systems againstbreaches and cyber-attacks. If these efforts are not successful, our business and operations could be disrupted or our intellectual property could becompromised, as a result of which our operating results and reputation could be harmed.We are continuously expanding and improving our information technology systems, including implementing new internally developed systems anddeploying such systems globally, to assist us in the management of our business. In particular, our volume production of multiple vehicles necessitates continueddevelopment, maintenance and improvement of our information technology systems in the U.S. and abroad, including at Gigafactory Shanghai, such as systems forproduct data management, procurement, inventory management, production planning and execution, sales, service and logistics, dealer management, financial, taxand regulatory compliance systems. We also maintain information technology measures designed to protect us against intellectual property theft, data breaches andother cyber-attacks. The implementation, maintenance, segregation and improvement of these systems require significant management time, support and cost.Moreover, there are inherent risks associated with developing, improving and expanding our core systems as well as implementing new systems and updatingcurrent systems, including the disruption of our data management, procurement, manufacturing execution, finance, supply chain and sales and service processes.These risks may affect our ability to manage our data and inventory, procure parts or supplies or manufacture, sell, deliver and service vehicles, adequately protectour intellectual property or achieve and maintain compliance with, or realize available benefits under, tax laws and other applicable regulations.25 We cannot be sure that these systems or their required functionality will be effectively implemented, maintained or expanded as planned. If we do notsuccessfully implement, maintain or expand these systems as planned, our operations may be disrupted, our ability to accurately and/or timely report our financialresults could be impaired, and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results.Moreover, our proprietary information or intellectual property could be compromised or misappropriated and our reputation may be adversely affected. If thesesystems or their functionality do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternativesources for performing these functions.Any unauthorized control or manipulation of our products’ systems could result in loss of confidence in us and our products and harm our business.Our products contain complex information technology systems. For example, our vehicles and energy storage products are designed with built-in dataconnectivity to accept and install periodic remote updates from us to improve or update their functionality. We have designed, implemented and tested securitymeasures intended to prevent unauthorized access to our information technology networks, our products and their systems. However, hackers have reportedlyattempted, and may attempt in the future, to gain unauthorized access to modify, alter and use such networks, products and systems to gain control of, or to change,our products’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by our products. We encourage reportingof potential vulnerabilities in the security of our products via our security vulnerability reporting policy, and we aim to remedy any reported and verifiedvulnerability. Accordingly, we have received reports of potential vulnerabilities in the past and have attempted to remedy them. However, there can be noassurance that vulnerabilities will not be exploited in the future before they can be identified, or that our remediation efforts are or will be successful.Any unauthorized access to or control of our products or their systems or any loss of data could result in legal claims or proceedings. In addition,regardless of their veracity, reports of unauthorized access to our products, their systems or data, as well as other factors that may result in the perception that ourproducts, their systems or data are capable of being “hacked,” could negatively affect our brand and harm our business, prospects, financial condition andoperating results. We have been the subject of such reports in the past.We are subject to substantial laws and regulations that could impose substantial costs, legal prohibitions or unfavorable changes upon our operationsor products, and any failure to comply with these laws and regulations, including as they evolve, could negatively impact our ability to operate ourmanufacturing facilities and substantially harm our business and operating results.As a manufacturing company, including with respect to our current facilities such as the Fremont Factory, Gigafactory Nevada, Gigafactory New York andGigafactory Shanghai and our future facility at Gigafactory Berlin, we are or will be subject to complex environmental, manufacturing, health and safety laws andregulations 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 human exposure to hazardous materials and with respect to constructing, expanding and maintaining our facilities. The costs of compliance,including remediating contamination if any is found on our properties and any changes to our operations mandated by new or amended laws, may be significant.We may also face unexpected delays in obtaining permits and approvals required by such laws in connection with our manufacturing facilities, which would hinderour operation of these facilities. Such costs and delays may adversely impact our business prospects and operating results. Furthermore, any violations of theselaws may result in substantial fines and penalties, remediation costs, third party damages, or a suspension or cessation of our operations.26 In addition, motor vehicles are subject to substantial regulation under international, federal, state and local laws. We incur significant costs in complyingwith these regulations and may be required to incur additional costs to comply with any changes to such regulations, and any failures to comply could result insignificant expenses, delays or fines. We are subject to laws and regulations applicable to the supply, manufacture, import, sale and service of automobilesinternationally. For example, in countries outside of the U.S., we are required to meet standards relating to vehicle safety, fuel economy and emissions, amongother things, that are often materially different from requirements in the U.S., thus resulting in additional investment into the vehicles and systems to ensureregulatory compliance in those countries. This process may include official review and certification of our vehicles by foreign regulatory agencies prior to marketentry, as well as compliance with foreign reporting and recall management systems requirements.In particular, we offer in our vehicles Autopilot and FSD features that today assist drivers with certain tedious and potentially dangerous aspects of roadtravel, but which currently require drivers to remain engaged. We are continuing to develop our FSD technology with the goal of achieving full self-drivingcapability in the future. There is a variety of international, federal and state regulations that may apply to self-driving vehicles, which include many existingvehicle standards that were not originally intended to apply to vehicles that may not have a driver. Such regulations continue to rapidly change, which increases thelikelihood of a patchwork of complex or conflicting regulations, or may delay products or restrict self-driving features and availability, any of which couldadversely affect our business.Finally, as a manufacturer and installer of solar generation and energy storage systems and a supplier of electricity generated and stored by the solarenergy and energy storage systems we install for customers, we are impacted by federal, state and local regulations and policies concerning electricity pricing, theinterconnection of electricity generation and storage equipment with the electric grid, and the sale of electricity generated by third-party owned systems. Forexample, existing or proposed regulations and policies would permit utilities to limit the amount of electricity generated by our customers with their solar energysystems, charge fees and penalties to our customers relating to the purchase of energy other than from the grid, adjust electricity rate designs such that the price ofour solar products may not be competitive with that of electricity from the grid, restrict us and our customers from transacting under our PPAs or qualifying forgovernment incentives and benefits that apply to solar power, and limit or eliminate net energy metering. If such regulations and policies are adopted, or if otherregulations and policies that adversely impact the interconnection or use of our solar and energy storage systems are introduced, they could deter potentialcustomers from purchasing our solar and energy storage products, threaten the economics of our existing contracts and cause us to cease solar and energy storagesystem sales and operations in the relevant jurisdictions, which could harm our business, prospects, financial condition and results of operations.Failure to comply with a variety of U.S. and international privacy and consumer protection laws to which we are subject could harm the Company.Our privacy policy is posted on our website, and any failure by us or our vendor or other business partners to comply with it or with federal, state orinternational privacy, data protection or security laws or regulations relating to the collection, use, retention, security and transfer of personally identifiableinformation 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 in particular certain emergingprivacy laws are still subject to a high degree of uncertainty as to their interpretation and application. For example, in May 2018, the General Data ProtectionRegulation began to fully apply to the processing of personal information collected from individuals located in the European Union, and has created newcompliance obligations and has significantly increased fines for noncompliance. Similarly, beginning in January 2020, the California Consumer Privacy Actimposes certain legal obligations on our use and processing of personal information related to California residents. Although we take steps to protect the securityand integrity of our customers’ personal information, we may be required to expend significant resources to comply with data breach requirements if third partiesimproperly obtain and use the personal information of our customers or we otherwise experience a data loss with respect to customers’ personal information. Amajor breach of our network security and systems could have negative consequences for our business and future prospects, including possible fines, penalties anddamages, reduced customer demand for our vehicles and harm to our reputation and brand.27 Our business may be adversely affected by any disruptions caused by union activities.It is not uncommon for employees of certain trades at companies such as us to belong to a union, which can result in higher employee costs and increasedrisk of work stoppages. Moreover, regulations in some jurisdictions outside of the U.S. mandate employee participation in industrial collective bargainingagreements and work councils with certain consultation rights with respect to the relevant companies’ operations. Although we work diligently to provide the bestpossible 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 unionsignatory. From time to time, labor unions have engaged in campaigns to organize certain of our operations, as part of which such unions have filed unfair laborpractice charges against us with the National Labor Relations Board, and they may do so in the future. In September 2019, an administrative law judge issued arecommended decision for Tesla on certain issues and against us on certain others. The National Labor Relations Board has not yet adopted the recommendationand we have appealed certain aspects of the recommended decision. Any unfavorable ultimate outcome for Tesla may have a negative impact on the perception ofTesla’s treatment of our employees. Furthermore, we are directly or indirectly dependent upon companies with unionized work forces, such as parts suppliers andtrucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial conditionor operating results. If a work stoppage occurs, it could delay the manufacture and sale of our products and have a material adverse effect on our business,prospects, operating results or financial condition.We may choose to or be compelled to undertake product recalls or take other similar actions, which could adversely affect our brand image andfinancial performance.Any product recall with respect to our products may result in adverse publicity, damage our brand and adversely affect our business, prospects, operatingresults and financial condition. For example, certain vehicle recalls that we initiated have resulted from various causes, including a component that could preventthe parking brake from releasing once engaged, a concern with the firmware in the restraints control module in certain right-hand-drive vehicles, industry-wideissues with airbags from a particular supplier, Model X seat components that could cause unintended seat movement during a collision, and concerns of corrosionin Model S and Model X power steering assist motor bolts. Furthermore, testing of our products by government regulators or industry groups may require us toinitiate product recalls or may result in negative public perceptions about the safety of our products. In the future, we may at various times, voluntarily orinvoluntarily, initiate a recall if any of our products or our electric vehicle powertrain components that we have provided to other vehicle OEMs, including anysystems or parts sourced from our suppliers, prove to be defective or noncompliant with applicable laws and regulations, such as federal motor vehicle safetystandards. Such recalls, whether voluntary or involuntary or caused by systems or components engineered or manufactured by us or our suppliers, could involvesignificant expense and could adversely affect our brand image in our target markets, as well as our business, prospects, financial condition and results ofoperations.Our current and future warranty reserves may be insufficient to cover future warranty claims which could adversely affect our financial performance.We provide a manufacturer’s warranty on all new and used Tesla vehicles and production powertrain components and systems we sell. In addition, wealso provide a warranty on the installation and components of the energy generation and storage systems we sell, and we pass through to our customers the inverterand panel manufacturers’ warranties. Finally, we offer a performance guarantee with our leased solar energy systems that compensates a customer on an annualbasis if their system does not meet the electricity production guarantees set forth in their PPA or lease. Under these performance guarantees, we bear the risk ofelectricity production shortfalls resulting from an inverter or panel failure. These risks are exacerbated in the event the panel or inverter manufacturers ceaseoperations or fail to honor their warranties.If our warranty reserves are inadequate to cover future warranty claims on our products, our business, prospects, financial condition and operating resultscould be materially and adversely affected. Warranty reserves include our management’s best estimate of the projected costs to repair or to replace items underwarranty. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. Such estimates areinherently uncertain and changes to our historical or projected experience, especially with respect to products such as Model 3, Model Y and the Solar Roof thatwe have recently introduced and/or that we expect to produce at significantly greater volumes than our past products, may cause material changes to our warrantyreserves in the future.28 Our insurance coverage strategy may not be adequate to protect us from all business risks.We may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God and other claims against us, forwhich we may have no insurance coverage. As a general matter, we do not maintain as much insurance coverage as many other companies do, and in some cases,we do not maintain any at all. Additionally, the policies that we do have may include significant deductibles or self-insured retentions, and we cannot be certainthat our insurance coverage will be sufficient to cover all future losses or claims against us. A loss that is uninsured or which exceeds policy limits may require usto pay substantial amounts, which could adversely affect our financial condition and operating results.Our financial results may vary significantly from period to period due to fluctuations in our operating costs and other factors.We expect our period-to-period financial results to vary based on our operating costs, which we anticipate will fluctuate as the pace at which we continueto design, develop and manufacture new products and increase production capacity by expanding our current manufacturing facilities and adding future facilities,may not be consistent or linear between periods. Additionally, our revenues from period to period may fluctuate as we introduce existing products to new marketsfor the first time and as we develop and introduce new products. As a result of these factors, we believe that quarter-to-quarter comparisons of our financial results,especially in the short term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. Moreover, ourfinancial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be focused only on quarterly financial results. Ifany of this occurs, the trading price of our stock could fall substantially, either suddenly or over time.Servicing our indebtedness requires a significant amount of cash, and there is no guarantee that we will have sufficient cash flow from our business topay our substantial indebtedness.As of December 31, 2019, we and our subsidiaries had outstanding $12.49 billion in aggregate principal amount of indebtedness (see Note 12, Debt, to theconsolidated financial statements included elsewhere in this Annual Report on Form 10-K). Our substantial consolidated indebtedness may increase ourvulnerability to any generally adverse economic and industry conditions. We and our subsidiaries may, subject to the limitations in the terms of our existing andfuture indebtedness, incur additional debt, secure existing or future debt or recapitalize our debt.Pursuant to their terms, holders of our 1.25% Convertible Senior Notes due 2021, 2.375% Convertible Senior Notes due 2022 and 2.00% ConvertibleSenior Notes due 2024 (together, the “Tesla Convertible Notes”) may convert their respective Tesla Convertible Notes at their option prior to the scheduledmaturities of the respective Tesla Convertible Notes under certain circumstances. Upon conversion of the applicable Tesla Convertible Notes, we will be obligatedto deliver cash and/or shares in respect of the principal amounts thereof and the conversion value in excess of such principal amounts on such Tesla ConvertibleNotes. Moreover, our subsidiary’s Zero-Coupon Convertible Senior Notes due 2020 (the “Subsidiary Convertible Notes”) are convertible into shares of ourcommon stock at a conversion price of $300.00 per share. Finally, holders of the Tesla Convertible Notes and the Subsidiary Convertible Notes will have the rightto require us to repurchase their notes upon the occurrence of a fundamental change at a purchase price equal to 100% of the principal amount of the notes, plusaccrued and unpaid interest, if any, to, but not including, the fundamental change purchase date.29 Our ability to make scheduled payments of the principal and interest on our indebtedness when due or to make payments upon conversion or repurchasedemands with respect to our convertible notes, or to refinance our indebtedness as we may need or desire, depends on our future performance, which is subject toeconomic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficientto satisfy our obligations under our existing indebtedness, and any future indebtedness we may incur, and to make necessary capital expenditures. If we are unableto generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets,refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance existing or future indebtedness willdepend on the capital markets and our financial condition at such time. In addition, our ability to make payments may be limited by law, by regulatory authority orby agreements governing our future indebtedness. We may not be able to engage in any of these activities or engage in these activities on desirable terms or at all,which could result in a default on our existing or future indebtedness and have a material adverse effect on our business, results of operations and financialcondition.Our debt agreements contain covenant restrictions that may limit our ability to operate our business.The terms of certain of our credit facilities, including the Credit Agreement, contain, and any of our other future debt agreements may contain, covenantrestrictions that limit our ability to operate our business, including restrictions on our ability to, among other things, incur additional debt or issue guarantees,create liens, repurchase stock or make other restricted payments, and make certain voluntary prepayments of specified debt. In addition, under certaincircumstances we are required to comply with a fixed charge coverage ratio. As a result of these covenants, our ability to respond to changes in business andeconomic conditions and engage in beneficial transactions, including to obtain additional financing as needed, may be restricted. Furthermore, our failure tocomply with our debt covenants could result in a default under our debt agreements, which could permit the holders to accelerate our obligation to repay the debt.If any of our debt is accelerated, we may not have sufficient funds available to repay it.We may need or want to raise additional funds and these funds may not be available to us when we need them. If we cannot raise additional fundswhen we need or want them, our operations and prospects could be negatively affected.The design, manufacture, sale, installation and/or servicing of automobiles, energy storage products and solar products is a capital-intensive business, andthe specific timing of cash inflows and outflows may fluctuate substantially from period to period. Until we are consistently generating positive free cash flows, wemay need or want to raise additional funds through the issuance of equity, equity-related or debt securities or through obtaining credit from financial institutions tofund, together with our principal sources of liquidity, the costs of developing and manufacturing our current or future vehicles, energy storage products and/orsolar products, to pay any significant unplanned or accelerated expenses or for new significant strategic investments, or to refinance our significant consolidatedindebtedness, even if not required to do so by the terms of such indebtedness. We need sufficient capital to fund ongoing operations, research and developmentprojects for new products, establishment and/or increases of Model 3 and Model Y production capacity at the Fremont Factory and at Gigafactory Shanghai, thecontinued expansion of Gigafactory Nevada, the construction of Gigafactory Berlin, the manufacturing ramp of the Solar Roof at Gigafactory New York, and thecontinued expansion of our retail and service locations, body shops, Mobile Service fleet and Supercharger network. We cannot be certain that additional fundswill 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 ofoperations, business and prospects could be materially and adversely affected.30 We could be subject to liability, penalties and other restrictive sanctions and adverse consequences arising out of certain governmental investigationsand proceedings.We are cooperating with certain government investigations as discussed in Note 16, Commitments and Contingencies, to the consolidated financialstatements included elsewhere in this Annual Report on Form 10-K. To our knowledge, no government agency in any such ongoing investigation has concludedthat any wrongdoing occurred. However, we cannot predict the outcome or impact of any such ongoing matters, and there exists the possibility that we could besubject to liability, penalties and other restrictive sanctions and adverse consequences if the SEC, the DOJ, or any other government agency were to pursue legalaction in the future. Moreover, we expect to incur costs in responding to related requests for information and subpoenas, and if instituted, in defending against anygovernmental proceedings.For example, on October 16, 2018, the U.S. District Court for the Southern District of New York entered a final judgment approving the terms of asettlement filed with the Court on September 29, 2018, in connection with the actions taken by the SEC relating to Mr. Musk’s statement on August 7, 2018 that hewas considering taking Tesla private. Pursuant to the settlement, we, among other things, paid a civil penalty of $20 million, appointed an independent director asthe Chair of the Board, appointed two additional independent directors to our board of directors, and made further enhancements to our disclosure controls andother corporate governance-related matters. On April 26, 2019, this settlement was amended to clarify certain of the previously-agreed disclosure procedures,which was subsequently approved by the Court. All other terms of the prior settlement were reaffirmed without modification. Although we intend to continue tocomply with the terms and requirements of the settlement, if there is a lack of compliance or an alleged lack of compliance, additional enforcement actions or otherlegal proceedings may be instituted against us.If we update or discontinue the use of our manufacturing equipment more quickly than expected, we may have to shorten the useful lives of anyequipment to be retired as a result of any such update, and the resulting acceleration in our depreciation could negatively affect our financial results.We have invested and expect to continue to invest significantly in what we believe is state of the art tooling, machinery and other manufacturingequipment for our various product lines, and we depreciate the cost of such equipment over their expected useful lives. However, manufacturing technology mayevolve rapidly, and we may decide to update our manufacturing process with cutting-edge equipment more quickly than expected. Moreover, we are continuallyimplementing learnings as our engineering and manufacturing expertise and efficiency increase, which may result in our ability to manufacture our products usingless of our currently installed equipment. Alternatively, as we ramp and mature the production of our products to higher levels, our learnings may cause us todiscontinue 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 aresult would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations could be negatively impacted.We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial results.We transact business globally in multiple currencies and have foreign currency risks related to our revenue, costs of revenue and operating expensesdenominated in currencies other than the U.S. dollar, primarily the euro, Japanese yen, Canadian dollar, Chinese yuan and Norwegian krone. To the extent we havesignificant 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, aswe have historically experienced. In addition, a portion of our costs and expenses have been, and we anticipate will continue to be, denominated in foreigncurrencies, including the Japanese yen. If we do not have fully offsetting revenues in these currencies and if the value of the U.S. dollar depreciates significantlyagainst these currencies, our costs as measured in U.S. dollars as a percent of our revenues will correspondingly increase and our margins will suffer. Moreover,while we undertake limited hedging activities intended to offset the impact of currency translation exposure, it is impossible to predict or eliminate such impact. Asa result, our operating results could be adversely affected.31 We may face regulatory limitations on our ability to sell vehicles directly which could materially and adversely affect our ability to sell our electricvehicles.We sell our vehicles directly to consumers using means that we believe will maximize our reach, currently including through our website and our ownstores. While we intend to continue to leverage our most effective sales strategies, we may not be able to sell our vehicles through our own stores in each state inthe U.S., as some states have laws that may be interpreted to impose limitations on this direct-to-consumer sales model. In some states, we have also openedgalleries to educate and inform customers about our products, but such locations do not actually transact in the sale of vehicles. The application of these state lawsto our operations continues to be difficult to predict. Laws in some states have limited our ability to obtain dealer licenses from state motor vehicle regulators andmay continue to do so.In addition, decisions by regulators permitting us to sell vehicles may be challenged by dealer associations and others as to whether such decisions complywith applicable state motor vehicle industry laws. We have prevailed in many of these lawsuits and such results have reinforced our continuing belief that statelaws were not designed to prevent our distribution model. In some states, there have also been regulatory and legislative efforts by dealer associations to proposelaws that, if enacted, would prevent us from obtaining dealer licenses in their states given our current sales model. A few states have passed legislation thatclarifies our ability to operate, but at the same time limits the number of dealer licenses we can obtain or stores that we can operate.Internationally, there may be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict oursales or other business practices. Even for those jurisdictions we have analyzed, the laws in this area can be complex, difficult to interpret and may change overtime. Continued regulatory limitations and other obstacles interfering with our ability to sell vehicles directly to consumers could have a negative and materialimpact our business, prospects, financial condition and results of operations.We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and could cause us to incursubstantial costs.Others, including our competitors, may hold or obtain patents, copyrights, trademarks or other proprietary rights that could prevent, limit or interfere withour ability to make, use, develop, sell or market our products and services, which could make it more difficult for us to operate our business. From time to time, theholders of such intellectual property rights may assert their rights and urge us to take licenses, and/or may bring suits alleging infringement or misappropriation ofsuch rights. While we endeavor to obtain and protect the intellectual property rights that we expect will allow us to retain or advance our strategic initiatives, therecan be no assurance that we will be able to adequately identify and protect the portions of intellectual property that are strategic to our business, or mitigate the riskof potential suits or other legal demands by our competitors. Accordingly, we may consider the entering into licensing agreements with respect to such rights,although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur, and such licenses and associatedlitigation could significantly increase our operating expenses. In addition, if we are determined to have or believe there is a high likelihood that we have infringedupon a third party’s intellectual property rights, we may be required to cease making, selling or incorporating certain components or intellectual property into thegoods and services we offer, to pay substantial damages and/or license royalties, to redesign our products and services, and/or to establish and maintain alternativebranding for our products and services. In the event that we were required to take one or more such actions, our business, prospects, operating results and financialcondition could be materially adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity anddiversion of resources and management attention.32 Our facilities or operations could be adversely affected by events outside of our control, such as natural disasters, wars or health epidemics.We may be impacted by natural disasters, wars, health epidemics or other events outside of our control. For example, our corporate headquarters, theFremont Factory and Gigafactory Nevada are located in seismically active regions in Northern California and Nevada, and our Gigafactory Shanghai is located in aflood-prone area. If major disasters such as earthquakes, floods or other events occur, or our information system or communications network breaks down oroperates improperly, our headquarters and production facilities may be seriously damaged, or we may have to stop or delay production and shipment of ourproducts. In addition, beginning in late 2019, the media has reported a public health epidemic originating in China, prompting precautionary government-imposedclosures of certain travel and business. Gigafactory Shanghai was closed for a brief time as a result, before it reopened in February 2020 and rejoined our U.S.factories, which had continued to operate. It is unknown whether and how global supply chains, particularly for automotive parts, may be affected if such anepidemic persists for an extended period of time. We may incur expenses or delays relating to such events outside of our control, which could have a materialadverse impact on our business, operating results and financial condition.Risks Related to the Ownership of Our Common StockThe trading price of our common stock is likely to continue to be volatile.The trading price of our common stock has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, someof which are beyond our control. Our common stock has experienced an intra-day trading high of $968.99 per share and a low of $176.99 per share over the last52 weeks. The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that haveoften been unrelated or disproportionate to the operating performance of those companies. In particular, a large proportion of our common stock has been and maycontinue to be traded by short sellers which may put pressure on the supply and demand for our common stock, further influencing volatility in its market price.Public perception and other factors outside of our control may additionally impact the stock price of companies like us that garner a disproportionate degree ofpublic attention, regardless of actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of aparticular company’s securities, securities class action litigation has often been instituted against these companies. Moreover, stockholder litigation like this hasbeen filed against us in the past. While we defend such actions vigorously, any judgment against us or any future stockholder litigation could result in substantialcosts and a diversion of our management’s attention and resources.We may fail to meet our publicly announced guidance or other expectations about our business, which could cause our stock price to decline.We may provide from time to time guidance regarding our expected financial and business performance, which may include projections regarding salesand production, as well as anticipated future revenues, gross margins, profitability and cash flows. Correctly identifying key factors affecting business conditionsand predicting future events is inherently an uncertain process, and our guidance may not ultimately be accurate and has in the past been inaccurate in certainrespects, such as the timing of new product manufacturing ramps. Our guidance is based on certain assumptions such as those relating to anticipated productionand sales volumes (which generally are not linear throughout a given period), average sales prices, supplier and commodity costs, and planned cost reductions. Ifour guidance is not accurate or varies from actual results due to our inability to meet our assumptions or the impact on our financial performance that could occuras a result of various risks and uncertainties, the market value of our common stock could decline significantly.33 Transactions relating to our convertible notes may dilute the ownership interest of existing stockholders, or may otherwise depress the price of ourcommon stock.The conversion of some or all of the Tesla Convertible Notes or the Subsidiary Convertible Notes would dilute the ownership interests of existingstockholders to the extent we deliver shares upon conversion of any of such notes. Our Subsidiary Convertible Notes have been historically, and the other TeslaConvertible Notes may become in the future, convertible at the option of their holders prior to their scheduled terms under certain circumstances. If holders electto convert their convertible notes, we could be required to deliver to them a significant number of shares of our common stock. Any sales in the public market ofthe common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of theconvertible notes may encourage short selling by market participants because the conversion of such notes could be used to satisfy short positions, or anticipatedconversion of such notes into shares of our common stock could depress the price of our common stock.Moreover, in connection with each issuance of the Tesla Convertible Notes, we entered into convertible note hedge transactions, which are expected toreduce the potential dilution and/or offset potential cash payments we are required to make in excess of the principal amount upon conversion of the applicableTesla Convertible Notes. We also entered into warrant transactions with the hedge counterparties, which could separately have a dilutive effect on our commonstock to the extent that the market price per share of our common stock exceeds the applicable strike price of the warrants on the applicable expiration dates. Inaddition, the hedge counterparties or their affiliates may enter into various transactions with respect to their hedge positions, which could also cause or prevent anincrease or a decrease in the market price of our common stock or the convertible notes.Elon Musk has pledged shares of our common stock to secure certain bank borrowings. If Mr. Musk were forced to sell these shares in order to satisfyhis loan obligations, such sales could cause our stock price to decline.Certain banking institutions have made extensions of credit to Elon Musk, our Chief Executive Officer, a portion of which was used to purchase shares ofcommon stock in certain of our public offerings and private placements at the same prices offered to third party participants in such offerings and placements. Weare not a party to these loans, which are partially secured by pledges of a portion of the Tesla common stock currently owned by Mr. Musk. If the price of ourcommon stock were to decline substantially, Mr. Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy hisloan obligations if he could not do so through other means. Any such sales could cause the price of our common stock to decline further.Anti-takeover provisions contained in our governing documents, applicable laws and our convertible notes could impair a takeover attempt.Our certificate of incorporation and bylaws afford certain rights and powers to our board of directors that could contribute to the delay or prevention of anacquisition that it deems undesirable. We are also subject to Section 203 of the Delaware General Corporation Law and other provisions of Delaware law that limitthe ability of stockholders in certain situations to effect certain business combinations. In addition, the terms of our convertible notes require us to repurchase suchnotes in the event of a fundamental change, including a takeover of our company. Any of the foregoing provisions and terms that has the effect of delaying ordeterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect theprice that some investors are willing to pay for our common stock. ITEM 1B.UNRESOLVED STAFF COMMENTSNone.34 ITEM 2.PROPERTIESWe are headquartered in Palo Alto, California. Our principal facilities include a large number of properties in North America, Europe and Asia utilized formanufacturing and assembly, warehousing, engineering, retail and service locations, Supercharger sites, and administrative and sales offices. Our facilities areused to support both of our reporting segments, and are suitable and adequate for the conduct of our business. We primarily lease such facilities with the exceptionof some manufacturing facilities. The following table sets forth the location of our primary owned and leased manufacturing facilities. Primary Manufacturing Facilities Location Owned or LeasedFremont Factory Fremont, California OwnedGigafactory Nevada Sparks, Nevada OwnedGigafactory New York Buffalo, New York LeasedGigafactory Shanghai Shanghai, China * *We own the building and the land use rights with an initial term of 50 years. The land use rights are treated as operating lease right-of-use assets.ITEM 3.LEGAL PROCEEDINGSFor a description of our material pending legal proceedings, please see Note 16, Commitments and Contingencies, to the consolidated financial statementsincluded elsewhere in this Annual Report on Form 10-K.In addition, the following matters are being disclosed pursuant to Item 103 of Regulation S-K because they relate to environmental regulations andaggregate civil penalties could potentially exceed $100,000.The Bay Area Air Quality Management District (the “BAAQMD”) has issued notices of violation to us relating to air permitting for the Fremont Factory,but has not initiated formal proceedings. We dispute certain of these allegations and are working to resolve them with the BAAQMD. Further, we assert that therehas been no related adverse community or environmental impact. While we cannot predict the outcome of this matter, including the final amount of any penalties,it is not expected to have a material adverse impact on our business.We have also received an information request from the U.S. Environmental Protection Agency (the “EPA”) under Section 114(a) of the Clean Air Act of1963, as amended (the “Clean Air Act”). The EPA is reviewing the compliance of our Fremont Factory operations with applicable requirements under the CleanAir Act, and we are working with the EPA in responding to this request. While the outcome of this matter cannot be determined at this time, it is not currentlyexpected to have a material adverse impact on our business. ITEM 4.MINE SAFETY DISCLOSURESNot applicable. 35 PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESMarket InformationOur common stock has traded on The NASDAQ Global Select Market under the symbol “TSLA” since it began trading on June 29, 2010. Our initialpublic offering was priced at $17.00 per share on June 28, 2010.HoldersAs of February 7, 2020, there were 1,685 holders of record of our common stock. A substantially greater number of holders of our common stock are“street name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future.Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on ourfinancial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.Stock Performance GraphThis performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),or incorporated by reference into any filing of Tesla, Inc. under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shallbe expressly set forth by specific reference in such filing.36 The following graph shows a comparison, from January 1, 2015 through December 31, 2019, of the cumulative total return on our common stock, TheNASDAQ Composite Index and a group of all public companies sharing the same SIC code as us, which is SIC code 3711, “Motor Vehicles and Passenger CarBodies” (Motor Vehicles and Passenger Car Bodies Public Company Group). Such returns are based on historical results and are not intended to suggest futureperformance. Data for The NASDAQ Composite Index and the Motor Vehicles and Passenger Car Bodies Public Company Group assumes an investment of $100on January 1, 2015 and reinvestment of dividends. We have never declared or paid cash dividends on our common stock nor do we anticipate paying any suchcash dividends in the foreseeable future. Unregistered Sales of Equity SecuritiesNone.Purchases of Equity Securities by the Issuer and Affiliated PurchasersNone. 37 ITEM 6.SELECTED CONSOLIDATED FINANCIAL DATAThe following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition andResults of Operations” and the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K and from thehistorical consolidated financial statements not included herein to fully understand factors that may affect the comparability of the information presented below (inmillions, except per share data). Year Ended December 31, 2019 (3) 2018 (2) 2017 2016 (1) 2015 Consolidated Statements of Operations Data: Total revenues $24,578 $21,461 $11,759 $7,000 $4,046 Gross profit $4,069 $4,042 $2,223 $1,599 $924 Loss from operations $(69) $(388) $(1,632) $(667) $(717)Net loss attributable to common stockholders $(862) $(976) $(1,962) $(675) $(889)Net loss per share of common stock attributable to common stockholders, basic and diluted $(4.92) $(5.72) $(11.83) $(4.68) $(6.93)Weighted average shares used in computing net loss per share of common stock, basic and diluted 177 171 166 144 128 As of December 31, 2019 (3) 2018 (2) 2017 2016 (1) 2015 Consolidated Balance Sheet Data: Working (deficit) capital $1,436 $(1,686) $(1,104) $433 $(29)Total assets 34,309 29,740 28,655 22,664 8,068 Total long-term obligations 15,532 13,434 15,348 10,923 4,126 (1)We acquired SolarCity Corporation (“SolarCity”) on November 21, 2016. SolarCity’s financial results have been included in our financial results from theacquisition date as previously reported in our Annual Report on Form 10-K for the year ended December 31, 2016.(2)We adopted ASC 606 in 2018. Prior periods have not been revised. See Note 2, Summary of Significant Accounting Policies, of the notes to theconsolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.(3)Includes the impact of the adoption of the new lease accounting standard in 2019. Prior periods have not been revised. See Note 2, Summary of SignificantAccounting Policies, of the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. 38 ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewherein this Annual Report on Form 10-K. For discussion related to changes in financial condition and the results of operations for fiscal year 2017-related items, referto 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 year2018, which was filed with the Securities and Exchange Commission on February 19, 2019.Overview and 2019 HighlightsOur mission is to accelerate the world’s transition to sustainable energy. We design, develop, manufacture, lease and sell high-performance fully electricvehicles, solar energy generation systems and energy storage products. We also offer maintenance, installation, operation and other services related to ourproducts.AutomotiveDuring 2019, we achieved annual vehicle delivery and production records of 367,656 and 365,232 total vehicles, respectively. We also laid thegroundwork for our next phase of growth with the commencement of Model 3 production at Gigafactory Shanghai; preparations at the Fremont Factory for ModelY production, which commenced in the first quarter of 2020; the selection of Berlin, Germany as the site for our next factory for the European market; and theunveiling of Cybertruck. We also continued to enhance our user experience through improved Autopilot and FSD features, including the introduction of a newpowerful on-board FSD computer and a new Smart Summon feature, and the expansion of a unique set of in-car entertainment options.Energy Generation and StorageWe revamped key aspects of our solar operations in 2019 by streamlining traditionally complex ordering, permitting, installation and back-end serviceprocesses to enhance the customer experience, especially for retrofit solar installations. Our solar deployments grew approximately 48% and 26%, quarter-over-quarter, in the second half of the year. We also deployed 1.65 GWh of energy storage in 2019, more than the aggregate of all prior years. Finally, we furtherevolved our product offerings by launching the third generation of the Solar Roof, for which we are expanding both our manufacturing and installation capabilities,and Megapack, our largest utility-scale energy storage product to date.Management Opportunities, Challenges and Risks and 2020 OutlookAutomotive—ProductionA key focus in 2020 will be our efforts towards establishing and expanding capacity for vehicle production at volume across three continents. At theFremont Factory, we commenced Model Y production earlier than anticipated, and combined with Model 3, we have installed annual production capacity for400,000 vehicles. We expect to further increase this capacity to 500,000 vehicles through the installation of additional equipment.At Gigafactory Shanghai, we have installed annual production capacity for 150,000 Model 3 vehicles that we believe we will eventually be able to push toactual rates of production in excess of such number, subject to local production of battery packs, which we began ramping there later than other processes. Wehave commenced construction of the next phase of Gigafactory Shanghai to add Model Y manufacturing capacity at least equivalent to that for Model 3. Tofinance our construction and expansion, in December 2019 our local subsidiary entered into a RMB 9.0 billion (or the equivalent amount in U.S. dollars) fixedasset term facility and a RMB 2.25 billion (or the equivalent amount in U.S. dollars) working capital revolving facility, part of which was used to repay a RMB 3.5billion bridge loan entered into in March 2019. We are supplementing such financing with limited direct capital expenditures.39 Finally, we have selected Germany as the site of our next factory for manufacturing vehicles for the European market, due to its strong manufacturing andengineering presence. However, the construction of and ramp at Gigafactory Berlin, as well as at Gigafactory Shanghai, are subject to a number of uncertaintiesinherent in all new manufacturing operations, including ongoing compliance with regulatory requirements, maintenance of operational licenses and approvals foradditional expansion, potential supply chain constraints, hiring, training and retention of qualified employees, and the pace of bringing production equipment andprocesses online with the capability to manufacture high-quality units at scale. Ultimately, achieving increased total vehicle production cost-effectively across allof our manufacturing operations will require that we timely address any bottlenecks that may arise as we ramp, establish and maintain sustained supplier capacity,and successfully utilize manufacturing processes at the maximum output rates that we have planned for them.Automotive—Demand and SalesAs the automotive industry continues to validate and grow the market for electric vehicles, we are generating demand and new customers even withouttraditional marketing and with relatively low marketing costs, and in 2019 our orders shifted to originating mostly from new customers without prior reservations.Production at Gigafactory Shanghai allows us to offer Model 3 in China at competitive local pricing and more quickly, which should drive further demand andopportunity in the world’s largest market for mid-sized premium sedans, and we expect a similar impact in China for Model Y when we commence productionthere of this offering in the popular compact SUV segment.Moreover, the significant interest generated by our unveiling of Cybertruck demonstrated our brand visibility, innovation and viability across anincreasing range of vehicle segments. Meanwhile, we are making our existing vehicles incrementally more compelling, including through a planned softwareupdate for FSD-enabled vehicles to react to traffic lights and stop signs and navigate city intersections, and additional functionality of both in-vehicle software andthe Tesla mobile app. On the other hand, we may be impacted by trade and environmental policies, political uncertainty and economic cycles involving geographic regionswhere we have significant operations, which are inherently unpredictable. Sales of vehicles in the automotive industry also tend to be cyclical in many markets,which may expose us to increased volatility. Specifically, it is uncertain as to how such macroeconomic factors will impact us as a company that has beenexperiencing growth and increasing market share in an industry that has globally been experiencing a recent decline in sales. Finally, we make certain adjustmentsto our prices from time to time in the ordinary course of business, including as we introduce new vehicles and variants and optimize the pricing among them. Suchpricing changes may impact our vehicles’ resale values, and in turn our operating results. For example, if price reductions result in an increase to our estimates ofthe volume of vehicles that may potentially be returned to us under pre-existing resale value guarantees provided to customers and partners for certain financingprograms, our gross profits may be reduced.Automotive—Deliveries and Customer Infrastructure We continue to optimize our manufacturing and global delivery patterns to address higher volumes of our predominantly single-factory production at theFremont Factory. We expect to alleviate any related issues through local production at Gigafactory Shanghai and eventually at Gigafactory Berlin.We also continue to expand and invest in our servicing and charging locations and capabilities to keep pace with our customer vehicle fleet and ensure aconvenient and efficient customer experience. However, if our customer vehicles, particularly in the rapidly growing Model 3 fleet, experience unexpectedreliability issues, it could outpace and overburden our servicing capabilities and parts inventory.Energy Generation and Storage Demand, Production and Deployment We expect to continue to grow our retrofit solar system deployments as we execute our new strategy, including through compelling financing options suchas a subscription-based offering, which is currently available in California.40 We are focused on training our personnel and third party partners to ramp installations of our Solar Roof, and are also hiring rapidly for its ongoingmanufacturing ramp at Gigafactory New York. We expect such ramp will support our significant operations and our compliance with minimum hiring andcumulative investment targets under our agreement with the SUNY Foundation related to the construction and use of Gigafactory New York. However, if ourexpectations as to the costs and timelines of our investment and operations at Buffalo or our production ramp of the Solar Roof prove incorrect, we may incuradditional expenses or substantial payments to the SUNY Foundation.Finally, with the introduction of our 3 MWh Megapack, we now offer an even greater variety of scalable energy storage products with a wide range ofmarkets and applications, and expect this product to drive additional interest from global project developers and utilities. Trends in Cash Flow, Capital Expenditures and Operating ExpensesOur capital expenditures are difficult to project beyond the short term, given the number and breadth of our core projects at any given time. For example,the curve of any new product ramp, such as for Model Y and the Solar Roof, is inherently subject to uncertainty of timing, and if we are able to meet variousmilestones along such ramp more quickly than expected, our capital expenditures may be accelerated. We also continuously evaluate, and as appropriate adjust,our capital expenditures based on, among other things: our manufacturing plans for our various products, which we may rebalance from time to time based on themix of demand among them and other contingent factors; the pace and prioritization of current projects under development; and the addition of any new projects.Moreover, we are generally increasing the capital efficiency of our projects with experience, and we may find that our actual capital expenditures on new projectsare different than previously expected.Subject to the above, considering the expected pace of the manufacturing ramps for our products, construction and expansion of our factories, and pipelineof announced projects under development, and consistent with our current strategy of using partners to manufacture battery cells, as well as considering all otherinfrastructure growth, we currently expect our average annual capital expenditures in 2020 and the two succeeding fiscal years to be $2.5 billion to $3.5 billion.We expect operating expenses as a percentage of revenue to continue to decrease in the future as we focus on increasing operational efficiency and processautomation, as well as from increases in expected overall revenues from our expanding sales. In particular, our efforts to scale down and optimize our coststructure relative to the size of our business have already manifested in total operating expenses decreasing from $4.4 billion to $4.1 billion from fiscal year 2018 tofiscal year 2019, including restructuring and other charges. Meanwhile, our total revenues increased from $21.5 billion to $24.6 billion in the same period.In March 2018, our stockholders approved the 2018 CEO Performance Award, with vesting contingent on achieving market capitalization and operationalmilestones. We will incur significant non-cash stock-based compensation expense for each tranche under this award after the related operational milestone initiallybecomes probable of being met, and if later than the grant date, we will also have to record a cumulative catch-up expense at such time. Such catch-up expensemay be material depending on the length of time elapsed from the grant date. For example, in the fourth quarter of 2019, as the result of an additional operationalmilestone becoming probable of achievement, we recorded a cumulative catch-up expense of $72 million for service provided from the grant date. Moreover, asthe expense for a tranche is recorded over the longer of (i) the expected achievement period of the relevant operational milestone and (ii) only if the related marketcapitalization milestone has not been achieved, its expected achievement period, the achievement of a market capitalization milestone earlier than expected mayaccelerate the rate at which such expense is recognized. Upon vesting of a tranche, all remaining associated expense will be recognized immediately. See Note 14,Equity Incentive Plans—2018 CEO Performance Award, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K forfurther details regarding the stock-based compensation relating to the 2018 CEO Performance Award. 41 Critical Accounting Policies and EstimatesThe consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation ofthe consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs andexpenses and related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe to be reasonableunder the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differsignificantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are materialdifferences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will beaffected. We believe that the following critical accounting policies involve a greater degree of judgment and complexity than our other accounting policies.Accordingly, these are the policies we believe are the most critical to understanding and evaluating the consolidated financial condition and results of operations.Revenue RecognitionAdoption of new revenue standardOn January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers, (“new revenue standard”) using the modified retrospective method.The new revenue standard had a material impact in our consolidated financial statements. For further discussion, refer to Note 2, Summary of SignificantAccounting Policies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.Automotive SegmentAutomotive Sales RevenueAutomotive Sales without Resale Value GuaranteeAutomotive sales revenue includes revenues related to deliveries of new vehicles and pay-per-use charges, and specific other features and services thatmeet the definition of a performance obligation under the new revenue standard, including access to our Supercharger network, internet connectivity, Autopilot,FSD features and over-the-air software updates. We recognize revenue on automotive sales upon delivery to the customer, which is when the control of a vehicletransfers. Payments are typically received at the point control transfers or in accordance with payment terms customary to the business. Other features and servicessuch as access to our Supercharger network, internet connectivity and over-the-air software updates are provisioned upon control transfer of a vehicle andrecognized over time on a straight-line basis as we have a stand-ready obligation to deliver such services to the customer. We recognize revenue related to theseother features and services over the performance period, which is generally the expected ownership life of the vehicle or the eight-year life of the vehicle. Revenuerelated to Autopilot and FSD features is recognized when functionality is delivered to the customer. For our obligations related to automotive sales, we estimatestandalone selling price by considering costs used to develop and deliver the service, third-party pricing of similar options and other information that may beavailable.At the time of revenue recognition, we reduce the transaction price and record a sales return reserve against revenue for estimated variable considerationrelated to future product returns based on historical experience. In addition, any fees that are paid or payable by us to a customer’s lender when we arrange thefinancing are recognized as an offset against automotive sales revenue.Costs to obtain a contract mainly relate to commissions paid to our sales personnel for the sale of vehicles. Commissions are not paid on other obligationssuch as access to our Supercharger network, internet connectivity, Autopilot, FSD features and over-the-air software updates. As our contract costs related toautomotive sales are typically fulfilled within one year, the costs to obtain a contract are expensed as incurred. Amounts billed to customers related to shipping andhandling are classified as automotive revenue, and we have elected to recognize the cost for freight and shipping when control over vehicles, parts, or accessorieshave transferred to the customer as an expense in cost of revenues. Our policy is to exclude taxes collected from a customer from the transaction price ofautomotive contracts.42 Automotive Sales with Resale Value Guarantee or a Buyback OptionWe offer resale value guarantees or similar buy-back terms to certain international customers who purchase vehicles and who finance their vehiclesthrough one of our specified commercial banking partners. We also offer resale value guarantees in connection with automotive sales to certain leasing partners.Under these programs, we receive full payment for the vehicle sales price at the time of delivery and our counterparty has the option of selling their vehicle back tous during the guarantee period, which currently is generally at the end of the term of the applicable loan or financing program, for a pre-determined resale value.With the exception of two programs which are discussed within the Automotive Leasing section, we recognize revenue when control transfers upondelivery to customers in accordance with the new revenue standard as a sale with a right of return as we do not believe the customer has a significant economicincentive to exercise the resale value guarantee provided to them. The process to determine whether there is a significant economic incentive includes a comparisonof a vehicle’s estimated market value at the time the option is exercisable with the guaranteed resale value to determine the customer’s economic incentive toexercise. The performance obligations and the pattern of recognizing automotive sales with resale value guarantees are consistent with automotive sales withoutresale value guarantees with the exception of our estimate for sales return reserve. Sales return reserves for automotive sales with resale value guarantees areestimated based on historical experience plus consideration for expected future market values. On a quarterly basis, we assess the estimated market values ofvehicles under our buyback options program to determine whether there have been changes to the likelihood of future product returns. As we accumulate moredata related to the buyback values of our vehicles or as market conditions change, there may be material changes to their estimated values. The two programs thatare still being recorded as operating leases are discussed in further detail below in Vehicle Sales to Leasing Partners with a Resale Value Guarantee and aBuyback Option and Vehicle Sales to Customers with a Resale Value Guarantee where Exercise is Probable.Prior to the adoption of the new revenue standard, all transactions with resale value guarantees were recorded as operating leases. The amount of saleproceeds equal to the resale value guarantee was deferred until the guarantee expired or was exercised. For certain transactions that were considered interestbearing collateralized borrowings as required under ASC 840, Leases prior to January 1, 2019, we also accrued interest expense based on our borrowing rate. Theremaining sale proceeds were deferred and recognized on a straight-line basis over the stated guarantee period to automotive leasing revenue. The guarantee periodexpired at the earlier of the end of the guarantee period or the pay-off of the initial loan. We capitalized the cost of these vehicles on the consolidated balance sheetas operating lease vehicles, net, and depreciated their value, less estimated residual value, to cost of automotive leasing revenue over the same period.In cases where our counterparty retained ownership of the vehicle at the end of the guarantee period, the resale value guarantee liability and any remainingdeferred revenue balances related to the vehicle were settled to automotive leasing revenue, and the net book value of the leased vehicle was expensed to cost ofautomotive leasing revenue. If our counterparty returned the vehicle to us during the guarantee period, we purchased the vehicle from our counterparty in anamount equal to the resale value guarantee and settled any remaining deferred balances to automotive leasing revenue, and we reclassified the net book value of thevehicle on the consolidated balance sheet to used vehicle inventory.Automotive Regulatory CreditsIn connection with the production and delivery of our zero emission vehicles in global markets, we have earned and will continue to earn various tradableautomotive regulatory credits. We have sold these credits, and will continue to sell future credits, to automotive companies and other regulated entities who can usethe credits to comply with emission standards and other regulatory requirements. For example, under California’s Zero Emission Vehicle Regulation and those ofstates that have adopted California’s standard, vehicle manufacturers are required to earn or purchase credits, referred to as ZEV credits, for compliance with theirannual regulatory requirements. These laws provide that automakers may bank or sell to other regulated parties their excess credits if they earn more credits thanthe minimum quantity required by those laws. We also earn other types of saleable regulatory credits in the United States and abroad, including greenhouse gas,fuel economy and clean fuels credits. Payments for regulatory credits are typically received at the point control transfers to the customer, or in accordance withpayment terms customary to the business. We recognize revenue on the sale of automotive regulatory credits at the time control of the regulatory credits istransferred to the purchasing party as automotive revenue in the consolidated statement of operations.43 Automotive Leasing RevenueAutomotive leasing revenue includes revenue recognized under lease accounting guidance for our direct leasing programs as well as the two programswith resale value guarantees which continue to qualify for operating lease treatment. Prior to the adoption of the new revenue standard, all programs with resalevalue guarantees were accounted for as operating leases.Direct Vehicle Leasing ProgramWe have outstanding leases under our direct vehicle leasing programs in the U.S., Canada and in certain countries in Europe. As of December 31, 2019,the direct vehicle leasing program is offered for all new Model S, Model X and Model 3 vehicles in the U.S. and new Model S and Model X vehicles in Canada.Qualifying customers are permitted to lease a vehicle directly from Tesla for up to 48 months. At the end of the lease term, customers are required to return thevehicles to us or for Model S and Model X leases, may opt to purchase the vehicles for a pre-determined residual value. We account for these leasing transactionsas operating leases. We record leasing revenues to automotive leasing revenue on a straight-line basis over the contractual term, and we record the depreciation ofthese vehicles to cost of automotive leasing revenue.We capitalize shipping costs and initial direct costs such as the incremental cost of referral fees and sales commissions from the origination of automotivelease agreements as an element of operating lease vehicles, net, and subsequently amortize these costs over the term of the related lease agreement. Our policy is toexclude taxes collected from a customer from the transaction price of automotive contracts.Vehicle Sales to Leasing Partners with a Resale Value Guarantee and a Buyback OptionWe offer buyback options in connection with automotive sales with resale value guarantees with certain leasing partner sales in the United States. Thesetransactions entail a transfer of leases, which we have originated with an end-customer, to our leasing partner. As control of the vehicles has not been transferred inaccordance with the new revenue standard, these transactions were accounted for as interest bearing collateralized borrowings in accordance with ASC 840, Leases,prior to January 1, 2019. Under this program, cash is received for the full price of the vehicle and the collateralized borrowing value is generally recorded withinresale value guarantees and the customer upfront down payment is recorded within deferred revenue. We amortize the deferred revenue amount to automotiveleasing revenue on a straight-line basis over the option period and accrue interest expense based on our borrowing rate. We capitalize vehicles under this programto operating lease vehicles, net, on the consolidated balance sheets, and we record depreciation from these vehicles to cost of automotive leasing revenue during theperiod the vehicle is under a lease arrangement. Cash received for these vehicles, net of revenue recognized during the period, is classified as collateralized lease(repayments) borrowings within cash flows from financing activities in the consolidated statements of cash flows. With the adoption of ASC 842 on January 1,2019, all new agreements under this program are accounted for as operating leases under ASC 842 and there was no material change in the timing and amount ofrevenue recognized over the term. Consequently, any cash flows for new agreements are classified as operating cash activities on the consolidated statements ofcash flows.At the end of the lease term, we settle our liability in cash by either purchasing the vehicle from the leasing partner for the buyback option amount orpaying a shortfall to the option amount the leasing partner may realize on the sale of the vehicle. Any remaining balances within deferred revenue and resale valueguarantee will be settled to automotive leasing revenue. The end customers can extend the lease for a period of up to 6 months. In cases where the leasing partnerretains ownership of the vehicle after the end of our option period, we expense the net value of the leased vehicle to cost of automotive leasing revenue.44 Vehicle Sales to Customers with a Resale Value Guarantee where Exercise is ProbableFor certain international programs where we have offered resale value guarantees to certain customers who purchased vehicles and where we expect thecustomer has a significant economic incentive to exercise the resale value guarantee provided to them, we continue to recognize these transactions as operatingleases. The process to determine whether there is a significant economic incentive includes a comparison of a vehicle’s estimated market value at the time theoption is exercisable with the guaranteed resale value to determine the customer’s economic incentive to exercise. We have not sold any vehicles under thisprogram since the first half of 2017 and all current period activity relates to the exercise or cancellation of active transactions. The amount of sale proceeds equal tothe resale value guarantee is deferred until the guarantee expires or is exercised. The remaining sale proceeds are deferred and recognized on a straight-line basisover the stated guarantee period to automotive leasing revenue. The guarantee period expires at the earlier of the end of the guarantee period or the pay-off of theinitial loan. We capitalize the cost of these vehicles on the consolidated balance sheet as operating lease vehicles, net, and depreciate their value, less salvage value,to cost of automotive leasing revenue over the same period.In cases where a customer retains ownership of a vehicle at the end of the guarantee period, the resale value guarantee liability and any remaining deferredrevenue balances related to the vehicle are settled to automotive leasing revenue, and the net book value of the leased vehicle is expensed to cost of automotiveleasing revenue. If a customer returns the vehicle to us during the guarantee period, we purchase the vehicle from the customer in an amount equal to the resalevalue guarantee and settle any remaining deferred balances to automotive leasing revenue, and we reclassify the net book value of the vehicle on the consolidatedbalance sheets to used vehicle inventory.Energy Generation and Storage SegmentEnergy Generation and Storage SalesEnergy generation and storage sales revenue consists of the sale of solar energy systems and energy storage systems to residential, small commercial, andlarge commercial and utility grade customers, including solar subscription-based arrangements. Upon adoption of ASC 842, energy generation and storage salesrevenue includes agreements for solar energy systems and PPAs that commence after January 1, 2019, as these are now accounted for under the new revenuestandard. Sales of solar energy systems to residential and small scale commercial customers consist of the engineering, design, and installation of the system. Post-installation, residential and small scale commercial customers receive a proprietary monitoring system that captures and displays historical energy generation data.Residential and small scale commercial customers pay the full purchase price of the solar energy system upfront. Revenue for the design and installation obligationis recognized when control transfers, which is when we install a solar energy system and the system passes inspection by the utility or the authority havingjurisdiction. Revenue for the monitoring service is recognized ratably as a stand-ready obligation over the warranty period of the solar energy system. Sales ofenergy storage systems to residential and small scale commercial customers consist of the installation of the energy storage system and revenue is recognized whencontrol transfers, which is when the product has been delivered or, if we are performing installation, when installed and commissioned. Payment for such storagesystems is made upon invoice or in accordance with payment terms customary to the business.For large commercial and utility grade solar energy system and energy storage system sales which consist of the engineering, design, and installation ofthe system, customers make milestone payments that are consistent with contract-specific phases of a project. Revenue from such contracts is recognized over timeusing the percentage of completion method based on cost incurred as a percentage of total estimated contract costs for energy storage system sales and as apercentage of total estimated labor hours for solar energy system sales. Certain large-scale commercial and utility grade solar energy system and energy storagesystem sales also include operations and maintenance service which are negotiated with the design and installation contracts and are thus considered to be acombined contract with the design and installation service. For certain large commercial and utility grade solar energy systems and energy storage systems wherethe percentage of completion method does not apply, revenue is recognized when control transfers, which is when the product has been delivered to the customerand commissioned for energy storage systems and when the project has received permission to operate from the utility for solar energy systems. Operations andmaintenance service revenue is recognized ratably over the respective contract term for solar energy system sales and upon delivery of the service for energystorage system sales. Customer payments for such services are usually paid annually or quarterly in advance.45 In instances where there are multiple performance obligations in a single contract, we allocate the consideration to the various obligations in the contractbased on the relative standalone selling price method. Standalone selling prices are estimated based on estimated costs plus margin or using market data forcomparable products. Costs incurred on the sale of residential installations before the solar energy systems are completed are included as work in process withininventory in the consolidated balance sheets. However, any fees that are paid or payable by us to a solar loan lender would be recognized as an offset againstrevenue. Costs to obtain a contract relate mainly to commissions paid to our sales personnel related to the sale of solar energy systems and energy storage systems.As our contract costs related to solar energy system and energy storage system sales are typically fulfilled within one year, the costs to obtain a contract areexpensed as incurred.As part of our solar energy system and energy storage system contracts, we may provide the customer with performance guarantees that warrant that theunderlying system will meet or exceed the minimum energy generation or retention requirements specified in the contract. In certain instances, we may receive abonus payment if the system performs above a specified level. Conversely, if a solar energy system or energy storage system does not meet the performanceguarantee requirements, we may be required to pay liquidated damages. Other forms of variable consideration related to our large commercial and utility gradesolar energy system and energy storage system contracts include variable customer payments that will be made based on our energy market participation activities.Such guarantees and variable customer payments represent a form of variable consideration and are estimated at contract inception at their most likely amount andupdated at the end of each reporting period as additional performance data becomes available. Such estimates are included in the transaction price only to the extentthat it is probable a significant reversal of revenue will not occur.We record as deferred revenue any non-refundable amounts that are collected from customers related to fees charged for prepayments and remotemonitoring service and operations and maintenance service, which is recognized as revenue ratably over the respective customer contract term. Energy Generation and Storage LeasingFor revenue arrangements where we are the lessor under operating lease agreements for energy generation and storage products, we record lease revenuefrom minimum lease payments, including upfront rebates and incentives earned from such systems, on a straight-line basis over the life of the lease term, assumingall other revenue recognition criteria have been met. The difference between the payments received and the revenue recognized is recorded as deferred revenue onthe consolidated balance sheet.For solar energy systems where customers purchase electricity from us under PPAs prior to January 1, 2019, we have determined that these agreementsshould be accounted for as operating leases pursuant to ASC 840. Revenue is recognized based on the amount of electricity delivered at rates specified under thecontracts, assuming all other revenue recognition criteria are met.We record as deferred revenue any amounts that are collected from customers, including lease prepayments, in excess of revenue recognized andoperations and maintenance service, which is recognized as revenue ratably over the respective customer contract term. Deferred revenue also includes the portionof rebates and incentives received from utility companies and various local and state government agencies, which is recognized as revenue over the lease term.We capitalize initial direct costs from the execution of agreements for solar energy systems and PPAs, which include the referral fees and salescommissions, as an element of solar energy systems, net, and subsequently amortize these costs over the term of the related agreements.Inventory ValuationInventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost for vehicles and energy storage products, whichapproximates actual cost on a first-in, first-out basis. In addition, cost for solar energy systems is recorded using actual cost. We record inventory write-downs forexcess or obsolete inventories based upon assumptions about current and future demand forecasts. If our inventory on-hand is in excess of our future demandforecast, the excess amounts are written-off.46 We also review our inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. Thisrequires us to determine the estimated selling price of our vehicles less the estimated cost to convert the inventory on-hand into a finished product. Once inventoryis written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration orincrease in that newly established cost basis.Should our estimates of future selling prices or production costs change, additional and potentially material increases to this reserve may be required. Asmall change in our estimates may result in a material charge to our reported financial results.WarrantiesWe provide a manufacturer’s warranty on all new and used vehicles and production powertrain components and systems we sell. In addition, we alsoprovide a warranty on the installation and components of the energy generation and storage systems we sell for periods typically between 10 to 25 years. Weaccrue 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 recallswhen 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 areinherently uncertain given our relatively short history of sales, and changes to our historical or projected warranty experience may cause material changes to thewarranty reserve in the future. The warranty reserve does not include projected warranty costs associated with our vehicles subject to lease accounting and oursolar energy systems under lease contracts or PPAs, as the costs to repair these warranty claims are expensed as incurred. The portion of the warranty reserveexpected to be incurred within the next 12 months is included within accrued liabilities and other, while the remaining balance is included within other long-termliabilities on the consolidated balance sheets. Warranty expense is recorded as a component of cost of revenues in the consolidated statements of operations.Stock-Based CompensationWe use the fair value method of accounting for our stock options and restricted stock units (“RSUs”) granted to employees and our employee stockpurchase 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 withonly service and/or performance conditions and ESPP is estimated on the grant or offering date using the Black-Scholes option-pricing model. The Black-Scholesoption-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. These inputs are subjective and generally requiresignificant judgment. The fair value of RSUs is measured on the grant date based on the closing fair market value of our common stock. The resulting cost isrecognized over the period during which an employee is required to provide service in exchange for the awards, usually the vesting period, which is generally fouryears 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 inthe period.For performance-based awards, stock-based compensation expense is recognized over the expected performance achievement period of individualperformance milestones when the achievement of each individual performance milestone becomes probable. For performance-based awards with a vestingschedule based entirely on the attainment of both performance and market conditions, stock-based compensation expense associated with each tranche isrecognized over the longer of (i) the expected achievement period for the operational milestone for such tranche and (ii) the expected achievement period for therelated market capitalization milestone determined on the grant date, beginning at the point in time when the relevant operational milestone is considered probableof being met. If such operational milestone becomes probable any time after the grant date, we will recognize a cumulative catch-up expense from the grant date tothat point in time. If the related market capitalization milestone is achieved earlier than its expected achievement period and the achievement of the relatedoperational milestone, then the stock-based compensation expense will be recognized over the expected achievement period for the operational milestone, whichmay accelerate the rate at which such expense is recognized. If additional operational milestones become probable, stock-based compensation expense will berecorded in the period it becomes probable including cumulative catch-up expense for the service provided since the grant date. The fair value of such awards isestimated on the grant date using Monte Carlo simulations.47 As we accumulate additional employee stock-based awards data over time and as we incorporate market data related to our common stock, we maycalculate significantly different volatilities and expected lives, which could materially impact the valuation of our stock-based awards and the stock-basedcompensation expense that we will recognize in future periods. Stock-based compensation expense is recorded in cost of revenues, research and developmentexpense and selling, general and administrative expense in the consolidated statements of operations.Income TaxesWe are subject to federal and state taxes in the U.S. and in many foreign jurisdictions. Significant judgment is required in determining our provision forincome taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We make these estimates andjudgments about our future taxable income that are based on assumptions that are consistent with our future plans. Tax laws, regulations, and administrativepractices 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, 2019, wehad recorded a full valuation allowance on our net U.S. deferred tax assets because we expect that it is more likely than not that our U.S. deferred tax assets willnot be realized in the foreseeable future. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted.Furthermore, significant judgment is required in evaluating our tax positions. In the ordinary course of business, there are many transactions andcalculations for which the ultimate tax settlement is uncertain. As a result, we recognize the effect of this uncertainty on our tax attributes based on our estimatesof the eventual outcome. These effects are recognized when, despite our belief that our tax return positions are supportable, we believe that it is more likely thannot that those positions may not be fully sustained upon review by tax authorities. We are required to file income tax returns in the U.S. and various foreignjurisdictions, which requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions. Such returns are subject to audit by the variousfederal, state and foreign taxing authorities, who may disagree with respect to our tax positions. We believe that our consideration is adequate for all open audityears based on our assessment of many factors, including past experience and interpretations of tax law. We review and update our estimates in light of changingfacts and circumstances, such as the closing of a tax audit, the lapse of a statute of limitations or a change in estimate. To the extent that the final tax outcome ofthese matters differs from our expectations, such differences may impact income tax expense in the period in which such determination is made. The eventualimpact on our income tax expense depends in part if we still have a valuation allowance recorded against our deferred tax assets in the period that suchdetermination is made.Principles of ConsolidationThe consolidated financial statements reflect our accounts and operations and those of our subsidiaries in which we have a controlling financial interest. Inaccordance with the provisions of ASC 810, Consolidation, we consolidate any variable interest entity (“VIE”) of which we are the primary beneficiary. We formVIEs with our financing fund investors in the ordinary course of business in order to facilitate the funding and monetization of certain attributes associated withour solar energy systems and leases under our direct vehicle leasing programs. The typical condition for a controlling financial interest ownership is holding amajority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do notinvolve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of the VIEthat most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or theright to receive benefits from the VIE that could potentially be significant to the VIE. We do not consolidate a VIE in which we have a majority ownership interestwhen we are not considered the primary beneficiary. We have determined that we are the primary beneficiary of all the VIEs. We evaluate our relationships withall the VIEs on an ongoing basis to ensure that we continue to be the primary beneficiary. All intercompany transactions and balances have been eliminated uponconsolidation.48 Noncontrolling Interests and Redeemable Noncontrolling InterestsNoncontrolling interests and redeemable noncontrolling interests represent third-party interests in the net assets under certain funding arrangements, orfunds, that we enter into to finance the costs of solar energy systems and vehicles under operating leases. We have determined that the contractual provisions of thefunds represent substantive profit sharing arrangements. We have further determined that the appropriate methodology for calculating the noncontrolling interestand redeemable noncontrolling interest balances that reflects the substantive profit sharing arrangements is a balance sheet approach using the hypotheticalliquidation at book value (“HLBV”) method. We, therefore, determine the amount of the noncontrolling interests and redeemable noncontrolling interests in the netassets of the funds at each balance sheet date using the HLBV method, which is presented on the consolidated balance sheet as noncontrolling interests insubsidiaries and redeemable noncontrolling interests in subsidiaries. Under the HLBV method, the amounts reported as noncontrolling interests and redeemablenoncontrolling interests in the consolidated balance sheet represent the amounts the third-parties would hypothetically receive at each balance sheet date under theliquidation provisions of the funds, assuming the net assets of the funds were liquidated at their recorded amounts determined in accordance with GAAP and withtax laws effective at the balance sheet date and distributed to the third-parties. The third-parties’ interests in the results of operations of the funds are determined asthe difference in the noncontrolling interest and redeemable noncontrolling interest balances in the consolidated balance sheets between the start and end of eachreporting period, after taking into account any capital transactions between the funds and the third-parties. However, the redeemable noncontrolling interestbalance is at least equal to the redemption amount. The redeemable noncontrolling interest balance is presented as temporary equity in the mezzanine section of theconsolidated balance sheet since these third-parties have the right to redeem their interests in the funds for cash or other assets. Results of OperationsRevenues Year Ended December 31, 2019 vs. 2018 Change 2018 vs. 2017 Change (Dollars in millions) 2019 2018 2017 $ % $ % Automotive sales $19,952 $17,632 $8,535 $2,320 13% $9,097 107%Automotive leasing 869 883 1,107 (14) -2% (224) -20%Total automotive revenues 20,821 18,515 9,642 2,306 12% 8,873 92%Services and other 2,226 1,391 1,001 835 60% 390 39%Total automotive & services and other segment revenue 23,047 19,906 10,643 3,141 16% 9,263 87%Energy generation and storage segment revenue 1,531 1,555 1,116 (24) -2% 439 39%Total revenues $24,578 $21,461 $11,759 $3,117 15% $9,702 83% Automotive & Services and Other SegmentAutomotive sales revenue includes revenues related to cash sales of new Model S, Model X and Model 3 vehicles, including access to our Superchargernetwork, internet connectivity, Autopilot and FSD features and over-the-air software updates, as well as sales of regulatory credits to other automotivemanufacturers. Cash deliveries are vehicles that are not subject to lease accounting.Automotive leasing revenue includes the amortization of revenue for Model S, Model X and Model 3 vehicles under direct lease agreements as well asthose sold with resale value guarantees accounted for as operating leases under lease accounting. We began offering direct leasing for Model 3 vehicles in thesecond quarter of 2019.Services and other revenue consists of non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, sales by our acquiredsubsidiaries to third party customers, and vehicle insurance revenue.49 2019 Compared to 2018Automotive sales revenue increased $2.32 billion, or 13%, in the year ended December 31, 2019 as compared to the year ended December 31, 2018,primarily due to an increase of 137,969 Model 3 cash deliveries from production scaling and an increase of $175 million in sales of regulatory credits to $594million. The increase was partially offset by a decrease of 30,487 Model S and Model X cash deliveries. The deliveries in the year ended December 31, 2019 wereat lower average selling prices than the prior year due to price adjustments we made to our vehicle offerings and the introduction of lower end Model 3 trims in2019. Due to the price adjustments, we estimated that there is a greater likelihood that customers will exercise their buyback options that were provided prior tosuch adjustments. As a result, along with the estimated variable consideration related to normal future product returns for vehicles sold under the buyback optionsprogram, we adjusted our sales return reserve on vehicles previously sold under our buyback options program resulting in a reduction of automotive sales revenuesof $555 million. Refer to Note 2, Summary of Significant Accounting Policies, to the consolidated statements included elsewhere in this Annual Report on Form10-K.Automotive leasing revenue decreased $14 million, or 2%, in the year ended December 31, 2019 as compared to the year ended December 31, 2018. Thedecrease was primarily due to a decrease in cumulative vehicles under our resale value guarantee leasing programs which are accounted for as operating leases.The decrease was partially offset by an increase in cumulative vehicles under our direct vehicle leasing program, partially due to the introduction of Model 3 directleasing in the second quarter of 2019.Services and other revenue increased $835 million, or 60%, in the year ended December 31, 2019 as compared to the year ended December 31, 2018. Theincrease was primarily due to an increase in used vehicle sales from an increased volume of trade-in vehicles, partially offset by lower average selling prices fortraded-in Tesla vehicles due to price adjustments we made to our vehicle offerings in 2019. Additionally, there was an increase in non-warranty maintenanceservices revenue as our fleet continues to grow.Energy Generation and Storage SegmentEnergy generation and storage revenue includes sales and leasing of solar energy generation and energy storage products, services related to suchproducts, and sales of solar energy systems incentives.2019 Compared to 2018Energy generation and storage revenue decreased by $24 million, or 2%, in the year ended December 31, 2019 as compared to the year endedDecember 31, 2018, primarily due to decreases in deployments of solar cash and loan jobs partially offset increases in deployments of Powerwall, Powerpack, andMegapack.50 Cost of Revenues and Gross Margin Year Ended December 31, 2019 vs. 2018 Change 2018 vs. 2017 Change (Dollars in millions) 2019 2018 2017 $ % $ % Cost of revenues Automotive sales $15,939 $13,686 $6,725 $2,253 16% $6,961 104%Automotive leasing 459 488 708 (29) -6% (220) -31%Total automotive cost of revenues 16,398 14,174 7,433 2,224 16% 6,741 91%Services and other 2,770 1,880 1,229 890 47% 651 53%Total automotive & services and other segment cost of revenues 19,168 16,054 8,662 3,114 19% 7,392 85%Energy generation and storage segment 1,341 1,365 874 (24) -2% 491 56%Total cost of revenues $20,509 $17,419 $9,536 $3,090 18% $7,883 83% Gross profit total automotive $4,423 $4,341 $2,209 Gross margin total automotive 21% 23% 23% Gross profit total automotive & services and other segment $3,879 $3,852 $1,981 Gross margin total automotive & services and other segment 17% 19% 19% Gross profit energy generation and storage segment $190 $190 $242 Gross margin energy generation and storage segment 12% 12% 22% Total gross profit $4,069 $4,042 $2,223 Total gross margin 17% 19% 19% Automotive & Services and Other SegmentCost of automotive sales revenue includes direct parts, material and labor costs, manufacturing overhead, including depreciation costs of tooling andmachinery, shipping and logistic costs, vehicle connectivity costs, allocations of electricity and infrastructure costs related to our Supercharger network, andreserves for estimated warranty expenses. Cost of automotive sales revenues also includes adjustments to warranty expense and charges to write down the carryingvalue 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.Cost of automotive leasing revenue includes primarily the amortization of operating lease vehicles over the lease term, as well as warranty expensesrecognized as incurred. Cost of automotive leasing revenue also includes vehicle connectivity costs and allocations of electricity and infrastructure costs related toour Supercharger network for vehicles under our leasing programs.Costs of services and other revenue includes costs associated with providing non-warranty after-sales services, costs to acquire and certify used vehicles,costs for retail merchandise, and costs to provide vehicle insurance. Cost of services and other revenue also includes direct parts, material and labor costs,manufacturing overhead associated with the sales by our acquired subsidiaries to third party customers.51 2019 Compared to 2018Cost of automotive sales revenue increased $2.25 billion, or 16%, in the year ended December 31, 2019 as compared to the year ended December 31,2018, primarily due to an increase of 137,969 Model 3 cash deliveries and higher average Model S and Model X costs per unit compared to the prior year due tothe discontinuation of lower end trims in 2019. The increases were partially offset by a decrease of 30,487 Model S and Model X cash deliveries and a decrease inaverage Model 3 costs per unit compared to the prior year primarily due to lower end trims introduced in 2019 and temporary under-utilization of manufacturingcapacity at lower production volumes in the first half of 2018. Additionally, due to price adjustments we made to our vehicle offerings in 2019, we estimated thatthere is a greater likelihood that customers will exercise their buyback options that were provided prior to such adjustments. If customers elect to exercise thebuyback options, we expect to be able to subsequently resell the returned vehicles, which resulted in a reduction of automotive cost of sales of $451 million for theyear ended December 31, 2019. Refer to Note 2, Summary of Significant Accounting Policies, to the consolidated statements included elsewhere in this AnnualReport on Form 10-K.Cost of automotive leasing revenue decreased $29 million, or 6%, in the year ended December 31, 2019 compared to the year ended December 31, 2018.The decrease was primarily due to a decrease in cumulative vehicles under our resale value guarantee leasing programs which are accounted for as operatingleases. The decrease was partially offset by an increase in cumulative vehicles under our direct vehicle leasing program, partially due to the introduction of Model3 leasing in the second quarter of 2019.Cost of services and other revenue increased $890 million, or 47%, in the year ended December 31, 2019 as compared to the year ended December 31,2018. The increase was primarily due to the costs of used vehicle sales from the increased volumes of trade-in vehicles. Additionally, there were increases in thecosts of our new service centers, additional service personnel in existing and new service centers, Mobile Service capabilities, parts distribution centers andinvestment in new body shops to provide maintenance services to our rapidly growing fleet of vehicles.Gross margin for total automotive decreased from 23% to 21% in the year ended December 31, 2019 as compared to the year ended December 31, 2018,primarily due to lower Model S and Model X margins from lower selling prices due to price adjustments we made to our vehicle offerings in 2019, a higherproportion of Model 3 as a percentage of our total automotive sales compared to the prior period. Additionally, the price adjustments also resulted in a reduction ingross automotive sales profit of $104 million from the adjustment of our sales return reserve on vehicles previously sold under our buyback options program. Thedecrease was partially offset by improvement of Model 3 margins compared to the prior year as we achieved additional manufacturing efficiencies in theproduction of Model 3 and an increase of $175 million in sales of regulatory credits.Gross margin for total automotive & services and other segment decreased from 19% to 17% in the year ended December 31, 2019 as compared to theyear ended December 31, 2018, primarily due to the automotive gross margin impacts discussed above and a higher proportion of services and other within thesegment, which operates at lower gross margins than our automotive business.Energy Generation and Storage SegmentCost of energy generation and storage revenue includes direct and indirect material and labor costs, warehouse rent, freight, warranty expense, otheroverhead costs and amortization of certain acquired intangible assets. In addition, where arrangements are accounted for as operating leases, the cost of revenue isprimarily comprised of depreciation of the cost of leased solar energy systems, maintenance costs associated with those systems and amortization of any initialdirect costs.2019 Compared to 2018Cost of energy generation and storage revenue decreased by $24 million , or 2%, in the year ended December 31, 2019 as compared to the year endedDecember 31, 2018. The decrease was primarily due to a decrease in deployments of solar cash and loan jobs, partially offset by increases in deployments ofPowerwall, Powerpack, and Megapack.52 Gross margin for energy generation and storage remained relatively consistent at 12% in the year ended December 31, 2019 as compared to the year endedDecember 31, 2018. Energy storage gross margins improved in the current year as a result of lower materials costs, partially offset by lower gross margins in ourcash and loan solar business driven by higher costs from temporary manufacturing under-utilization of our Solar Roof ramp.Research and Development Expense Year Ended December 31, 2019 vs. 2018 Change 2018 vs. 2017 Change (Dollars in millions) 2019 2018 2017 $ % $ % Research and development $1,343 $1,460 $1,378 $(117) -8% $82 6%As a percentage of revenues 5% 7% 12% Research and development (“R&D”) expenses consist primarily of personnel costs for our teams in engineering and research, manufacturing engineeringand manufacturing test organizations, prototyping expense, contract and professional services and amortized equipment expense.R&D expenses as a percentage of revenue decreased from 7% to 5% in the year ended December 31, 2019 as compared to the year ended December 31,2018. The decrease was primarily from an increase in overall revenues from our expanding sales, as well as from our focus on increasing operational efficiencyand process automation, our efforts to scale down and optimize our cost structure relative to the size of our business.R&D expenses decreased $117 million, or 8%, in the year ended December 31, 2019 compared to the year ended December 31, 2018. The decrease wasprimarily due to a $95 million decrease in employee and labor related expenses from cost efficiency initiatives and a $26 million decrease in professional andoutside service expenses.Selling, General and Administrative Expense Year Ended December 31, 2019 vs. 2018 Change 2018 vs. 2017 Change (Dollars in millions) 2019 2018 2017 $ % $ % Selling, general and administrative $2,646 $2,835 $2,477 $(189) -7% $358 14%As a percentage of revenues 11% 13% 21% Selling, general and administrative (“SG&A”) expenses generally consist of personnel and facilities costs related to our stores, marketing, sales, executive,finance, human resources, information technology and legal organizations, as well as fees for professional and contract services and litigation settlements.SG&A expenses as a percentage of revenue decreased from 13% to 11% in year ended December 31, 2019 as compared to the year ended December 31,2018. The decrease was primarily from an increase in overall revenues from our expanding sales, as well as from our focus on increasing operational efficiencyand process automation, our efforts to scale down and optimize our cost structure relative to the size of our business.SG&A expenses decreased $189 million, or 7%, in the year ended December 31, 2019 as compared to the year ended December 31, 2018. The decreasewas primarily due to a $302 million decrease in employee and labor related expenses from decreased headcount and cost efficiency initiatives, partially offset by a$112 million increase in stock-based compensation expense. The increase in stock-based compensation expense was primarily related to the 2018 CEOPerformance Award as we recorded a $72 million cumulative catch-up expense for the service provided from the grant date when an additional operationalmilestone was considered probable of being met in the fourth quarter of 2019. Additionally, the expense period was shorter in the prior year as it commenced uponthe grant approval date of March 21, 2018.53 Restructuring and other Year Ended December 31, 2019 vs. 2018 Change 2018 vs. 2017 Change(Dollars in millions) 2019 2018 2017 $ % $ %Restructuring and other $149 $135 $— $14 10% $135 N/AAs a percentage of revenues 1% 1% 0% During the year ended December 31, 2019, we carried out certain restructuring actions in order to reduce costs and improve efficiency. As a result, werecognized $50 million of costs primarily related to employee termination expenses and losses from closing certain stores impacting both segments. Werecognized $47 million in impairment related to the IPR&D intangible asset as we abandoned further development efforts (refer to Note 4, Goodwill and IntangibleAssets for details) and $15 million for the related equipment within the energy generation and storage segment. We also incurred a loss of $37 million for closingoperations in certain facilities. On the statement of cash flows, the amounts were presented in the captions in which such amounts would have been recorded absentthe impairment charges. The employee termination expenses were substantially paid by December 31, 2019, while the remaining amounts were non-cash.During the year ended December 31, 2018, we carried-out certain restructuring actions in order to reduce costs and improve efficiency and recognized$37 million of employee termination expenses and estimated losses from sub-leasing a certain facility. The employee termination cash expenses of $27 millionwere substantially paid by the end of 2018, while the remaining amounts were non-cash. Also included within restructuring and other activities was $55 million ofexpenses (materially all of which were non-cash) from restructuring the energy generation and storage segment, which comprised of disposals of certain tangibleassets, the shortening of the useful life of a trade name intangible asset and a contract termination penalty. In addition, we concluded that a small portion of theIPR&D asset is not commercially feasible. Consequently, we recognized an impairment loss of $13 million. We recognized settlement and legal expenses of $30million in the year ended December 31, 2018 for the settlement with the SEC relating to a take-private proposal for Tesla. These expenses were substantially paidby the end of 2018.Interest Expense Year Ended December 31, 2019 vs. 2018 Change 2018 vs. 2017 Change (Dollars in millions) 2019 2018 2017 $ % $ % Interest expense $685 $663 $471 $22 3% $192 41%As a percentage of revenues 3% 3% 4% Interest expense increased by $22 million, or 3%, in the year ended December 31, 2019 as compared to the year ended December 31, 2018. The increasewas primarily due to an increase in our average outstanding indebtedness at relatively consistent weighted average interest rates as compared to the year endedDecember 31, 2018.Other Income (Expense), Net Year Ended December 31, 2019 vs. 2018 Change 2018 vs. 2017 Change(Dollars in millions) 2019 2018 2017 $ % $ %Other income (expense), net $45 $22 $(125) $23 105% $147 NotmeaningfulAs a percentage of revenues 0% 0% -1% Other income (expense), net, consists primarily of foreign exchange gains and losses related to our foreign currency-denominated monetary assets andliabilities and changes in the fair values of our fixed-for-floating interest rate swaps. We expect our foreign exchange gains and losses will vary depending uponmovements in the underlying exchange rates.54 Other income (expense), net, increased by $23 million, or 105%, in the year ended December 31, 2019 as compared to the year ended December 31, 2018.The change was primarily due to favorable fluctuations in foreign currency exchange rates, offset by losses from interest rate swaps related to our debt facilitiesyear-over-year.Provision for Income Taxes Year Ended December 31, 2019 vs. 2018 Change 2018 vs. 2017 Change (Dollars in millions) 2019 2018 2017 $ % $ % Provision for income taxes $110 $58 $32 $52 90% $26 81%Effective tax rate -17% -6% -1% Our provision for income taxes increased by $52 million, or 90%, in the year ended December 31, 2019 as compared to the year ended December 31,2018, primarily due to the increase in taxable profits in certain foreign jurisdictions year-over-year.Net Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests Year Ended December 31, 2019 vs. 2018 Change 2018 vs. 2017 Change (Dollars in millions) 2019 2018 2017 $ % $ % Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries $87 $(87) $(279) $174 Notmeaningful $192 -69% Our net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests was related to financing fund arrangements.Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests changed unfavorably by $174 million in the year endedDecember 31, 2019 as compared to the year ended December 31, 2018. The change was primarily due to lower activities in our financing fund arrangements.Liquidity and Capital ResourcesAs of December 31, 2019, we had $6.27 billion of cash and cash equivalents. Balances held in foreign currencies had a U.S. dollar equivalent of$1.26 billion and consisted primarily of Chinese yuan, euros and Canadian dollars. Our sources of cash are predominantly from our deliveries of vehicles, sales andinstallations of our energy storage products and solar energy systems, proceeds from debt facilities, proceeds from financing funds and proceeds from equityofferings.Our sources of liquidity and cash flows enable us to fund ongoing operations, research and development projects for new products, establishment and/orincreases of Model 3 and Model Y production capacity at the Fremont Factory and at Gigafactory Shanghai, the continued expansion of Gigafactory Nevada, theconstruction of Gigafactory Berlin, the manufacturing ramp of the Solar Roof at Gigafactory New York, and the continued expansion of our retail and servicelocations, body shops, Mobile Service fleet and Supercharger network.As discussed in and subject to the considerations referenced in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Resultsof Operations—Management Opportunities, Challenges and Risks and 2020 Outlook—Trends in Cash Flow, Capital Expenditures and Operating Expenses in thisAnnual Report on Form 10-K, considering the expected pace of the manufacturing ramps for our products, construction and expansion of our factories, andpipeline of projects under development, and consistent with our current strategy of using a partner to manufacture battery cells, as well as considering all otherinfrastructure growth, we currently expect our average annual capital expenditures in 2020 and the two succeeding fiscal years to be $2.5 billion to $3.5 billion.55 We expect that the cash we generate from our core operations will generally be sufficient to cover our future capital expenditures and to pay down ournear-term debt obligations, although we may choose to seek alternative financing sources. For example, we expect that much of our investment in GigafactoryShanghai will continue to be funded through indebtedness arranged through local financial institutions in China, such as the RMB 9.0 billion (or the equivalentamount in U.S. dollars) fixed asset term facility and RMB 2.25 billion (or the equivalent amount in U.S. dollars) working capital revolving facility that our localsubsidiary entered into in December 2019, and we expect the same with respect to Gigafactory Berlin. As always, we continually evaluate our capital expenditureneeds and may decide it is best to raise additional capital to fund the rapid growth of our business, to further strengthen our balance sheet, or for general corporatepurposes.We have an agreement to spend or incur $5.0 billion in combined capital, operational expenses, costs of goods sold and other costs in the State of NewYork during the 10-year period following full production at Gigafactory New York. We anticipate meeting these obligations through our operations at this facilityand other operations within the State of New York, and we do not believe that we face a significant risk of default.We expect that our current sources of liquidity together with our projection of cash flows from operating activities will provide us with adequate liquidityover at least the next 12 months. A large portion of our future expenditures is to fund our growth, and we can adjust our capital and operating expenditures byoperating segment, including future expansion of our product offerings, retail and service locations, body shops, Mobile Service fleet, and Supercharger network.We may need or want to raise additional funds in the future, and these funds may not be available to us when we need or want them, or at all. If we cannot raiseadditional funds when we need or want them, our operations and prospects could be negatively affected.In addition, we had $3.03 billion of unused committed amounts under our credit facilities and financing funds as of December 31, 2019, some of whichare subject to satisfying specified conditions prior to draw-down (such as pledging to our lenders sufficient amounts of qualified receivables, inventories, leasedvehicles and our interests in those leases, solar energy systems and the associated customer contracts, our interests in financing funds or various other assets; andcontributing or selling qualified solar energy systems and the associated customer contracts or qualified leased vehicles and our interests in those leases into thefinancing funds). Upon the draw-down of any unused committed amounts, there are no restrictions on use of available funds for general corporate purposes. Fordetails regarding our indebtedness and financing funds, refer to Note 12, Debt, and Note 17, Variable Interest Entity Arrangements, to the consolidated financialstatements included elsewhere in this Annual Report on Form 10-K.Summary of Cash Flows Year Ended December 31, (Dollars in millions) 2019 2018 2017 Net cash provided by (used in) operating activities $2,405 $2,098 $(61)Net cash used in investing activities $(1,436) $(2,337) $(4,196)Net cash provided by financing activities $1,529 $574 $4,415 Cash Flows from Operating ActivitiesOur cash flows from operating activities are significantly affected by our cash investments to support the growth of our business in areas such as researchand development and selling, general and administrative and working capital, especially inventory, which includes vehicles in transit. Our operating cash inflowsinclude cash from vehicle sales, customer lease payments, customer deposits, cash from sales of regulatory credits and energy generation and storage products.These cash inflows are offset by our payments to suppliers for production materials and parts used in our manufacturing process, operating expenses, operatinglease payments and interest payments on our financings.56 Net cash provided by operating activities increased by $307 million to $2.41 billion during the year ended December 31, 2019 from $2.10 billion duringthe year ended December 31, 2018. This favorable change was primarily due to the increase in net income, excluding non-cash expenses and gains, of $902million, partially offset by the increase in net operating assets and liabilities of $407 million and $188 million of the repayment of our 0.25% Convertible SeniorNotes due in 2019 which was classified as an operating activity, as this represented an interest payment on the discounted convertible notes. The increase in netoperating assets and liabilities was mainly driven by a smaller increase in accounts payable and accrued liabilities in 2019 as compared to 2018, as we wereramping for Model 3 production in 2018 and a larger increase in operating lease vehicles in 2019 as compared to 2018 as we began offering Model 3 leasing in2019. The increase in net operating assets and liabilities was partially offset by a smaller increase in inventory and a larger increase in deferred revenue in 2019 ascompared to 2018.Cash Flows from Investing ActivitiesCash flows from investing activities and their variability across each period related primarily to capital expenditures, which were $1.33 billion during2019, mainly for Gigafactory Shanghai construction, Model 3 production, and Model Y preparations, and $2.10 billion during 2018, mainly for Model 3production. Design, acquisition and installation of solar energy systems amounted to $105 million and $218 million for the years ended December 31, 2019 and2018, respectively. Cash Flows from Financing ActivitiesCash flows from financing activities during the year ended December 31, 2019 consisted primarily of $1.82 billion from the issuance of the 2.00%Convertible Senior Notes due in 2024 (“2024 Notes”), net of transaction costs, and $848 million from the issuance of common stock, net of underwriting discounts,in registered public offerings, $736 million of net borrowings under loan agreements entered into by certain Chinese subsidiaries, $394 million of net borrowingsfor automotive asset-backed notes, and $174 million from the issuance of warrants in connection with the offering of the 2024 Notes. These cash inflows werepartially offset by a $732 million portion of the repayment of our 0.25% Convertible Senior Notes due in 2019 that was classified as financing activity, a $566million repayment of our 1.625% Convertible Senior Notes due in 2019, a purchase of convertible note hedges of $476 million in connection with the offering ofthe 2024 Notes, and collateralized lease repayments of $389 million. See Note 12, Debt, and Note 2, Summary of Significant Accounting Policies, to theconsolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details regarding our debt obligations and collateralizedborrowings, respectively.Cash flows from financing activities during the year ended December 31, 2018 consisted primarily of $1.18 billion of net borrowings under automobileasset-backed notes, $431 million of net borrowings under the senior secured asset-based revolving credit agreement (the “Credit Agreement”), $334 million fromthe issuance of solar asset-backed notes and $296 million of proceeds from exercises of stock options and other stock issuances. These cash inflows were partiallyoffset by net repayments of $582 million under our vehicle lease-backed loan and security agreements (the “Warehouse Agreements”), collateralized leaserepayments of $559 million, repayments of $230 million of the 2.75% Convertible Senior Notes due on November 1, 2018, and repayments of $210 million underthe revolving aggregation credit facility.57 Contractual ObligationsWe are party to contractual obligations involving commitments to make payments to third parties, including certain debt financing arrangements andleases, primarily for stores, service centers, certain manufacturing and corporate offices. These also include, as part of our normal business practices, contracts withsuppliers for purchases of certain raw materials, components and services to facilitate adequate supply of these materials and services and capacity reservationcontracts. The following table sets forth, as of December 31, 2019, certain significant obligations that will affect our future liquidity (in millions): Year Ended December 31, Total 2020 2021 2022 2023 2024 Thereafter Operating lease obligations, including imputed interest $1,459 $296 $262 $210 $173 $146 $372 Finance lease obligations, including imputed interest 1,795 474 478 600 225 5 13 Purchase obligations (1) 16,292 5,729 2,946 3,645 3,948 24 — Debt, including scheduled interest (2) 14,031 1,774 2,594 2,287 1,993 2,575 2,808 Total $33,577 $8,273 $6,280 $6,742 $6,339 $2,750 $3,193 (1)These amounts represent (i) purchase orders of $2.50 billion issued under binding and enforceable agreements with all vendors as of December 31, 2019and (ii) $13.79 billion in other estimable purchase obligations pursuant to such agreements, primarily relating to the purchase of lithium-ion cells producedby Panasonic at Gigafactory Nevada, including any additional amounts we may have to pay vendors if we do not meet certain minimum purchaseobligations. In cases where no purchase orders were outstanding under binding and enforceable agreements as of December 31, 2019, we have includedestimated amounts based on our best estimates and assumptions or discussions with the relevant vendors as of such date or, where applicable, on amountsor assumptions included in such agreements for purposes of discussion or reference. In certain cases, such estimated amounts were subject to contingentevents. Furthermore, these amounts do not include future payments for purchase obligations that were recorded in accounts payable or accrued liabilitiesas of December 31, 2019.(2)Debt, including scheduled interest, includes our non-recourse indebtedness of $5.29 billion. Non-recourse debt refers to debt that is recourse to only assetsof our subsidiaries. Short-term scheduled interest payments and amortization of convertible senior note conversion features, debt discounts and deferredfinancing costs for the year ended December 31, 2020 is $375 million. Long-term scheduled interest payments and amortization of convertible senior noteconversion features, debt discounts and deferred financing costs for the years thereafter is $1.86 billion.The table above excludes unrecognized tax benefits of $247 million because if recognized, they would be an adjustment to our deferred tax assets.We offer resale value guarantees or similar buyback terms to certain customers who purchase and finance their vehicles through one of our specifiedcommercial banking partners and certain leasing partners (refer to Automotive Sales with Resale Value Guarantee or a Buyback Option in Note 2, SignificantAccounting Policies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K). The maximum amount we could berequired to pay under these programs, should customers exercise their resale value guarantees or buyback options, would be $1.70 billion over the next five years,of which $226 million is within a 12-month period from December 31, 2019. We have not included this in the table above as it is unknown how many customerswill exercise their options. Additionally, we plan to resell any vehicles which are returned to us and therefore, the actual exposure to us is deemed to be limited.58 Off-Balance Sheet ArrangementsDuring the periods presented, we did not have relationships with unconsolidated entities or financial partnerships, such as entities often referred to asstructured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow orlimited purposes.Recent Accounting PronouncementsSee Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 59 ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKForeign Currency RiskWe transact business globally in multiple currencies and hence have foreign currency risks related to our revenue, costs of revenue and operating expensesdenominated in currencies other than the U.S. dollar (primarily the euro, Japanese yen, Canadian dollar, Chinese yuan and Norwegian krone). In general, we are anet receiver of currencies other than the U.S. dollar for our foreign subsidiaries. Accordingly, changes in exchange rates and, in particular, a strengthening of theU.S. dollar have in the past, and may in the future, negatively affect our revenue and other operating results as expressed in U.S. dollars as we do not typicallyhedge foreign currency.We have also experienced, and will continue to experience, fluctuations in our net income (loss) 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 andcash equivalents balances). For the year ended December 31, 2019, we recognized a net foreign currency gain of $48 million in other (expense) income, net, withour largest re-measurement exposures from the U.S. dollar, British pound and Canadian dollar as our subsidiaries are denominated in various local currencies. Forthe year ended December 31, 2018, we recognized a net foreign currency gain of $2 million in other (expense) income, net, with our largest re-measurementexposures from the euro, New Taiwan dollar and Canadian dollar.We considered the historical trends in foreign currency exchange rates and determined that it is reasonably possible that adverse changes in foreigncurrency exchange rates of 10% for all currencies could be experienced in the near-term. These changes were applied to our total monetary assets and liabilitiesdenominated in currencies other than our local currencies at the balance sheet date to compute the impact these changes would have had on our net income (loss)before income taxes. These changes would have resulted in an adverse impact of $362 million at December 31, 2019 and $176 million at December 31, 2018assuming no foreign currency hedging.Interest Rate RiskWe are exposed to interest rate risk on our borrowings that bear interest at floating rates. Pursuant to our risk management policies, in certain cases, weutilize derivative instruments to manage some of this risk. We do not enter into derivative instruments for trading or speculative purposes. A hypothetical 10%change in our interest rates would have increased or decreased our interest expense for the years ended December 31, 2019 and 2018 by $8 million and $9 million,respectively. 60 ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements PageReport of Independent Registered Public Accounting Firm 62Consolidated Balance Sheets 65Consolidated Statements of Operations 66Consolidated Statements of Comprehensive Loss 67Consolidated Statements of Redeemable Noncontrolling Interests and Equity 68Consolidated Statements of Cash Flows 69Notes to Consolidated Financial Statements 70 61 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Tesla, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of Tesla, Inc. and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and therelated consolidated statements of operations, of comprehensive loss, of redeemable noncontrolling interests and equity and of cash flows for each of the threeyears in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”). We also have auditedthe Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity withaccounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.Changes in Accounting PrinciplesAs discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in whichit accounts for revenue from contracts with customers in 2018.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and forits assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reportingappearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control overfinancial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as weconsidered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.62 Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactionsand dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Critical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated orrequired to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii)involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on theconsolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the criticalaudit matters or on the accounts or disclosures to which they relate.Automotive Sales To Customers With a Resale Value Guarantee or Buyback OptionAs described in Note 2 to the consolidated financial statements, the sales return reserve related to resale value guarantees or buyback options was $639 million asof December 31, 2019, of which $93 million was short-term. The Company offers some customers resale value guarantees or buyback options. Under theseprograms, the Company receives full payment for the vehicle sales price at the time of delivery and the customer has the option of selling their vehicle back to theCompany during the guarantee period for a pre-determined resale value. In circumstances where management does not believe the customer has a significanteconomic incentive to exercise the resale value guarantee or buyback option provided to them, the Company recognizes revenue when control transfers upondelivery to a customer as a sale with a right of return. In circumstances where management believes the customer has a significant economic incentive to exercisethe resale value guarantee or buyback option, the Company recognizes the transaction as an operating lease. Management’s determination of whether there is asignificant economic incentive includes comparing and considering a vehicle’s estimated market value at the time the option is exercisable with the guaranteedresale value. Sales return reserves are estimated based on historical experience plus estimates of expected future market values. On a quarterly basis, managementreassesses the estimated future market values of vehicles under these programs, taking into account price adjustments on new vehicles and other changes in marketvalue subsequent to the initial sale to determine the need for changes to the reserve. The principal considerations for our determination that performing procedures relating to automotive sales to customers with a resale value guarantee or buybackoption is a critical audit matter are there was significant judgment by management in determining the sales return reserve when customers do not have a significanteconomic incentive to exercise their option. This in turn led to high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluatingevidence in the sales return reserve when customers do not have a significant economic incentive. 63 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financialstatements. These procedures included testing the effectiveness of controls relating to automotive revenue recognition for sales to customers with a resale valueguarantee or buyback option as well as the related sales return reserve, including controls over management’s estimate of expected future market values andhistorical experience. These procedures also included, among others, testing management’s process for determining whether customers have a significant economicincentive to exercise their put rights under the resale value guarantee and buyback option programs and, if not, the related sales return reserve. This includedevaluating the appropriateness of the model applied and the reasonableness of significant assumptions, including historical experience and the estimated expectedfuture market values used in the comparison to guaranteed resale amounts. Evaluating assumptions related to historical experience and estimated expected futuremarket values involved evaluating whether the assumptions used were reasonable considering current and past performance and consistency with evidenceobtained in other areas of the audit. Procedures were performed to evaluate the reliability, completeness and relevance of management’s data used in thedevelopment of the historical experience assumption.Automotive Warranty ReserveAs described in Note 2 to the consolidated financial statements, total accrued warranty, which primarily relates to the automotive segment, was $1,089 million asof December 31, 2019. The Company provides a manufacturer’s warranty on all new and used Tesla vehicles. As described in Note 2, a warranty reserve isaccrued for these products sold, which includes management’s best estimate of the projected costs to repair or replace items under warranty, including recalls whenidentified. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. The principal considerations for our determination that performing procedures relating to the automotive warranty reserve is a critical audit matter are there wassignificant judgment by management in determining the warranty reserve. This in turn led to significant auditor judgment, subjectivity, and effort in performingprocedures to evaluate the estimate of the nature, frequency and costs of future claims, and the audit effort involved the use of professionals with specialized skilland knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financialstatements. These procedures included testing the effectiveness of controls relating to management’s estimate of the automotive warranty reserve, includingcontrols over management’s estimate of the nature, frequency and costs of future claims as well as the completeness and accuracy of actual claims incurred to date.These procedures also included, among others, testing management’s process for determining the automotive warranty reserve. This included evaluating theappropriateness of the model applied and the reasonableness of significant assumptions, including the nature and frequency of future claims and the related costs torepair or replace items under warranty. Evaluating the assumptions related to the nature and frequency of future claims and the related costs to repair or replaceitems under warranty involved evaluating whether the assumptions used were reasonable considering current and past performance, including a lookback analysiscomparing prior period forecasted claims to actual claims incurred. These procedures also included developing an independent estimate of a portion of thewarranty accrual, comparing the independent estimate to management’s estimate to evaluate the reasonableness of the estimate, and testing the completeness andaccuracy of historical vehicle claims. Procedures were performed to test the reliability, completeness, and relevance of management’s data related to the historicalclaims processed and that such claims were appropriately used by management in the estimation of future claims. Professionals with specialized skill andknowledge were used to assist in evaluating the appropriateness of aspects of management’s model for estimating the nature and frequency of future claims, andtesting management’s warranty reserve for a portion of future warranty claims. /s/PricewaterhouseCoopers LLPSan Jose, CaliforniaFebruary 13, 2020We have served as the Company’s auditor since 2005. 64 Tesla, Inc.Consolidated Balance Sheets(in millions, except per share data) December 31, December 31, 2019 2018 Assets Current assets Cash and cash equivalents $6,268 $3,686 Restricted cash 246 193 Accounts receivable, net 1,324 949 Inventory 3,552 3,113 Prepaid expenses and other current assets 713 366 Total current assets 12,103 8,307 Operating lease vehicles, net 2,447 2,090 Solar energy systems, net 6,138 6,271 Property, plant and equipment, net 10,396 11,330 Operating lease right-of-use assets 1,218 — Intangible assets, net 339 282 Goodwill 198 68 MyPower customer notes receivable, net of current portion 393 422 Restricted cash, net of current portion 269 398 Other assets 808 572 Total assets $34,309 $29,740 Liabilities Current liabilities Accounts payable $3,771 $3,405 Accrued liabilities and other 2,905 2,094 Deferred revenue 1,163 630 Resale value guarantees 317 503 Customer deposits 726 793 Current portion of debt and finance leases 1,785 2,568 Total current liabilities 10,667 9,993 Debt and finance leases, net of current portion 11,634 9,404 Deferred revenue, net of current portion 1,207 991 Resale value guarantees, net of current portion 36 329 Other long-term liabilities 2,655 2,710 Total liabilities 26,199 23,427 Commitments and contingencies (Note 16) Redeemable noncontrolling interests in subsidiaries 643 556 Equity Stockholders' equity Preferred stock; $0.001 par value; 100 shares authorized; no shares issued and outstanding — — Common stock; $0.001 par value; 2,000 shares authorized; 181 and 173 shares issued and outstanding as of December 31, 2019 and 2018, respectively 0 0 Additional paid-in capital 12,737 10,249 Accumulated other comprehensive loss (36) (8)Accumulated deficit (6,083) (5,318)Total stockholders' equity 6,618 4,923 Noncontrolling interests in subsidiaries 849 834 Total liabilities and equity $34,309 $29,740 The accompanying notes are an integral part of these consolidated financial statements. 65 Tesla, Inc. Consolidated Statements of Operations(in millions, except per share data) Year Ended December 31, 2019 2018 2017 Revenues Automotive sales $19,952 $17,632 $8,535 Automotive leasing 869 883 1,107 Total automotive revenues 20,821 18,515 9,642 Energy generation and storage 1,531 1,555 1,116 Services and other 2,226 1,391 1,001 Total revenues 24,578 21,461 11,759 Cost of revenues Automotive sales 15,939 13,686 6,725 Automotive leasing 459 488 708 Total automotive cost of revenues 16,398 14,174 7,433 Energy generation and storage 1,341 1,365 874 Services and other 2,770 1,880 1,229 Total cost of revenues 20,509 17,419 9,536 Gross profit 4,069 4,042 2,223 Operating expenses Research and development 1,343 1,460 1,378 Selling, general and administrative 2,646 2,835 2,477 Restructuring and other 149 135 — Total operating expenses 4,138 4,430 3,855 Loss from operations (69) (388) (1,632)Interest income 44 24 19 Interest expense (685) (663) (471)Other income (expense), net 45 22 (125)Loss before income taxes (665) (1,005) (2,209)Provision for income taxes 110 58 32 Net loss (775) (1,063) (2,241)Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries 87 (87) (279)Net loss attributable to common stockholders $(862) $(976) $(1,962)Net loss per share of common stock attributable to common stockholders Basic (4.92) $(5.72) $(11.83)Diluted (4.92) $(5.72) $(11.83)Weighted average shares used in computing net loss per share of common stock Basic 177 171 166 Diluted 177 171 166 The accompanying notes are an integral part of these consolidated financial statements. 66 Tesla, Inc.Consolidated Statements of Comprehensive Loss(in millions) Year Ended December 31, 2019 2018 2017 Net loss $(775) $(1,063) $(2,241)Other comprehensive loss: Reclassification adjustment for net gains on derivatives into net loss — — (6)Foreign currency translation adjustment (28) (42) 63 Comprehensive loss (803) (1,105) (2,184)Less: Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests in subsidiaries 87 (87) (279)Comprehensive loss attributable to common stockholders $(890) $(1,018) $(1,905) The accompanying notes are an integral part of these consolidated financial statements. 67 Tesla, Inc.Consolidated Statements of Redeemable Noncontrolling Interests and Equity(in millions, except per share data) Accumulated Redeemable Additional Other Total Noncontrolling Noncontrolling Common Stock Paid-In Accumulated Comprehensive Stockholders' Interests in Total Interests Shares Amount Capital Deficit Loss Equity Subsidiaries Equity Balance as of December 31, 2016 $367 162 $0 $7,774 $(2,997) $(24) $4,753 $785 $5,538 Adjustment of prior periods due to adoption of Accounting Standards UpdateNo. 2016-09 — — — 15 (15) — — — — Conversion feature of Convertible Senior Notes due in 2022 — — — 146 — — 146 — 146 Purchases of convertible note hedges — — — (204) — — (204) — (204)Sales of warrants — — — 53 — — 53 — 53 Exercises of conversion feature of convertible senior notes — 1 0 230 — — 230 — 230 Issuance of common stock for equity incentive awards and acquisitions, net oftransaction costs — 4 0 269 — — 269 — 269 Issuance of common stock in March 2017 public offering at $262.00 per share,net of issuance costs of $3 — 2 0 400 — — 400 — 400 Stock-based compensation — — — 485 — — 485 — 485 Contributions from noncontrolling interests 193 — — — — — — 597 597 Distributions to noncontrolling interests (101) — — — — — (164) (164)Other (3) — — 10 — — 10 — 10 Net loss (58) — — — (1,962) — (1,962) (221) (2,183)Other comprehensive income — — — — — 57 57 — 57 Balance as of December 31, 2017 $398 169 $0 $9,178 $(4,974) $33 $4,237 $997 $5,234 Adjustments for prior periods from adopting ASC 606 8 — — — 623 — 623 (89) 534 Adjustments for prior periods from adopting Accounting Standards Update No.2017-05 — — — — 9 — 9 — 9 Issuance of common stock for equity incentive awards — 4 0 296 — — 296 — 296 Stock-based compensation — — — 775 — — 775 — 775 Contributions from noncontrolling interests 276 — — — — — — 161 161 Distributions to noncontrolling interests (61) — — — — — — (210) (210)Other (3) — — — — — — — — Net loss (62) — — — (976) — (976) (25) (1,001)Other comprehensive loss — — — — — (41) (41) — (41)Balance as of December 31, 2018 $556 173 $0 $10,249 $(5,318) $(8) $4,923 $834 $5,757 Adjustments for prior periods from adopting ASC 842 — — — — 97 — 97 — 97 Conversion feature of Convertible Senior Notes due in 2024 — — — 491 — — 491 — 491 Purchase of convertible note hedges — — — (476) — — (476) — (476)Sales of warrants — — — 174 — — 174 — 174 Issuance of common stock for equity incentive awards and acquisitions, net oftransaction costs — 5 0 482 — — 482 — 482 Issuance of common stock in May 2019 public offering at $243.00 per share, netof issuance costs of $15 — 3 0 848 — — 848 — 848 Stock-based compensation — — — 973 — — 973 — 973 Contributions from noncontrolling interests 105 — — — — — — 174 174 Distributions to noncontrolling interests (65) — — — — — — (198) (198)Other (1) — — (4) — — (4) — (4)Net income (loss) 48 — — — (862) — (862) 39 (823)Other comprehensive loss — — — — — (28) (28) — (28)Balance as of December 31, 2019 $643 181 $0 $12,737 $(6,083) $(36) $6,618 $849 $7,467 The accompanying notes are an integral part of these consolidated financial statements. 68 Tesla, Inc.Consolidated Statements of Cash Flows(in millions) Year Ended December 31, 2019 2018 2017 Cash Flows from Operating Activities Net loss $(775) $(1,063) $(2,241)Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation, amortization and impairment 2,154 1,901 1,636 Stock-based compensation 898 749 467 Amortization of debt discounts and issuance costs 188 159 91 Inventory and purchase commitments write-downs 193 85 132 Loss on disposals of fixed assets 146 162 106 Foreign currency transaction (gains) loss (48) (2) 52 Loss related to SolarCity acquisition — — 58 Non-cash interest and other operating activities 186 49 135 Operating cash flow related to repayment of discounted convertible notes (188) — — Changes in operating assets and liabilities, net of effect of business combinations: Accounts receivable (367) (497) (25)Inventory (429) (1,023) (179)Operating lease vehicles (764) (215) (1,523)Prepaid expenses and other current assets (288) (82) (72)Other non-current assets 115 (207) (15)Accounts payable and accrued liabilities 682 1,723 388 Deferred revenue 801 406 469 Customer deposits (58) (96) 170 Resale value guarantee (150) (111) 209 Other long-term liabilities 109 160 81 Net cash provided by (used in) operating activities 2,405 2,098 (61)Cash Flows from Investing Activities Purchases of property and equipment excluding finance leases, net of sales (1,327) (2,101) (3,415)Purchases of solar energy systems (105) (218) (666)Purchase of intangible assets (5) — — Receipt of government grants 46 — — Business combinations, net of cash acquired (45) (18) (115)Net cash used in investing activities (1,436) (2,337) (4,196)Cash Flows from Financing Activities Proceeds from issuances of common stock in public offerings, net of underwriting discounts 848 — 400 Proceeds from issuances of convertible and other debt 10,669 6,176 7,138 Repayments of convertible and other debt (9,161) (5,247) (3,996)Repayments of borrowings issued to related parties — (100) (165)Collateralized lease repayments (389) (559) 511 Proceeds from exercises of stock options and other stock issuances 263 296 259 Principal payments on finance leases (321) (181) (103)Common stock and debt issuance costs (37) (15) (63)Purchase of convertible note hedges (476) — (204)Proceeds from settlement of convertible note hedges — — 287 Proceeds from issuance of warrants 174 — 53 Payments for settlements of warrants — — (230)Proceeds from investments by noncontrolling interests in subsidiaries 279 437 790 Distributions paid to noncontrolling interests in subsidiaries (311) (227) (262)Payments for buy-outs of noncontrolling interests in subsidiaries (9) (6) — Net cash provided by financing activities 1,529 574 4,415 Effect of exchange rate changes on cash and cash equivalents and restricted cash 8 (23) 40 Net increase in cash and cash equivalents and restricted cash 2,506 312 198 Cash and cash equivalents and restricted cash, beginning of period 4,277 3,965 3,767 Cash and cash equivalents and restricted cash, end of period $6,783 $4,277 $3,965 Supplemental Non-Cash Investing and Financing Activities Equity issued in connection with business combination $207 $— $— Acquisitions of property and equipment included in liabilities $562 $249 $914 Estimated fair value of facilities under build-to-suit leases $— $94 $313 Supplemental Disclosures Cash paid during the period for interest, net of amounts capitalized $455 $381 $183 Cash paid during the period for taxes, net of refunds $54 $35 $66 The accompanying notes are an integral part of these consolidated financial statements. 69 Tesla, Inc.Notes to Consolidated Financial Statements Note 1 – OverviewTesla, Inc. (“Tesla”, the “Company”, “we”, “us” or “our”) was incorporated in the State of Delaware on July 1, 2003. We design, develop, manufactureand sell high-performance fully electric vehicles and design, manufacture, install and sell solar energy generation and energy storage products. Our ChiefExecutive Officer, as the chief operating decision maker (“CODM”), organizes the Company, manages resource allocations and measures performance among twooperating and reportable segments: (i) automotive and (ii) energy generation and storage. Note 2 – Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) andreflect our accounts and operations and those of our subsidiaries in which we have a controlling financial interest. In accordance with the provisions of AccountingStandards Codification (“ASC”) 810, Consolidation, we consolidate any variable interest entity (“VIE”) of which we are the primary beneficiary. We form VIEswith financing fund investors in the ordinary course of business in order to facilitate the funding and monetization of certain attributes associated with solar energysystems and leases under our direct vehicle leasing programs. The typical condition for a controlling financial interest ownership is holding a majority of the votinginterests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling votinginterests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of the VIE that most significantlyimpact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receivebenefits from the VIE that could potentially be significant to the VIE. We do not consolidate a VIE in which we have a majority ownership interest when we arenot considered the primary beneficiary. We have determined that we are the primary beneficiary of all the VIEs (see Note 17, Variable Interest EntityArrangements). We evaluate our relationships with all the VIEs on an ongoing basis to ensure that we continue to be the primary beneficiary. All intercompanytransactions and balances have been eliminated upon consolidation.Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets, liabilities and disclosures in the accompanying notes. Estimates are used for, but not limited to, determining the transaction price of productsand services in arrangements with multiple performance obligations and determining the amortization period of these obligations, significant economic incentivefor residual value guarantee arrangements, sales return reserves, the collectability of accounts receivable, inventory valuation, fair value of long-lived assets,goodwill, fair value of financial instruments, residual value of operating lease vehicles, depreciable lives of property and equipment and solar energy systems, fairvalue and residual value of solar energy systems subject to leases, warranty liabilities, income taxes, contingencies, determining lease pass-through financingobligations, the valuation of build-to-suit lease assets, fair value of interest rate swaps and inputs used to value stock-based compensation. In addition, estimatesand assumptions are used for the accounting for business combinations, including the fair values and useful lives of acquired assets, assumed liabilities andnoncontrolling interests. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of whichform the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.70 Revenue RecognitionAdoption of new accounting standardsASU 2014-09, Revenue - Revenue from Contracts with Customers. On January 1, 2018, we adopted the new accounting standard ASC 606, Revenue fromContracts with Customers and all the related amendments (“new revenue standard”) using the modified retrospective method. As a policy election, the new revenuestandard was applied only to contracts that were not substantially completed as of the date of adoption. We recognized the cumulative effect of initially applyingthe new revenue standard as an adjustment to the January 1, 2018 opening balance of accumulated deficit. The prior period consolidated financial statements havenot been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.A majority of our automotive sales revenue is recognized when control transfers upon delivery to customers. For certain vehicle sales where revenue waspreviously deferred as an in-substance operating lease, such as certain vehicle sales to customers or leasing partners with a resale value guarantee, we recognizerevenue when the vehicles are delivered as a sale with a right of return. As a result, the corresponding operating lease asset, deferred revenue, and resale valueguarantee balances as of December 31, 2017, were reclassified to accumulated deficit as part of our adoption entry. Furthermore, the warranty liability related tosuch vehicles has been accrued as a result of the change from in-substance operating leases to vehicle sales. Prepayments on contracts that can be cancelledwithout significant penalties, such as vehicle maintenance plans, have been reclassified from deferred revenue to customer deposits. Refer to the Automotive SalesRevenue and Automotive Leasing Revenue sections below for further discussion of the impact on various categories of vehicle sales. Automotive SegmentAutomotive Sales RevenueAutomotive Sales without Resale Value GuaranteeAutomotive sales revenue includes revenues related to deliveries of new vehicles and pay-per-use charges, and specific other features and services thatmeet the definition of a performance obligation under the new revenue standard, including access to our Supercharger network, internet connectivity, Autopilot,Full Self-Driving (“FSD”) features and over-the-air software updates. We recognize revenue on automotive sales upon delivery to the customer, which is when thecontrol of a vehicle transfers. Payments are typically received at the point control transfers or in accordance with payment terms customary to the business. Otherfeatures and services such as access to our Supercharger network, internet connectivity and over-the-air software updates are provisioned upon control transfer of avehicle and recognized over time on a straight-line basis as we have a stand-ready obligation to deliver such services to the customer. We recognize revenue relatedto these other features and services over the performance period, which is generally the expected ownership life of the vehicle or the eight-year life of the vehicle.Revenue related to Autopilot and FSD features is recognized when functionality is delivered to the customer. For our obligations related to automotive sales, weestimate standalone selling price by considering costs used to develop and deliver the service, third-party pricing of similar options and other information that maybe available.At the time of revenue recognition, we reduce the transaction price and record a sales return reserve against revenue for estimated variable considerationrelated to future product returns. Such estimates are based on historical experience and are immaterial in all periods presented. In addition, any fees that are paid orpayable by us to a customer’s lender when we arrange the financing are recognized as an offset against automotive sales revenue.Costs to obtain a contract mainly relate to commissions paid to our sales personnel for the sale of vehicles. Commissions are not paid on other obligationssuch as access to our Supercharger network, internet connectivity, Autopilot, FSD features and over-the-air software updates. As our contract costs related toautomotive sales are typically fulfilled within one year, the costs to obtain a contract are expensed as incurred. Amounts billed to customers related to shipping andhandling are classified as automotive revenue, and we have elected to recognize the cost for freight and shipping when control over vehicles, parts, or accessorieshave transferred to the customer as an expense in cost of revenues. Our policy is to exclude taxes collected from a customer from the transaction price ofautomotive contracts.71 Automotive Sales with Resale Value Guarantee or a Buyback OptionWe offer resale value guarantees or similar buy-back terms to certain international customers who purchase vehicles and who finance their vehiclesthrough one of our specified commercial banking partners. We also offer resale value guarantees in connection with automotive sales to certain leasing partners.Under these programs, we receive full payment for the vehicle sales price at the time of delivery and our counterparty has the option of selling their vehicle back tous during the guarantee period, which currently is generally at the end of the term of the applicable loan or financing program, for a pre-determined resale value.With the exception of two programs which are discussed within the Automotive Leasing section, we recognize revenue when control transfers upondelivery to customers in accordance with the new revenue standard as a sale with a right of return as we do not believe the customer has a significant economicincentive to exercise the resale value guarantee provided to them. The process to determine whether there is a significant economic incentive includes a comparisonof a vehicle’s estimated market value at the time the option is exercisable with the guaranteed resale value to determine the customer’s economic incentive toexercise. The performance obligations and the pattern of recognizing automotive sales with resale value guarantees are consistent with automotive sales withoutresale value guarantees with the exception of our estimate for sales return reserve. Sales return reserves for automotive sales with resale value guarantees areestimated based on historical experience plus consideration for expected future market values. On a quarterly basis, we assess the estimated market values ofvehicles under our buyback options program to determine whether there have been changes to the likelihood of future product returns. As we accumulate moredata related to the buyback values of our vehicles or as market conditions change, there may be material changes to their estimated values. Due to priceadjustments we made to our vehicle offerings during 2019, we estimated that there is a greater likelihood that customers will exercise their buyback options thatwere provided prior to such adjustments. As a result, along with the estimated variable consideration related to normal future product returns for vehicles soldunder the buyback options program, we adjusted our sales return reserve on vehicles previously sold under our buyback options program resulting in a reduction ofautomotive sales revenues of $555 million for the year ended December 31, 2019. If customers elect to exercise the buyback option, we expect to be able tosubsequently resell the returned vehicles, which resulted in a corresponding reduction in cost of automotive sales of $451 million for the year ended December 31,2019. The net impact was $104 million reduction in gross profit for the year ended December 31, 2019. The total sales return reserve on vehicles previously soldunder our buyback options program was $639 million as of December 31, 2019, of which $93 million was short term. The two programs that are still beingrecorded as operating leases are discussed in further detail below in Vehicle Sales to Leasing Partners with a Resale Value Guarantee and a Buyback Option andVehicle Sales to Customers with a Resale Value Guarantee where Exercise is Probable.Prior to the adoption of the new revenue standard, all transactions with resale value guarantees were recorded as operating leases. The amount of saleproceeds equal to the resale value guarantee was deferred until the guarantee expired or was exercised. For certain transactions that were considered interestbearing collateralized borrowings as required under ASC 840, Leases prior to January 1, 2019, we also accrued interest expense based on our borrowing rate. Theremaining sale proceeds were deferred and recognized on a straight-line basis over the stated guarantee period to automotive leasing revenue. The guarantee periodexpired at the earlier of the end of the guarantee period or the pay-off of the initial loan. We capitalized the cost of these vehicles on the consolidated balance sheetas operating lease vehicles, net, and depreciated their value, less estimated residual value, to cost of automotive leasing revenue over the same period.In cases where our counterparty retained ownership of the vehicle at the end of the guarantee period, the resale value guarantee liability and any remainingdeferred revenue balances related to the vehicle were settled to automotive leasing revenue, and the net book value of the leased vehicle was expensed to cost ofautomotive leasing revenue. If our counterparty returned the vehicle to us during the guarantee period, we purchased the vehicle from our counterparty in anamount equal to the resale value guarantee and settled any remaining deferred balances to automotive leasing revenue, and we reclassified the net book value of thevehicle on the consolidated balance sheet to used vehicle inventory.72 Deferred revenue activity related to the access to our Supercharger network, internet connectivity, Autopilot, FSD features and over-the-air softwareupdates on automotive sales with and without resale value guarantee consisted of the following (in millions): Year ended December 31, 2019 2018 Deferred revenue on automotive sales with and without resale value guarantee— beginning of period $883 $476 Additions 880 532 Net changes in liability for pre-existing contracts 9 (13)Revenue recognized (300) (112)Deferred revenue on automotive sales with and without resale value guarantee— end of period $1,472 $883 Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as ofDecember 31, 2019. From the deferred revenue balance as of December 31, 2018, revenue recognized during the year ended December 31, 2019 was$220 million. From the deferred revenue balance as of January 1, 2018, revenue recognized during the year ended December 31, 2018 was $81 million. Of thetotal deferred revenue on automotive sales with and without resale value guarantees as of December 31, 2019, we expect to recognize $751 million of revenue inthe next 12 months. The remaining balance will be recognized over the performance period as discussed above in Automotive Sales without Resale ValueGuarantee.Automotive Regulatory CreditsIn connection with the production and delivery of our zero emission vehicles in global markets, we have earned and will continue to earn various tradableautomotive regulatory credits. We have sold these credits, and will continue to sell future credits, to automotive companies and other regulated entities who can usethe credits to comply with emission standards and other regulatory requirements. For example, under California’s Zero Emission Vehicle Regulation and those ofstates that have adopted California’s standard, vehicle manufacturers are required to earn or purchase credits, referred to as ZEV credits, for compliance with theirannual regulatory requirements. These laws provide that automakers may bank or sell to other regulated parties their excess credits if they earn more credits thanthe minimum quantity required by those laws. We also earn other types of saleable regulatory credits in the United States and abroad, including greenhouse gas,fuel economy and clean fuels credits. Payments for regulatory credits are typically received at the point control transfers to the customer, or in accordance withpayment terms customary to the business.We recognize revenue on the sale of automotive regulatory credits at the time control of the regulatory credits is transferred to the purchasing party asautomotive revenue in the consolidated statements of operations. Revenue from the sale of automotive regulatory credits totaled $594 million, $419 million and$360 million for the years ended December 31, 2019, 2018 and 2017, respectively. Deferred revenue related to sales of automotive regulatory credits was $140million and $0 as of December 31, 2019 and 2018, respectively. We expect to recognize the deferred revenue as of December 31, 2019 in the next 12 months.Automotive Leasing RevenueAutomotive leasing revenue includes revenue recognized under lease accounting guidance for our direct leasing programs as well as the two programswith resale value guarantees which continue to qualify for operating lease treatment. Prior to the adoption of the new revenue standard, all programs with resalevalue guarantees were accounted for as operating leases.73 Direct Vehicle Leasing ProgramWe have outstanding leases under our direct vehicle leasing programs in the U.S., Canada and in certain countries in Europe. As of December 31, 2019,the direct vehicle leasing program is offered for all new Model S, Model X and Model 3 vehicles in the U.S. and for new Model S and Model X vehicles inCanada. Qualifying customers are permitted to lease a vehicle directly from Tesla for up to 48 months. At the end of the lease term, customers are required toreturn the vehicles to us or for Model S and Model X leases, may opt to purchase the vehicles for a pre-determined residual value. We account for these leasingtransactions as operating leases. We record leasing revenues to automotive leasing revenue on a straight-line basis over the contractual term, and we record thedepreciation of these vehicles to cost of automotive leasing revenue. For the years ended December 31, 2019, 2018 and 2017 , we recognized $532 million,$393 million and $221 million of direct vehicle leasing revenue, respectively . As of December 31, 2019 and 2018, we had deferred $218 million and$110 million, respectively, of lease-related upfront payments, which will be recognized on a straight-line basis over the contractual terms of the individual leases.We capitalize shipping costs and initial direct costs such as the incremental cost of referral fees and sales commissions from the origination of automotivelease agreements as an element of operating lease vehicles, net, and subsequently amortize these costs over the term of the related lease agreement. Our policy is toexclude taxes collected from a customer from the transaction price of automotive contracts. Total capitalized costs were immaterial as of December 31, 2019 and2018.Vehicle Sales to Leasing Partners with a Resale Value Guarantee and a Buyback OptionWe offer buyback options in connection with automotive sales with resale value guarantees with certain leasing partner sales in the United States. Thesetransactions entail a transfer of leases, which we have originated with an end-customer, to our leasing partner. As control of the vehicles has not been transferred inaccordance with the new revenue standard, these transactions were accounted for as interest bearing collateralized borrowings in accordance with ASC 840, Leases,prior to January 1, 2019. Under this program, cash is received for the full price of the vehicle and the collateralized borrowing value is generally recorded withinresale value guarantees and the customer upfront down payment is recorded within deferred revenue. We amortize the deferred revenue amount to automotiveleasing revenue on a straight-line basis over the option period and accrue interest expense based on our borrowing rate. The option period expires at the earlier ofthe end of the contractual option period or the pay-off of the initial loan. We capitalize vehicles under this program to operating lease vehicles, net, on theconsolidated balance sheets, and we record depreciation from these vehicles to cost of automotive leasing revenue during the period the vehicle is under a leasearrangement. Cash received for these vehicles, net of revenue recognized during the period, is classified as collateralized lease (repayments) borrowings within cashflows from financing activities in the consolidated statements of cash flows. Following the adoption of ASC 842 on January 1, 2019, all new agreements under thisprogram are accounted for as operating leases and there was no material change in the timing and amount of revenue recognized over the term. Consequently, anycash flows for new agreements are classified as operating cash activities on the consolidated statements of cash flows.At the end of the lease term, we settle our liability in cash by either purchasing the vehicle from the leasing partner for the buyback option amount orpaying a shortfall to the option amount the leasing partner may realize on the sale of the vehicle. Any remaining balances within deferred revenue and resale valueguarantee will be settled to automotive leasing revenue. The end customers can extend the lease for a period of up to 6 months. In cases where the leasing partnerretains ownership of the vehicle after the end of our option period, we expense the net value of the leased vehicle to cost of automotive leasing revenue. Themaximum amount we could be required to pay under this program, should we decide to repurchase all vehicles, was $214 million and $480 million as ofDecember 31, 2019 and 2018, respectively, including $178 million within a 12-month period from December 31, 2019. As of December 31, 2019 and 2018, wehad $238 million and $558 million, respectively, of such borrowings recorded in resale value guarantees and $29 million and $93 million, respectively, recordedin deferred revenue liability. For the year ended December 31, 2019 and 2018, we recognized $186 million and $332 million, respectively, of leasing revenuerelated to this program. The net carrying amount of operating lease vehicles under this program was $190 million and $469 million, respectively, as ofDecember 31, 2019 and 2018.74 Vehicle Sales to Customers with a Resale Value Guarantee where Exercise is ProbableFor certain international programs where we have offered resale value guarantees to certain customers who purchased vehicles and where we expect thecustomer has a significant economic incentive to exercise the resale value guarantee provided to them, we continue to recognize these transactions as operatingleases. The process to determine whether there is a significant economic incentive includes a comparison of a vehicle’s estimated market value at the time theoption is exercisable with the guaranteed resale value to determine the customer’s economic incentive to exercise. We have not sold any vehicles under thisprogram since the first half of 2017 and all current period activity relates to the exercise or cancellation of active transactions. The amount of sale proceeds equal tothe resale value guarantee is deferred until the guarantee expires or is exercised. The remaining sale proceeds are deferred and recognized on a straight-line basisover the stated guarantee period to automotive leasing revenue. The guarantee period expires at the earlier of the end of the guarantee period or the pay-off of theinitial loan. We capitalize the cost of these vehicles on the consolidated balance sheet as operating lease vehicles, net, and depreciate their value, less salvage value,to cost of automotive leasing revenue over the same period.In cases where a customer retains ownership of a vehicle at the end of the guarantee period, the resale value guarantee liability and any remaining deferredrevenue balances related to the vehicle are settled to automotive leasing revenue, and the net book value of the leased vehicle is expensed to cost of automotiveleasing revenue. If a customer returns the vehicle to us during the guarantee period, we purchase the vehicle from the customer in an amount equal to the resalevalue guarantee and settle any remaining deferred balances to automotive leasing revenue, and we reclassify the net book value of the vehicle on the consolidatedbalance sheets to used vehicle inventory. As of December 31, 2019 and 2018, $115 million and $150 million, respectively, of the guarantees were exercisable bycustomers within the next 12 months. For the year ended December 31, 2019 and 2018, we recognized $150 million and $158 million, respectively, of leasingrevenue related to this program. The net carrying amount of operating lease vehicles under this program was $83 million and $212 million, respectively, as ofDecember 31, 2019 and 2018.Services and Other RevenueServices and other revenue consists of non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, sales by our acquiredsubsidiaries to third party customers, and vehicle insurance revenue. There were no significant changes to the timing or amount of revenue recognition as a result ofour adoption of the new revenue standard.Revenues related to repair and maintenance services are recognized over time as services are provided and extended service plans are recognized over theperformance period of the service contract as the obligation represents a stand-ready obligation to the customer. We sell used vehicles, services, service plans,vehicle components and merchandise separately and thus use standalone selling prices as the basis for revenue allocation to the extent that these items are sold intransactions with other performance obligations. Payment for used vehicles, services, and merchandise are typically received at the point when control transfers tothe customer or in accordance with payment terms customary to the business. Payments received for prepaid plans are refundable upon customer cancellation ofthe related contracts and are included within customer deposits on the consolidated balance sheet. Deferred revenue related to services and other revenue wasimmaterial as of December 31, 2019 and 2018. 75 Energy Generation and Storage SegmentEnergy Generation and Storage SalesEnergy generation and storage sales revenue consists of the sale of solar energy systems and energy storage systems to residential, small commercial, andlarge commercial and utility grade customers. Upon adoption of the new lease standard (refer to Leases section below for details), energy generation and storagesales revenue includes agreements for solar energy systems and power purchase agreements (“PPAs”) that commence after January 1, 2019, as these are nowaccounted for under the new revenue standard. Sales of solar energy systems to residential and small scale commercial customers consist of the engineering,design, and installation of the system. Post installation, residential and small scale commercial customers receive a proprietary monitoring system that captures anddisplays historical energy generation data. Residential and small scale commercial customers pay the full purchase price of the solar energy system upfront.Revenue for the design and installation obligation is recognized when control transfers, which is when we install a solar energy system and the system passesinspection by the utility or the authority having jurisdiction. Revenue for the monitoring service is recognized ratably as a stand-ready obligation over the warrantyperiod of the solar energy system. Sales of energy storage systems to residential and small scale commercial customers consist of the installation of the energystorage system and revenue is recognized when control transfers, which is when the product has been delivered or, if we are performing installation, when installedand commissioned. Payment for such storage systems is made upon invoice or in accordance with payment terms customary to the business.For large commercial and utility grade solar energy system and energy storage system sales which consist of the engineering, design, and installation ofthe system, customers make milestone payments that are consistent with contract-specific phases of a project. Revenue from such contracts is recognized over timeusing the percentage of completion method based on cost incurred as a percentage of total estimated contract costs for energy storage system sales and as apercentage of total estimated labor hours for solar energy system sales. Certain large-scale commercial and utility grade solar energy system and energy storagesystem sales also include operations and maintenance service which are negotiated with the design and installation contracts and are thus considered to be acombined contract with the design and installation service. For certain large commercial and utility grade solar energy systems and energy storage systems wherethe percentage of completion method does not apply, revenue is recognized when control transfers, which is when the product has been delivered to the customerand commissioned for energy storage systems and when the project has received permission to operate from the utility for solar energy systems. Operations andmaintenance service revenue is recognized ratably over the respective contract term for solar energy system sales and upon delivery of the service for energystorage system sales. Customer payments for such services are usually paid annually or quarterly in advance.In instances where there are multiple performance obligations in a single contract, we allocate the consideration to the various obligations in the contractbased on the relative standalone selling price method. Standalone selling prices are estimated based on estimated costs plus margin or using market data forcomparable products. Costs incurred on the sale of residential installations before the solar energy systems are completed are included as work in process withininventory in the consolidated balance sheets. However, any fees that are paid or payable by us to a solar loan lender would be recognized as an offset againstrevenue. Costs to obtain a contract relate mainly to commissions paid to our sales personnel related to the sale of solar energy systems and energy storage systems.As our contract costs related to solar energy system and energy storage system sales are typically fulfilled within one year, the costs to obtain a contract areexpensed as incurred.As part of our solar energy system and energy storage system contracts, we may provide the customer with performance guarantees that warrant that theunderlying system will meet or exceed the minimum energy generation or retention requirements specified in the contract. In certain instances, we may receive abonus payment if the system performs above a specified level. Conversely, if a solar energy system or energy storage system does not meet the performanceguarantee requirements, we may be required to pay liquidated damages. Other forms of variable consideration related to our large commercial and utility gradesolar energy system and energy storage system contracts include variable customer payments that will be made based on our energy market participation activities.Such guarantees and variable customer payments represent a form of variable consideration and are estimated at contract inception at their most likely amount andupdated at the end of each reporting period as additional performance data becomes available. Such estimates are included in the transaction price only to the extentthat it is probable a significant reversal of revenue will not occur.76 We record as deferred revenue any non-refundable amounts that are collected from customers related to fees charged for prepayments and remotemonitoring service and operations and maintenance service, which is recognized as revenue ratably over the respective customer contract term. As of December 31,2019 and 2018, deferred revenue related to such customer payments amounted to $156 million and $149 million, respectively. Revenue recognized from thedeferred revenue balance as of December 31, 2018 was $41 million for the year ended December 31, 2019. Revenue recognized from the deferred revenue balanceas of January 1, 2018 was $41 million for the year ended December 31, 2018. We have elected the practical expedient to omit disclosure of the amount of thetransaction price allocated to remaining performance obligations for energy generation and storage sales with an original expected contract length of one year orless and the amount that we have the right to invoice when that amount corresponds directly with the value of the performance to date. As of December 31, 2019,total transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied for contracts with an original expected length of more thanone year was $103 million. Of this amount, we expect to recognize $5 million in the next 12 months and the remaining over a period up to 28 years.Energy Generation and Storage LeasingFor revenue arrangements where we are the lessor under operating lease agreements for energy generation and storage products, we record lease revenuefrom minimum lease payments, including upfront rebates and incentives earned from such systems, on a straight-line basis over the life of the lease term, assumingall other revenue recognition criteria have been met. The difference between the payments received and the revenue recognized is recorded as deferred revenue onthe consolidated balance sheet.For solar energy systems where customers purchase electricity from us under PPAs prior to January 1, 2019, we have determined that these agreementsshould be accounted for as operating leases pursuant to ASC 840. Revenue is recognized based on the amount of electricity delivered at rates specified under thecontracts, assuming all other revenue recognition criteria are met.We record as deferred revenue any amounts that are collected from customers, including lease prepayments, in excess of revenue recognized andoperations and maintenance service, which is recognized as revenue ratably over the respective customer contract term. As of December 31, 2019 and 2018,deferred revenue related to such customer payments amounted to $226 million and $225 million, respectively. Deferred revenue also includes the portion ofrebates and incentives received from utility companies and various local and state government agencies, which is recognized as revenue over the lease term. As ofDecember 31, 2019 and December 31, 2018, deferred revenue from rebates and incentives amounted to $36 million and $37 million, respectively.We capitalize initial direct costs from the execution of agreements for solar energy systems and PPAs, which include the referral fees and salescommissions, as an element of solar energy systems, net, and subsequently amortize these costs over the term of the related agreements.77 Revenue by sourceThe following table disaggregates our revenue by major source (in millions): Year Ended December 31, 2019 2018 Automotive sales without resale value guarantee $19,212 $15,810 Automotive sales with resale value guarantee (1) 146 1,403 Automotive regulatory credits 594 419 Energy generation and storage sales (2) 1,000 1,056 Services and other 2,226 1,391 Total revenues from sales and services 23,178 20,079 Automotive leasing 869 883 Energy generation and storage leasing (2) 531 499 Total revenues $24,578 $21,461 (1)We made pricing adjustments to our vehicle offerings in 2019, which resulted in a reduction of automotive sales with resale value guarantee revenues.Refer to Automotive Sales with Resale Value Guarantee section above for details. The amount presented represents automotive sales with resale valueguarantee in year ended December 31, 2019 net of such pricing adjustments impact.(2)Under ASC 842, Leases, solar energy system sales and PPAs that commence after January 1, 2019, where we are the lessor and were previously accountedfor as leases, no longer meet the definition of a lease and are instead accounted for in accordance with the new revenue standard (refer to the Leases sectionbelow for details). Cost of RevenuesAutomotive SegmentAutomotive SalesCost of automotive sales revenue includes direct parts, material and labor costs, manufacturing overhead, including depreciation costs of tooling andmachinery, shipping and logistic costs, vehicle connectivity costs, allocations of electricity and infrastructure costs related to our Supercharger network, andreserves for estimated warranty expenses. Cost of automotive sales revenues also includes adjustments to warranty expense and charges to write down the carryingvalue 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.Automotive LeasingCost of automotive leasing revenue includes primarily the amortization of operating lease vehicles over the lease term, as well as warranty expensesrecognized as incurred. Cost of automotive leasing revenue also includes vehicle connectivity costs and allocations of electricity and infrastructure costs related toour Supercharger network for vehicles under our leasing programs.Services and OtherCosts of services and other revenue includes costs associated with providing non-warranty after-sales services, costs to acquire and certify used vehicles,costs for retail merchandise, and costs to provide vehicle insurance. Cost of services and other revenue also includes direct parts, material and labor costs,manufacturing overhead associated with the sales by our acquired subsidiaries to third party customers.78 Energy Generation and Storage SegmentEnergy Generation and StorageEnergy generation and storage cost of revenue includes direct and indirect material and labor costs, warehouse rent, freight, warranty expense, otheroverhead costs and amortization of certain acquired intangible assets. In addition, where arrangements are accounted for as operating leases, the cost of revenue isprimarily comprised of depreciation of the cost of leased solar energy systems, maintenance costs associated with those systems and amortization of any initialdirect costs. LeasesIn February 2016, the FASB issued ASU No. 2016-02 (“ASC 842”), Leases, to require lessees to recognize all leases, with certain exceptions, on thebalance sheet, while recognition on the statement of operations will remain similar to lease accounting under ASC 840. Subsequently, the FASB issued ASU No.2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Targeted Improvements, ASU No. 2018-20, Narrow-Scope Improvements forLessors, and ASU 2019-01, Codification Improvements, to clarify and amend the guidance in ASU No. 2016-02. ASC 842 eliminates real estate-specificprovisions and modifies certain aspects of lessor accounting. We adopted ASC 842 as of January 1, 2019 using the cumulative effect adjustment approach(“adoption of the new lease standard”). In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard,which allowed us to carry forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for historical leasearrangements. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the newstandard to all comparative periods presented. The finance lease classification under ASC 842 includes leases previously classified as capital leases under ASC840.Agreements for solar energy system leases and PPAs (solar leases) that commence after January 1, 2019, where we are the lessor and were previouslyaccounted for as operating leases no longer meet the definition of a lease upon the adoption of ASC 842 and are instead accounted for in accordance with therevenue standard. Under these two types of arrangements, the customer is not responsible for the design of the energy system but rather approved the energysystem benefits in terms of energy capacity and production to be received over the term. Accordingly, the revenue from solar leases commencing after January 1,2019 are now recognized as earned, based on the amount of capacity provided or electricity delivered at the contractual billing rates, assuming all other revenuerecognition criteria have been met. Under the practical expedient available under ASC 606-10-55-18, we recognize revenue based on the value of the service whichis consistent with the billing amount.We have lease agreements with lease and non-lease components, and have elected to utilize the practical expedient to account for lease and non-leasecomponents together as a single combined lease component, from both a lessee and lessor perspective. From a lessor perspective, the timing and pattern of transferare the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as anoperating lease. Additionally, leases previously identified as build-to-suit leasing arrangements under legacy lease accounting (ASC 840), were derecognizedpursuant to the transition guidance provided for build-to-suit leases in ASC 842. Accordingly, these leases have been reassessed as operating leases as of theadoption date under ASC 842, and are included on the consolidated balance sheet as of December 31, 2019.Operating lease assets are included within operating lease right-of-use assets, and the corresponding operating lease liabilities are included within accruedliabilities and other for the current portion, and within other long-term liabilities for the long-term portion on our consolidated balance sheet as of December 31,2019. Finance lease assets are included within property, plant and equipment, net, and the corresponding finance lease liabilities are included within current portionof long-term debt and finance leases for the current portion, and within long-term debt and finance leases, net of current portion for the long-term portion on ourconsolidated balance sheet as of December 31, 2019.79 We have elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inceptionand do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based onthe present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used ourincremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.Adoption of the new lease standard on January 1, 2019 had a material impact on our consolidated financial statements. The most significant impactsrelated to the (i) recognition of right-of-use ("ROU") assets of $1.29 billion and lease liabilities of $1.24 billion for operating leases on the consolidated balancesheet, and (ii) de-recognition of build-to-suit lease assets and liabilities of $1.62 billion and $1.74 billion, respectively, with the net impact of $97 million recordedto accumulated deficit, as of January 1, 2019. We also reclassified prepaid expenses and other current asset balances of $142 million and deferred rent balance,including tenant improvement allowances, and other liability balances of $70 million relating to our existing lease arrangements as of December 31, 2018, into theROU asset balance as of January 1, 2019. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligationto make lease payments arising from the lease. The standard did not materially impact our consolidated statement of operations and consolidated statement of cashflows.The cumulative effect of the changes made to our consolidated balance sheet as of January 1, 2019 for the adoption of the new lease standard was asfollows (in millions): Balances atDecember 31, 2018 Adjustmentsfrom Adoptionof New LeaseStandard Balances atJanuary 1, 2019 Assets Prepaid expenses and other current assets $366 $— $366 Property, plant and equipment, net 11,330 (1,617) 9,713 Operating lease right-of-use assets — 1,286 1,286 Other assets 572 (141) 431 Liabilities Accrued liabilities and other 2,094 118 2,212 Current portion of long-term debt and finance leases 2,568 — 2,568 Long-term debt and finance leases, net of current portion 9,404 — 9,404 Other long-term liabilities 2,710 (687) 2,023 Equity Accumulated deficit (5,318) 97 (5,221) Research and Development CostsResearch and development costs are expensed as incurred.Marketing, Promotional and Advertising CostsMarketing, promotional and advertising costs are expensed as incurred and are included as an element of selling, general and administrative expense in theconsolidated statement of operations. We incurred marketing, promotional and advertising costs of $27 million, $32 million and $37 million in the years endedDecember 31, 2019, 2018 and 2017, respectively, of which the majority is related to promotional activities.Income TaxesIncome taxes are computed using the asset and liability method, under which deferred tax assets and liabilities are determined based on the differencebetween the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affecttaxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.80 We record liabilities related to uncertain tax positions when, despite our belief that our tax return positions are supportable, we believe that it is morelikely than not that those positions may not be fully sustained upon review by tax authorities. Accrued interest and penalties related to unrecognized tax benefitsare classified as income tax expense. Comprehensive Income (Loss)Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) consists ofunrealized gains and losses on cash flow hedges and foreign currency translation adjustments that have been excluded from the determination of net income (loss).Stock-Based CompensationWe recognize compensation expense for costs related to all share-based payments, including stock options, restricted stock units (“RSUs”) and ouremployee stock purchase plan (the “ESPP”). The fair value of stock option awards with only service and/or performance conditions and the ESPP is estimated onthe grant or offering date using the Black-Scholes option-pricing model. The fair value of RSUs is measured on the grant date based on the closing fair marketvalue of our common stock. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, net of actual forfeitures inthe period.For performance-based awards, stock-based compensation expense is recognized over the expected performance achievement period of individualperformance milestones when the achievement of each individual performance milestone becomes probable. For performance-based awards with a vestingschedule based entirely on the attainment of both performance and market conditions, stock-based compensation expense associated with each tranche isrecognized over the longer of (i) the expected achievement period for the operational milestone for such tranche and (ii) the expected achievement period for therelated market capitalization milestone determined on the grant date, beginning at the point in time when the relevant operational milestone is considered probableof being met. If such operational milestone becomes probable any time after the grant date, we will recognize a cumulative catch-up expense from the grant date tothat point in time. If the related market capitalization milestone is achieved earlier than its expected achievement period and the achievement of the relatedoperational milestone, then the stock-based compensation expense will be recognized over the expected achievement period for the operational milestone, whichmay accelerate the rate at which such expense is recognized. The fair value of such awards is estimated on the grant date using Monte Carlo simulations (seeNote 14, Equity Incentive Plans).As we accumulate additional employee stock-based awards data over time and as we incorporate market data related to our common stock, we maycalculate significantly different volatilities and expected lives, which could materially impact the valuation of our stock-based awards and the stock-basedcompensation expense that we will recognize in future periods. Stock-based compensation expense is recorded in cost of revenues, research and developmentexpense and selling, general and administrative expense in the consolidated statements of operations.81 Noncontrolling Interests and Redeemable Noncontrolling InterestsNoncontrolling interests and redeemable noncontrolling interests represent third-party interests in the net assets under certain funding arrangements, orfunds, that we enter into to finance the costs of solar energy systems and vehicles under operating leases. We have determined that the contractual provisions of thefunds represent substantive profit sharing arrangements. We have further determined that the appropriate methodology for calculating the noncontrolling interestand redeemable noncontrolling interest balances that reflects the substantive profit sharing arrangements is a balance sheet approach using the hypotheticalliquidation at book value (“HLBV”) method. We, therefore, determine the amount of the noncontrolling interests and redeemable noncontrolling interests in the netassets of the funds at each balance sheet date using the HLBV method, which is presented on the consolidated balance sheet as noncontrolling interests insubsidiaries and redeemable noncontrolling interests in subsidiaries. Under the HLBV method, the amounts reported as noncontrolling interests and redeemablenoncontrolling interests in the consolidated balance sheet represent the amounts the third-parties would hypothetically receive at each balance sheet date under theliquidation provisions of the funds, assuming the net assets of the funds were liquidated at their recorded amounts determined in accordance with GAAP and withtax laws effective at the balance sheet date and distributed to the third-parties. The third-parties’ interests in the results of operations of the funds are determined asthe difference in the noncontrolling interest and redeemable noncontrolling interest balances in the consolidated balance sheets between the start and end of eachreporting period, after taking into account any capital transactions between the funds and the third-parties. However, the redeemable noncontrolling interestbalance is at least equal to the redemption amount. The redeemable noncontrolling interest balance is presented as temporary equity in the mezzanine section of theconsolidated balance sheet since these third-parties have the right to redeem their interests in the funds for cash or other assets.Net Income (Loss) per Share of Common Stock Attributable to Common StockholdersBasic net income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable tocommon stockholders by the weighted-average shares of common stock outstanding for the period. During the year ended December 31, 2019, we increased netloss attributable to common stockholders by $8 million to arrive at the numerator used to calculate net loss per share. This adjustment represents the differencebetween the cash we paid to a financing fund investor for their noncontrolling interest in one of our subsidiaries and the carrying amount of the noncontrollinginterest on our consolidated balance sheet, in accordance with ASC 260, Earnings per Share. Potentially dilutive shares, which are based on the weighted-averageshares of common stock underlying outstanding stock-based awards, warrants and convertible senior notes using the treasury stock method or the if-convertedmethod, as applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect isdilutive. Since we intend to settle or have settled in cash the principal outstanding under our 0.25% Convertible Senior Notes due in 2019, 1.25% ConvertibleSenior Notes due in 2021, 2.375% Convertible Senior Notes due in 2022, 2.00% Convertible Senior Notes due in 2024 and 5.50% Convertible Senior Notes due in2022 (assumed in our Maxwell Technologies, Inc. acquisition), we use the treasury stock method when calculating their potential dilutive effect, if any.Furthermore, in connection with the offerings of our notes, we entered into convertible note hedges and warrants (see Note 12, Debt). However, our convertiblenote hedges are not included when calculating potentially dilutive shares since their effect is always anti-dilutive. Warrants which have a strike price above ourshare price were out of the money and have not been included in the table below. The following table presents the potentially dilutive shares that were excluded from the computation of diluted net income (loss) per share of commonstock attributable to common stockholders, because their effect was anti-dilutive (in millions): Year Ended December 31, 2019 2018 2017 Stock-based awards 10 10 10 Convertible senior notes 1 1 2Warrants — — 1 82 Business CombinationsWe account for business acquisitions under ASC 805, Business Combinations. The total purchase consideration for an acquisition is measured as the fairvalue of the assets given, equity instruments issued and liabilities assumed at the acquisition date. Costs that are directly attributable to the acquisition are expensedas incurred. Identifiable assets (including intangible assets), liabilities assumed (including contingent liabilities) and noncontrolling interests in an acquisition aremeasured initially at their fair values at the acquisition date. We recognize goodwill if the fair value of the total purchase consideration and any noncontrollinginterests is in excess of the net fair value of the identifiable assets acquired and the liabilities assumed. We recognize a bargain purchase gain within other income(expense), net, on the consolidated statement of operations if the net fair value of the identifiable assets acquired and the liabilities assumed is in excess of the fairvalue of the total purchase consideration and any noncontrolling interests. We include the results of operations of the acquired business in the consolidatedfinancial statements beginning on the acquisition date.Cash and Cash EquivalentsAll highly liquid investments with an original maturity of three months or less at the date of purchase are considered cash equivalents. Our cashequivalents are primarily comprised of money market funds.Restricted CashWe maintain certain cash balances restricted as to withdrawal or use. Our restricted cash is comprised primarily of cash as collateral for our sales to leasepartners with a resale value guarantee, letters of credit, real estate leases, insurance policies, credit card borrowing facilities and certain operating leases. Inaddition, restricted cash includes cash received from certain fund investors that have not been released for use by us and cash held to service certain paymentsunder various secured debt facilities.The following table totals cash and cash equivalents and restricted cash as reported on the consolidated balance sheets; the sums are presented in theconsolidated statements of cash flows (in millions): December 31, December 31, December 31, December 31, 2019 2018 2017 2016 Cash and cash equivalents $6,268 $3,686 $3,368 $3,393 Restricted cash, current portion 246 193 155 106 Restricted cash, net of current portion 269 398 442 268 Total as presented in the consolidatedstatements of cash flows $6,783 $4,277 $3,965 $3,767 Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable primarily include amounts related to receivables from financial institutions and leasing companies offering various financingproducts to our customers, sales of energy generation and storage products, sales of regulatory credits to other automotive manufacturers and maintenance serviceson vehicles owned by leasing companies. We provide an allowance against accounts receivable to the amount we reasonably believe will be collected. We write-off accounts receivable when they are deemed uncollectible.We typically do not carry significant accounts receivable related to our vehicle and related sales as customer payments are due prior to vehicle delivery,except for amounts due from commercial financial institutions for approved financing arrangements between our customers and the financial institutions.83 MyPower Customer Notes ReceivableWe have customer notes receivable under the legacy MyPower loan program. MyPower was offered by SolarCity to provide residential customers with theoption to finance the purchase of a solar energy system through a 30-year loan. The outstanding balances, net of any allowance for potentially uncollectibleamounts, are presented on the consolidated balance sheet as a component of prepaid expenses and other current assets for the current portion and as MyPowercustomer notes receivable, net of current portion, for the long-term portion. In determining the allowance and credit quality for customer notes receivable, weidentify significant customers with known disputes or collection issues and also consider our historical level of credit losses and current economic trends thatmight impact the level of future credit losses. Customer notes receivable that are individually impaired are charged-off as a write-off of the allowance for losses.Since acquisition, there have been no new significant customers with known disputes or collection issues, and the amount of potentially uncollectible amounts hasbeen insignificant. In addition, there were no material non-accrual or past due customer notes receivable as of December 31, 2019.Concentration of RiskCredit RiskFinancial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, restricted cash, accounts receivable,convertible note hedges, and interest rate swaps. Our cash balances are primarily invested in money market funds or on deposit at high credit quality financialinstitutions in the U.S. These deposits are typically in excess of insured limits. As of December 31, 2019 and 2018, no entity represented 10% or more of our totalaccounts receivable balance . The risk of concentration for our interest rate swaps is mitigated by transacting with several highly-rated multinational banks.Supply RiskWe are dependent on our suppliers, the majority of which are single source suppliers, and the inability of these suppliers to deliver necessary componentsof our products in a timely manner at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components from thesesuppliers, could have a material adverse effect on our business, prospects, financial condition and operating results.Inventory ValuationInventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost for vehicles and energy storage products, whichapproximates actual cost on a first-in, first-out basis. In addition, cost for solar energy systems is recorded using actual cost. We record inventory write-downs forexcess or obsolete inventories based upon assumptions about current and future demand forecasts. If our inventory on-hand is in excess of our future demandforecast, the excess amounts are written-off.We also review our inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. Thisrequires us to determine the estimated selling price of our vehicles less the estimated cost to convert the inventory on-hand into a finished product. Once inventoryis written-down, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration orincrease in that newly established cost basis.Should our estimates of future selling prices or production costs change, additional and potentially material increases to this reserve may be required. Asmall change in our estimates may result in a material charge to our reported financial results.84 Operating Lease VehiclesVehicles that are leased as part of our direct vehicle leasing program, vehicles delivered to leasing partners with a resale value guarantee and a buybackoption, and vehicles delivered to customers with resale value guarantee where exercise is probable are classified as operating lease vehicles as the related revenuetransactions are treated as operating leases under ASC 842 (refer to the Automotive Leasing Revenue section above for details). Operating lease vehicles arerecorded at cost less accumulated depreciation. We generally depreciate their value, less salvage value, using the straight-line-method to cost of automotive leasingrevenue over the contractual period. The total cost of operating lease vehicles recorded on the consolidated balance sheets as of December 31, 2019 and 2018 was$2.85 billion and $2.55 billion, respectively. Accumulated depreciation related to leased vehicles as of December 31, 2019 and 2018 was $406 million and$458 million, respectively.Solar Energy Systems, NetWe are the lessor of solar energy systems. Prior to January 1, 2019, these leases were accounted for as operating leases in accordance with ASC 840.Under ASC 840, to determine lease classification, we evaluated the lease terms to determine whether there was a transfer of ownership or bargain purchase optionat the end of the lease, whether the lease term was greater than 75% of the useful life or whether the present value of the minimum lease payments exceeded 90%of the fair value at lease inception. As discussed in the Leases section above, agreements for solar energy system leases and PPAs that commence after January 1,2019 no longer meet the definition of a lease upon the adoption of ASC 842 and are instead accounted for in accordance with the new revenue standard. We utilizeperiodic appraisals to estimate useful lives and fair values at lease inception and residual values at lease termination. Solar energy systems are stated at cost lessaccumulated depreciation.Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the respective assets, as follows: Solar energy systems in service 30 to 35 yearsInitial direct costs related to customer solar energy system lease acquisition costs Lease term (up to 25years) Solar energy systems pending interconnection will be depreciated as solar energy systems in service when they have been interconnected and placed in-service. Solar energy systems under construction represents systems that are under installation, which will be depreciated as solar energy systems in service whenthey are completed, interconnected and placed in service. Initial direct costs related to customer solar energy system agreement acquisition costs are capitalized andamortized over the term of the related customer agreements.Property, Plant and Equipment, netProperty, plant and equipment, net, including leasehold improvements, are recognized at cost less accumulated depreciation. Depreciation is generallycomputed using the straight-line method over the estimated useful lives of the respective assets, as follows: Machinery, equipment, vehicles and office furniture 2 to 12 yearsBuilding and building improvements 15 to 30 yearsComputer equipment and software 3 to 10 yearsLeasehold improvements are depreciated on a straight-line basis over the shorter of their estimated useful lives or the terms of the related leases.Upon the retirement or sale of our property, plant and equipment, the cost and associated accumulated depreciation are removed from the consolidatedbalance sheet, and the resulting gain or loss is reflected on the consolidated statement of operations. Maintenance and repair expenditures are expensed as incurredwhile major improvements that increase the functionality, output or expected life of an asset are capitalized and depreciated ratably over the identified useful life.85 Interest expense on outstanding debt is capitalized during the period of significant capital asset construction. Capitalized interest on construction-in-progress is included within property, plant and equipment and is amortized over the life of the related assets.Prior to the adoption of the new lease standard, we were deemed to be the owner, for accounting purposes, during the construction phase of certain long-lived assets under build-to-suit lease arrangements because of our involvement with the construction, our exposure to any potential cost overruns or our othercommitments under the arrangements. In accordance with ASC 840, we recognized build-to-suit lease assets under construction and corresponding build-to-suitlease liabilities on the consolidated balance sheet. Once construction was completed, if a lease met certain “sale-leaseback” criteria, we removed the asset andliability and accounted for the lease as an operating lease. Otherwise, the lease was accounted for as a capital lease. As a result of the adoption of the new leasestandard on January 1, 2019, we have de-recognized all build-to-suit lease assets and have reassessed these leases to be operating lease right-of-use assets withinthe consolidated balance sheet as of December 31, 2019 (refer to Leases section above for details).Long-Lived Assets Including Acquired Intangible AssetsWe review our property, plant and equipment, long-term prepayments and intangible assets for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset (or asset group) may not be recoverable. We measure recoverability by comparing the carrying amount to the futureundiscounted cash flows that the asset is expected to generate. If the asset is not recoverable, its carrying amount would be adjusted-down to its fair value. For theyears ended December 31, 2019 and 2018, we have recognized certain impairments of our long-lived assets (refer to Note 4, Goodwill and Intangible Assets andNote 22, Restructuring and Other, for further details). For the year ended December 31, 2017, we have recognized no material impairments of our long-livedassets.Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives, which range from one to thirty years.GoodwillWe assess goodwill for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that it might beimpaired, by comparing its carrying value to the reporting unit’s fair value. For the years ended December 31, 2019, 2018, and 2017, we had not recognized anyimpairment of goodwill.Capitalization of Software CostsFor costs incurred in development of internal use software, we capitalize costs incurred during the application development stage. Costs related topreliminary project activities and post-implementation activities are expensed as incurred. Internal use software is amortized on a straight-line basis over itsestimated useful life of three to ten years. We evaluate the useful lives of these assets on an annual basis, and we test for impairment whenever events or changes incircumstances occur that could impact the recoverability of these assets.Foreign CurrencyWe determine the functional and reporting currency of each of our international subsidiaries and their operating divisions based on the primary currency inwhich they operate. In cases where the functional currency is not the U.S. dollar, we recognize a cumulative translation adjustment created by the different rateswe apply to accumulated deficits, including current period income or loss and the balance sheet. For each subsidiary, we apply the monthly average functionalexchange rate to its monthly income or loss and the month-end functional currency rate to translate the balance sheet.Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than thefunctional currency. Transaction gains and losses are recognized in other income (expense), net, in the consolidated statements of operations. For the years endedDecember 31, 2019, 2018 and 2017, we recorded foreign currency transaction gains of $48 million, gains of $2 million and losses of $52 million, respectively.86 WarrantiesWe provide a manufacturer’s warranty on all new and used vehicles and production powertrain components and systems we sell. In addition, we alsoprovide a warranty on the installation and components of the energy generation and storage systems we sell for periods typically between 10 to 25 years. Weaccrue 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 recallswhen 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 areinherently uncertain given our relatively short history of sales, and changes to our historical or projected warranty experience may cause material changes to thewarranty reserve in the future. The warranty reserve does not include projected warranty costs associated with our vehicles subject to lease accounting and oursolar energy systems under lease contracts or PPAs, as the costs to repair these warranty claims are expensed as incurred. The portion of the warranty reserveexpected to be incurred within the next 12 months is included within accrued liabilities and other, while the remaining balance is included within other long-termliabilities on the consolidated balance sheets. Warranty expense is recorded as a component of cost of revenues in the consolidated statements of operations. Due tothe magnitude of our automotive business, accrued warranty balance as of December 31, 2019 was primarily related to our automotive segment. Accrued warrantyactivity consisted of the following (in millions): Year Ended December 31, 2019 2018 2017 Accrued warranty—beginning of period $748 $402 $267 Assumed warranty liability from acquisition — — 5 Warranty costs incurred (250) (209) (123)Net changes in liability for pre-existing warranties, including expirations and foreign exchange impact 36 (26) 4 Additional warranty accrued from adoption of the new revenue standard — 37 — Provision for warranty 555 544 249 Accrued warranty—end of period $1,089 $748 $402 For the years ended December 31, 2019 and 2018 , and 2017, warranty costs incurred for vehicles accounted for as operating leases were $20 million,$22 million and $36 million, respectively . Solar Renewable Energy CreditsWe account for solar renewable energy credits (“SRECs”) when they are purchased by us or sold to third-parties. For SRECs generated by solar energysystems owned by us and minted by government agencies, we do not recognize any specifically identifiable costs as there are no specific incremental costs incurredto generate the SRECs. We recognize revenue within the energy generation and storage segment from the sale of an SREC when the SREC is transferred to thebuyer, and the cost of the SREC, if any, is then recorded to energy generation and storage cost of revenue.Deferred Investment Tax Credit RevenueWe have solar energy systems that are eligible for ITCs that accrue to eligible property under the Internal Revenue Code (“IRC”). Under Section 50(d)(5)of the IRC and the related regulations, a lessor of qualifying property may elect to treat the lessee as the owner of such property for the purposes of claiming theITCs associated with such property. These regulations enable the ITCs to be separated from the ownership of the property and allow the transfer of the ITCs. Underour lease pass-through fund arrangements, we can make a tax election to pass-through the ITCs to the investors, who are the legal lessee of the property. Therefore,we are able to monetize these ITCs to the investors who can utilize them in return for cash payments. We consider the monetization of ITCs to constitute one of thekey elements of realizing the value associated with solar energy systems. Consequently, we consider the proceeds from the monetization of ITCs to be acomponent of revenue generated from solar energy systems.87 Under the new revenue standard, we recognize revenue upon the delivery of ITCs to investors under our lease pass-through fund arrangements as this isthe point in time that control of ITCs has transferred.We indemnify the investors for any recapture of ITCs due to our non-compliance. We have concluded that the likelihood of a recapture event is remote,and consequently, we have not recognized a liability for this indemnification on the consolidated balance sheets.Nevada Tax IncentivesWe had entered into agreements with the State of Nevada and Storey County in Nevada that provide abatements for sales, use, real property, personalproperty and employer excise taxes, discounts to the base tariff energy rates and transferable tax credits. These incentives are available for the applicable periodsbeginning on October 17, 2014 and ending on either June 30, 2024 or June 30, 2034 (depending on the incentive). Under these agreements, we were eligible for amaximum of $195 million of transferable tax credits, subject to capital investments by us and our partners for Gigafactory Nevada of at least $3.50 billion, whichwe exceeded during 2017, and specified hiring targets for Gigafactory Nevada, which we exceeded during 2018. We recorded these credits as earned when we hadevidence there was a market for their sale. Credits were applied as a cost offset to either employee expense or to capital assets, depending on the source of thecredits. Credits earned from employee hires or capital spending by our partners at Gigafactory Nevada were recorded as a reduction to operating expenses. As ofDecember 31, 2019 and 2018, we had earned the maximum of $195 million of transferable tax credits under these agreements.Recent Accounting PronouncementsRecently issued accounting pronouncements not yet adoptedIn June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, to require financial assets carried at amortizedcost to be presented at the net amount expected to be collected based on historical experience, current conditions and forecasts. Subsequently, the FASB issuedASU No. 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope of lease accountingstandards. Further, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU 2019-10 and ASU 2019-11 to provide additional guidance on the credit lossesstandard. The ASUs are effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. Adoption of the ASUs is on amodified retrospective basis. We plan to adopt the ASUs on January 1, 2020. The ASUs are currently not expected to have a material impact on our consolidatedfinancial statements.In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, to simplify the test for goodwill impairment byremoving Step 2. An entity will, therefore, perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount andrecognizing an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to thereporting unit. An entity still has the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary. The ASU is effectivefor interim and annual periods beginning after December 15, 2019, with early adoption permitted. Adoption of the ASU is prospective. We plan to adopt the ASUprospectively on January 1, 2020. The ASU is currently not expected to have a material impact on our consolidated financial statements.In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement thatIs a Service Contract. The ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with therequirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-usesoftware license). The ASU is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. Adoption of the ASU iseither retrospective or prospective. We plan to adopt the ASU prospectively on January 1, 2020. The ASU is currently not expected to have a material impact onour consolidated financial statements.88 In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity inaccounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Earlyadoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. We have not earlyadopted this ASU for 2019. The ASU is currently not expected to have a material impact on our consolidated financial statements.Recently adopted accounting pronouncementsIn February 2016, the FASB issued ASU No. 2016-02, Leases, to require lessees to recognize all leases, with limited exceptions, on the balance sheet,while recognition on the statement of operations will remain similar to legacy lease accounting, ASC 840. The ASU also eliminates real estate-specific provisionsand modifies certain aspects of lessor accounting. Subsequently, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, ASU No. 2018-11,Targeted Improvements, ASU No. 2018-20, Narrow-Scope Improvements for Lessors, and ASU 2019-01, Codification Improvements, to clarify and amend theguidance in ASU No. 2016-02. We adopted the ASUs on January 1, 2019 on a modified retrospective basis through a cumulative adjustment to our beginningaccumulated deficit balance. Prior comparative periods have not been recast under this method, and we adopted all available practical expedients, as applicable.Further, solar leases that commence on or after January 1, 2019, where we are the lessor and which were accounted for as leases under ASC 840, will no longermeet the definition of a lease. Instead, solar leases commencing on or after January 1, 2019 will be accounted for under the new revenue standard. In addition torecognizing operating leases that were previously not recognized on the consolidated balance sheet, our build-to-suit leases were also de-recognized with a netdecrease of approximately $97 million to our beginning accumulated deficit after income tax effects, as our build-to-suit leases no longer qualify for build-to-suitaccounting and are instead recognized as operating leases. Upon adoption, our consolidated balance sheet include an overall reduction in assets of $473 millionand a reduction in liabilities of $570 million. The adoption of the ASUs did not have a material impact on the consolidated statement of operations or theconsolidated statement of cash flows.In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, to simplify the application of currenthedge accounting guidance. The ASU expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition andpresentation of the effects of the hedging instrument and the hedged item in the financial statements. We adopted the ASU prospectively on January 1, 2019, andthe ASU did not have a material impact on the consolidated financial statements.In January 2018, the FASB issued ASU No. 2018-01, Land Easement Practical Expedient Transition to Topic 842, to permit an entity to elect a practicalexpedient to not re-evaluate land easements that existed or expired before the entity’s adoption of ASU No. 2016-02, Leases, and that were not accounted for asleases. The ASU did not have a material impact on the consolidated financial statements. Note 3 – Business CombinationsMaxwell AcquisitionOn May 16, 2019 (the “Acquisition Date”), we completed our strategic acquisition of Maxwell Technologies, Inc. (“Maxwell”), an energy storage andpower delivery products company, for its complementary technology and workforce. Pursuant to the related Agreement and Plan of Merger (the “MergerAgreement”), each issued and outstanding share of Maxwell common stock was converted into 0.0193 (the “Exchange Ratio”) shares of our common stock. Inaddition, Maxwell’s stock option awards and restricted stock unit awards were assumed by us and converted into corresponding equity awards in respect of ourcommon stock based on the Exchange Ratio, with the awards retaining the same vesting and other terms and conditions as in effect immediately prior to theacquisition.Fair Value of Purchase ConsiderationThe Acquisition Date fair value of the purchase consideration was $207 million (902,968 shares issued at $229.49 per share, the opening price of ourcommon stock on the Acquisition Date).89 Fair Value of Assets Acquired and Liabilities Assumed We accounted for the acquisition using the purchase method of accounting for business combinations under ASC 805, Business Combinations. The totalpurchase price is allocated to the tangible and identifiable intangible assets acquired and liabilities based on their estimated fair values as of the Acquisition Date. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Thejudgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives and the expected futurecash flows and related discount rates, can materially impact our consolidated financial statements. Significant inputs used for the model included the amount ofcash flows, the expected period of the cash flows and the discount rates. In 2019, we finalized our estimate of the Acquisition Date fair values of the assetsacquired and the liabilities assumed and there were no changes to the fair values of the assets acquired and the liabilities assumed. The allocation of the purchase price is based on management’s estimate of the Acquisition Date fair values of the assets acquired and liabilities assumed,as follows (in millions): Assets acquired: Cash and cash equivalents $32 Accounts receivable 24 Inventory 32 Property, plant and equipment, net 27 Operating lease right-of-use assets 10 Intangible assets 105 Prepaid expenses and other assets, current and non-current 3 Total assets acquired 233 Liabilities and equity assumed: Accounts payable (10)Accrued liabilities and other (28)Debt and finance leases, current and non-current (44)Deferred revenue, current (1)Other long-term liabilities (14)Additional paid-in capital (8)Total liabilities and equity assumed (105)Net assets acquired 128 Goodwill 79 Total purchase price $207 Goodwill represented the excess of the purchase price over the fair value of the net assets acquired and was primarily attributable to the expected synergiesfrom integrating Maxwell’s technology into our automotive segment as well as the acquired talent. Goodwill is not deductible for U.S. income tax purposes and isnot amortized.Identifiable Intangible Assets AcquiredThe determination of the fair value of identified intangible assets and their respective useful lives are as follows (in millions, except for estimated usefullife): Fair Value Useful Life(in years) Developed technology $102 9 Customer relations 2 9 Trade name 1 10 Total intangible assets $105 90 Maxwell’s results of operations since the Acquisition Date have been included within the automotive segment. Standalone and pro forma results ofoperations have not been presented because they were not material to the consolidated financial statements.Other AcquisitionsDuring the year ended December 31, 2019, we completed various other acquisitions generally for the related technology and workforce. Totalconsideration for these acquisitions was $96 million, of which $80 million was paid in cash. In aggregate, $36 million was attributed to intangible assets, $51million was attributed to goodwill within the automotive segment, and $9 million was attributed to net assets assumed. Goodwill is not deductible for U.S. incometax purposes. The identifiable intangible assets were related to purchased technology, with estimated useful lives of one to nine years.Standalone and pro forma results of operations have not been presented because they were not material to the consolidated financial statements, eitherindividually or in aggregate. Note 4 – Goodwill and Intangible AssetsGoodwill increased $130 million from $68 million as of December 31, 2018 to $198 million as of December 31, 2019 primarily due to completedbusiness combinations during the year ended December 31, 2019 (see Note 3, Business Combinations). There were no accumulated impairment losses as ofDecember 31, 2019 and 2018.Information regarding our intangible assets including assets recognized from our acquisitions was as follows (in millions): December 31, 2019 December 31, 2018 Gross CarryingAmount AccumulatedAmortization Other Net CarryingAmount Gross CarryingAmount AccumulatedAmortization Other Net CarryingAmount Finite-lived intangible assets: Developed technology $291 $(72) $1 $220 $152 $(40) $1 $113 Trade names 3 (1) 1 3 45 (44) — 1 Favorable contracts and leases, net 113 (24) — 89 113 (17) — 96 Other 38 (16) — 22 36 (12) 1 25 Total finite-lived intangible assets 445 (113) 2 334 346 (113) 2 235 Indefinite-lived intangible assets: Gigafactory Nevada water rights 5 — — 5 — — — — In-process research and development (“IPR&D”) 60 — (60) — 60 — (13) 47 Total indefinite-lived intangible assets 65 — (60) 5 60 — (13) 47 Total intangible assets $510 $(113) $(58) $339 $406 $(113) $(11) $282 During 2019, the Company determined to abandon further development efforts on the IPR&D and therefore impaired the remaining $47 million inrestructuring and other expenses in the consolidated statement of operations. Amortization expense during the years ended December 31, 2019, 2018 and 2017 was$44 million, $66 million and $40 million, respectively.91 Total future amortization expense for finite-lived intangible assets was estimated as follows (in millions): 2020 $50 2021 49 2022 48 2023 42 2024 27 Thereafter 118 Total $334 Note 5 – Fair Value of Financial InstrumentsASC 820, Fair Value Measurements, states that fair value is an exit price, representing the amount that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based onassumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should beused in measuring fair value, is comprised of: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices inactive markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair valuehierarchy requires the use of observable market data when available in determining fair value. Our assets and liabilities that were measured at fair value on arecurring basis were as follows (in millions): December 31, 2019 December 31, 2018 Fair Value Level I Level II Level III Fair Value Level I Level II Level III Money market funds (cash and cash equivalents & restricted cash) $1,632 $1,632 $— $— $1,813 $1,813 $— $— Interest rate swap asset 1 — 1 — 12 — 12 — Interest rate swap liability (27) — (27) — (1) — (1) — Total $1,606 $1,632 $(26) $— $1,824 $1,813 $11 $— All of our money market funds were classified within Level I of the fair value hierarchy because they were valued using quoted prices in active markets.Our interest rate swaps were classified within Level II of the fair value hierarchy because they were valued using alternative pricing sources or models that utilizedmarket observable inputs, including current and forward interest rates. During the year ended December 31, 2019, there were no transfers between the levels of thefair value hierarchy.Interest Rate SwapsWe enter into fixed-for-floating interest rate swap agreements to swap variable interest payments on certain debt for fixed interest payments, as required bycertain of our lenders. We do not designate our interest rate swaps as hedging instruments. Accordingly, our interest rate swaps are recorded at fair value on theconsolidated balance sheets within other assets or other long-term liabilities, with any changes in their fair values recognized as other income (expense), net, in theconsolidated statements of operations and with any cash flows recognized as investing activities in the consolidated statements of cash flows. Our interest rateswaps outstanding were as follows (in millions): December 31, 2019 December 31, 2018 Aggregate NotionalAmount Gross Asset atFair Value Gross Liability atFair Value Aggregate NotionalAmount Gross Asset atFair Value Gross Liability atFair Value Interest rate swaps $821 $1 $27 $800 $12 $1 92 Our interest rate swaps activity was as follows (in millions): Year Ended December 31, 2019 2018 2017 Gross gains $11 $22 $7 Gross losses $51 $12 $13 Disclosure of Fair ValuesOur financial instruments that are not re-measured at fair value include accounts receivable, MyPower customer notes receivable, rebates receivable,accounts payable, accrued liabilities, customer deposits, participation interest and debt. The carrying values of these financial instruments other than our 1.25%Convertible Senior Notes due in 2021, 2.375% Convertible Senior Notes due in 2022 and 2.00% Convertible Senior Notes due in 2024 and our subsidiary’s Zero-Coupon Convertible Senior Notes due in 2020 (collectively referred to as “Convertible Senior Notes” below), 5.30% Senior Notes due in 2025, solar asset-backednotes and solar loan-backed notes approximate their fair values.We estimate the fair value of the Convertible Senior Notes and the 5.30% Senior Notes due in 2025 using commonly accepted valuation methodologiesand market-based risk measurements that are indirectly observable, such as credit risk (Level II). In addition, we estimate the fair values of our solar asset-backednotes and solar loan-backed notes based on rates currently offered for instruments with similar maturities and terms (Level III). The following table presents theestimated fair values and the carrying values (in millions): December 31, 2019 December 31, 2018 Carrying Value Fair Value Carrying Value Fair Value Convertible Senior Notes $3,686 $6,067 $3,661 $4,347 5.30% Senior Notes due in 2025 $1,782 $1,748 $1,779 $1,575 Solar asset-backed notes $1,155 $1,211 $1,183 $1,207 Solar loan-backed notes $175 $189 $203 $212 Note 6 – InventoryOur inventory consisted of the following (in millions): December 31, December 31, 2019 2018 Raw materials $1,428 $932 Work in process 362 297 Finished goods (1) 1,356 1,581 Service parts 406 303 Total $3,552 $3,113 (1)Finished goods inventory includes vehicles in transit to fulfill customer orders, new vehicles available for sale, used vehicles and energy storage products.For solar energy systems, we commence transferring component parts from inventory to construction in progress, a component of solar energy systems,once a lease or PPA contract with a customer has been executed and installation has been initiated. Additional costs incurred on the leased solar energy systems,including labor and overhead, are recorded within construction in progress.We write-down inventory for any excess or obsolete inventories or when we believe that the net realizable value of inventories is less than the carryingvalue. During the years ended December 31, 2019, 2018 and 2017, we recorded write-downs of $138 million, $78 million and $124 million, respectively, in costof revenues. 93 Note 7 – Solar Energy Systems, NetSolar energy systems, net, consisted of the following (in millions): December 31, December 31, 2019 2018 Solar energy systems in service $6,682 $6,431 Initial direct costs related to customer solar energy system lease acquisition costs 102 99 6,784 6,530 Less: accumulated depreciation and amortization (1) (723) (496) 6,061 6,034 Solar energy systems under construction 18 68 Solar energy systems pending interconnection 59 169 Solar energy systems, net (2) $6,138 $6,271 (1)Depreciation and amortization expense during the years ended December 31, 2019, 2018 and 2017 was $227 million, $276 million, and $213 million,respectively.(2)As of December 31, 2019 and 2018, solar energy systems, net, included $36 million of gross finance leased assets with accumulated depreciation andamortization of $6 million and $4 million, respectively. Note 8 – Property, Plant and Equipment, NetOur property, plant and equipment, net, consisted of the following (in millions): December 31, December 31, 2019 2018 Machinery, equipment, vehicles and office furniture $7,167 $6,329 Tooling 1,493 1,398 Leasehold improvements 1,087 961 Land and buildings 3,024 4,047 Computer equipment, hardware and software 595 487 Construction in progress 764 807 14,130 14,029 Less: Accumulated depreciation (3,734) (2,699)Total $10,396 $11,330 As of December 31, 2018, the table above included $1.69 billion of gross build-to-suit lease assets. As a result of the adoption of the new lease standard onJanuary 1, 2019, we have de-recognized all build-to-suit lease assets and have reassessed these leases to be operating lease right-of-use assets within theconsolidated balance sheet as of December 31, 2019 (see Note 2, Summary of Significant Accounting Policies).Construction in progress is primarily comprised of tooling and equipment related to the manufacturing of our products and Gigafactory Shanghaiconstruction. Completed assets are transferred to their respective asset classes, and depreciation begins when an asset is ready for its intended use. Interest onoutstanding debt is capitalized during periods of significant capital asset construction and amortized over the useful lives of the related assets. During the yearsended December 31, 2019 and 2018, we capitalized $31 million and $55 million, respectively, of interest.Depreciation expense during the years ended December 31, 2019, 2018 and 2017 was $1.37 billion, $1.11 billion and $769 million, respectively. Grossproperty plant and equipment under finance leases as of December 31, 2019 and 2018 was $2.08 billion and $1.52 billion, respectively. Accumulated depreciationon property, plant and equipment under finance leases as of these dates was $483 million and $232 million, respectively.94 Panasonic has partnered with us on Gigafactory Nevada with investments in the production equipment that it uses to manufacture and supply us withbattery cells. Under our arrangement with Panasonic, we plan to purchase the full output from their production equipment at negotiated prices. As the terms of thearrangement convey a finance lease under ASC 842, Leases, we account for their production equipment as leased assets when production commences. This resultsin us recording the cost of their production equipment within property, plant and equipment, net, on the consolidated balance sheets with a corresponding liabilityrecorded to debt and finance leases. As of December 31, 2019 and 2018, we had cumulatively capitalized costs of $1.73 billion and $1.24 billion, respectively, onthe consolidated balance sheets in relation to the production equipment under our Panasonic arrangement. We had cumulatively capitalized total costs forGigafactory Nevada, including costs under our Panasonic arrangement, of $5.27 billion and $4.62 billion as of December 31, 2019 and 2018, respectively.In 2019, the Shanghai government agreed to provide $85 million of certain incentives in connection with us making certain manufacturing equipmentinvestments at Gigafactory Shanghai, of which $46 million was received in cash and the remaining $39 million was in the form of assets and services contributedby the government. These incentives were taken as a reduction to property, plant and equipment, net, on the consolidated balance sheet. Note 9 – Accrued Liabilities and Other As of December 31, 2019 and 2018, accrued liabilities and other current liabilities consisted of the following (in millions): December 31, December 31, 2019 2018 Accrued purchases (1) $638 $394 Payroll and related costs 466 449 Taxes payable (2) 611 348 Accrued interest 86 78 Financing obligation, current portion 57 62 Accrued warranty, current portion 344 201 Sales return reserve, current portion 272 108 Build-to-suit lease liability, current portion — 82 Operating lease right-of-use liabilities, current portion 228 — Other current liabilities 203 372 Total $2,905 $2,094 (1)Accrued purchases primarily reflects receipts of goods and services that we had not been invoiced yet. As we are invoiced for these goods and services,this balance will reduce and accounts payable will increase.(2)Taxes payable includes value added tax, sales tax, property tax, use tax and income tax payables. Due to price adjustments we made to our vehicle offerings during 2019, we increased our sales return reserve significantly on vehicles previously soldunder our buyback options program. See Note 2, Summary of Significant Accounting Policies for details.As of December 31, 2018, the table above included $82 million of current build-to-suit lease liabilities. As a result of the adoption of the new leasestandard on January 1, 2019, we have de-recognized all build-to-suit lease liabilities and have reassessed these leases to be operating lease right-of-use liabilities asof December 31, 2019. 95 Note 10 – Other Long-Term LiabilitiesAs of December 31, 2019 and 2018, other long-term liabilities consisted of the following (in millions): December 31, December 31, 2019 2018 Accrued warranty reserve $745 $547 Build-to-suit lease liability — 1,662 Operating lease right-of-use liabilities 956 — Deferred rent expense — 59 Financing obligation 37 50 Sales return reserve 545 84 Other noncurrent liabilities 372 308 Total other long-term liabilities $2,655 $2,710 As of December 31, 2018, the table above included $1.66 billion of non-current build-to-suit lease liabilities. As a result of the adoption of the new leasestandard on January 1, 2019, we have de-recognized all build-to-suit lease liabilities and have reassessed these leases to be operating lease right-of-use liabilities asof December 31, 2019.Due to price adjustments we made to our vehicle offerings during 2019, we increased our sales return reserve significantly on vehicles previously soldunder our buyback options program. Refer to Note 2, Summary of Significant Accounting Policies, for details on these transactions. Note 11 – Customer DepositsCustomer deposits primarily consisted of cash payments from customers at the time they place an order or reservation for a vehicle or an energy productand any additional payments up to the point of delivery or the completion of installation, including the fair values of any customer trade-in vehicles that areapplicable toward a new vehicle purchase. Customer deposits also include prepayments on contracts that can be cancelled without significant penalties, such asvehicle maintenance plans. Customer deposit amounts and timing vary depending on the vehicle model, the energy product and the country of delivery. In the caseof a vehicle, customer deposits are fully refundable. In the case of an energy generation or storage product, customer deposits are fully refundable prior to theentry into a purchase agreement or in certain cases for a limited time thereafter (in accordance with applicable laws). Customer deposits are included in currentliabilities until refunded or until they are applied towards the customer’s purchase balance. As of December 31, 2019 and December 31, 2018, we held$726 million and $793 million, respectively, in customer deposits. 96 Note 12 –DebtThe following is a summary of our debt as of December 31, 2019 (in millions): Unpaid Unused Principal Net Carrying Value Committed Contractual Contractual Balance Current Long-Term Amount (1) Interest Rates Maturity DateRecourse debt: 1.25% Convertible Senior Notes due in 2021 ("2021 Notes") $1,380 $— $1,304 $— 1.25% March 20212.375% Convertible Senior Notes due in 2022 ("2022 Notes") 978 — 902 — 2.375% March 20222.00% Convertible Senior Notes due in 2024 ("2024 Notes") 1,840 — 1,383 — 2.00% May 20245.30% Senior Notes due in 2025 ("2025 Notes") 1,800 — 1,782 — 5.30% August 2025Credit Agreement 1,727 141 1,586 499 2.7%-4.8% June 2020-July 2023Zero-Coupon Convertible Senior Notes due in 2020 103 97 — — 0.0% December 2020Solar Bonds and other Loans 70 15 53 — 3.6%-5.8% March 2020-January 2031Total recourse debt 7,898 253 7,010 499 Non-recourse debt: Automotive Asset-backed Notes 1,577 573 997 — 2.0%-7.9% February 2020- May 2023Solar Asset-backed Notes 1,183 32 1,123 — 4.0%-7.7% September 2024-February 2048China Loan Agreements 741 444 297 1,542 3.7%-4.0% September 2020-December 2024Cash Equity Debt 454 10 430 — 5.3%-5.8% July 2033-January 2035Solar Loan-backed Notes 182 11 164 — 4.8%-7.5% September 2048-September 2049Warehouse Agreements 167 21 146 933 3.1%-3.6% September 2021Solar Term Loans 161 8 152 — 5.4% January 2021Canada Credit Facility 40 24 16 — 4.2%-5.9% November 2022Solar Renewable Energy Credit and other Loans 89 23 67 6 4.5%-7.4% March 2020-June 2022Total non-recourse debt 4,594 1,146 3,392 2,481 Total debt $12,492 $1,399 $10,402 $2,980 97 The following is a summary of our debt as of December 31, 2018 (in millions): Unpaid Unused Principal Net Carrying Value Committed Contractual Contractual Balance Current Long-Term Amount (1) Interest Rates Maturity DateRecourse debt: 0.25% Convertible Senior Notes due in 2019 ("2019 Notes") $920 $913 $— $— 0.25% March 20192021 Notes 1,380 — 1,244 — 1.25% March 20212022 Notes 978 — 871 — 2.375% March 20222025 Notes 1,800 — 1,779 — 5.30% August 2025Credit Agreement 1,540 — 1,540 231 1% plus LIBOR June 20201.625% Convertible Senior Notes due in 2019 566 541 — — 1.625% November 2019Zero-Coupon Convertible Senior Notes due in 2020 103 — 92 — 0.0% December 2020Vehicle, Solar Bonds and other Loans 101 1 100 — 1.8%-7.6% January 2019-January 2031Total recourse debt 7,388 1,455 5,626 231 Non-recourse debt: Solar Asset-backed Notes 1,214 28 1,155 — 4.0%-7.7% September 2024-February 2048Automotive Asset-backed Notes 1,178 468 704 — 2.3%-7.9% December 2019-June 2022Cash Equity Debt 467 11 442 — 5.3%-5.8% July 2033-January 2035Solar Term Loans 350 188 162 — 6.0%-6.1% January 2019-January 2021Solar Loan-backed Notes 210 10 193 — 4.8%-7.5% September 2048-September 2049Warehouse Agreements 92 14 78 1,008 3.9%-4.2% September 2020Canada Credit Facility 73 32 41 — 3.6%-5.9% November 2022Solar Renewable Energy Credit and other Loans 27 16 10 18 5.1%-7.9% December 2019-July 2021Total non-recourse debt 3,611 767 2,785 1,026 Total debt $10,999 $2,222 $8,411 $1,257 (1)Unused committed amounts under some of our credit facilities and financing funds are subject to satisfying specified conditions prior to draw-down (suchas pledging to our lenders sufficient amounts of qualified receivables, inventories, leased vehicles and our interests in those leases, solar energy systemsand the associated customer contracts, our interests in financing funds or various other assets). Upon draw-down of any unused committed amounts, thereare no restrictions on use of available funds for general corporate purposes.Recourse debt refers to debt that is recourse to our general assets. Non-recourse debt refers to debt that is recourse to only assets of our subsidiaries. Thedifferences between the unpaid principal balances and the net carrying values are due to convertible senior note conversion features, debt discounts or deferredfinancing costs. As of December 31, 2019, we were in material compliance with all financial debt covenants, which include minimum liquidity and expense-coverage balances and ratios.2019 Notes, 2021 Notes, Bond Hedges and Warrant TransactionsIn March 2014, we issued $800 million in aggregate principal amount of 0.25% Convertible Senior Notes due in March 2019 and $1.20 billion inaggregate principal amount of 1.25% Convertible Senior Notes due in March 2021 in a public offering. In April 2014, we issued an additional $120 million inaggregate principal amount of the 2019 Notes and $180 million in aggregate principal amount of the 2021 Notes, pursuant to the exercise in full of theoverallotment options by the underwriters. The total net proceeds from the issuances, after deducting transaction costs, were $906 million for the 2019 Notes and$1.36 billion for the 2021 Notes.98 Each $1,000 of principal of these notes is initially convertible into 2.7788 shares of our common stock, which is equivalent to an initial conversion priceof $359.87 per share, subject to adjustment upon the occurrence of specified events. Holders of these notes had the option to convert on or after December 1, 2018for the 2019 Notes and may elect to convert on or after December 1, 2020 for the 2021 Notes. The settlement of such an election to convert the 2019 Notes was incash and/or shares of our common stock, which we settled in cash on the maturity date. The settlement of such an election to convert the 2021 Notes would be incash for the principal amount and, if applicable, cash and/or shares of our common stock for any conversion premium at our election. Further, holders of thesenotes may convert, at their option, prior to the respective dates above only under the following circumstances: (1) during a quarter in which the closing price of ourcommon stock for at least 20 trading days (whether or not consecutive) during the last 30 consecutive trading days immediately preceding the quarter is greaterthan or equal to 130% of the conversion price; (2) during the five-business day period following any five-consecutive trading day period in which the trading priceof these notes is less than 98% of the product of the closing price of our common stock and the applicable conversion rate for each day during such five-consecutive trading day period, or (3) if we make specified distributions to holders of our common stock or if specified corporate transactions occur. Upon such aconversion of the 2019 Notes, we would pay or deliver (as applicable) cash, shares of our common stock or a combination thereof, at our election. Upon such aconversion of the 2021 Notes, we would pay cash for the principal amount and, if applicable, deliver shares of our common stock (subject to our right to delivercash in lieu of all or a portion of such shares of our common stock) based on a daily conversion value. If a fundamental change occurs prior to the applicablematurity date, holders of these notes may require us to repurchase all or a portion of their notes for cash at a repurchase price equal to 100% of the principalamount plus any accrued and unpaid interest. In addition, if specific corporate events occur prior to the applicable maturity date, we would increase the conversionrate for a holder who elects to convert their notes in connection with such an event in certain circumstances. As of December 31, 2019, none of the conditionspermitting the holders of 2021 to early convert had been met. Therefore, the 2021 Notes are classified as long-term.In accordance with GAAP relating to embedded conversion features, we initially valued and bifurcated the conversion features associated with thesenotes. We recorded to stockholders’ equity $188 million for the 2019 Notes’ conversion feature and $369 million for the 2021 Notes’ conversion feature. Theresulting debt discounts are being amortized to interest expense at an effective interest rate of 4.89% and 5.96%, respectively.In connection with the offering of these notes in March and April 2014, we entered into convertible note hedge transactions whereby we had the option topurchase 2.6 million shares of our common stock for the 2019 Notes and have the option to purchase initially (subject to adjustment for certain specified events)3.8 million shares of our common stock for the 2021 Notes at a price of $359.87 per share. The total cost of the convertible note hedge transactions was$604 million. In addition, we sold warrants whereby the holders of the warrants had the option to purchase 2.6 million shares of our common stock at a price of$512.66 per share for the 2019 Notes and have the option to purchase initially (subject to adjustment for certain specified events) 3.8 million shares of our commonstock at a price of $560.64 per share for the 2021 Notes. We received $389 million in total cash proceeds from the sales of these warrants. Taken together, thepurchases of the convertible note hedges and the sales of the warrants are intended to reduce potential dilution and/or cash payments from the conversion of thesenotes and to effectively increase the overall conversion price from $359.87 to $512.66 per share for the 2019 Notes and from $359.87 to $560.64 per share for the2021 Notes. As these transactions meet certain accounting criteria, the convertible note hedges and warrants are recorded in stockholders’ equity and are notaccounted for as derivatives. The net cost incurred in connection with the convertible note hedge and warrant transactions was recorded as a reduction to additionalpaid-in capital on the consolidated balance sheet.During the first quarter of 2019, we repaid the $920 million in aggregate principal amount of the 2019 Notes. As of December 31, 2019, the convertiblenote hedges and warrants associated with the 2019 Notes have expired.As of December 31, 2019, the if-converted value of the 2021 Notes exceeds the outstanding principal amount by $224 million.2022 Notes, Bond Hedges and Warrant TransactionsIn March 2017, we issued $978 million in aggregate principal amount of 2.375% Convertible Senior Notes due in March 2022 in a public offering. The netproceeds from the issuance, after deducting transaction costs, were $966 million.99 Each $1,000 of principal of the 2022 Notes is initially convertible into 3.0534 shares of our common stock, which is equivalent to an initial conversionprice of $327.50 per share, subject to adjustment upon the occurrence of specified events. Holders of the 2022 Notes may convert, at their option, on or afterDecember 15, 2021. Further, holders of the 2022 Notes may convert, at their option, prior to December 15, 2021 only under the following circumstances: (1)during any quarter beginning after June 30, 2017, if the closing price of our common stock for at least 20 trading days (whether or not consecutive) during the last30 consecutive trading days immediately preceding the quarter is greater than or equal to 130% of the conversion price; (2) during the five-business day periodfollowing any five-consecutive trading day period in which the trading price of the 2022 Notes is less than 98% of the product of the closing price of our commonstock and the applicable conversion rate for each day during such five-consecutive trading day period or (3) if we make specified distributions to holders of ourcommon stock or if specified corporate transactions occur. Upon a conversion, we would pay cash for the principal amount and, if applicable, deliver shares of ourcommon stock (subject to our right to deliver cash in lieu of all or a portion of such shares of our common stock) based on a daily conversion value. If afundamental change occurs prior to the maturity date, holders of the 2022 Notes may require us to repurchase all or a portion of their 2022 Notes for cash at arepurchase price equal to 100% of the principal amount plus any accrued and unpaid interest. In addition, if specific corporate events occur prior to the maturitydate, we would increase the conversion rate for a holder who elects to convert its 2022 Notes in connection with such an event in certain circumstances. As ofDecember 31, 2019, none of the conditions permitting the holders of the 2022 Notes to early convert had been met. Therefore, the 2022 Notes are classified aslong-term.In accordance with GAAP relating to embedded conversion features, we initially valued and bifurcated the conversion feature associated with the 2022Notes. We recorded to stockholders’ equity $146 million for the conversion feature. The resulting debt discount is being amortized to interest expense at aneffective interest rate of 6.00%.In connection with the offering of the 2022 Notes, we entered into convertible note hedge transactions whereby we have the option to purchase initially(subject to adjustment for certain specified events) 3.0 million shares of our common stock at a price of $327.50 per share. The cost of the convertible note hedgetransactions was $204 million. In addition, we sold warrants whereby the holders of the warrants have the option to purchase initially (subject to adjustment forcertain specified events) 3.0 million shares of our common stock at a price of $655.00 per share. We received $53 million in cash proceeds from the sale of thesewarrants. Taken together, the purchase of the convertible note hedges and the sale of the warrants are intended to reduce potential dilution from the conversion ofthe 2022 Notes and to effectively increase the overall conversion price from $327.50 to $655.00 per share. As these transactions meet certain accounting criteria,the convertible note hedges and warrants are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost incurred in connection with theconvertible note hedge and warrant transactions was recorded as a reduction to additional paid-in capital on the consolidated balance sheet.As of December 31, 2019, the if-converted value of the notes exceeds the outstanding principal amount by $271 million.2024 Notes, Bond Hedges and Warrant TransactionsIn May 2019, we issued $1.84 billion in aggregate principal amount of 2.00% Convertible Senior Notes due in May 2024 in a public offering. The netproceeds from the issuance, after deducting transaction costs, were $1.82 billion.100 Each $1,000 of principal of the 2024 Notes is initially convertible into 3.2276 shares of our common stock, which is equivalent to an initial conversionprice of $309.83 per share, subject to adjustment upon the occurrence of specified events. Holders of the 2024 Notes may convert, at their option, on or afterFebruary 15, 2024. Further, holders of the 2024 Notes may convert, at their option, prior to February 15, 2024 only under the following circumstances: (1) duringany calendar quarter commencing after September 30, 2019 (and only during such calendar quarter), if the last reported sale price of our common stock for at least20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of immediately preceding calendarquarter is greater than or equal to 130% of the conversion price on each trading day; (2) during the five-business day period after any five-consecutive trading dayperiod in which the trading price per $1,000 principal amount of the 2024 Notes for each trading day of such period is less than 98% of the product of the lastreported sale price of our common stock and the conversion rate on each such trading day, or (3) if specified corporate events occur. Upon conversion, the 2024Notes will be settled in cash, shares of our common stock or a combination thereof, at our election. If a fundamental change occurs prior to the maturity date,holders of the 2024 Notes may require us to repurchase all or a portion of their 2024 Notes for cash at a repurchase price equal to 100% of the principal amountplus any accrued and unpaid interest. In addition, if specific corporate events occur prior to the maturity date, we would increase the conversion rate for a holderwho elects to convert its 2024 Notes in connection with such an event in certain circumstances. As of December 31, 2019, none of the conditions permitting theholders of the 2024 Notes to early convert had been met. Therefore, the 2024 Notes are classified as long-term.In accordance with GAAP relating to embedded conversion features, we initially valued and bifurcated the conversion feature associated with the 2024Notes. We recorded to stockholders’ equity $491 million for the conversion feature. The resulting debt discount is being amortized to interest expense at aneffective interest rate of 8.68%.In connection with the offering of the 2024 Notes, we entered into convertible note hedge transactions whereby we have the option to purchase initially(subject to adjustment for certain specified events) 5.9 million shares of our common stock at a price of $309.83 per share. The cost of the convertible note hedgetransactions was $476 million. In addition, we sold warrants whereby the holders of the warrants have the option to purchase initially (subject to adjustment forcertain specified events) 5.9 million shares of our common stock at a price of $607.50 per share. We received $174 million in cash proceeds from the sale of thesewarrants. Taken together, the purchase of the convertible note hedges and the sale of the warrants are intended to reduce potential dilution from the conversion ofthe 2024 Notes and to effectively increase the overall conversion price from $309.83 to $607.50 per share. As these transactions meet certain accounting criteria,the convertible note hedges and warrants are recorded in stockholders’ equity and are not accounted for as derivatives. The net cost incurred in connection with theconvertible note hedge and warrant transactions was recorded as a reduction to additional paid-in capital on the consolidated balance sheet.As of December 31, 2019, the if-converted value of the notes exceeds the outstanding principal amount by $644 million.2025 NotesIn August 2017, we issued $1.80 billion in aggregate principal amount of unsecured 5.30% Senior Notes due in August 2025 pursuant to Rule 144A andRegulation S under the Securities Act. The net proceeds from the issuance, after deducting transaction costs, were $1.77 billion.Credit AgreementIn June 2015, we entered into a senior asset-based revolving credit agreement (as amended from time to time, the “Credit Agreement”) with a syndicate ofbanks. Borrowed funds bear interest, at our option, at an annual rate of (a) 1% plus LIBOR or (b) the highest of (i) the federal funds rate plus 0.50%, (ii) thelenders’ “prime rate” or (iii) 1% plus LIBOR. The fee for undrawn amounts is 0.25% per annum. The Credit Agreement is secured by certain of our accountsreceivable, inventory and equipment. Availability under the Credit Agreement is based on the value of such assets, as reduced by certain reserves.In March 2019, we amended and restated the Credit Agreement to increase the total lender commitments by $500 million to $2.425 billion and extend theterm of substantially all of the total commitments to July 2023.101 1.625% Convertible Senior Notes due in 2019In 2014, SolarCity issued $566 million in aggregate principal amount of 1.625% Convertible Senior Notes due on November 1, 2019 in a privateplacement.Each $1,000 of principal of the convertible senior notes was convertible into 1.3169 shares of our common stock, which is equivalent to a conversion priceof $759.36 per share (subject to adjustment upon the occurrence of specified events related to dividends, tender offers or exchange offers). The maximumconversion rate was capped at 1.7449 shares for each $1,000 of principal of the convertible senior notes, which is equivalent to a minimum conversion price of$573.10 per share. The convertible senior notes did not have a cash conversion option and the convertible senior note holders could require us to repurchase theirconvertible senior notes for cash only under certain defined fundamental changes. In November 2019, we fully repaid $566 million in aggregate principal amount of the Notes.Zero-Coupon Convertible Senior Notes due in 2020In December 2015, SolarCity issued $113 million in aggregate principal amount of Zero-Coupon Convertible Senior Notes due on December 1, 2020 in aprivate placement. $13 million of the convertible senior notes were issued to related parties (see Note 20, Related Party Transactions).Each $1,000 of principal of the convertible senior notes is now convertible into 3.3333 shares of our common stock, which is equivalent to a conversionprice of $300.00 per share (subject to adjustment upon the occurrence of specified events related to dividends, tender offers or exchange offers). The maximumconversion rate is capped at 4.2308 shares for each $1,000 of principal of the convertible senior notes, which is equivalent to a minimum conversion price of$236.36 per share. The convertible senior notes do not have a cash conversion option. The convertible senior note holders may require us to repurchase theirconvertible senior notes for cash only under certain defined fundamental changes. On or after June 30, 2017, the convertible senior notes are redeemable by us inthe event that the closing price of our common stock exceeds 200% of the conversion price for 45 consecutive trading days ending within three trading days ofsuch redemption notice at a redemption price equal to 100% of the principal amount plus any accrued and unpaid interest.As of December 31, 2019, the if-converted value of the notes exceeds the outstanding principal amount by $41 million. Solar Bonds and other LoansSolar Bonds are senior unsecured obligations that are structurally subordinate to the indebtedness and other liabilities of our subsidiaries. Solar Bonds wereissued under multiple series with various terms and interest rates. Additionally, we have assumed the 5.50% Convertible Senior Notes due in 2022 issued byMaxwell, which are convertible into shares of our common stock as a result of our acquisition of Maxwell.Automotive Asset-backed NotesFrom time to time, we transfer receivables or beneficial interests related to certain leased vehicles into SPEs and issue Automotive Asset-backed Notes,backed by these automotive assets to investors. The SPEs are consolidated in the financial statements. The cash flows generated by these automotive assets areused to service the principal and interest payments on the Automotive Asset-backed Notes and satisfy the SPEs’ expenses, and any remaining cash is distributed tothe owners of the SPEs. We recognize revenue earned from the associated customer lease contracts in accordance with our revenue recognition policy. The SPEs’assets and cash flows are not available to our other creditors, and the creditors of the SPEs, including the Automotive Asset-backed Note holders, have no recourseto our other assets. A third-party contracted with us to provide administrative and collection services for these automotive assets.In November 2019, we issued $861 million in aggregate principal amount of Automotive Asset-backed Notes. The proceeds from the issuance, net ofdiscounts and fees, were $857 million.102 Solar Asset-backed NotesFrom time to time, our subsidiaries pool and transfer either qualifying solar energy systems and the associated customer contracts or our interests incertain financing funds into Special Purpose Entities (“SPEs”) and issue Solar Asset-backed Notes backed by these solar assets or interests to investors. The SPEsare wholly owned by us and are consolidated in the financial statements. The cash flows generated by these solar assets or distributed by the underlying financingfunds to certain SPEs are used to service the principal and interest payments on the Solar Asset-backed Notes and satisfy the SPEs’ expenses, and any remainingcash is distributed to us. We recognize revenue earned from the associated customer contracts in accordance with our revenue recognition policy. The SPEs’ assetsand cash flows are not available to our other creditors, and the creditors of the SPEs, including the Solar Asset-backed Note holders, have no recourse to our otherassets. We contracted with the SPEs to provide operations & maintenance and administrative services for the solar energy systems. As of December 31, 2019,solar assets pledged as collateral for Solar Asset-backed Notes had a carrying value of $690 million and are included within solar energy systems, net, on theconsolidated balance sheets. China Loan AgreementsIn March 2019, one of our subsidiaries entered into a loan agreement with a syndicate of lenders in China for a bridge loan to be used for expendituresrelated to the construction of and production at our Gigafactory Shanghai. The loan agreement was terminated in December 2019. In September 2019, one of our subsidiaries entered into a loan agreement with a lender in China for an unsecured 12-month revolving facility of up toRMB 5.0 billion (or the equivalent drawn in U.S. dollars), to finance vehicles in-transit to China. Borrowed funds bear interest at an annual rate no greater than90% of the one-year rate published by the People’s Bank of China. The loan facility is non-recourse to our assets.In December 2019, one of our subsidiaries entered into loan agreements with a syndicate of lenders in China for: (i) a secured term loan facility of up toRMB 9.0 billion or the equivalent amount drawn in U.S. dollars (the “Fixed Asset Facility”) and (ii) an unsecured revolving loan facility of up to RMB 2.25 billionor the equivalent amount drawn in U.S. dollars (the “Working Capital Facility”), in each case to be used in connection with our construction of and production atour Gigafactory Shanghai. Outstanding borrowings pursuant to the Fixed Asset Facility accrue interest at a rate equal to: (i) for RMB-denominated loans, themarket quoted interest rate published by the People’s Bank of China minus 0.7625%, and (ii) for U.S. dollar-denominated loans, the sum of one-year LIBOR plus1.3%. Outstanding borrowings pursuant to the Working Capital Facility accrue interest at a rate equal to: (i) for RMB-denominated loans, the market quotedinterest rate published by the People’s Bank of China minus 0.4525%, and (ii) for U.S. dollar-denominated loans, the sum of one-year LIBOR plus 0.8%. TheFixed Asset Facility is secured by the land and buildings at Gigafactory Shanghai and both facilities are non-recourse to our other assets.Cash Equity DebtIn connection with the cash equity financing deals closed in 2016, our subsidiaries issued $502 million in aggregate principal amount of debt that bearsinterest at fixed rates. This debt is secured by, among other things, our interests in certain financing funds and is non-recourse to our other assets.Solar Loan-backed NotesIn January 2016 and January 2017, our subsidiaries pooled and transferred certain MyPower customer notes receivable into two SPEs and issued$330 million in aggregate principal amount of Solar Loan-backed Notes, backed by these notes receivable to investors. Accordingly, we did not recognize a gainor loss on the transfer of these notes receivable. The SPEs are wholly owned by us and are consolidated in the financial statements. The payments received by theSPEs from these notes receivable are used to service the semi-annual principal and interest payments on the Solar Loan-backed Notes and satisfy the SPEs’expenses, and any remaining cash is distributed to us. The SPEs’ assets and cash flows are not available to our other creditors, and the creditors of the SPEs,including the Solar Loan-backed Note holders, have no recourse to our other assets.103 Warehouse AgreementsIn August 2016, our subsidiaries entered into a loan and security agreement (the “2016 Warehouse Agreement”) for borrowings secured by the future cashflows arising from certain leases and the associated leased vehicles. On August 17, 2017, the 2016 Warehouse Agreement was amended to modify the interestrates and extend the availability period and the maturity date, and our subsidiaries entered into another loan and security agreement (the “2017 WarehouseAgreement”) with substantially the same terms as and that shares the same committed amount with the 2016 Warehouse Agreement. On August 16, 2018, the 2016Warehouse Agreement and 2017 Warehouse Agreement were amended to extend the availability period from August 17, 2018 to August 16, 2019 and extend thematurity date from September 2019 to September 2020. On December 28, 2018, our subsidiaries terminated the 2017 Warehouse Agreement after having fullyrepaid all obligations thereunder, and entered into a third loan and security agreement with substantially the same terms as and that shares the same committedamount with the 2016 Warehouse Agreement. We refer to these agreements together as the “Warehouse Agreements.” Amounts drawn under the WarehouseAgreements generally bear interest at a fixed margin above (i) LIBOR or (ii) the commercial paper rate. The Warehouse Agreements are non-recourse to our otherassets.Pursuant to the Warehouse Agreements, an undivided beneficial interest in the future cash flows arising from certain leases and the related leased vehicleshas been sold for legal purposes but continues to be reported in the consolidated financial statements. The interest in the future cash flows arising from these leasesand the related vehicles is not available to pay the claims of our creditors other than pursuant to obligations to the lenders under the Warehouse Agreements. Anyexcess cash flows not required to pay obligations under the Warehouse Agreements are available for distributions.In August 2019, our subsidiaries amended the Warehouse Agreements to extend the availability period from August 16, 2019 to August 14, 2020 andextend the maturity date from September 2020 to September 2021.In November 2019, we repaid $723 million of the principal outstanding under the Warehouse Agreements.Solar Term LoansOur subsidiaries have entered into agreements for term loans with various financial institutions. The term loans are secured by substantially all of theassets of the subsidiaries, including its interests in certain financing funds, and are non-recourse to our other assets.During the fourth quarter of 2019, we fully repaid the $159 million in aggregate principal of one term loan.Canada Credit FacilityIn December 2016, one of our subsidiaries entered into a credit agreement (the “Canada Credit Facility”) with a bank for borrowings secured by ourinterests in certain vehicle leases. In December 2017 and December 2018, the Canada Credit Facility was amended to add our interests in additional vehicle leasesas collateral, allowing us to draw additional funds. Amounts drawn under the Canada Credit Facility bear interest at fixed rates. The Canada Credit Facility is non-recourse to our other assets.Solar Renewable Energy Credit and other LoansWe have entered into various solar renewable energy credit and other loan agreements with various financial institutions, including a solar revolvingcredit facility. The solar renewable energy credit loan facility is secured by substantially all of the assets of one of our wholly owned subsidiaries, including itsrights under forward contracts to sell SRECs, and is non-recourse to our other assets. The solar revolving credit facility is secured by certain assets of thesubsidiary and is non-recourse to our other assets.104 Interest ExpenseThe following table presents the interest expense related to the contractual interest coupon, the amortization of debt issuance costs and the amortization ofdebt discounts on our convertible senior notes with cash conversion features, which include the 1.50% Convertible Senior Notes due in 2018, the 2019 Notes, the2021 Notes, the 2022 Notes and the 2024 Notes (in millions): Year Ended December 31, 2019 2018 2017 Contractual interest coupon $65 $43 $39 Amortization of debt issuance costs 7 7 7 Amortization of debt discounts 148 123 114 Total $220 $173 $160 Pledged AssetsAs of December 31, 2019 and 2018, we had pledged or restricted $5.72 billion and $5.23 billion of our assets (consisted principally of restricted cash,receivables, inventory, SRECs, solar energy systems, operating lease vehicles, land use rights, property and equipment, and equity interests in certain SPEs) ascollateral for our outstanding debt.Schedule of Principal Maturities of DebtThe future scheduled principal maturities of debt as of December 31, 2019 were as follows (in millions): Recourse debt Non-recourse debt Total 2020 $259 $1,155 $1,414 2021 1,382 909 2,291 2022 1,024 1,013 2,037 2023 1,586 199 1,785 2024 1,840 558 2,398 Thereafter 1,807 760 2,567 Total $7,898 $4,594 $12,492 Note 13 – LeasesWe have entered into various non-cancellable operating and finance lease agreements for certain of our offices, manufacturing and warehouse facilities,retail and service locations, equipment, vehicles, and solar energy systems, worldwide. We determine if an arrangement is a lease, or contains a lease, at inceptionand record the leases in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor.Our leases, where we are the lessee, often include options to extend the lease term for up to 10 years. Some of our leases also include options to terminatethe lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the leasewhen it is reasonably certain that we will exercise such options.Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Certain operating leases provide for annual increasesto lease payments based on an index or rate. We calculate the present value of future lease payments based on the index or rate at the lease commencement date fornew leases commencing after January 1, 2019. For historical leases, we used the index or rate as of the adoption date. Differences between the calculated leasepayment and actual payment are expensed as incurred. Lease expense for finance lease payments is recognized as amortization expense of the finance lease ROUasset and interest expense on the finance lease liability over the lease term.105 The balances for the operating and finance leases where we are the lessee are presented as follows (in millions) within our consolidated balance sheet: December 31, 2019 Operating leases: Operating lease right-of-use assets $1,218 Accrued liabilities and other $228 Other long-term liabilities 956 Total operating lease liabilities $1,184 Finance leases: Solar energy systems, net $30 Property, plant and equipment, net 1,600 Total finance lease assets $1,630 Current portion of long-term debt and finance leases $386 Long-term debt and finance leases, net of current portion 1,232 Total finance lease liabilities $1,618 The components of lease expense are as follows (in millions) within our consolidated statements of operations: Year Ended December 31, 2019 Operating lease expense: Operating lease expense (1) $426 Finance lease expense: Amortization of leased assets $299 Interest on lease liabilities 104 Total finance lease expense $403 Total lease expense $829 (1)Includes short-term leases and variable lease costs, which are immaterial.Other information related to leases where we are the lessee is as follows: December 31, 2019 Weighted-average remaining lease term: Operating leases 6.2 years Finance leases 3.9 years Weighted-average discount rate: Operating leases 6.5%Finance leases 6.5% 106 Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at leasecommencement date in determining the present value of lease payments.Supplemental cash flow information related to leases where we are the lessee is as follows (in millions): Year Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $396 Operating cash outflows from finance leases (interest payments) $104 Financing cash outflows from finance leases $321 Leased assets obtained in exchange for finance lease liabilities $616 Leased assets obtained in exchange for operating lease liabilities $202 As of December 31, 2019, the maturities of our operating and finance lease liabilities (excluding short-term leases) are as follows (in millions): Operating Finance Leases Leases 2020 $296 $474 2021 262 478 2022 210 600 2023 174 224 2024 146 5 Thereafter 372 13 Total minimum lease payments 1,460 1,794 Less: Interest 276 176 Present value of lease obligations 1,184 1,618 Less: Current portion 228 386 Long-term portion of lease obligations $956 $1,232 Under legacy lease accounting (ASC 840), future minimum lease payments under non-cancellable leases as of December 31, 2018 are as follows (inmillions): Operating Finance Leases Leases 2019 $276 $417 2020 257 503 2021 230 506 2022 183 24 2023 158 5 Thereafter 524 6 Total minimum lease payments $1,628 1,461 Less: Interest 122 Present value of lease obligations 1,339 Less: Current portion 346 Long-term portion of lease obligations $993 107 Non-cancellable Operating Lease ReceivablesUnder the new lease standard, we are the lessor of certain vehicle arrangements as described in Note 2, Summary of Significant Accounting Policies.Following the adoption of the new lease standard, solar energy system leases and PPAs that commenced after January 1, 2019, where we are the lessor and werepreviously accounted for as leases, no longer meet the definition of a lease and are therefore not included in the table as of December 31, 2019 (refer to Note 2,Summary of Significant Accounting Policies). As of December 31, 2019, maturities of our operating lease receivables from customers for each of the next fiveyears and thereafter were as follows (in millions): 2020 $644 2021 494 2022 317 2023 190 2024 191 Thereafter 2,294 Total $4,130 Under legacy lease accounting (ASC 840), future minimum lease payments to be received from customers under non-cancellable leases as ofDecember 31, 2018 are as follows (in millions): 2019 $502 2020 418 2021 271 2022 187 2023 189 Thereafter 2,469 Total $4,036 The above tables do not include vehicle sales to customers or leasing partners with a resale value guarantee as the cash payments were received upfront.For our solar PPA arrangements, customers are charged solely based on actual power produced by the installed solar energy system at a predefined rate perkilowatt-hour of power produced. The future payments from such arrangements are not included in the above table as they are a function of the power generatedby the related solar energy systems in the future. Note 14 – Equity Incentive PlansIn June 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”), and simultaneously terminated the 2010 Equity Incentive Plan (the “2010Plan”). No new awards have been granted under the 2010 Plan following the adoption of the 2019 Plan, but such termination did not affect outstanding awardsunder the 2010 Plan. The 2019 Plan has similar terms as the 2010 Plan and provides for the granting of stock options, restricted stock, RSUs, stock appreciationrights, performance units and performance shares to our employees, directors and consultants. Stock options granted under the 2019 Plan may be either incentivestock options or nonstatutory stock options. Incentive stock options may only be granted to our employees. Nonstatutory stock options may be granted to ouremployees, directors and consultants. Generally, our stock options and RSUs vest over four years and our stock options are exercisable over a maximum period of10 years from their grant dates. Vesting typically terminates when the employment or consulting relationship ends.As of December 31, 2019, 11 million shares were reserved and available for issuance under the 2019 Plan.108 The following table summarizes our stock option and RSU activity: Stock Options RSUs Weighted- Weighted- Weighted- Average Aggregate Average Number of Average Remaining Intrinsic Number Grant Options Exercise Contractual Value of RSUs Date Fair (in thousands) Price Life (years) (in billions) (in thousands) Value Balance, December 31, 2018 31,208 $273.40 4,659 $294.63 Granted 1,473 $265.26 3,752 $282.74 Exercised or released (1,441) $106.68 (1,949) $277.13 Cancelled (1,245) $310.57 (1,656) $295.05 Balance, December 31, 2019 29,995 $279.49 6.89 $4.17 4,806 $291.06 Vested and expected to vest, December 31, 2019 15,860 $228.29 6.05 $3.02 4,804 $291.05 Exercisable and vested, December 31, 2019 7,025 $94.07 3.39 $2.28 The weighted-average grant date fair value of RSUs in the years ended December 31, 2019, 2018, and 2017 was $282.74, $316.46 and $308.71,respectively. The aggregate release date fair value of RSUs in the years ended December 31, 2019, 2018 and 2017 was $502 million, $546 million and $491million, respectively.The aggregate intrinsic value of options exercised in the years ended December 31, 2019, 2018, and 2017 was $237 million, $293 million and $544million, respectively.Fair Value AssumptionsWe use the fair value method in recognizing stock-based compensation expense. Under the fair value method, we estimate the fair value of each stockoption award with service or service and performance conditions and the ESPP on the grant date generally using the Black-Scholes option pricing model and theweighted-average assumptions in the following table: Year Ended December 31, 2019 2018 2017 Risk-free interest rate: Stock options 2.4% 2.5% 1.8%ESPP 2.2% 2.0% 1.1%Expected term (in years): Stock options 4.5 4.7 5.1 ESPP 0.5 0.5 0.5 Expected volatility: Stock options 48% 42% 42%ESPP 53% 43% 35%Dividend yield: Stock options 0.0% 0.0% 0.0%ESPP 0.0% 0.0% 0.0%Grant date fair value per share: Stock options $111.59 $121.92 $122.25 ESPP $78.25 $84.37 $75.05 109 The fair value of RSUs with service or service and performance conditions is measured on the grant date based on the closing fair market value of ourcommon stock. The risk-free interest rate is based on the U.S. Treasury yield for zero-coupon U.S. Treasury notes with maturities approximating each grant’sexpected life. Prior to the fourth quarter of 2017, given our then limited history with employee grants, we used the “simplified” method in estimating the expectedterm of our employee grants; the simplified method utilizes the average of the time-to-vesting and the contractual life of the employee grant. Beginning with thefourth quarter of 2017, we use our historical data in estimating the expected term of our employee grants. The expected volatility is based on the average of theimplied volatility of publicly traded options for our common stock and the historical volatility of our common stock.2018 CEO Performance AwardIn March 2018, our stockholders approved the Board of Directors’ grant of 20,264,042 stock option awards to our CEO (the “2018 CEO PerformanceAward”). The 2018 CEO Performance Award consists of 12 vesting tranches with a vesting schedule based entirely on the attainment of both operationalmilestones (performance conditions) and market conditions, assuming continued employment either as the CEO or as both Executive Chairman and Chief ProductOfficer and service through each vesting date. Each of the 12 vesting tranches of the 2018 CEO Performance Award will vest upon certification by the Board ofDirectors that both (i) the market capitalization milestone for such tranche, which begins at $100 billion for the first tranche and increases by increments of $50billion thereafter, and (ii) any one of the following eight operational milestones focused on revenue or eight operational milestones focused on Adjusted EBITDAhave been met for the previous four consecutive fiscal quarters on an annualized basis. Adjusted EBITDA is defined as net income (loss) attributable to commonstockholders before interest expense, provision (benefit) for income taxes, depreciation and amortization and stock-based compensation. Total Annualized Revenue(in billions) Annualized Adjusted EBITDA(in billions)$20.0 $1.5$35.0 $3.0$55.0 $4.5$75.0 $6.0$100.0 $8.0$125.0 $10.0$150.0 $12.0$ 175.0 $14.0 As of December 31, 2019, two operational milestones have been achieved: (i) $20.0 billion total annualized revenue and (ii) $1.5 billion annualizedadjusted EBITDA, each subject to the formal certification by our Board of Directors, while no market capitalization milestones have been achieved. Consequently,no shares subject to the 2018 CEO Performance Award have vested as of the date of this filing. As of December 31, 2019, the following operational milestones were considered probable of achievement: •Adjusted EBITDA of $3.0 billion •Total revenue of $35.0 billionStock-based compensation expense associated with each tranche under the 2018 CEO Performance Award is recognized over the longer of (i) the expectedachievement period for the operational milestone for such tranche and (ii) the expected achievement period for the related market capitalization milestonedetermined on the grant date, beginning at the point in time when the relevant operational milestone is considered probable of being met. If such operationalmilestone becomes probable any time after the grant date, we will recognize a cumulative catch-up expense from the grant date to that point in time. If the relatedmarket capitalization milestone is achieved earlier than its expected achievement period and the achievement of the related operational milestone, then the stock-based compensation expense will be recognized over the expected achievement period for the operational milestone, which may accelerate the rate at which suchexpense is recognized.110 The market capitalization milestone period and the valuation of each tranche are determined using a Monte Carlo simulation and is used as the basis fordetermining the expected achievement period. The probability of meeting an operational milestone is based on a subjective assessment of our future financialprojections. No tranches of the 2018 CEO Performance Award will vest unless a market capitalization and a matching operational milestone are both achieved.The first tranche of the 2018 CEO Performance Award will not vest unless our market capitalization were to approximately double from the initial level at the timethe award was approved, based on both a six calendar month trailing average and a 30 calendar day trailing average (counting only trading days). Upon vesting of atranche, all unamortized expense for the tranche will be recognized immediately. Additionally, stock-based compensation represents a non-cash expense and isrecorded as a selling, general, and administrative operating expense in our consolidated statement of operations.As of December 31, 2019, we had $527 million of total unrecognized stock-based compensation expense for the operational milestones that wereconsidered probable of achievement, which will be recognized over a weighted-average period of 2.72 years. As of December 31, 2019, we had unrecognizedstock-based compensation expense of $1.29 billion for the operational milestones that were considered not probable of achievement. For the year ended December31, 2019, we recorded stock-based compensation expense of $296 million related to the 2018 CEO Performance Award. From March 21, 2018, when the grantwas approved by our stockholders, through December 31, 2018, we recorded stock-based compensation expense of $175 million related to this award. Theincrease in stock-based compensation expense was primarily related to a $72 million cumulative catch-up expense for the service provided from the grant datewhen an additional operational milestone was considered probable of being met in the fourth quarter of 2019 and a shorter expense period in the prior year.2014 Performance-Based Stock Option AwardsIn 2014, to create incentives for continued long-term success beyond the Model S program and to closely align executive pay with our stockholders’interests in the achievement of significant milestones by us, the Compensation Committee of our Board of Directors granted stock option awards to certainemployees (excluding our CEO) to purchase an aggregate of 1,073,000 shares of our common stock. Each award consisted of the following four vesting trancheswith the vesting schedule based entirely on the attainment of the future performance milestones, assuming continued employment and service through each vestingdate: •1/4th of each award vests upon completion of the first Model X production vehicle; •1/4th of each award vests upon achieving aggregate production of 100,000 vehicles in a trailing 12-month period; •1/4th of each award vests upon completion of the first Model 3 production vehicle; and •1/4th of each award vests upon achieving an annualized gross margin of greater than 30% for any three-year period.As of December 31, 2019, the following performance milestones had been achieved: •Completion of the first Model X production vehicle; •Completion of the first Model 3 production vehicle; and •Aggregate production of 100,000 vehicles in a trailing 12-month period.We begin recognizing stock-based compensation expense as each performance milestone becomes probable of achievement. As of December 31, 2019,we had unrecognized stock-based compensation expense of $5 million for the performance milestone that was considered not probable of achievement. For theyears ended December 31, 2019 and 2018, we did not record any additional stock-based compensation related to these awards. For the year ended December 2017,we recorded stock-based compensation expense of $7 million related to these awards.111 2012 CEO Performance AwardIn August 2012, our Board of Directors granted 5,274,901 stock option awards to our CEO (the “2012 CEO Performance Award”). The 2012 CEOPerformance Award consists of 10 vesting tranches with a vesting schedule based entirely on the attainment of both performance conditions and market conditions,assuming continued employment and service through each vesting date. Each vesting tranche requires a combination of a pre-determined performance milestoneand an incremental increase in our market capitalization of $4.00 billion, as compared to our initial market capitalization of $3.20 billion at the time of grant. As ofDecember 31, 2019, the market capitalization conditions for all of the vesting tranches and the following performance milestones had been achieved: •Successful completion of the Model X alpha prototype; •Successful completion of the Model X beta prototype; •Completion of the first Model X production vehicle; •Aggregate production of 100,000 vehicles; •Successful completion of the Model 3 alpha prototype; •Successful completion of the Model 3 beta prototype; •Completion of the first Model 3 production vehicle; •Aggregate production of 200,000 vehicles; and •Aggregate production of 300,000 vehicles.We begin recognizing stock-based compensation expense as each milestone becomes probable of achievement. As of December 31, 2019, we hadunrecognized stock-based compensation expense of $6 million for the performance milestone that was considered not probable of achievement. For the year endedDecember 31, 2019, we recorded no stock-based compensation expense related to the 2012 CEO Performance Award. For the year ended December 31, 2018, thestock-based compensation we recorded related to this award was immaterial. For the year ended December 31, 2017, we recorded stock-based compensationexpense of $5 million related to this award.Our CEO earns a base salary that reflects the currently applicable minimum wage requirements under California law, and he is subject to income taxesbased on such base salary. However, he has never accepted his salary. Commencing in May 2019 at our CEO’s request, we eliminated altogether the earning andaccrual of his base salary.Summary Stock-Based Compensation InformationThe following table summarizes our stock-based compensation expense by line item in the consolidated statements of operations (in millions): Year Ended December 31, 2019 2018 2017 Cost of revenues $128 $109 $64 Research and development 285 261 218 Selling, general and administrative 482 375 185 Restructuring and other 3 4 — Total $898 $749 $467 We realized no income tax benefit from stock option exercises in each of the periods presented due to cumulative losses and valuation allowances. As ofDecember 31, 2019, we had $1.57 billion of total unrecognized stock-based compensation expense related to non-performance awards, which will be recognizedover a weighted-average period of 2.91 years.112 ESPPOur employees are eligible to purchase our common stock through payroll deductions of up to 15% of their eligible compensation, subject to any planlimitations. The purchase price would be 85% of the lower of the fair market value on the first and last trading days of each six-month offering period. During theyears ended December 31, 2019, 2018 and 2017, we issued 0.5 million, 0.4 million and 0.4 million shares under the ESPP with an associated expense of$40 million, $109 million and $71 million, respectively. There were 7 million shares available for issuance under the ESPP as of December 31, 2019. Note 15 – Income TaxesA provision for income taxes of $110 million, $58 million and $32 million has been recognized for the years ended December 31, 2019, 2018 and 2017,respectively, related primarily to our subsidiaries located outside of the U.S. Our loss before provision for income taxes for the years ended December 31, 2019,2018 and 2017 was as follows (in millions): Year Ended December 31, 2019 2018 2017 Domestic $287 $412 $993 Noncontrolling interest and redeemable noncontrolling interest (87) 87 279 Foreign 465 506 937 Loss before income taxes $665 $1,005 $2,209 The components of the provision for income taxes for the years ended December 31, 2019, 2018 and 2017 consisted of the following (in millions): Year Ended December 31, 2019 2018 2017 Current: Federal $— $(1) $(10)State 5 3 2 Foreign 86 24 43 Total current 91 26 35 Deferred: Federal (4) — — State — — — Foreign 23 32 (3)Total deferred 19 32 (3)Total provision for income taxes $110 $58 $32 On December 22, 2017, the 2017 Tax Cuts and Jobs Act (“Tax Act”) was enacted into law making significant changes to the Internal Revenue Code.Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition ofU.S. international taxation from a worldwide tax system to a territorial system and a one-time transition tax on the mandatory deemed repatriation of foreignearnings. We were required to recognize the effect of the tax law changes in the period of enactment, such as re-measuring our U.S. deferred tax assets andliabilities as well as reassessing the net realizability of our deferred tax assets and liabilities. The Tax Act did not give rise to any material impact on theconsolidated balance sheets and consolidated statements of operations due to our historical worldwide loss position and the full valuation allowance on our netU.S. deferred tax assets. 113 Deferred tax assets (liabilities) as of December 31, 2019 and 2018 consisted of the following (in millions): December 31, December 31, 2019 2018 Deferred tax assets: Net operating loss carry-forwards $1,846 $1,760 Research and development credits 486 377 Other tax credits 126 128 Deferred revenue 301 156 Inventory and warranty reserves 243 165 Stock-based compensation 102 102 Operating lease right-of-use liabilities 290 — Accruals and others 16 28 Total deferred tax assets 3,410 2,716 Valuation allowance (1,956) (1,806)Deferred tax assets, net of valuation allowance 1,454 910 Deferred tax liabilities: Depreciation and amortization (1,185) (861)Investment in certain financing funds (17) (33)Operating lease right-of-use assets (263) — Other (24) (24)Total deferred tax liabilities (1,489) (918)Deferred tax liabilities, net of valuation allowance and deferred tax assets $(35) $(8) As of December 31, 2019, we recorded a valuation allowance of $1.96 billion for the portion of the deferred tax asset that we do not expect to be realized.The valuation allowance on our net deferred taxes increased by $150 million, decreased by $38 million, and increased by $821 million during the years endedDecember 31, 2019, 2018 and 2017, respectively. The changes in valuation allowance are primarily due to additional U.S. deferred tax assets and liabilitiesincurred in the respective year. We have net $151 million of deferred tax assets in foreign jurisdictions, which management believes are more-likely-than-not to befully realized given the expectation of future earnings in these jurisdictions. We continue to monitor the realizability of the U.S. deferred tax assets taking intoaccount multiple factors, including the results of operations and magnitude of excess tax deductions for stock-based compensation. We intend to continuemaintaining 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 theseallowances. Release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income taxexpense for the period the release is recorded. 114 The reconciliation of taxes at the federal statutory rate to our provision for income taxes for the years ended December 31, 2019, 2018 and 2017 was asfollows (in millions): Year Ended December 31, 2019 2018 2017 Tax at statutory federal rate $(139) $(211) $(773)State tax, net of federal benefit 5 3 2 Nondeductible expenses 94 65 30 Excess tax benefits related to stock based compensation (1) (7) (44) (1,013)Foreign income rate differential 189 161 365 U.S. tax credits (107) (80) (110)Noncontrolling interests and redeemable noncontrolling interests adjustment (29) 32 66 Effect of U.S. tax law change — — 723 Bargain in purchase gain — — 20 Convertible debt (4) — — Unrecognized tax benefits 17 1 3 Change in valuation allowance 91 131 719 Provision for income taxes $110 $58 $32 (1)As of January 1, 2017, upon the adoption of ASU No. 2016-09, Improvements to Employee Share-based Payment Accounting, excess tax benefits fromshare-based award activity incurred from the prior and current years are reflected as a reduction of the provision for income taxes. The excess tax benefitsresult in an increase to our gross U.S. deferred tax assets that is offset by a corresponding increase to our valuation allowance.As of December 31, 2019, we had $7.51 billion of federal and $6.16 billion of state net operating loss carry-forwards available to offset future taxableincome, which will not begin to significantly expire until 2024 for federal and 2028 for state purposes. A portion of these losses were generated by SolarCity priorto our acquisition in 2016 and, therefore, are subject to change of control provisions, which limit the amount of acquired tax attributes that can be utilized in agiven tax year. We do not expect these change of control limitations to significantly impact our ability to utilize these attributes.As of December 31, 2019, we had research and development tax credits of $320 million and $284 million for federal and state income tax purposes,respectively. If not utilized, the federal research and development tax credits will expire in various amounts beginning in 2024. However, the state research anddevelopment tax credits can be carried forward indefinitely. In addition, we have other general business tax credits of $125 million for federal income tax purposes,which will not begin to significantly expire until 2033.No deferred tax liabilities for foreign withholding taxes have been recorded relating to the earnings of our foreign subsidiaries since all such earnings areintended to be indefinitely reinvested. The amount of the unrecognized deferred tax liability associated with these earnings is immaterial.Federal and state laws can impose substantial restrictions on the utilization of net operating loss and tax credit carry-forwards in the event of an “ownershipchange,” as defined in Section 382 of the Internal Revenue Code. We have determined that no significant limitation would be placed on the utilization of our netoperating loss and tax credit carry-forwards due to prior ownership changes.115 Uncertain Tax PositionsThe changes to our gross unrecognized tax benefits were as follows (in millions): December 31, 2016 $204 Decreases in balances related to prior year tax positions (31)Increases in balances related to current year tax positions 84 Changes in balances related to effect of U.S. tax law change (58)December 31, 2017 199 Decreases in balances related to prior year tax positions (6)Increases in balances related to current year tax positions 60 December 31, 2018 253 Decreases in balances related to prior year tax positions (39)Increases in balances related to current year tax positions 59 December 31, 2019 $273 As of December 31, 2019, accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense and were immaterial.Unrecognized tax benefits of $247 million, if recognized, would not affect our effective tax rate since the tax benefits would increase a deferred tax asset that iscurrently fully offset by a full valuation allowance.We file income tax returns in the U.S., California and various state and foreign jurisdictions. We are currently under examination by the IRS for the years2015 and 2016. Additional tax years within the period 2004 to 2018 remain subject to examination for federal income tax purposes, and tax years 2004 to 2018remain subject to examination for California income tax purposes. All net operating losses and tax credits generated to date are subject to adjustment for U.S.federal and California income tax purposes. Tax years 2008 to 2018 remain subject to examination in other U.S. state and foreign jurisdictions.The potential outcome of the current examination could result in a change to unrecognized tax benefits within the next twelve months. However, we cannotreasonably estimate possible adjustments at this time. The U.S. Tax Court issued a decision in Altera Corp v. Commissioner related to the treatment of stock-based compensation expense in a cost-sharingarrangement. On June 7, 2019, the Court reversed the Tax Court decision and upheld the validity of Treas. Reg. Section 1.482-7A(d)(2), requiring stock-basedcompensation costs be included in the costs shared under a cost sharing agreement. Given that the current active decision can still be appealed because Altera hasthe option to petition up to the Supreme Court, Tesla’s position is to continue to include stock-based compensation in cost sharing allocation agreement. If andwhen the current tax court’s decision is overturned, we will treat the amount previously shared as a pre-payment to future cost sharing agreement costs. Because wehave a full valuation allowance in the U.S., any potential tax benefits would increase our U.S. deferred tax asset and would not have a material impact to ourfinancials. 116 Note 16 – Commitments and ContingenciesOperating Lease Arrangement in Buffalo, New YorkWe have an operating lease through the Research Foundation for the State University of New York (the “SUNY Foundation”) for a manufacturing facilityconstructed on behalf of the SUNY Foundation and which was substantially completed in April 2018. We use this facility, referred to as Gigafactory New York,primarily for the development and production of our Solar Roof and other solar products and components, energy storage components, and Superchargercomponents, and for other lessor-approved functions. Under the lease and a related research and development agreement, on behalf of the SUNY Foundation, wehave and will continue to install certain utilities and other improvements and acquire certain equipment designated by us to be used in the manufacturing facility.The SUNY Foundation covered (i) construction costs related to the manufacturing facility up to $350 million, (ii) the acquisition and commissioning of themanufacturing equipment in an amount up to $275 million and (iii) $125 million for additional specified scope costs, in cases (i) and (ii) only, subject to themaximum funding allocation from the State of New York; and we were responsible for any construction or equipment costs in excess of such amounts. The SUNYFoundation owns the manufacturing facility and the manufacturing equipment purchased by the SUNY Foundation. Following completion of the manufacturingfacility, we have commenced leasing of the manufacturing facility and the manufacturing equipment owned by the SUNY Foundation for an initial period of 10years, with an option to renew, for $2.00 per year plus utilities. Following the adoption of ASC 842, we no longer recognize the build-to-suit asset and relateddepreciation expense or the corresponding financing liability and related amortization for Gigafactory New York in our consolidated financial statements.Under the terms of the operating lease arrangement, we are required to achieve specific operational milestones during the initial lease term; which includeemploying a certain number of employees at the manufacturing facility, within western New York and within the State of New York within specified periodsfollowing the completion of the manufacturing facility. We are also required to spend or incur $5.00 billion in combined capital, operational expenses and othercosts in the State of New York within 10 years following the achievement of full production. On an annual basis during the initial lease term, as measured on eachanniversary of the commissioning of the manufacturing facility, if we fail to meet these specified investment and job creation requirements, then we would beobligated to pay a $41 million “program payment” to the SUNY Foundation for each year that we fail to meet these requirements. Furthermore, if the arrangementis terminated due to a material breach by us, then additional amounts might become payable by us. As of December 31, 2019, we have met the targets as of theapplicable measurement dates and anticipate meeting the remaining obligations through our operations at this facility and other operations within the State of NewYork.Operating Lease Arrangement in Shanghai, ChinaWe have an operating lease arrangement for an initial term of 50 years with the local government of Shanghai for land use rights where we areconstructing Gigafactory Shanghai. Under the terms of the arrangement, we are required to spend RMB 14.08 billion in capital expenditures, and to generate RMB2.23 billion of annual tax revenues starting at the end of 2023. If we are unwilling or unable to meet such target or obtain periodic project approvals, in accordancewith the Chinese government’s standard terms for such arrangements, we would be required to revert the site to the local government and receive compensation forthe remaining value of the land lease, buildings and fixtures. We believe the capital expenditure requirement and the tax revenue target will be attainable even ifour actual vehicle production was far lower than the volumes we are forecasting.117 Legal ProceedingsSecurities Litigation Relating to the SolarCity AcquisitionBetween September 1, 2016 and October 5, 2016, seven lawsuits were filed in the Delaware Court of Chancery by purported stockholders of Teslachallenging our acquisition of SolarCity. Following consolidation, the lawsuit names as defendants the members of Tesla’s board of directors as then constitutedand alleges, among other things, that board members breached their fiduciary duties in connection with the acquisition. The complaint asserts both derivativeclaims and direct claims on behalf of a purported class and seeks, among other relief, unspecified monetary damages, attorneys’ fees, and costs. On January 27,2017, defendants filed a motion to dismiss the operative complaint. Rather than respond to the defendants’ motion, the plaintiffs filed an amended complaint. OnMarch 17, 2017, defendants filed a motion to dismiss the amended complaint. On December 13, 2017, the Court heard oral argument on the motion. On March 28,2018, the Court denied defendants’ motion to dismiss. Defendants filed a request for interlocutory appeal, but the Delaware Supreme Court denied that requestwithout ruling on the merits but electing not to hear an appeal at this early stage of the case. Defendants filed their answer on May 18, 2018, and mediations wereheld on June 10, 2019. Plaintiffs and defendants filed respective motions for summary judgment on August 25, 2019, and further mediations were held on October3, 2019. The Court held a hearing on the motions for summary judgment on November 4, 2019. On January 22, 2020, all of the director defendants except ElonMusk reached a tentative settlement to resolve the lawsuit against them for an amount that would be paid entirely under the applicable insurance policy. Thesettlement does not involve an admission of any wrongdoing by any party. Tesla will receive such amount, which would be recognized as a gain in its financialstatements, if the settlement is finally approved by the Court. On February 4, 2020, the Court issued a ruling that denied plaintiffs’ previously-filed motion andgranted in part and denied in part defendants’ previously-filed motion. Fact and expert discovery is complete, and the case is set for trial in March 2020.These plaintiffs and others filed parallel actions in the U.S. District Court for the District of Delaware on or about April 21, 2017. They include claims forviolations of the federal securities laws and breach of fiduciary duties by Tesla’s board of directors. Those actions have been consolidated and stayed pending theabove-referenced Chancery Court litigation.We believe that claims challenging the SolarCity acquisition are without merit and intend to defend against them vigorously. We are unable to estimate thepossible loss or range of loss, if any, associated with these claims.Securities Litigation Relating to Production of Model 3 VehiclesOn October 10, 2017, a purported stockholder class action was filed in the U.S. District Court for the Northern District of California against Tesla, two ofits current officers, and a former officer. The complaint alleges violations of federal securities laws and seeks unspecified compensatory damages and other reliefon behalf of a purported class of purchasers of Tesla securities from May 4, 2016 to October 6, 2017. The lawsuit claims that Tesla supposedly made materiallyfalse and misleading statements regarding the Company’s preparedness to produce Model 3 vehicles. Plaintiffs filed an amended complaint on March 23, 2018,and defendants filed a motion to dismiss on May 25, 2018. The court granted defendants’ motion to dismiss with leave to amend. Plaintiffs filed their amendedcomplaint on September 28, 2018, and defendants filed a motion to dismiss the amended complaint on February 15, 2019. The hearing on the motion to dismisswas held on March 22, 2019, and on March 25, 2019, the Court ruled in favor of defendants and dismissed the complaint with prejudice. On April 8, 2019,plaintiffs filed a notice of appeal and on July 17, 2019 filed their opening brief. We filed our opposition on September 16, 2019. We continue to believe that theclaims are without merit and intend to defend against this lawsuit vigorously. We are unable to estimate the possible loss or range of loss, if any, associated withthis lawsuit.118 On October 26, 2018, in a similar action, a purported stockholder class action was filed in the Superior Court of California in Santa Clara County againstTesla, Elon Musk and seven initial purchasers in an offering of debt securities by Tesla in August 2017. The complaint alleges misrepresentations made by Teslaregarding the number of Model 3 vehicles Tesla expected to produce by the end of 2017 in connection with such offering and seeks unspecified compensatorydamages and other relief on behalf of a purported class of purchasers of Tesla securities in such offering. Tesla thereafter removed the case to federal court. OnJanuary 22, 2019, plaintiff abandoned its effort to proceed in state court, instead filing an amended complaint against Tesla, Elon Musk and seven initialpurchasers in the debt offering before the same judge in the U.S. District Court for the Northern District of California who is hearing the above-referenced earlierfiled federal case. On February 5, 2019, the Court stayed this new case pending a ruling on the motion to dismiss the complaint in such earlier filed federalcase. After such earlier filed federal case was dismissed, defendants filed a motion on July 2, 2019 to dismiss this case as well. This case is now stayed pending aruling from the appellate court on such earlier filed federal case with an agreement that if defendants prevail on appeal in such case, this case will be dismissed. Webelieve that the claims are without merit and intend to defend against this lawsuit vigorously. We are unable to estimate the possible loss or range of loss, if any,associated with this lawsuit.Litigation Relating to 2018 CEO Performance AwardOn June 4, 2018, a purported Tesla stockholder filed a putative class and derivative action in the Delaware Court of Chancery against Elon Musk and themembers of Tesla’s board of directors as then constituted, alleging corporate waste, unjust enrichment and that such board members breached their fiduciary dutiesby approving the stock-based compensation plan. The complaint seeks, among other things, monetary damages and rescission or reformation of the stock-basedcompensation plan. On August 31, 2018, defendants filed a motion to dismiss the complaint; plaintiff filed its opposition brief on November 1, 2018 anddefendants filed a reply brief on December 13, 2018. The hearing on the motion to dismiss was held on May 9, 2019. On September 20, 2019, the Court grantedthe motion to dismiss as to the corporate waste claim but denied the motion as to the breach of fiduciary duty and unjust enrichment claims. Our answer was filedon December 3, 2019, and trial is set for June 2021. We believe the claims asserted in this lawsuit are without merit and intend to defend against them vigorously.Securities Litigation Relating to Potential Going Private TransactionBetween August 10, 2018 and September 6, 2018, nine purported stockholder class actions were filed against Tesla and Elon Musk in connection withElon Musk’s August 7, 2018 Twitter post that he was considering taking Tesla private. All of the suits are now pending in the U.S. District Court for the NorthernDistrict of California. Although the complaints vary in certain respects, they each purport to assert claims for violations of federal securities laws related to Mr.Musk’s statement and seek unspecified compensatory damages and other relief on behalf of a purported class of purchasers of Tesla’s securities. Plaintiffs filedtheir consolidated complaint on January 16, 2019 and added as defendants the members of Tesla’s board of directors. The now-consolidated purportedstockholder class action was stayed while the issue of selection of lead counsel was briefed and argued before the U.S. Court of Appeals for the Ninth Circuit. TheNinth Circuit ruled regarding lead counsel. Defendants filed a motion to dismiss the complaint on November 22, 2019. The hearing on the motion is set for March6, 2020. We believe that the claims have no merit and intend to defend against them vigorously. We are unable to estimate the potential loss, or range of loss,associated with these claims.Between October 17, 2018 and November 9, 2018, five derivative lawsuits were filed in the Delaware Court of Chancery against Mr. Musk and themembers of Tesla’s board of directors as then constituted in relation to statements made and actions connected to a potential going private transaction. In additionto these cases, on October 25, 2018, another derivative lawsuit was filed in the U.S. District Court for the District of Delaware against Mr. Musk and the membersof the Tesla board of directors as then constituted. The Courts in both the Delaware federal court and Delaware Court of Chancery actions have consolidated theirrespective actions and stayed each consolidated action pending resolution of the above-referenced consolidated purported stockholder class action. We believe thatthe claims have no merit and intend to defend against them vigorously. We are unable to estimate the potential loss, or range of loss, associated with these claims.119 On March 7, 2019, various stockholders filed a derivative suit in the Delaware Court of Chancery, purportedly on behalf of the Company, naming ElonMusk and Tesla’s board of directors, also related to Mr. Musk’s August 7, 2018 Twitter post that is the basis of the above-referenced consolidated purportedstockholder class action as well as Mr. Musk’s February 19, 2019 Twitter post regarding Tesla’s vehicle production. The suit asserts claims for breach of fiduciaryduty and seeks declaratory and injunctive relief, unspecified damages, and other relief. Plaintiffs moved for expedited proceedings in connection with thedeclaratory and injunctive relief. Briefs were filed on March 13, 2019 and the hearing held on March 18, 2019. Defendants prevailed, with the Court denyingplaintiffs’ request for an expedited trial and granting defendants’ request to stay this action pending the outcome of the above-referenced consolidated purportedstockholder class action. Settlement with SEC related to Potential Going Private TransactionOn October 16, 2018, the U.S. District Court for the Southern District of New York entered a final judgment approving the terms of a settlement filed withthe Court on September 29, 2018, in connection with the actions taken by the U.S. Securities and Exchange Commission (the “SEC”) relating to Elon Musk’s priorstatement that he was considering taking Tesla private. Without admitting or denying any of the SEC’s allegations, and with no restriction on Mr. Musk’s ability toserve as an officer or director on the Board (other than as its Chair), among other things, we and Mr. Musk paid civil penalties of $20 million each and agreedthat an independent director will serve as Chair of the Board for at least three years, and we appointed such an independent Chair of the Board and two additionalindependent directors to the Board, and further enhanced our disclosure controls and other corporate governance-related matters. On April 26, 2019, the settlementwas amended to modify certain of the previously-agreed disclosure procedures to clarify the application of such procedures, which was subsequently approved bythe Court. All other terms of the prior settlement were reaffirmed without modification.Certain Investigations and Other MattersWe receive requests for information from regulators and governmental authorities, such as the National Highway Traffic Safety Administration, theNational Transportation Safety Board, the SEC, the Department of Justice (“DOJ”) and various state, federal and international agencies. We routinely cooperatewith such regulatory and governmental requests. In particular, the SEC had issued subpoenas to Tesla in connection with (a) Elon Musk’s prior statement that he was considering taking Tesla private and(b) certain projections that we made for Model 3 production rates during 2017 and other public statements relating to Model 3 production. The take-privateinvestigation was resolved and closed with the settlement with the SEC described above. On December 4, 2019, the SEC (i) closed the investigation into theprojections and other public statements regarding Model 3 production rates and (ii) issued a subpoena seeking information concerning certain financial data andcontracts including Tesla’s regular financing arrangements. Separately, the DOJ had also asked us to voluntarily provide it with information about the abovematters related to taking Tesla private and Model 3 production rates.Aside from the settlement, as amended, with the SEC relating to Mr. Musk’s statement that he was considering taking Tesla private, there have not beenany developments in these matters that we deem to be material, and to our knowledge no government agency in any ongoing investigation has concluded that anywrongdoing occurred. As is our normal practice, we have been cooperating and will continue to cooperate with government authorities. We cannot predict theoutcome or impact of any ongoing matters. Should the government decide to pursue an enforcement action, there exists the possibility of a material adverse impacton our business, results of operation, prospects, cash flows, and financial position.We are also subject to various other legal proceedings and claims that arise from the normal course of business activities. If an unfavorable ruling ordevelopment were to occur, there exists the possibility of a material adverse impact on our business, results of operations, prospects, cash flows, financial positionand brand.120 Indemnification and Guaranteed ReturnsWe are contractually obligated to compensate certain fund investors for any losses that they may suffer in certain limited circumstances resulting fromreductions in U.S. Treasury grants or investment tax credits (“ITC”s). Generally, such obligations would arise as a result of reductions to the value of theunderlying solar energy systems as assessed by the U.S. Treasury Department for purposes of claiming U.S. Treasury grants or as assessed by the IRS for purposesof claiming ITCs or U.S. Treasury grants. For each balance sheet date, we assess and recognize, when applicable, a distribution payable for the potential exposurefrom this obligation based on all the information available at that time, including any guidelines issued by the U.S. Treasury Department on solar energy systemvaluations for purposes of claiming U.S. Treasury grants and any audits undertaken by the IRS. We believe that any payments to the fund investors in excess of theamounts already recognized by us for this obligation are not probable or material based on the facts known at the filing date.The maximum potential future payments that we could have to make under this obligation would depend on the difference between the fair values of thesolar energy systems sold or transferred to the funds as determined by us and the values that the U.S. Treasury Department would determine as fair value for thesystems for purposes of claiming U.S. Treasury grants or the values the IRS would determine as the fair value for the systems for purposes of claiming ITCs or U.S.Treasury grants. We claim U.S. Treasury grants based on guidelines provided by the U.S. Treasury department and the statutory regulations from the IRS. We usefair values determined with the assistance of independent third-party appraisals commissioned by us as the basis for determining the ITCs that are passed-throughto and claimed by the fund investors. Since we cannot determine future revisions to U.S. Treasury Department guidelines governing solar energy system values orhow the IRS will evaluate system values used in claiming ITCs or U.S. Treasury grants, we are unable to reliably estimate the maximum potential future paymentsthat it could have to make under this obligation as of each balance sheet date.We are eligible to receive certain state and local incentives that are associated with renewable energy generation. The amount of incentives that can beclaimed is based on the projected or actual solar energy system size and/or the amount of solar energy produced. We also currently participate in one state’sincentive program that is based on either the fair market value or the tax basis of solar energy systems placed in service. State and local incentives received areallocated between us and fund investors in accordance with the contractual provisions of each fund. We are not contractually obligated to indemnify any fundinvestor for any losses they may incur due to a shortfall in the amount of state or local incentives actually received.Our lease pass-through financing funds have a one-time lease payment reset mechanism that occurs after the installation of all solar energy systems in afund. As a result of this mechanism, we may be required to refund master lease prepayments previously received from investors. Any refunds of master leaseprepayments would reduce the lease pass-through financing obligation.Letters of CreditAs of December 31, 2019, we had $282 million of unused letters of credit outstanding. Note 17 – Variable Interest Entity ArrangementsWe have entered into various arrangements with investors to facilitate the funding and monetization of our solar energy systems and vehicles. In particular,our wholly owned subsidiaries and fund investors have formed and contributed cash and assets into various financing funds and entered into related agreements.We have determined that the funds are variable interest entities (“VIEs”) and we are the primary beneficiary of these VIEs by reference to the power and benefitscriterion under ASC 810, Consolidation. We have considered the provisions within the agreements, which grant us the power to manage and make decisions thataffect the operation of these VIEs, including determining the solar energy systems or vehicles and the associated customer contracts to be sold or contributed tothese VIEs, redeploying solar energy systems or vehicles and managing customer receivables. We consider that the rights granted to the fund investors under theagreements are more protective in nature rather than participating.121 As the primary beneficiary of these VIEs, we consolidate in the financial statements the financial position, results of operations and cash flows of theseVIEs, and all intercompany balances and transactions between us and these VIEs are eliminated in the consolidated financial statements. Cash distributions ofincome and other receipts by a fund, net of agreed upon expenses, estimated expenses, tax benefits and detriments of income and loss and tax credits, are allocatedto the fund investor and our subsidiary as specified in the agreements.Generally, our subsidiary has the option to acquire the fund investor’s interest in the fund for an amount based on the market value of the fund or theformula specified in the agreements.Upon the sale or liquidation of a fund, distributions would occur in the order and priority specified in the agreements.Pursuant to management services, maintenance and warranty arrangements, we have been contracted to provide services to the funds, such as operationsand maintenance support, accounting, lease servicing and performance reporting. In some instances, we have guaranteed payments to the fund investors asspecified in the agreements. A fund’s creditors have no recourse to our general credit or to that of other funds. None of the assets of the funds had been pledged ascollateral for their obligations.The aggregate carrying values of the VIEs’ assets and liabilities, after elimination of any intercompany transactions and balances, in the consolidatedbalance sheets were as follows (in millions): December 31, December 31, 2019 2018 Assets Current assets Cash and cash equivalents $106 $75 Restricted cash 90 131 Accounts receivable, net 27 19 Prepaid expenses and other current assets 10 10 Total current assets 233 235 Operating lease vehicles, net 1,183 155 Solar energy systems, net 5,030 5,117 Restricted cash, net of current portion 69 65 Other assets 87 56 Total assets $6,602 $5,628 Liabilities Current liabilities Accrued liabilities and other 80 133 Deferred revenue 78 21 Customer deposits 9 — Current portion of long-term debt and finance leases 608 663 Total current liabilities 775 817 Deferred revenue, net of current portion 264 178 Long-term debt and finance leases, net of current portion 1,516 1,238 Other long-term liabilities 22 26 Total liabilities $2,577 $2,259 Note 18 – Lease Pass-Through Financing ObligationThrough December 31, 2019, we had entered into eight transactions referred to as “lease pass-through fund arrangements”. Under these arrangements, ourwholly owned subsidiaries finance the cost of solar energy systems with investors through arrangements contractually structured as master leases for an initial termranging between 10 and 25 years. These solar energy systems are subject to lease or PPAs with customers with an initial term not exceeding 25 years. These solarenergy systems are included within solar energy systems, net on the consolidated balance sheets.122 The cost of the solar energy systems under lease pass-through fund arrangements as of December 31, 2019 and 2018 was $1.05 billion. The accumulateddepreciation on these assets as of December 31, 2019 and 2018 was $101 million and $66 million, respectively. The total lease pass-through financing obligation asof December 31, 2019 was $94 million, of which $57 million is classified as a current liability. The total lease pass-through financing obligation as ofDecember 31, 2018 was $112 million, of which $62 million was classified as a current liability. Lease pass-through financing obligation is included in accruedliabilities and other for the current portion and other long-term liabilities for the long-term portion on the consolidated balance sheets.Under a lease pass-through fund arrangement, the investor makes a large upfront payment to the lessor, which is one of our subsidiaries, and in somecases, subsequent periodic payments. We allocate a portion of the aggregate investor payments to the fair value of the assigned ITCs, which is estimated bydiscounting the projected cash flow impact of the ITCs using a market interest rate and is accounted for separately (see Note 2, Summary of Significant AccountingPolicies). We account for the remainder of the investor payments as a borrowing by recording the proceeds received as a lease pass-through financing obligation,which is repaid from the future customer lease payments and any incentive rebates. A portion of the amounts received by the investor is allocated to interestexpense using the effective interest rate method.The lease pass-through financing obligation is non-recourse once the associated solar energy systems have been placed in-service and the associatedcustomer arrangements have been assigned to the investors. However, we are required to comply with certain financial covenants specified in the contractualagreements, which we had met as of December 31, 2019. In addition, we are responsible for any warranties, performance guarantees, accounting and performancereporting. Furthermore, we continue to account for the customer arrangements and any incentive rebates in the consolidated financial statements, regardless ofwhether the cash is received by us or directly by the investors.As of December 31, 2019, the future minimum master lease payments to be received from investors, for each of the next five years and thereafter, were asfollows (in millions): 2020 $42 2021 41 2022 33 2023 26 2024 18 Thereafter 450 Total $610For two of the lease pass-through fund arrangements, our subsidiaries have pledged its assets to the investors as security for its obligations under thecontractual agreements.Each lease pass-through fund arrangement has a one-time master lease prepayment adjustment mechanism that occurs when the capacity and the placed-in-service dates of the associated solar energy systems are finalized or on an agreed-upon date. As part of this mechanism, the master lease prepayment amount isupdated, and we may be obligated to refund a portion of a master lease prepayment or entitled to receive an additional master lease prepayment. Any additionalmaster lease prepayments are recorded as an additional lease pass-through financing obligation while any master lease prepayment refunds would reduce the leasepass-through financing obligation. Note 19 – Defined Contribution PlanWe have a 401(k) savings plan that is intended to qualify as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the401(k) savings plan, participating employees may elect to contribute up to 100% of their eligible compensation, subject to certain limitations. Participants are fullyvested in their contributions. We did not make any contributions to the 401(k) savings plan during the years ended December 31, 2019, 2018 and 2017 (other thanemployee deferrals of eligible compensation). 123 Note 20 – Related Party TransactionsRelated party balances were comprised of the following (in millions): December 31, December 31, 2019 2018 Convertible senior notes due to related parties $3 $3 Our convertible senior notes are not re-measured at fair value (refer to Note 5, Fair Value of Financial Instruments). As of December 31, 2019 and 2018,the unpaid principal balance of convertible senior notes due to related parties is $3 million.In March 2017, our CEO purchased from us 95,420 shares of our common stock in a public offering at the public offering price for an aggregate $25million.In April 2017, our CEO exercised his right under the indenture to convert all of his Zero-Coupon Convertible Senior Notes due in 2020, which had anaggregate principal amount of $10 million. As a result, on April 26, 2017, we issued 33,333 shares of our common stock to our CEO in accordance with thespecified conversion rate, and we recorded an increase to additional paid-in capital of $10 million.In November 2018, our CEO purchased from us 56,915 shares of our common stock in a private placement at a per share price equal to the last closingprice of our stock prior to the execution of the purchase agreement for an aggregate $20 million.In May 2019, our CEO purchased from us 102,880 shares of our common stock in a public offering at the public offering price for an aggregate $25million. Note 21 – Segment Reporting and Information about Geographic AreasWe have two operating and reportable segments: (i) automotive and (ii) energy generation and storage. The automotive segment includes the design,development, manufacturing, sales, and leasing of electric vehicles as well as sales of automotive regulatory credits. Additionally, the automotive segment is alsocomprised of services and other, which includes non-warranty after-sales vehicle services, sales of used vehicles, retail merchandise, sales by our acquiredsubsidiaries to third party customers, and vehicle insurance revenue. The energy generation and storage segment includes the design, manufacture, installation,sales, and leasing of solar energy generation and energy storage products and related services and sales of solar energy systems incentives. Our CODM does notevaluate operating segments using asset or liability information. The following table presents revenues and gross profit by reportable segment (in millions): Year Ended December 31, 2019 2018 2017 Automotive segment Revenues $23,047 $19,906 $10,643 Gross profit $3,879 $3,852 $1,981 Energy generation and storage segment Revenues $1,531 $1,555 $1,116 Gross profit $190 $190 $242 124 The following table presents revenues by geographic area based on the sales location of our products (in millions): Year Ended December 31, 2019 2018 2017 United States $12,653 $14,872 $6,221 China 2,979 1,757 2,027 Netherlands 1,590 965 331 Norway 1,201 813 823 Other 6,155 3,054 2,357 Total $24,578 $21,461 $11,759 The revenues in certain geographic areas were impacted by the price adjustments we made to our vehicle offerings during 2019 . Refer to Note 2, Summaryof Significant Accounting Policies, for details. The following table presents long-lived assets by geographic area (in millions): December 31, December 31, 2019 2018 United States $15,644 $16,741 International 890 860 Total $16,534 $17,601 Note 22 – Restructuring and OtherDuring the year ended December 31, 2019, we carried out certain restructuring actions in order to reduce costs and improve efficiency. As a result, werecognized $50 million of costs primarily related to employee termination expenses and losses from closing certain stores impacting both segments. Werecognized $47 million in impairment related to the IPR&D intangible asset as we abandoned further development efforts (refer to Note 4, Goodwill and IntangibleAssets for details) and $15 million for the related equipment within the energy generation and storage segment. We also incurred a loss of $37 million for closingoperations in certain facilities. On the statement of cash flows, the amounts were presented in the captions in which such amounts would have been recorded absentthe impairment charges. The employee termination expenses were substantially paid by December 31, 2019, while the remaining amounts were non-cash.During the year ended December 31, 2018, we carried-out certain restructuring actions in order to reduce costs and improve efficiency and recognized$37 million of employee termination expenses and estimated losses from sub-leasing a certain facility. The employee termination cash expenses of $27 millionwere substantially paid by the end of 2018, while the remaining amounts were non-cash. Also included within restructuring and other activities was $55 million ofexpenses (materially all of which were non-cash) from restructuring the energy generation and storage segment, which comprised of disposals of certain tangibleassets, the shortening of the useful life of a trade name intangible asset and a contract termination penalty. In addition, we concluded that a small portion of theIPR&D asset is not commercially feasible. Consequently, we recognized an impairment loss of $13 million. We recognized settlement and legal expenses of $30million in the year ended December 31, 2018 for the settlement with the SEC relating to a take-private proposal for Tesla. These expenses were substantially paidby the end of 2018. 125 Note 23 – Quarterly Results of Operations (Unaudited)The following table presents selected quarterly results of operations data for the years ended December 31, 2019 and 2018 (in millions, except per shareamounts): Three Months Ended March 31 June 30 September 30 December 31 2019 Total revenues $4,541 $6,350 $6,303 $7,384 Gross profit $566 $921 $1,191 $1,391 Net (loss) income attributable to common stockholders $(702) $(408) $143 $105 Net (loss) income per share of common stock attributable to common stockholders, basic $(4.10) $(2.31) $0.80 $0.58 Net (loss) income per share of common stock attributable to common stockholders, diluted $(4.10) $(2.31) $0.78 $0.56 2018 Total revenues $3,409 $4,002 $6,824 $7,226 Gross profit $456 $619 $1,524 $1,443 Net (loss) income attributable to common stockholders $(709) $(718) $311 $140 Net (loss) income per share of common stock attributable to common stockholders, basic $(4.19) $(4.22) $1.82 $0.81 Net (loss) income per share of common stock attributable to common stockholders, diluted $(4.19) $(4.22) $1.75 $0.78 126 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosurecontrols and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating thedisclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there areresource constraints and that our management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2019, our disclosure controlsand procedures were designed at a reasonable assurance level and were effective to provide reasonable assurance that the information we are required to disclose inreports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities andExchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officerand our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reportingis a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles andincludes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions anddispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordancewith generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our managementand directors and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that couldhave a material effect on the financial statements.Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted anevaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control – Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our management concluded that our internal control over financialreporting was effective as of December 31, 2019.Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of our internal control over financialreporting as of December 31, 2019, as stated in their report which is included herein.Limitations on the Effectiveness of ControlsBecause of inherent limitations, internal control over financial reporting may not prevent or detect misstatements and projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.127 Changes in Internal Control over Financial ReportingThere was no change in our internal control over financial reporting that occurred during the fourth fiscal quarter of the year ended December 31, 2019,which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B.OTHER INFORMATIONNone. 128 PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by this Item 10 of Form 10-K will be included in our 2020 Proxy Statement to be filed with the Securities and ExchangeCommission in connection with the solicitation of proxies for our 2020 Annual Meeting of Stockholders and is incorporated herein by reference. The 2020 ProxyStatement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.ITEM 11.EXECUTIVE COMPENSATIONThe information required by this Item 11 of Form 10-K will be included in our 2020 Proxy Statement and is incorporated herein by reference.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSThe information required by this Item 12 of Form 10-K will be included in our 2020 Proxy Statement and is incorporated herein by reference.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCEThe information required by this Item 13 of Form 10-K will be included in our 2020 Proxy Statement and is incorporated herein by reference.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item 14 of Form 10-K will be included in our 2020 Proxy Statement and is incorporated herein by reference.ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES1.Financial statements (see Index to Consolidated Financial Statements in Part II, Item 8 of this report)2.All financial statement schedules have been omitted since the required information was not applicable or was not present in amounts sufficient to requiresubmission of the schedules, or because the information required is included in the consolidated financial statements or the accompanying notes3.The exhibits listed in the following Index to Exhibits are filed or incorporated by reference as part of this report 129 INDEX TO EXHIBITS Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 3.1 Amended and Restated Certificate of Incorporation of theRegistrant. 10-K 001-34756 3.1 March 1, 2017 3.2 Certificate of Amendment to the Amended and RestatedCertificate of Incorporation of the Registrant. 10-K 001-34756 3.2 March 1, 2017 3.3 Amended and Restated Bylaws of the Registrant. 8-K 001-34756 3.2 February 1, 2017 4.1 Specimen common stock certificate of the Registrant. 10-K 001-34756 4.1 March 1, 2017 4.2 Fifth Amended and Restated Investors’ RightsAgreement, dated as of August 31, 2009, betweenRegistrant and certain holders of the Registrant’s capitalstock named therein. S-1 333-164593 4.2 January 29, 2010 4.3 Amendment to Fifth Amended and Restated Investors’Rights Agreement, dated as of May 20, 2010, betweenRegistrant and certain holders of the Registrant’s capitalstock named therein. S-1/A 333-164593 4.2A May 27, 2010 4.4 Amendment to Fifth Amended and Restated Investors’Rights Agreement between Registrant, Toyota MotorCorporation and certain holders of the Registrant’s capitalstock named therein. S-1/A 333-164593 4.2B May 27, 2010 4.5 Amendment to Fifth Amended and Restated Investor’sRights Agreement, dated as of June 14, 2010, betweenRegistrant and certain holders of the Registrant’s capitalstock named therein. S-1/A 333-164593 4.2C June 15, 2010 4.6 Amendment to Fifth Amended and Restated Investor’sRights Agreement, dated as of November 2, 2010,between Registrant and certain holders of the Registrant’scapital stock named therein. 8-K 001-34756 4.1 November 4, 2010 4.7 Waiver to Fifth Amended and Restated Investor’s RightsAgreement, dated as of May 22, 2011, betweenRegistrant and certain holders of the Registrant’s capitalstock named therein. S-1/A 333-174466 4.2E June 2, 2011 4.8 Amendment to Fifth Amended and Restated Investor’sRights Agreement, dated as of May 30, 2011, betweenRegistrant and certain holders of the Registrant’s capitalstock named therein. 8-K 001-34756 4.1 June 1, 2011 130 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.9 Sixth Amendment to Fifth Amended and RestatedInvestors’ Rights Agreement, dated as of May 15, 2013among the Registrant, the Elon Musk Revocable Trustdated July 22, 2003 and certain other holders of thecapital stock of the Registrant named therein. 8-K 001-34756 4.1 May 20, 2013 4.10 Waiver to Fifth Amended and Restated Investor’s RightsAgreement, dated as of May 14, 2013, between theRegistrant and certain holders of the capital stock of theRegistrant named therein. 8-K 001-34756 4.2 May 20, 2013 4.11 Waiver to Fifth Amended and Restated Investor’s RightsAgreement, dated as of August 13, 2015, between theRegistrant and certain holders of the capital stock of theRegistrant named therein. 8-K 001-34756 4.1 August 19, 2015 4.12 Waiver to Fifth Amended and Restated Investors’ RightsAgreement, dated as of May 18, 2016, between theRegistrant and certain holders of the capital stock of theRegistrant named therein. 8-K 001-34756 4.1 May 24, 2016 4.13 Waiver to Fifth Amended and Restated Investors’ RightsAgreement, dated as of March 15, 2017, between theRegistrant and certain holders of the capital stock of theRegistrant named therein. 8-K 001-34756 4.1 March 17, 2017 4.14 Waiver to Fifth Amended and Restated Investors’ RightsAgreement, dated as of May 1, 2019, between theRegistrant and certain holders of the capital stock of theRegistrant named therein. 8-K 001-34756 4.1 May 3, 2019 4.15 Indenture, dated as of May 22, 2013, by and between theRegistrant and U.S. Bank National Association. 8-K 001-34756 4.1 May 22, 2013 4.16 Third Supplemental Indenture, dated as of March 5, 2014,by and between the Registrant and U.S. Bank NationalAssociation. 8-K 001-34756 4.4 March 5, 2014 4.17 Form of 1.25% Convertible Senior Note Due March 1,2021 (included in Exhibit 4.19). 8-K 001-34756 4.4 March 5, 2014 4.18 Fourth Supplemental Indenture, dated as of March 22,2017, by and between the Registrant and U.S. BankNational Association. 8-K 001-34756 4.2 March 22, 2017 4.19 Form of 2.375% Convertible Senior Note Due March 15,2022 (included in Exhibit 4.21). 8-K 001-34756 4.2 March 22, 2017 131 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.20 Indenture, dated as of August 18, 2017, by and among theRegistrant, SolarCity, and U.S. Bank NationalAssociation, as trustee. 8-K 001-34756 4.1 August 23, 2017 4.21 Form of 5.30% Senior Note due August 15, 2025. 8-K 001-34756 4.2 August 23, 2017 4.22 Indenture, dated as of September 30, 2014, betweenSolarCity and Wells Fargo Bank, National Association 8-K(1) 001-35758 4.1 October 6, 2014 4.23 First Supplemental Indenture, dated as of November 21,2016, between SolarCity and Wells Fargo Bank, NationalAssociation, as trustee to the Indenture, dated as ofSeptember 30, 2014, between SolarCity and Wells FargoBank, National Association, as trustee. 8-K 001-34756 4.2 November 21, 2016 4.24 Indenture, dated as of December 7, 2015, betweenSolarCity and Wells Fargo Bank, National Association 8-K(1) 001-35758 4.1 December 7, 2015 4.25 First Supplemental Indenture, dated as of November 21,2016, between SolarCity and Wells Fargo Bank, NationalAssociation, as trustee to the Indenture, dated as ofDecember 7, 2015, between SolarCity and Wells FargoBank, National Association, as trustee. 8-K 001-34756 4.3 November 21, 2016 4.26 Indenture, dated as of October 15, 2014, betweenSolarCity and U.S. Bank National Association, as trustee. S-3ASR(1) 333-199321 4.1 October 15, 2014 4.27 Fifth Supplemental Indenture, dated as of May 7, 2019,by and between Registrant and U.S. Bank NationalAssociation, related to 2.00% Convertible Senior Notesdue May 15, 2024. 8-K 001-34756 4.2 May 8, 2019 4.28 Form of 2.00% Convertible Senior Notes due May 15,2024 (included in Exhibit 4.27). 8-K 001-34756 4.3 May 8, 2019 4.29 Fourth Supplemental Indenture, dated as of October 15,2014, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.00% Solar Bonds, Series 2014/4-7. 8-K(1) 001-35758 4.5 October 15, 2014 4.30 Eighth Supplemental Indenture, dated as of January 29,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.00% Solar Bonds, Series 2015/4-7. 8-K(1) 001-35758 4.5 January 29, 2015 132 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.31 Ninth Supplemental Indenture, dated as of March 9, 2015,by and between SolarCity and the Trustee, related toSolarCity’s 4.00% Solar Bonds, Series 2015/5-5. 8-K(1) 001-35758 4.2 March 9, 2015 4.32 Tenth Supplemental Indenture, dated as of March 9, 2015,by and between SolarCity and the Trustee, related toSolarCity’s 5.00% Solar Bonds, Series 2015/6-10. 8-K(1) 001-35758 4.3 March 9, 2015 4.33 Eleventh Supplemental Indenture, dated as of March 9,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.75% Solar Bonds, Series 2015/7-15. 8-K(1) 001-35758 4.4 March 9, 2015 4.34 Fourteenth Supplemental Indenture, dated as of March 19,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 3.60% Solar Bonds, Series 2015/C3-5. 8-K(1) 001-35758 4.4 March 19, 2015 4.35 Fifteenth Supplemental Indenture, dated as of March 19,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.70% Solar Bonds, Series 2015/C4-10. 8-K(1) 001-35758 4.5 March 19, 2015 4.36 Sixteenth Supplemental Indenture, dated as of March 19,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.45% Solar Bonds, Series 2015/C5-15. 8-K(1) 001-35758 4.6 March 19, 2015 4.37 Nineteenth Supplemental Indenture, dated as of March26, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 3.60% Solar Bonds, Series2015/C8-5. 8-K(1) 001-35758 4.4 March 26, 2015 4.38 Twentieth Supplemental Indenture, dated as of March 26,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.70% Solar Bonds, Series 2015/C9-10. 8-K(1) 001-35758 4.5 March 26, 2015 4.39 Twenty-First Supplemental Indenture, dated as of March26, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 5.45% Solar Bonds, Series2015/C10-15. 8-K(1) 001-35758 4.6 March 26, 2015 4.40 Twenty-Fifth Supplemental Indenture, dated as of April 2,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 3.60% Solar Bonds, Series 2015/C13-5. 8-K(1) 001-35758 4.4 April 2, 2015 133 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.41 Twenty-Sixth Supplemental Indenture, dated as of April2, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 4.70% Solar Bonds, Series2015/C14-10. 8-K(1) 001-35758 4.5 April 2, 2015 4.42 Twenty-Ninth Supplemental Indenture, dated as of April9, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 3.60% Solar Bonds, Series2015/C18-5. 8-K(1) 001-35758 4.4 April 9, 2015 4.43 Thirtieth Supplemental Indenture, dated as of April 9,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.70% Solar Bonds, Series 2015/C19-10. 8-K(1) 001-35758 4.5 April 9, 2015 4.44 Thirty-First Supplemental Indenture, dated as of April 9,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.45% Solar Bonds, Series 2015/C20-15. 8-K(1) 001-35758 4.6 April 9, 2015 4.45 Thirty-Fourth Supplemental Indenture, dated as of April14, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 3.60% Solar Bonds, Series2015/C23-5. 8-K(1) 001-35758 4.4 April 14, 2015 4.46 Thirty-Fifth Supplemental Indenture, dated as of April 14,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.70% Solar Bonds, Series 2015/C24-10. 8-K(1) 001-35758 4.5 April 14, 2015 4.47 Thirty-Sixth Supplemental Indenture, dated as of April14, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 5.45% Solar Bonds, Series2015/C25-15. 8-K(1) 001-35758 4.6 April 14, 2015 4.48 Thirty-Eighth Supplemental Indenture, dated as of April21, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 4.70% Solar Bonds, Series2015/C27-10. 8-K(1) 001-35758 4.3 April 21, 2015 4.49 Thirty-Ninth Supplemental Indenture, dated as of April21, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 5.45% Solar Bonds, Series2015/C28-15. 8-K(1) 001-35758 4.4 April 21, 2015 4.50 Forty-Second Supplemental Indenture, dated as of April27, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 3.60% Solar Bonds, Series2015/C31-5. 8-K(1) 001-35758 4.4 April 27, 2015 134 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.51 Forty-Third Supplemental Indenture, dated as of April 27,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.70% Solar Bonds, Series 2015/C32-10. 8-K(1) 001-35758 4.5 April 27, 2015 4.52 Forty-Fourth Supplemental Indenture, dated as of April27, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 5.45% Solar Bonds, Series2015/C33-15. 8-K(1) 001-35758 4.6 April 27, 2015 4.53 Forty-Seventh Supplemental Indenture, dated as of May1, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 4.00% Solar Bonds, Series 2015/11-5. 8-K(1) 001-35758 4.4 May 1, 2015 4.54 Forty-Eighth Supplemental Indenture, dated as of May 1,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.00% Solar Bonds, Series 2015/12-10. 8-K(1) 001-35758 4.5 May 1, 2015 4.55 Forty-Ninth Supplemental Indenture, dated as of May 1,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.75% Solar Bonds, Series 2015/13-15. 8-K(1) 001-35758 4.6 May 1, 2015 4.56 Fifty-First Supplemental Indenture, dated as of May 11,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 3.60% Solar Bonds, Series 2015/C35-5. 8-K(1) 001-35758 4.3 May 11, 2015 4.57 Fifty-Second Supplemental Indenture, dated as of May11, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 4.70% Solar Bonds, Series2015/C36-10. 8-K(1) 001-35758 4.4 May 11, 2015 4.58 Fifty-Third Supplemental Indenture, dated as of May 11,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.45% Solar Bonds, Series 2015/C37-15. 8-K(1) 001-35758 4.5 May 11, 2015 4.59 Fifty-Sixth Supplemental Indenture, dated as of May 18,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 3.60% Solar Bonds, Series 2015/C39-5. 8-K(1) 001-35758 4.3 May 18, 2015 4.60 Fifty-Seventh Supplemental Indenture, dated as of May18, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 4.70% Solar Bonds, Series2015/C40-10. 8-K(1) 001-35758 4.4 May 18, 2015 135 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.61 Fifty-Eighth Supplemental Indenture, dated as of May 18,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.45% Solar Bonds, Series 2015/C41-15. 8-K(1) 001-35758 4.5 May 18, 2015 4.62 Sixtieth Supplemental Indenture, dated as of May 26,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 3.60% Solar Bonds, Series 2015/C43-5. 8-K(1) 001-35758 4.3 May 26, 2015 4.63 Sixty-First Supplemental Indenture, dated as of May 26,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.70% Solar Bonds, Series 2015/C44-10. 8-K(1) 001-35758 4.4 May 26, 2015 4.64 Sixty-Second Supplemental Indenture, dated as of May26, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 5.45% Solar Bonds, Series2015/C45-15. 8-K(1) 001-35758 4.5 May 26, 2015 4.65 Sixty-Fifth Supplemental Indenture, dated as of June 8,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 3.60% Solar Bonds, Series 2015/C47-5. 8-K(1) 001-35758 4.3 June 10, 2015 4.66 Sixty-Seventh Supplemental Indenture, dated as of June8, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 5.45% Solar Bonds, Series2015/C49-15. 8-K(1) 001-35758 4.5 June 10, 2015 4.67 Seventieth Supplemental Indenture, dated as of June 16,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.70% Solar Bonds, Series 2015/C52-10. 8-K(1) 001-35758 4.4 June 16, 2015 4.68 Seventy-First Supplemental Indenture, dated as of June16, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 5.45% Solar Bonds, Series2015/C53-15. 8-K(1) 001-35758 4.5 June 16, 2015 4.69 Seventy-Fourth Supplemental Indenture, dated as of June22, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 4.70% Solar Bonds, Series2015/C56-10. 8-K(1) 001-35758 4.4 June 23, 2015 4.70 Seventy-Fifth Supplemental Indenture, dated as of June22, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 5.45% Solar Bonds, Series2015/C57-15. 8-K(1) 001-35758 4.5 June 23, 2015 136 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.71 Seventy-Ninth Supplemental Indenture, dated as of June29, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 3.60% Solar Bonds, Series2015/C60-5. 8-K(1) 001-35758 4.4 June 29, 2015 4.72 Eightieth Supplemental Indenture, dated as of June 29,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.70% Solar Bonds, Series 2015/C61-10. 8-K(1) 001-35758 4.5 June 29, 2015 4.73 Eighty-First Supplemental Indenture, dated as of June 29,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.45% Solar Bonds, Series 2015/C62-15. 8-K(1) 001-35758 4.6 June 29, 2015 4.74 Eighty-Fourth Supplemental Indenture, dated as of July14, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 3.60% Solar Bonds, Series2015/C65-5. 8-K(1) 001-35758 4.4 July 14, 2015 4.75 Eighty-Sixth Supplemental Indenture, dated as of July 14,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.45% Solar Bonds, Series 2015/C67-15. 8-K(1) 001-35758 4.6 July 14, 2015 4.76 Eighty-Ninth Supplemental Indenture, dated as of July20, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 3.60% Solar Bonds, Series2015/C70-5. 8-K(1) 001-35758 4.4 July 21, 2015 4.77 Ninetieth Supplemental Indenture, dated as of July 20,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 4.70% Solar Bonds, Series 2015/C71-10. 8-K(1) 001-35758 4.5 July 21, 2015 4.78 Ninety-First Supplemental Indenture, dated as of July 20,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.45% Solar Bonds, Series 2015/C72-15. 8-K(1) 001-35758 4.6 July 21, 2015 4.79 Ninety-Fourth Supplemental Indenture, dated as of July31, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 4.00% Solar Bonds, Series 2015/19-5. 8-K(1) 001-35758 4.4 July 31, 2015 4.80 Ninety-Fifth Supplemental Indenture, dated as of July 31,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.00% Solar Bonds, Series 2015/20-10. 8-K(1) 001-35758 4.5 July 31, 2015 137 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.81 Ninety-Sixth Supplemental Indenture, dated as of July 31,2015, by and between SolarCity and the Trustee, relatedto SolarCity’s 5.75% Solar Bonds, Series 2015/21-15. 8-K(1) 001-35758 4.6 July 31, 2015 4.82 Ninety-Ninth Supplemental Indenture, dated as of August3, 2015, by and between SolarCity and the Trustee,related to SolarCity’s 3.60% Solar Bonds, Series2015/C75-5. 8-K(1) 001-35758 4.4 August 3, 2015 4.83 One Hundred-and-Fifth Supplemental Indenture, dated asof August 10, 2015, by and between SolarCity and theTrustee, related to SolarCity’s 4.70% Solar Bonds, Series2015/C81-10. 8-K(1) 001-35758 4.5 August 10, 2015 4.84 One Hundred-and-Ninth Supplemental Indenture, datedas of August 17, 2015, by and between SolarCity and theTrustee, related to SolarCity’s 3.60% Solar Bonds, Series2015/C85-5. 8-K(1) 001-35758 4.4 August 17, 2015 4.85 One Hundred-and-Eleventh Supplemental Indenture,dated as of August 17, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 5.45% SolarBonds, Series 2015/C87-15. 8-K(1) 001-35758 4.6 August 17, 2015 4.86 One Hundred-and-Fourteenth Supplemental Indenture,dated as of August 24, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 3.60% SolarBonds, Series 2015/C90-5. 8-K(1) 001-35758 4.4 August 24, 2015 4.87 One Hundred-and-Sixteenth Supplemental Indenture,dated as of August 24, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 5.45% SolarBonds, Series 2015/C92-15. 8-K(1) 001-35758 4.6 August 24, 2015 4.88 One Hundred-and-Nineteenth Supplemental Indenture,dated as of August 31, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 3.60% SolarBonds, Series 2015/C95-5. 8-K(1) 001-35758 4.4 August 31, 2015 4.89 One Hundred-and-Twenty-First Supplemental Indenture,dated as of August 31, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 5.45% SolarBonds, Series 2015/C97-15. 8-K(1) 001-35758 4.6 August 31, 2015 138 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.90 One Hundred-and-Twenty-Seventh SupplementalIndenture, dated as of September 14, 2015, by andbetween SolarCity and the Trustee, related to SolarCity’s3.60% Solar Bonds, Series 2015/C100-5. 8-K(1) 001-35758 4.4 September 15, 2015 4.91 One Hundred-and-Twenty-Eighth SupplementalIndenture, dated as of September 14, 2015, by andbetween SolarCity and the Trustee, related to SolarCity’s4.70% Solar Bonds, Series 2015/C101-10. 8-K(1) 001-35758 4.5 September 15, 2015 4.92 One Hundred-and-Twenty-Ninth Supplemental Indenture,dated as of September 14, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.45%Solar Bonds, Series 2015/C102-15. 8-K(1) 001-35758 4.6 September 15, 2015 4.93 One Hundred-and-Thirty-Second SupplementalIndenture, dated as of September 28, 2015, by andbetween SolarCity and the Trustee, related to SolarCity’s3.60% Solar Bonds, Series 2015/C105-5. 8-K(1) 001-35758 4.4 September 29, 2015 4.94 One Hundred-and-Thirty-Third Supplemental Indenture,dated as of September 28, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 4.70%Solar Bonds, Series 2015/C106-10. 8-K(1) 001-35758 4.5 September 29, 2015 4.95 One Hundred-and-Thirty-Fourth Supplemental Indenture,dated as of September 28, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.45%Solar Bonds, Series 2015/C107-15. 8-K(1) 001-35758 4.6 September 29, 2015 4.96 One Hundred-and-Thirty-Seventh SupplementalIndenture, dated as of October 13, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 3.60%Solar Bonds, Series 2015/C110-5. 8-K(1) 001-35758 4.4 October 13, 2015 4.97 One Hundred-and-Thirty-Eighth Supplemental Indenture,dated as of October 13, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 4.70% SolarBonds, Series 2015/C111-10. 8-K(1) 001-35758 4.5 October 13, 2015 139 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.98 One Hundred-and-Forty-Second Supplemental Indenture,dated as of October 30, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 4.00% SolarBonds, Series 2015/24-5. 8-K(1) 001-35758 4.4 October 30, 2015 4.99 One Hundred-and-Forty-Third Supplemental Indenture,dated as of October 30, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 5.00% SolarBonds, Series 2015/25-10. 8-K(1) 001-35758 4.5 October 30, 2015 4.100 One Hundred-and-Forty-Fourth Supplemental Indenture,dated as of October 30, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 5.75% SolarBonds, Series 2015/26-15. 8-K(1) 001-35758 4.6 October 30, 2015 4.101 One Hundred-and-Forty-Seventh Supplemental Indenture,dated as of November 4, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 3.60% SolarBonds, Series 2015/C115-5. 8-K(1) 001-35758 4.4 November 4, 2015 4.102 One Hundred-and-Forty-Eighth Supplemental Indenture,dated as of November 4, 2015, by and between SolarCityand the Trustee, related to SolarCity’s 4.70% SolarBonds, Series 2015/C116-10. 8-K(1) 001-35758 4.5 November 4, 2015 4.103 One Hundred-and-Fifty-Third Supplemental Indenture,dated as of November 16, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 4.70%Solar Bonds, Series 2015/C121-10. 8-K(1) 001-35758 4.5 November 17, 2015 4.104 One Hundred-and-Fifty-Fourth Supplemental Indenture,dated as of November 16, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.45%Solar Bonds, Series 2015/C122-15. 8-K(1) 001-35758 4.6 November 17, 2015 4.105 One Hundred-and-Fifty-Eighth Supplemental Indenture,dated as of November 30, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 4.70%Solar Bonds, Series 2015/C126-10. 8-K(1) 001-35758 4.5 November 30, 2015 140 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.106 One Hundred-and-Fifty-Ninth Supplemental Indenture,dated as of November 30, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.45%Solar Bonds, Series 2015/C127-15. 8-K(1) 001-35758 4.6 November 30, 2015 4.107 One Hundred-and-Sixty-Second Supplemental Indenture,dated as of December 14, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 3.60%Solar Bonds, Series 2015/C130-5. 8-K(1) 001-35758 4.4 December 14, 2015 4.058 One Hundred-and-Sixty-Third Supplemental Indenture,dated as of December 14, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 4.70%Solar Bonds, Series 2015/C131-10. 8-K(1) 001-35758 4.5 December 14, 2015 4.109 One Hundred-and-Sixty-Fourth Supplemental Indenture,dated as of December 14, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.45%Solar Bonds, Series 2015/C132-15. 8-K(1) 001-35758 4.6 December 14, 2015 4.110 One Hundred-and-Sixty-Seventh Supplemental Indenture,dated as of December 28, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 3.60%Solar Bonds, Series 2015/C135-5. 8-K(1) 001-35758 4.4 December 28, 2015 4.111 One Hundred-and-Sixty-Eighth Supplemental Indenture,dated as of December 28, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 4.70%Solar Bonds, Series 2015/C136-10. 8-K(1) 001-35758 4.5 December 28, 2015 4.112 One Hundred-and-Sixty-Ninth Supplemental Indenture,dated as of December 28, 2015, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.45%Solar Bonds, Series 2015/C137-15. 8-K(1) 001-35758 4.6 December 28, 2015 4.113 One Hundred-and-Seventy-Second SupplementalIndenture, dated as of January 29, 2016, by and betweenSolarCity and the Trustee, related to SolarCity’s 4.00%Solar Bonds, Series 2016/3-5. 8-K(1) 001-35758 4.4 January 29, 2016 141 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 4.114 One Hundred-and-Seventy-Third SupplementalIndenture, dated as of January 29, 2016, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.00%Solar Bonds, Series 2016/4-10. 8-K(1) 001-35758 4.5 January 29, 2016 4.115 One Hundred-and-Seventy-Fourth SupplementalIndenture, dated as of January 29, 2016, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.75%Solar Bonds, Series 2016/5-15. 8-K(1) 001-35758 4.6 January 29, 2016 4.116 One Hundred-and-Seventy-Seventh SupplementalIndenture, dated as of February 26, 2016, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.25%Solar Bonds, Series 2016/8-5. 8-K(1) 001-35758 4.4 February 26, 2016 4.117 One Hundred-and-Seventy-Ninth SupplementalIndenture, dated as of March 21, 2016, by and betweenSolarCity and the Trustee, related to SolarCity’s 5.25%Solar Bonds, Series 2016/10-5. 8-K(1) 001-35758 4.3 March 21, 2016 4.118 One Hundred-and-Eighty-First Supplemental Indenture,dated as of June 10, 2016, by and between SolarCity andthe Trustee, related to SolarCity’s 5.25% Solar Bonds,Series 2016/12-5. 8-K(1) 001-35758 4.3 June 10, 2016 4.119 Description of Registrant’s Securities — — — — X 10.1** Form of Indemnification Agreement between theRegistrant and its directors and officers. S-1/A 333-164593 10.1 June 15, 2010 10.2** 2003 Equity Incentive Plan. S-1/A 333-164593 10.2 May 27, 2010 10.3** Form of Stock Option Agreement under 2003 EquityIncentive Plan. S-1 333-164593 10.3 January 29, 2010 10.4** Amended and Restated 2010 Equity Incentive Plan. 10-K 001-34756 10.4 February 23, 2018 10.5** Form of Stock Option Agreement under 2010 EquityIncentive Plan. 10-K 001-34756 10.6 March 1, 2017 10.6** Form of Restricted Stock Unit Award Agreement under2010 Equity Incentive Plan. 10-K 001-34756 10.7 March 1, 2017 10.7** Amended and Restated 2010 Employee Stock PurchasePlan, effective as of February 1, 2017. 10-K 001-34756 10.8 March 1, 2017 10.8** 2019 Equity Incentive Plan. S-8 333-232079 4.2 June 12, 2019 142 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.9** Form of Stock Option Agreement under 2019 EquityIncentive Plan. S-8 333-232079 4.3 June 12, 2019 10.10** Form of Restricted Stock Unit Award Agreement under2019 Equity Incentive Plan. S-8 333-232079 4.4 June 12, 2019 10.11** Employee Stock Purchase Plan, effective as of June 12,2019. S-8 333-232079 4.5 June 12, 2019 10.12** 2007 SolarCity Stock Plan and form of agreements usedthereunder. S-1(1) 333-184317 10.2 October 5, 2012 10.13** 2012 SolarCity Equity Incentive Plan and form ofagreements used thereunder. S-1(1) 333-184317 10.3 October 5, 2012 10.14** 2010 Zep Solar, Inc. Equity Incentive Plan and form ofagreements used thereunder. S-8(1) 333-192996 4.5 December 20, 2013 10.15** Offer Letter between the Registrant and Elon Musk datedOctober 13, 2008. S-1 333-164593 10.9 January 29, 2010 10.16** Performance Stock Option Agreement between theRegistrant and Elon Musk dated January 21, 2018. DEF 14A 001-34756 Appendix A February 8, 2018 10.17 Indemnification Agreement, dated as of February 27,2014, by and between the Registrant and J.P. MorganSecurities LLC. 8-K 001-34756 10.1 March 5, 2014 10.18 Form of Call Option Confirmation relating to 0.25%Convertible Senior Notes Due March 1, 2019. 8-K 001-34756 10.2 March 5, 2014 10.19 Form of Call Option Confirmation relating to 1.25%Convertible Senior Notes Due March 1, 2021. 8-K 001-34756 10.3 March 5, 2014 10.20 Form of Warrant Confirmation relating to 0.25%Convertible Senior Notes Due March 1, 2019. 8-K 001-34756 10.4 March 5, 2014 10.21 Form of Warrant Confirmation relating to 1.25%Convertible Senior Notes Due March 1, 2021. 8-K 001-34756 10.5 March 5, 2014 10.22 Form of Call Option Confirmation relating to 2.375%Convertible Notes due March 15, 2022. 8-K 001-34756 10.1 March 22, 2017 10.23 Form of Warrant Confirmation relating to 2.375%Convertible Notes due March 15, 2022. 8-K 001-34756 10.2 March 22, 2017 10.24 Form of Call Option Confirmation relating to 2.00%Convertible Senior Notes due May 15, 2024. 8-K 001-34756 10.1 May 3, 2019 143 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.25 Form of Warrant Confirmation relating to 2.00%Convertible Senior Notes due May 15, 2024. 8-K 001-34756 10.2 May 3, 2019 10.26† Supply Agreement between Panasonic Corporation andthe Registrant dated October 5, 2011. 10-K -001-34756 10.50 February 27, 2012 10.27† Amendment No. 1 to Supply Agreement betweenPanasonic Corporation and the Registrant dated October29, 2013. 10-K 001-34756 10.35A February 26, 2014 10.28 Agreement between Panasonic Corporation and theRegistrant dated July 31, 2014. 10-Q 001-34756 10.1 November 7, 2014 10.29† General Terms and Conditions between PanasonicCorporation and the Registrant dated October 1, 2014. 8-K 001-34756 10.2 October 11, 2016 10.30 Letter Agreement, dated as of February 24, 2015,regarding addition of co-party to General Terms andConditions, Production Pricing Agreement andInvestment Letter Agreement between PanasonicCorporation and the Registrant. 10-K 001-34756 10.25A February 24, 2016 10.31† Amendment to Gigafactory General Terms, dated March1, 2016, by and among the Registrant, PanasonicCorporation and Panasonic Energy Corporation of NorthAmerica. 8-K 001-34756 10.1 October 11, 2016 10.32† Production Pricing Agreement between PanasonicCorporation and the Registrant dated October 1, 2014. 10-Q 001-34756 10.3 November 7, 2014 10.33† Investment Letter Agreement between PanasonicCorporation and the Registrant dated October 1, 2014. 10-Q 001-34756 10.4 November 7, 2014 10.34 Amendment to Gigafactory Documents, dated April 5,2016, by and among the Registrant, PanasonicCorporation, Panasonic Corporation of North Americaand Panasonic Energy Corporation of North America. 10-Q 001-34756 10.2 May 10, 2016 10.35†† 2019 Pricing Agreement (2170 Cells) with respect to2014 Gigafactory Agreements, executed September 20,2019, by and among the Registrant, Tesla MotorsNetherlands B.V., Panasonic Corporation and PanasonicCorporation of North America, on behalf of its divisionPanasonic Energy Corporation of North America. 10-Q 001-34756 10.5 October 29, 2019 144 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.36†† 2019 Pricing Agreement (Japan Cells) with respect to2011 Supply Agreement, executed September 20, 2019,by and among the Registrant, Tesla Motors NetherlandsB.V., Panasonic Corporation and SANYO Electric Co.,Ltd. 10-Q 001-34756 10.6 October 29, 2019 10.37†† Amended and Restated Factory Lease, executed as ofMarch 26, 10`9, by and between Tesla, Inc. andPanasonic Energy North America, a division of PanasonicCorporation of North America, as tenant. 10-Q 001-34756 10.3 July 29, 2019 10.38†† Lease Amendment, executed September 20, 2019, by andamong the Registrant, Panasonic Corporation of NorthAmerica, on behalf of its division Panasonic Energy ofNorth America, with respect to the Amended and RestatedFactory Lease, executed as of March 26, 2019. 10-Q 001-34756 10.7 October 29, 2019 10.39 ABL Credit Agreement, dated as of June 10, 2015, by andamong the Registrant, Tesla Motors Netherlands B.V.,certain of the Registrant’s and Tesla Motors NetherlandsB.V.’s direct or indirect subsidiaries from time to timeparty thereto, as borrowers, Wells Fargo Bank, NationalAssociation, as documentation agent, JPMorgan ChaseBank, N.A., Goldman Sachs Bank USA, Morgan StanleySenior Funding Inc. and Bank of America, N.A., assyndication agents, the lenders from time to time partythereto, and Deutsche Bank AG New York Branch, asadministrative agent and collateral agent. 8-K 001-34756 10.1 June 12, 2015 10.40 First Amendment, dated as of November 3, 2015, to ABLCredit Agreement, dated as of June 10, 2015, by andamong the Registrant, Tesla Motors Netherlands B.V.,certain of the Registrant’s and Tesla Motors NetherlandsB.V.’s direct or indirect subsidiaries from time to timeparty thereto, as borrowers, and the documentation agent,syndication agents, administrative agent, collateral agentand lenders from time to time party thereto. 10-Q 001-34756 10.1 November 5, 2015 145 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.41 Second Amendment, dated as of December 31, 2015, toABL Credit Agreement, dated as of June 10, 2015, by andamong the Registrant, Tesla Motors Netherlands B.V.,certain of the Registrant’s and Tesla Motors NetherlandsB.V.’s direct or indirect subsidiaries from time to timeparty thereto, as borrowers, and the documentation agent,syndication agents, administrative agent, collateral agentand lenders from time to time party thereto. 10-K 001-34756 10.28B February 24, 2016 10.42 Third Amendment, dated as of February 9, 2016, to ABLCredit Agreement, dated as of June 10, 2015, by andamong the Registrant, Tesla Motors Netherlands B.V.,certain of the Registrant’s and Tesla Motors NetherlandsB.V.’s direct or indirect subsidiaries from time to timeparty thereto, as borrowers, and the documentation agent,syndication agents, administrative agent, collateral agentand lenders from time to time party thereto. 10-K 001-34756 10.28C February 24, 2016 10.43 Fourth Amendment to Credit Agreement, dated as of July31, 2016, by and among the Registrant, Tesla MotorsNetherlands B.V., the lenders party thereto and DeutscheBank AG New York Branch, as administrative agent andcollateral agent. 8-K 001-34756 10.1 August 1, 2016 10.44 Fifth Amendment to Credit Agreement, dated as ofDecember 15, 2016, among the Registrant, Tesla MotorsNetherlands B.V., the lenders party thereto and DeutscheBank AG, New York Branch, as administrative agent andcollateral agent. 8-K 001-34756 10.1 December 20, 2016 10.45 Sixth Amendment to Credit Agreement, dated as ofJune 19, 2017, among the Registrant, Tesla MotorsNetherlands B.V., the lenders party thereto and DeutscheBank AG, New York Branch, as administrative agent andcollateral agent. 10-Q 001-34756 10.1 August 4, 2017 10.46 Seventh Amendment to the ABL Credit Agreement, datedas of August 11, 2017, by and among the Registrant,Tesla Motors Netherlands B.V., Deutsche Bank AG NewYork Branch, as administrative agent and collateral agent,and the other agents party thereto. 8-K 001-34756 10.2 August 23, 2017 146 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.47 Eighth Amendment to the ABL Credit Agreement, datedas of March 12, 2018, by and among the Registrant, TeslaMotors Netherlands B.V., Deutsche Bank AG New YorkBranch, as administrative agent and collateral agent, andthe other agents party thereto. 10-Q 001-34756 10.2 May 7, 2018 10.48 Ninth Amendment to the ABL Credit Agreement, dated asof May 3, 2018, by and among the Registrant, TeslaMotors Netherlands B.V., Deutsche Bank AG New YorkBranch, as administrative agent and collateral agent, andthe other agents party thereto. 10-Q 001-34756 10.3 May 7, 2018 10.49 Tenth Amendment to the ABL Credit Agreement, dated asof December 10, 2018, by and among the Registrant,Tesla Motors Netherlands B.V., Deutsche Bank AG NewYork Branch, as administrative agent and collateral agent,and the other agents party thereto. 10-K 001-34756 10.41 February 19, 2019 10.50 Amendment and Restatement in respect of ABL CreditAgreement, dated as of March 6, 2019, by and amongcertain of the Registrant’s and Tesla Motors NetherlandsB.V.’s direct or indirect subsidiaries from time to timeparty thereto, as borrowers, Wells Fargo Bank, NationalAssociation, as documentation agent, JPMorgan ChaseBank, N.A., Goldman Sachs Bank USA, Morgan StanleySenior Funding Inc. and Bank of America, N.A., assyndication agents, the lenders from time to time partythereto, and Deutsche Bank AG New York Branch, asadministrative agent and collateral agent. S-4/A333-229749 10.68 April 3, 2019 10.51 Eleventh Amendment to Credit Agreement, dated as ofFebruary 1, 2019, in respect of the ABL CreditAgreement, dated as of June 10, 2015, among Tesla, Inc.,Tesla Motors Netherlands B.V., the lenders from time totime party thereto, Deutsche Bank AG New York Branch,as administrative agent and collateral agent and asCollateral Agent, and the other agent parties thereto. 10-Q 001-34756 10.1 April 29, 2019 147 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.52† Agreement for Tax Abatement and Incentives, dated as ofMay 7, 2015, by and between Tesla Motors, Inc. and theState of Nevada, acting by and through the NevadaGovernor’s Office of Economic Development. 10-Q 001-34756 10.1 August 7, 2015 10.53† Amended and Restated Loan and Security Agreement,dated as of August 17, 2017, by and among Tesla 2014Warehouse SPV LLC, Tesla Finance LLC, the Lendersand Group Agents from time to time party thereto, andDeutsche Bank AG, New York Branch, as AdministrativeAgent. 10-Q 001-34756 10.3 November 3, 2017 10.54† Amendment No. 1 to Amended and Restated Loan andSecurity Agreement, dated as of October 18, 2017, by andamong Tesla 2014 Warehouse SPV LLC, Tesla FinanceLLC, the Lenders and Group Agents from time to timeparty thereto, Deutsche Bank AG, New York Branch, asAdministrative Agent, and Deutsche Bank TrustCompany Americas, as Paying Agent. 10-K 001-34756 10.44 February 23, 2018 10.55 Amendment No. 2 to Amended and Restated Loan andSecurity Agreement, dated as of March 23, 2018, by andamong Tesla 2014 Warehouse SPV LLC, Tesla FinanceLLC, the Lenders and Group Agents from time to timeparty thereto, Deutsche Bank AG, New York Branch, asAdministrative Agent, and Deutsche Bank TrustCompany Americas, as Paying Agent. 10-Q 001-34756 10.4 May 7, 2018 10.56 Amendment No. 3 to Amended and Restated Loan andSecurity Agreement, dated as of May 4, 2018, by andamong Tesla 2014 Warehouse SPV LLC, Tesla FinanceLLC, the Lenders and Group Agents from time to timeparty thereto, Deutsche Bank AG, New York Branch asAdministrative Agent, and Deutsche Bank TrustCompany Americas, as Paying Agent. 10-Q 001-34756 10.1 November 2, 2018 148 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.57† Amendment No. 4 to Amended and Restated Loan andSecurity Agreement, dated as of August 16, 2018, by andamong Tesla 2014 Warehouse SPV LLC, Tesla FinanceLLC, the Lenders and Group Agents from time to timeparty thereto, Deutsche Bank AG, New York Branch asAdministrative Agent and Deutsche Bank Trust CompanyAmericas, as Paying Agent. 10-Q 001-34756 10.3 November 2, 2018 10.58† Amendment No. 5 to Amended and Restated Loan andSecurity Agreement, executed on December 28, 2018, byand among Tesla 2014 Warehouse SPV LLC, TeslaFinance LLC, the Lenders and Group Agents from time totime party thereto, Deutsche Bank AG, New York Branchas Administrative Agent and Deutsche Bank TrustCompany Americas, as Paying Agent. 10-K 001-34756 10.48 February 19, 2019 10.59†† Amendment No. 6 to Amended and Restated Loan andSecurity Agreement, dated as of August 16, 2019, by andamong Tesla 2014 Warehouse SPV LLC, Deutsche BankTrust Company Americas, New York Branch, asAdministrative Agent, and the Lenders and Group Agentsfrom time to time party thereto. 10-Q 001-34756 10.1 October 29, 2019 10.60† Loan and Security Agreement, dated as of August 17,2017, by and among LML Warehouse SPV, LLC, TeslaFinance LLC, the Lenders and Group Agents from time totime party thereto, and Deutsche Bank AG, New YorkBranch, as Administrative Agent. 10-Q 001-34756 10.4 November 3, 2017 10.61† Amendment No. 1 to Loan and Security Agreement, datedas of October 18, 2017, by and among LML WarehouseSPV, LLC, Tesla Finance LLC, the Lenders and GroupAgents from time to time party thereto, Deutsche BankAG, New York Branch, as Administrative Agent, andDeutsche Bank Trust Company Americas, as PayingAgent. 10-K 001-34756 10.46 February 23, 2018 149 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.62 Amendment No. 2 to Loan and Security Agreement, datedas of March 23, 2018, by and among LML WarehouseSPV, LLC, Tesla Finance LLC, the Lenders and GroupAgents from time to time party thereto, Deutsche BankAG, New York Branch, as Administrative Agent, andDeutsche Bank Trust Company Americas, as PayingAgent. 10-Q 001-34756 10.5 May 7, 2018 10.63 Amendment No. 3 to Loan and Security Agreement, datedas of May 4, 2018, by and among LML Warehouse SPV,LLC, the Lenders and Group Agents from time to timeparty thereto, and Deutsche Bank AG, New York Branch,as Administrative Agent. 10-Q 001-34756 10.2 November 2, 2018 10.64† Amendment No. 4 to Loan and Security Agreement, datedas of August 16, 2018, by and among LML WarehouseSPV, LLC, the Lenders and Group Agents from time totime party thereto, and Deutsche Bank AG, New YorkBranch, as Administrative Agent. 10-Q 001-34756 10.4 November 2, 2018 10.65† Payoff and Termination Letter, executed on December28, 2018, by and among LML Warehouse SPV, LLC, theLenders and Group Agents from time to time partythereto, and Deutsche Bank AG, New York Branch, asAdministrative Agent, relating to Loan and SecurityAgreement. 10-K 001-34756 10.54 February 19, 2019 10.66† Loan and Security Agreement, executed on December 28,2018, by and among LML 2018 Warehouse SPV, LLC,Tesla Finance LLC, the Lenders and Group Agents fromtime to time party thereto, Deutsche Bank Trust CompanyAmericas, as Paying Agent, and Deutsche Bank AG, NewYork Branch, as Administrative Agent. 10-K 001-34756 10.55 February 19, 2019 150 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.67†† Letter of Consent, dated as of June 14, 2019, by andamong LML 2018 Warehouse SPV, LLC, Deutsche BankAG, New York Branch, as Administrative Agent, and theGroup Agents party thereto, in respect of the Loan andSecurity Agreement, dated as of August 17, 2017 and asamended from time to time, by and among LMLWarehouse SPV, LLC, Tesla Finance LLC, and theLenders, Group Agents and Administrative Agent fromtime to time party thereto. 10-Q 001-34756 10.1 July 29, 2019 10.68†† Amendment No. 1 to Loan and Security Agreement, datedas of August 16, 2019, by and among LML 2018Warehouse SPV, LLC, Deutsche Bank Trust CompanyAmericas, as Paying Agent, and Deutsche Bank AG, NewYork Branch, as Administrative Agent, and the Lendersand Group Agents from time to time party thereto. 10-Q 001-34756 10.2 October 29, 2019 10.69 Amendment No. 2 to Loan and Security Agreement, datedas of December 13, 2019, by and among LML 2018Warehouse SPV, LLC, Deutsche Bank Trust CompanyAmericas, as Paying Agent, and Deutsche Bank AG, NewYork Branch, as Administrative Agent, and the Lendersand Group Agents from time to time party thereto. — — — — X 10.70 Purchase Agreement, dated as of August 11, 2017, by andamong the Registrant, SolarCity and Goldman Sachs &Co. LLC and Morgan Stanley & Co. LLC asrepresentatives of the several initial purchasers namedtherein. 8-K 001-34756 10.1 August 23, 2017 10.71 Amended and Restated Agreement For Research &Development Alliance on Triex Module Technology,effective as of September 2, 2014, by and between TheResearch Foundation For The State University of NewYork, on behalf of the College of Nanoscale Science andEngineering of the State University of New York, andSilevo, Inc. 10-Q(1) 001-35758 10.16 November 6, 2014 151 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.72 First Amendment to Amended and Restated AgreementFor Research & Development Alliance on Triex ModuleTechnology, effective as of October 31, 2014, by andbetween The Research Foundation For The StateUniversity of New York, on behalf of the College ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, Inc. 10-K(1) 001-35758 10.16a February 24, 2015 10.73 Second Amendment to Amended and Restated AgreementFor Research & Development Alliance on Triex ModuleTechnology, effective as of December 15, 2014, by andbetween The Research Foundation For The StateUniversity of New York, on behalf of the College ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, Inc. 10-K(1) 001-35758 10.16b February 24, 2015 10.74 Third Amendment to Amended and Restated AgreementFor Research & Development Alliance on Triex ModuleTechnology, effective as of February 12, 2015, by andbetween The Research Foundation For The StateUniversity of New York, on behalf of the College ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, Inc. 10-Q(1) 001-35758 10.16c May 6, 2015 10.75 Fourth Amendment to Amended and Restated AgreementFor Research & Development Alliance on Triex ModuleTechnology, effective as of March 30, 2015, by andbetween The Research Foundation For The StateUniversity of New York, on behalf of the College ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, Inc. 10-Q(1) 001-35758 10.16d May 6, 2015 10.76 Fifth Amendment to Amended and Restated AgreementFor Research & Development Alliance on Triex ModuleTechnology, effective as of June 30, 2015, by andbetween The Research Foundation For The StateUniversity of New York, on behalf of the College ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, LLC. 10-Q(1) 001-35758 10.16e July 30, 2015 152 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.77 Sixth Amendment to Amended and Restated AgreementFor Research & Development Alliance on Triex ModuleTechnology, effective as of September 1, 2015, by andbetween The Research Foundation For The StateUniversity of New York, on behalf of the College ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, LLC. 10-Q(1) 001-35758 10.16f October 30, 2015 10.78 Seventh Amendment to Amended and RestatedAgreement For Research & Development Alliance onTriex Module Technology, effective as of October 9,2015, by and between The Research Foundation For TheState University of New York, on behalf of the College ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, LLC. 10-Q(1) 001-35758 10.16g October 30, 2015 10.79 Eighth Amendment to Amended and Restated AgreementFor Research & Development Alliance on Triex ModuleTechnology, effective as of October 26, 2015, by andbetween The Research Foundation For The StateUniversity of New York, on behalf of the College ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, LLC. 10-Q(1) 001-35758 10.16h October 30, 2015 10.80 Ninth Amendment to Amended and Restated AgreementFor Research & Development Alliance on Triex ModuleTechnology, effective as of December 9, 2015, by andbetween The Research Foundation For The StateUniversity of New York, on behalf of the College ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, LLC. 10-K(1) 001-35758 10.16i February 10, 2016 10.81 Tenth Amendment to Amended and Restated AgreementFor Research & Development Alliance on Triex ModuleTechnology, effective as of March 31, 2017, by andbetween The Research Foundation For The StateUniversity of New York, on behalf of the Colleges ofNanoscale Science and Engineering of the StateUniversity of New York, and Silevo, LLC. 10-Q 001-34756 10.8 May 10, 2017 153 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.82†† Grant Contract for State-Owned Construction Land UseRight, dated as of October 17, 2018, by and betweenShanghai Planning and Land Resource AdministrationBureau, as grantor, and Tesla (Shanghai) Co., Ltd., asgrantee (English translation). 10-Q 001-34756 10.2 July 29, 2019 10.83†† Facility Agreement, dated as of September 26, 2019, byand between China Merchants Bank Co., Ltd. BeijingBranch and Tesla Automobile (Beijing) Co., Ltd. (Englishtranslation). 10-Q 001-34756 10.3 October 29, 2019 10.84†† Statement Letter to China Merchants Bank Co., Ltd.Beijing Branch from Tesla Automobile (Beijing) Co.,Ltd., dated as of September 26, 2019 (Englishtranslation). 10-Q 001-34756 10.4 October 29, 2019 10.85†† Fixed Asset Syndication Loan Agreement, dated as ofDecember 18, 2019, by and among Tesla (Shanghai) Co.,Ltd., China Construction Bank Corporation, China(Shanghai) Pilot Free Trade Zone Special Area Branch,Agricultural Bank of China Shanghai Changning Sub-branch, Shanghai Pudong Development Bank Co., Ltd.,Shanghai Branch, and Industrial and Commercial Bank ofChina Limited, China (Shanghai) Pilot Free Trade ZoneSpecial Area Branch (English translation). — — — — X 10.86†† Fixed Asset Syndication Loan Agreement andSupplemental Agreement, dated as of December 18,2019, by and among Tesla (Shanghai) Co., Ltd., ChinaConstruction Bank Corporation, China (Shanghai) PilotFree Trade Zone Special Area Branch, Agricultural Bankof China Shanghai Changning Sub-branch, ShanghaiPudong Development Bank Co., Ltd., Shanghai Branch,and Industrial and Commercial Bank of China Limited,China (Shanghai) Pilot Free Trade Zone Special AreaBranch (English translation). — — — — X 154 Exhibit Incorporated by Reference FiledNumber Exhibit Description Form File No. Exhibit Filing Date Herewith 10.87†† Syndication Revolving Loan Agreement, dated as ofDecember 18, 2019, by and among Tesla (Shanghai) Co.,Ltd. China Construction Bank Corporation, China(Shanghai) Pilot Free Trade Zone Special Area Branch,Agricultural Bank of China Shanghai Changning Sub-branch, Shanghai Pudong Development Bank Co., Ltd.,Shanghai Branch, and Industrial and Commercial Bank ofChina Limited, China (Shanghai) Pilot Free Trade ZoneSpecial Area Branch (English translation). — — — — X 21.1 List of Subsidiaries of the Registrant — — — — X 23.1 Consent of PricewaterhouseCoopers LLP, IndependentRegistered Public Accounting Firm — — — — X 31.1 Rule 13a-14(a) / 15(d)-14(a) Certification of PrincipalExecutive Officer — — — — X 31.2 Rule 13a-14(a) / 15(d)-14(a) Certification of PrincipalFinancial Officer — — — — X 32.1* Section 1350 Certifications — — — — X 101.INS Inline XBRL Instance Document — — — — X 101.SCH Inline XBRL Taxonomy Extension Schema Document — — — — X 101.CAL Inline XBRL Taxonomy Extension Calculation LinkbaseDocument. — — — — X 101.DEF Inline XBRL Taxonomy Extension Definition LinkbaseDocument — — — — X 101.LAB Inline XBRL Taxonomy Extension Label LinkbaseDocument — — — — X 101.PRE Inline XBRL Taxonomy Extension Presentation LinkbaseDocument — — — — X 104 Cover Page Interactive Data File (formatted as inlineXBRL with applicable taxonomy extension informationcontained in Exhibits 101) *Furnished herewith**Indicates a management contract or compensatory plan or arrangement†Confidential treatment has been requested for portions of this exhibit††Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).(1)Indicates a filing of SolarCityITEM 16.SUMMARYNone155 SIGNATURESPursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Tesla, Inc. Date: February 13, 2020 /s/ Elon Musk Elon Musk Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantand in the capacities and on the dates indicated. Signature Title Date /s/ Elon Musk Chief Executive Officer and Director (Principal ExecutiveOfficer) February 13, 2020 Elon Musk /s/ Zachary J. Kirkhorn Chief Financial Officer (Principal Financial Officer) February 13, 2020 Zachary J. Kirkhorn /s/ Vaibhav Taneja Chief Accounting Officer (Principal Accounting Officer) February 13, 2020 Vaibhav Taneja /s/ Robyn Denholm Director February 13, 2020 Robyn Denholm /s/ Ira Ehrenpreis Director February 13, 2020 Ira Ehrenpreis /s/ Lawrence J. Ellison Director February 13, 2020 Lawrence J. Ellison /s/ Antonio J. Gracias Director February 13, 2020 Antonio J. Gracias /s/ Stephen T. Jurvetson Director February 13, 2020 Stephen T. Jurvetson /s/ James Murdoch Director February 13, 2020 James Murdoch /s/ Kimbal Musk Director February 13, 2020 Kimbal Musk /s/ Kathleen Wilson-Thompson Director February 13, 2020 Kathleen Wilson-Thompson 156Exhibit 4.119 DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 As of February 13, 2020, Tesla, Inc. had one class of common stock registered under Section 12 of the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”). The following description of our common stock is a summary and does not purport to be complete. It is subject to andqualified in its entirety by reference to our restated certificate of incorporation (the “Certificate of Incorporation”) and ouramended and restated bylaws (the “Bylaws”), each of which is incorporated herein by reference as an exhibit to the Annual Reporton Form 10-K filed with the Securities and Exchange Commission, of which this Exhibit 4.119 is a part. We encourage you to readour Certificate of Incorporation, our Bylaws and the applicable provisions of the General Corporation Law of the State of Delaware(the “DGCL”) for additional information. Authorized Capital Stock Our authorized capital stock consists of 2,100,000,000 shares, with a par value of $0.001 per share, of which2,000,000,000 shares are designated as common stock. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of our stockholdersand do not have cumulative voting rights. Accordingly, holders of a majority of the shares of common stock entitled to vote in anyelection of directors may elect all of the directors standing for election. Subject to preferences that may be applicable to anypreferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive ratably anydividends declared by our board of directors out of assets legally available. Upon our liquidation, dissolution or winding up, holdersof our common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferenceof any then outstanding shares of preferred stock. Holders of common stock have no preemptive or conversion rights or othersubscription rights. There are no redemption or sinking fund provisions applicable to the common stock.We have certain outstanding securities that may be converted, exercised or exchanged into shares of our commonstock. Registration Rights Certain holders of unregistered common stock purchased in private placements, or their permitted transferees, areentitled to rights with respect to the registration of such shares under the Securities Act of 1933, as amended, or the SecuritiesAct. These rights are provided under the terms of an investors’ rights agreement between us and the holders of these shares, orthe investors’ rights agreement, and include demand registration rights, short-form1 registration rights and piggyback registration rights. All fees, costs and expenses of underwritten registrations will be borne by usand all selling expenses, including underwriting discounts and selling commissions, will be borne by the holders of the shares beingregistered. The registration rights terminate with respect to the registration rights of an individual holder after the date that is fiveyears following such time when the holder can sell all of the holder’s shares in any three month period under Rule 144 or anothersimilar exemption under the Securities Act, unless such holder holds at least 2% of our voting stock.ListingOur common stock is listed on the Nasdaq Global Select Market under the symbol “TSLA.”Transfer Agent and RegistrarThe transfer agent and registrar for our common stock is Computershare Trust Company, N.A.Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws Our amended and restated certificate of incorporation and our amended and restated bylaws contain certain provisionsthat could have the effect of delaying, deterring or preventing another party from acquiring control of us. These provisions andcertain provisions of Delaware law, which are summarized below, are expected to discourage coercive takeover practices andinadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us tonegotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiatemore favorable terms with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquireus.Limits on Ability of Stockholders to Act by Written Consent or Call a Special MeetingOur amended and restated certificate of incorporation provides that our stockholders may not act by written consent,which may lengthen the amount of time required to take stockholder actions. As a result, a holder controlling a majority of ourcapital stock would not be able to amend our amended and restated bylaws or remove directors without holding a meeting of ourstockholders called in accordance with our amended and restated bylaws.In addition, our amended and restated bylaws provide that special meetings of the stockholders may be called only by thechairperson of the board, the chief executive officer, the president (in the absence of a chief executive officer), or our board ofdirectors. Stockholders may not call a special meeting, which may delay the ability of our stockholders to force2 consideration of a proposal or for holders controlling a majority of our capital stock to take any action, including the removal ofdirectors.Requirements for Advance Notification of Stockholder Nominations and ProposalsOur amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and thenomination of candidates for election as directors, other than nominations made by or at the direction of our board of directors ora committee of our board of directors. These provisions may have the effect of precluding the conduct of certain business at ameeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer fromconducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of ourcompany.Board ClassificationOur board of directors is divided into three classes, one class of which is elected each year by our stockholders, and thedirectors in each class will serve for a three-year term. A third party may be discouraged from making a tender offer or otherwiseattempting to obtain control of us as it is more difficult and time-consuming for stockholders to replace a majority of the directorson a classified board.No Cumulative VotingOur amended and restated certificate of incorporation and amended and restated bylaws do not permit cumulative votingin the election of directors. Cumulative voting allows a stockholder to vote a portion or all of its shares for one or more candidatesfor seats on the board of directors. Without cumulative voting, a minority stockholder may not be able to gain as many seats onour board of directors as the stockholder would be able to gain if cumulative voting were permitted. The absence of cumulativevoting makes it more difficult for a minority stockholder to gain a seat on our board of directors to influence our board’s decisionregarding a takeover.Amendment of Charter Provisions The amendment of the above provisions of our amended and restated certificate of incorporation requires approval byholders of at least two-thirds of our outstanding capital stock entitled to vote generally in the election of directors.Delaware Anti-Takeover StatuteWe are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers.In general, Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a businesscombination with an interested stockholder for a period of three years following the date the person became an interestedstockholder unless:3  • prior to the date of the transaction, our board of directors approved either the business combination or the transactionwhich resulted in the stockholder becoming an interested stockholder; • upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interestedstockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transactioncommenced, calculated as provided under Section 203; or • at or subsequent to the date of the transaction, the business combination is approved by our board of directors andauthorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of atleast two-thirds of the outstanding voting stock which is not owned by the interested stockholder.Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financialbenefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or,within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’soutstanding voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions ourboard of directors does not approve in advance. We also anticipate that Section 203 may also discourage attempts that mightresult in a premium over the market price for the shares of common stock held by stockholders.The provisions of Delaware law and the provisions of our amended and restated certificate of incorporation and amendedand restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, theymight also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostiletakeover attempts. These provisions might also have the effect of preventing changes in our management. It is possible that theseprovisions could make it more difficult to accomplish transactions that stockholders might otherwise deem to be in their bestinterests. 4  Exhibit 10.69EXECUTION COPYAMENDMENT NO. 2TOLOAN AND SECURITY AGREEMENTTHIS AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of December13, 2019, is entered into by and among LML 2018 WAREHOUSE SPV, LLC, a Delaware limited liability company (the“Borrower”), the Lenders party hereto, the Group Agents party hereto, DEUTSCHE BANK TRUST COMPANY AMERICAS, aNew York banking corporation, as paying agent (the “Paying Agent”) and DEUTSCHE BANK AG, NEW YORK BRANCH, asadministrative agent (in such capacity, the “Administrative Agent”) and is made in respect of the Loan and Security Agreement,dated as of December 27, 2018 (the “Loan Agreement”) among the Borrower, Tesla Finance LLC, a Delaware limited liabilitycompany (“TFL”), the Lenders party thereto, the Group Agents party thereto, the Administrative Agent and the PayingAgent. Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the LoanAgreement as amended hereby.WHEREAS, the Borrower, the Lenders, the Group Agents, the Paying Agent and the Administrative Agent have agreedto amend the Loan Agreement on the terms and conditions set forth herein;NOW, THEREFORE, in consideration of the premises set forth above, and for other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders, the Group Agents, the Paying Agent and theAdministrative Agent agree as follows:1.Amendments to Loan Agreement. Effective as of the Amendment Effective Date (as defined below) and subjectto the satisfaction of the conditions precedent set forth in Section 2 hereof:(a)Section 1.01 of the Loan Agreement is hereby amended by amending the definition of “ExcessConcentration Amount” to read as follows:“‘Excess Concentration Amount’ shall mean, with respect to all Warehouse SUBI Leases that are EligibleLeases on such date, the sum of, without duplication, the amounts (if any) by which:(i)the aggregate Securitization Value of all Warehouse SUBI Leases that are Eligible Leases with LeaseMaturity Dates occurring more than 48 months from the date of origination of such Leases exceeds the 48+ Month Limit;(ii)if such date is on or after June 30, 2020, the aggregate Base Residual Value of all Warehouse SUBILeases that are Eligible Leases scheduled to reach their Lease Maturity Date in any one (1) month exceeds the SingleMonth Maturity Limit;  (iii)if such date is on or after June 30, 2020, the aggregate Base Residual Value of all Warehouse SUBILeases that are Eligible Leases scheduled to reach their Lease Maturity Date in any 6 consecutive months exceeds the SixMonth Maturity Limit;(iv)if such date is on or after the 90th day after the Closing Date, the amount by which the aggregateBase Residual Value of all Warehouse SUBI Leases that are Eligible Leases exceeds the Base RV Limit;(v)the aggregate Securitization Value of all Warehouse SUBI Leases that are Eligible Leases that causethe weighted average FICO Score of all Lessees (or, if a Lessee is an entity, the natural person who is the co-lessee orguarantor under the applicable Lease and an owner of such Lessee) of all Warehouse SUBI Leases that are Eligible Leasesto be less than the WA FICO Limit; in determining which Warehouse SUBI Lease causes such weighted average FICOScore to be less than the WA FICO Limit, the Warehouse SUBI Lease or Warehouse SUBI Leases most recentlyoriginated or purchased by the Trust shall be treated as causing such breach;(vi)the aggregate Securitization Value of all Warehouse SUBI Leases that are Eligible Leases withrespect to which the FICO Score of the related Lessee (or, if a Lessee is an entity, the natural person who is the co-lesseeor guarantor under the applicable Lease and an owner of such Lessee) of such Eligible Leases is 600 or greater but lessthan the Minimum FICO Limit Score exceeds the Minimum FICO Limit;(vii) the aggregate Securitization Value of all Warehouse SUBI Leases originated in any state (other thanCalifornia) that are Eligible Leases exceeds the Single State (Non-CA) Limit;(viii)the aggregate Securitization Value of all Warehouse SUBI Leases originated in the State ofCalifornia that are Eligible Leases exceeds the Single State (CA) Limit;(ix)the aggregate Securitization Value of all Warehouse SUBI Leases that are Extended Leases exceedsthe Extended Lease Limit;(x)the aggregate Securitization Value of Warehouse SUBI Leases with Lessees with no FICO scoreexceeds the No FICO Score Limit;(xi)the aggregate Securitization Value of Warehouse SUBI Leases with Lessees with less than a 600FICO score exceeds the Sub 600 FICO Score Limit; and(xii)the aggregate Securitization Value of Warehouse SUBI Leases that are Commercial Leases exceedthe Commercial Lease Limit.”2.Conditions Precedent. This Amendment shall become effective as of the date hereof (the “Amendment EffectiveDate”) upon satisfaction or waiver of the following conditions precedent:2  (a)the receipt by the Administrative Agent or its counsel of counterpart signature pages to thisAmendment;(b)no Default, Event of Default or Potential Servicer Default shall have occurred or be continuing, theTermination Date shall not have occurred and no Event of Bankruptcy shall have occurred with respect to TFL or Tesla,Inc.; and(c)the Administrative Agent and each Group Agent shall have received such other documents,instruments and agreements as the Administrative Agent or such Group Agent may have reasonably requested.3.Representations and Warranties of the Borrower. The Borrower hereby represents and warrants to theAdministrative Agent, each Group Agent and each Lender as of the date hereof that:(a)This Amendment and the Loan Agreement, as amended hereby, constitute the legal, valid and bindingobligations of the Borrower and are enforceable against the Borrower in accordance with their respective terms, except assuch enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to orlimiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in aproceeding in equity or at law).(b)Upon the effectiveness of this Amendment, the Borrower hereby affirms that all representations andwarranties made by it in Article IV of the Loan Agreement, as amended, are correct in all material respects on the datehereof as though made as of the effective date of this Amendment, unless and to the extent that any such representationand warranty is stated to relate solely to an earlier date, in which case such representation and warranty shall have beentrue and correct in all material respects as of such earlier date.(c)As of the date hereof, no Default, Event of Default or Potential Servicer Default shall have occurredor be continuing, the Termination Date shall not have occurred and no Event of Bankruptcy shall have occurred withrespect to TFL or Tesla, Inc.4.Reference to and Effect on the Loan Agreement.(a)Upon the effectiveness of Section 1 hereof, each reference in the Loan Agreement to “thisAgreement”, “hereunder”, “hereof”, “herein” or words of like import shall mean and be a reference to the LoanAgreement as amended hereby.(b)The Loan Agreement, as amended hereby, and all other documents, instruments and agreementsexecuted and/or delivered in connection therewith, shall remain in full force and effect until hereafter terminated inaccordance with their respective terms, and the Loan Agreement and such documents, instruments and agreements arehereby ratified and confirmed.(c)Except as expressly provided herein, the execution, delivery and effectiveness of this Amendmentshall not operate as a waiver of any right, power or remedy of the Administrative Agent, any Agent or any Lender, norconstitute a waiver of3  any provision of the Loan Agreement or any other documents, instruments and agreements executed and/or delivered inconnection therewith.5.Costs and Expenses. The Borrower agrees to pay all reasonable and actual costs, fees, and out-of-pocketexpenses (including the reasonable attorneys’ fees, costs and expenses of Morgan, Lewis & Bockius LLP, counsel to theAdministrative Agent, the Group Agents and the Lenders) incurred by the Administrative Agent, the Paying Agent, each GroupAgent and each Lender in connection with the preparation, review, execution and enforcement of this Amendment.6.Direction to Paying Agent to Execute this Amendment. By execution of this Amendment, the AdministrativeAgent and the Lenders hereby direct the Paying Agent to execute this Amendment.7.GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED INACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICTS OFLAWS PROVISIONS (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONSLAW).8.Headings. Section headings in this Amendment are included herein for convenience of reference only and shallnot constitute a part of this Amendment for any other purpose.9.Incorporation by Reference. Section 12.13 (No Petition) of the Loan Agreement is hereby incorporated byreference herein, mutatis mutandis. This Section 11 shall be continuing and shall survive any termination of the Loan Agreement.10.Counterparts. This Amendment may be executed by one or more of the parties to the Amendment on anynumber of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the sameinstrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile (transmitted by telecopier or byemail) shall be effective as delivery of a manually executed counterpart of this Amendment. Remainder of page left intentionally blank4  IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered by their dulyauthorized signatories as of the date first above written. LML 2018 WAREHOUSESPV, LLC, as Borrower By: /s/ Jeff MunsonName: Jeff MunsonTitle: President Signature Page to Amendment No. 2 to Loan and Security Agreement  DEUTSCHE BANKTRUST COMPANYAMERICAS, as PayingAgent By: /s/ RosemaryCabreraName: Rosemary CabreraTitle: Associate By: /s/ WilliamSchwerdtmanName: WilliamSchwerdtmanTitle: Associate Signature Page to Amendment No. 2 to Loan and Security Agreement  DEUTSCHE BANK AG,NEW YORK BRANCH, asAdministrative Agent, as aGroup Agent and as aCommitted Lender By: /s/ Kevin FaganName: Kevin FaganTitle: Vice President By: /s/ KatherineBolognaName: Katherine BolognaTitle: Managing Director Signature Page to Amendment No. 2 to Loan and Security Agreement  CITIBANK, N.A., as aGroup Agent and as aCommitted Lender By: /s/ Brian ChinName: Brian ChinTitle: Vice President CAFCO LLC, as a ConduitLender By: Citibank, N.A., asAttorney-in-Fact By: /s/ Brian ChinName: Brian ChinTitle: Vice President CHARTA LLC, as aConduit Lender By: Citibank, N.A., asAttorney-in-Fact By: /s/ Brian ChinName: Brian ChinTitle: Vice President CIESCO LLC, as a ConduitLender By: Citibank, N.A., asAttorney-in-Fact By: /s/ Brian ChinName: Brian ChinTitle: Vice President Signature Page to Amendment No. 2 to Loan and Security Agreement  CRC FUNDING LLC, as aConduit Lender By: Citibank, N.A., asAttorney-in-Fact By: /s/ Brian ChinName: Brian ChinTitle: Vice President Signature Page to Amendment No. 2 to Loan and Security Agreement  CREDIT SUISSE AG,NEW YORK BRANCH, asa Group Agent By: /s/ Kevin QuinnName: Kevin QuinnTitle: Vice President By: /s/ JasonRuchelsmanName: Jason RuchelsmanTitle: Director CREDIT SUISSE AG,CAYMAN ISLANDSBRANCH, as a CommittedLender By: /s/ Kevin QuinnName: Kevin QuinnTitle: AuthorizedSignatory By: /s/ JasonRuchelsmanName: Jason RuchelsmanTitle: AuthorizedSignatory GIFS CAPITALCOMPANY LLC, as aConduit Lender By: /s/ R. Scott ChisholmName: R. Scott ChisholmTitle: Authorized Signer Signature Page to Amendment No. 2 to Loan and Security Agreement  BARCLAYS BANK PLC,as a Group Agent By: /s/ John McCarthyName: John McCarthyTitle: Director SALISBURYRECEIVABLESCOMPANY LLC, as aConduit Lender By: Barclays Bank PLC,as attorney-in-fact By: /s/ John McCarthyName: John McCarthyTitle: Director Signature Page to Amendment No. 2 to Loan and Security Agreement  WELLS FARGO BANK,NATIONALASSOCIATION, as aGroup Agent and aCommitted Lender By: /s/ Austin VanassaName: Austin VanassaTitle: Managing Director Signature Page to Amendment No. 2 to Loan and Security Agreement Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Exhibit 10.85 English Convenience Translation-Original Agreement has been executed in Mandarin Chinese-Tesla (Shanghai) Co., Ltd.(as Borrower)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Primary Lead Arranger)Agricultural Bank of China Limited, Shanghai Changning Sub-branchIndustrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area BranchShanghai Pudong Development Bank Co., Ltd., Shanghai Branch(as Joint Lead Arrangers)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Facility Agent)Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Security Agent)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch andIndustrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Account Banks)Agricultural Bank of China Limited, Shanghai Changning Sub-branch(as Trade Finance Bank)1Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch(as Capital Account Bank)Financial Institutions set out in Schedule 1(as Original Lenders) FIXED ASSET SYNDICATION LOAN AGREEMENTRMB Nine Billion (or its equivalent in USD)December 18, 20192Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. TABLE OF CONTENTSClausePage 1.DEFINITIONS AND INTERPRETATION52.THE FACILITY133.PURPOSES134.DRAWDOWN145.INTEREST166.REPAYMENT187.PREPAYMENTS198.PAYMENTS209.STAMP DUTIES AND FEES2310.REPRESENTATIONS OF FACTS2411.COVENANTS2512.EVENTS OF DEFAULT3013.RELATIONSHIP AMONG FINANCE PARTIES3314.TRANSFER4015.RELATIONSHIP OF RIGHTS AND OBLIGATIONS AMONG THE FINANCE PARTIES4316.CONFIDENTIALITY4317.AMENDMENTS AND WAIVERS4518.NOTICES4619.RIGHTS ACCUMULATIVE AND SEVERABILITY4720.DOCUMENTATION4721.GOVERNING LAW AND DISPUTE RESOLUTION4822.TAKING EFFECT48SCHEDULE 1 ORIGINAL COMMITMENT49SCHEDULE 2 FORM OF DRAWDOWN NOTICE50SCHEDULE 3 FORM OF TRANSFER CERTIFICATE51EXECUTION PAGE53 1Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. THIS AGREEMENT is made in Shanghai on December 18, 2019 (the "Effective Date")AMONG(1)Tesla (Shanghai) Co., Ltd. as Borrower (the "Borrower") Legal Address:D203A, No.168 Tonghui Road, Nanhui New Town, Pudong NewDistrict Legal Representative:Xiaotong Zhu(2)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch as PrimaryMandated Lead Arranger and Bookrunner (the “Primary Lead Arranger”)(3)Agricultural Bank of China Limited, Shanghai Changning Sub-branch, Industrial and Commercial Bank of ChinaLimited, China (Shanghai) Pilot Free Trade Zone Special Area Branch, Shanghai Pudong Development Bank Co.,Ltd., Shanghai Branch as Joint Mandated Lead Arrangers and Bookrunners (the "Joint Lead Arrangers", togetherwith the Primary Lead Arranger referred to as the “Lead Arrangers”)(4)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch as FacilityAgent (the "Facility Agent")(5)Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch asSecurity Agent (the "Security Agent")(6)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch as AccountBank A (the “Account Bank A”); Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot FreeTrade Zone Special Area Branch as Account Bank B (the “Account Bank B”, together with the Account Bank Areferred to as the “Account Banks”)(7)Agricultural Bank of China Limited, Shanghai Changning Sub-branch as Trade Finance Bank (the "Trade FinanceBank")(8)Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch as Capital Account Bank (the “Capital AccountBank”)(9)The following financial institutions as Original Lenders (the "Original Lenders")2Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Agricultural Bank of China Limited, Shanghai Changning Sub-branch Legal Address:No.998 West Dingxi Road, Changning District, Shanghai Responsible Person:Li Xu Lending Office:Agricultural Bank of China Limited, Shanghai Changning Sub-branch China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone SpecialArea Branch Legal Address:No.900 Lujiazui Ring Road, China (Shanghai) Pilot Free TradeZone Responsible Person: Lending Office:China Construction Bank Corporation, China (Shanghai) Pilot FreeTrade Zone Special Area Branch Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade ZoneSpecial Area Branch Legal Address:No.555, South Xinyuan Road, Pudong New District, Shanghai Responsible Person:Sheng Zhan Lending Office:Industrial and Commercial Bank of China Limited, China (Shanghai)Pilot Free Trade Zone Special Area Branch Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch Legal Address:No.588 South Pudong Road, China (Shanghai) Pilot Free TradeZone Responsible Person:Su’nan Wang 3Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Lending Office:Shanghai Pudong Development Bank Co., Ltd., Shanghai BranchIT IS HEREBY AGREED, after mutual and friendly discussion and based on the true intention of each party, as follows.4Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 1.DEFINITIONS AND INTERPRETATION1.1DefinitionsIn this Agreement, Financial Yearmeans a period commencing from and including January 1st and ending onand including December 31st of each calendar year. Commitment Percentagemeans, in relation to each Lender, the percentage proportion of that Lender’sCommitment for the time being to the Total Commitment for the time being. Commitmentmeans, (i) in relation to each Original Lender, the Original Commitment of suchOriginal Lender minus the participation of such Original Lender in all theAdvances already drawn as well as its participation in the TotalCommitment cancelled and transferred under the terms of thisAgreement;(ii) in relation to each Transferee Bank, any part of the Commitmenttransferred to such Transferee Bank minus the participation of suchTransferee Bank in all Advances already drawn as well as itsparticipation in the Total Commitment cancelled and transferred underthe terms of this Agreement. Original Commitmentmeans, in relation to each Original Lender, the original commitment amountof that Original Lender in RMB (or its equivalent in USD) set out in Schedule1 hereof. Loan Period has the meaning specified in Clause 6 of this Agreement. Outstanding Advances means the aggregate amount of all outstanding Advances drawn in RMB orUSD. Loan Accountmeans the account opened by the Borrower with the Facility Agent for thepurpose of collecting the Advances. 5Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Revenue Collection Accountmeans the Revenue Collection Account A and/or the Revenue CollectionAccount B. Revenue Collection AccountAmeans the account opened by the Borrower with the Account Bank A for thepurpose of collecting its relevant operating revenue according to the AccountControl Agreement. Revenue Collection AccountBmeans the account opened by the Borrower with the Account Bank B for thepurpose of collection its relevant operating revenue according to the AccountControl Agreement. Facilityhas the meaning given to it in Clause 2 hereof. Lendermeans the Original Lender and/or the Transferee Bank. Loan Prime Rate (LPR)means the market quoted interest rate issued by the People’s Bank of Chinaon 20 November 2019 or by any authority which is authorized by thePeople’s Bank of China (currently the National Interbank Funding Center),i.e. 4.80%. Interest Ratemeans, (i) in relation to each Advance drawn in RMB, the interest rate referred to inparagraph 1 of Clause 5.1 (Interest Rate) hereof.(ii) in relation to each Advance drawn in USD, the interest rate referred to inparagraph 2 of Clause 5.1 (Interest Rate) hereof. Advancemeans any principal amount borrowed or to be borrowed (by any means)under the provisions hereof. Agent Security Interestsmeans the Facility Agent and the Security Agent. means any mortgage, pledge, lien, deposit or any agreement or arrangementhaving the effect or for the purpose of a collateral security (whether suchagreement or arrangement is governed by or construed in accordance withthe laws of the PRC or otherwise). 6Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Majority Lendersmeans, at any time, (i) if the Facility has not been drawn, a Lender or the Lenders (eitherindividually or collectively) whose aggregate Commitments representmore than 50% (exclusive of 50%) of the Total Commitment;(ii) if the Facility has been drawn, a Lender or the Lenders (eitherindividually or collectively) whose aggregate Outstanding Advancesrepresent more than 50% (exclusive of 50%) of the total OutstandingAdvances under the Facility. Legal Restraintmeans, (i) the principle that fair compensation may be granted or denied inaccordance with the discretion of the court;(ii) in relation to bankruptcy, reorganization and other legal events that maygenerally affect creditors, the laws that enforce the performance ofpriority obligations;(iii) statutory limitation period of legal restrictions;(iv) defense for set-off and counterclaims; and(v) any other restriction or reservation under any other generally applicablelaw set out in the legal opinion delivered to the Facility Agent under thisAgreement. Default Interest Ratemeans the Overdue Rate and/or the Misappropriation Rate. Interest Payment Datemeans the date on which the Borrower shall pay the interest under thisAgreement, which shall be (1) the 21st day of the last month of each quarteror if such day is not a Business Day, the immediately succeeding BusinessDay, and (2) the Final Maturity Date. Affiliate Companymeans in relation to any person, a Subsidiary of that person or a HoldingCompany of that person or any other Subsidiary of any Holding Company ofthat person. 7Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Borrower’s CounterpartyAccountmeans any such account set out in paragraph 2 part 2 of Schedule 2 (Formof Drawdown Notice) hereof. Lending Officemeans, in relation to each Finance Party, its office through which it performsits obligation hereunder including such changed Lending Office pursuant toClause 14.10 (Change of Lending Offices) hereof. Available Commitmentmeans, with respect to a Drawdown Notice, the Total Commitment minus theaggregate amount of all requested Advances in any prior Drawdown Noticefor which the Drawdown Date has not yet occurred. Holding Companymeans, in relation to a company, enterprise or entity, any other company,enterprise or entity in respect of which it is a Subsidiary. Interest Rate AdjustmentDatemeans the date that is the annual anniversary of the Drawdown Date of thefirst Advance drawn in USD. London Business Daymeans a day on which a bank located in London, United Kingdom is open forgeneral business (other than a Saturday or Sunday). USD Benchmark Ratemeans, on the two (2) London Business Days prior to a Drawdown Date oran Interest Rate Adjustment Date (as applicable), the one year LondonInterbank Offered Rate administered by ICE Benchmark AdministrationLimited (or any other person which takes over the administration of that rate)for USD quoted at 11:00 a.m. (London time) displayed on pages LIBOR01 orLIBOR02 of the Thomson Reuters screen (or any replacement ThomsonReuters page which displays that rate) or on the appropriate page of suchother information service which publishes that rate from time to time in placeof Thomson Reuters. Misappropriation Ratehas the meaning given to it in paragraph 2 of Clause 5.2 (Default InterestRate) hereof. PBOCmeans the People’s Bank of China and/ or its branches. 8Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Finance Partymeans each of the Lead Arrangers, the Facility Agent, the Security Agent,the Trade Finance Bank, the Account Banks, the Capital Account Bank andthe Lenders. Finance Documents includes this Agreement, the Mortgage Agreement over the Land, theAccount Control Agreement, and any agreement that is designated as aFinance Document by the parties to this Agreement. Effective Datehas the meaning given to it at the beginning of this Agreement. Transferee Bankhas the meaning given to it in Clause 14.3 (Transfer by the Lenders) hereof. Availability Periodmeans the period from the Effective Date of this Agreement to the datefalling three (3) years after the Effective Date of this Agreement. Drawdown Datemeans each date on which any Advance is drawn pursuant to thisAgreement. Drawdown Noticemeans, in relation to each Advance, a notice of drawing duly completed anddelivered by the Borrower pursuant to Clause 4.1 (Drawdown Notice) hereof. Prepayment Noticehas the meaning given to it in Clause 7 (Prepayments) hereof. Mortgage Agreement overthe Landmeans the mortgage agreement over the land executed between theBorrower as the mortgagor and the Security Agent as the mortgagee aroundthe Effective Date of this Agreement. Event of Defaultmeans any circumstance set out in Clause 12.1 (Events of Default) hereof. 9Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Existing Loanmeans the loan under a RMB three billion five hundred million (or itsequivalent in USD) syndication loan agreement executed at March 1, 2019,between the Borrower as the borrower and (1) China Construction BankCorporation, Shanghai Pudong Branch, Agricultural Bank of China Limited,Shanghai Changning Sub-branch, Industrial and Commercial Bank of ChinaLimited, Shanghai Lingang Sub-branch and Shanghai Pudong DevelopmentBank Co., Ltd., Shanghai Branch, as the lead arrangers; (2) ChinaConstruction Bank Corporation, Shanghai Pudong Branch, as the facilityagent and the account bank; (3) Agricultural Bank of China Limited,Shanghai Changning Sub-branch, as the consulting bank; (4) Industrial andCommercial Bank of China Limited, Shanghai Lingang Sub-branch, as themanaging bank; (5) Shanghai Pudong Development Bank Co., Ltd.,Shanghai Branch, as the advising bank and (6) the financial institutions setout in the schedule 1 thereto as the original lenders. Projectmeans the project contained in the Shanghai foreign investment project filingcertificate (Project Shanghai Code: 310115MA1H9YGWX20195E2101001)(including the updates and changes of such filing certificate from time to timeafter the Effective Date) of the Borrower, i.e. the Tesla Gigafactory Project(First Phase) First Stage which is located at 1/1 Hill, 8th Street, LuchaogangTown, Shanghai. Business Daymeans a day on which each Lender is open for general business (other thana Saturday or Sunday (excluding Saturdays and Sundays adjusted to bebusiness days pursuant to national regulations) or any other statutoryholidays). 10Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Permitted Trade FinanceFacilitymeans, each Finance Party agrees that the Borrower may subsequentlyapply to the Trade Finance Bank for issuing and/or conducting letter of credit(and subsequent import bills advance), domestic bank’s acceptance bill,guarantee of non-financing nature and providing notes pool service, providedthat at the end of any day within the Loan Period, the sum of theaggregate of outstanding amount under such trade finance facility andOutstanding Advances under this Agreement shall not exceed the maximumaggregate principal amount of the Facility set forth in Clause 2. Overdue Ratehas the meaning given to it in paragraph 1 of Clause 5.2 (Default InterestRate) hereof. Account Control Agreementmeans the account control agreement executed between the Borrower andthe Account Banks around the Effective Date of this Agreement. PRCmeans the People’s Republic of China. Material Adverse Effectmeans, in the reasonable opinion of all the Lenders, a material adverseeffect on: (i) the ability of the Borrower to perform its payment obligations hereunder;or(ii) the legality, validity or enforceability of the Finance Documents. Total Commitmentsmeans the aggregate amount of each Lender’s Commitment. Net Assetsmeans at any time of determination thereof, the owner’s equity of theBorrower as set forth in the most recent financial statements of the Borrowerdelivered to the Facility Agent pursuant to this Agreement. Transferring Lenderhas the meaning given to it in Clause 14.3 (Transfer by the Lenders) hereof. Transfer Noticehas the meaning given to it in Clause 14.3 (Transfer by the Lenders) hereof. Transfer Certificatemeans a transfer certificate duly executed and delivered by the TransferringLender, the Transferee Bank and the Facility Agent substantially in the formand substance set out in Schedule 3 (Form of Transfer Certificate) hereof. 11Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Capital Account means the account opened by the Borrower with the Capital Account Bankfor the purpose of depositing the Borrower’s registered capital. Subsidiarymeans, in relation to any company, corporation or entity, a company,corporation or entity: (i) which is controlled, directly or indirectly, by the first mentioned companycorporation or entity;(ii) more than half the issued equity share capital, registered capital or equityshare capital of which is beneficially owned, directly or indirectly, by thefirst mentioned company, corporation or entity; or(iii) which is a Subsidiary of another Subsidiary of the first mentionedcompany, corporation or entity, and, for this purpose, a company, corporation or entity shall be treated asbeing controlled by another if that other company, corporation or entity isable to direct its affairs and/or to control the composition of its board ofdirectors or equivalent body. Final Maturity Datemeans the date falling five (5) years from the first Drawdown Date.1.2Principles of Interpretation In this Agreement: 1.The table of contents and clause headings inserted herein are for ease of reference only and may be ignoredin construing this Agreement. 2.The "assets" shall be construed to include all present and future, tangible or intangible asset, property,income, revenue, account receivable or each right and benefit in any asset. 3.A "person" shall be construed to include any individual, company, partnership, sole proprietary or any othercorporate or unincorporated person or any other legal entity. 4.An Event of Default is "continuing" if such Event of Default has occurred and is neither eliminated norremedied or waived pursuant to the provisions hereof.12Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 5.A "month" means a period starting on one day in a calendar month and ending on the numericallycorresponding day in the next calendar month, provided that, if there is no such numerically correspondingday, it shall end on the last day in such next calendar month. 6.The RMB "equivalent" amount denominated in USD shall be converted at the exchange rate at the centralparity of the spot exchange rate for USD to RMB published or authorized to publish by the PBOC on 11:00a.m. (Beijing Time) on the previous Business Day of the calculation date, however, if no such central parityrate is available at that time, the exchange rate shall be determined through reasonable negotiation betweenthe Facility Agent and the Borrower. 7.The "liquidation" or "bankruptcy" of any person shall be construed to include any identical or comparablelegal process carried out in accordance with the laws of its place of incorporation or its place of business,and "entering into" such legal process includes such legal process being commenced upon resolution of suchperson or upon application of any person. 8.Parties hereto or any other person shall include its legal successors and permitted assignees. 9.This Agreement, any other agreement or document shall be construed to include itself and any amendment,modification, substitution or supplement thereof made from time to time in accordance with the provisionstherein.2.THE FACILITYThe Lenders agree to make available to the Borrower a Facility (the "Facility") in a maximum aggregate principalamount of RMB9,000,000,000 (IN WORDS: RMB nine billion) (or the equivalent amount drawn in USD); whetherthe Facility is drawn in RMB or USD shall be determined according to the Borrower’s actual needs.3.PURPOSES3.1The Borrower shall apply the Advances drawn to pay the costs and expenses related to construction of theProject.3.2The Borrower shall apply each Advance in accordance with the purposes agreed in the Finance Documents; andthe Borrower shall not misappropriate any Advance.3.3The Borrower shall use each Advance in accordance with the purposes permitted by laws and regulations of thePRC.13Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 4.DRAWDOWN4.1Drawdown Notice 1.The Borrower may (based on its actual needs) draw one or more Advances under the Facility during theAvailability Period in accordance with the provisions hereof. There is no limitation on the number ofdrawdowns. 2.In connection with a request for an Advance, the Borrower shall deliver a Drawdown Notice to the FacilityAgent no later than three (3) Business Days prior to the proposed Drawdown Date specified in theDrawdown Notice. 3.Each Drawdown Notice shall satisfy the following requirements: (1) it shall be substantially in the form andsubstance set out in Schedule 2 (Form of Drawdown Notice) hereof; (2) it shall be executed by the authorizedsignatory of the Borrower (including through handwritten signing or affixing chop of legal representative oraffixing signature chop) or by stamping the Borrower’s official seal; (3) the proposed Drawdown Datespecified in the Drawdown Notice shall be a Business Day; (4) the proposed drawdown amount shall notexceed the Available Commitment as of the date of such Drawdown Notice. 4.The Facility Agent shall, within one (1) Business Day upon receipt of each Drawdown Notice, forward suchDrawdown Notice to each Lender and notify each Lender of its Commitment Percentage for that Advance.4.2Conditions Precedent to the First DrawdownBefore the first drawdown, the Borrower shall provide the Facility Agent with the following documents or completethe following matters to the satisfaction of the Facility Agent, and the Facility Agent shall not unreasonably refuseor delay to confirm the satisfaction of each following conditions precedent: 1.the original copies of the executed Finance Documents; 2.photocopies (stamped with the Borrower’s official seal) of the latest business license, the latest receipt offiling for foreign invested enterprise issued by the Ministry of Commerce and the latest articles of association,and the original copy of the board resolutions of the Borrower; 3.the Shanghai foreign investment project filing certificate stamped with the Borrower’s official seal relating tothe Project obtained by the Borrower (the Project Shanghai Code: 310115MA1H9YGWX20195E2101001); 4.evidence that the Borrower’s Loan Account and the Revenue Collection Account have been opened;14Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 5.photocopies of the following documents stamped with the Borrower’s official seal: (1)the land use right certificate; (2)construction site planning permit corresponding to the purpose of such drawdown; (3)construction engineering planning permit corresponding to the purpose of such drawdown; and (4)construction permit corresponding to the purpose of such drawdown; 6.evidence that the ratio of the paid-up capital funds of the Project and the aggregate drawdown amount is noless than 2:8, and the Project capital funds shall be applied to the Project before the utilization of theAdvance; 7.a photocopy of the evidence that the Borrower has obtained the environment impact assessment fillingcertificate in relation to the Project, stamped with the Borrower’s official seal; 8.a photocopy of the construction all-risk insurance policy stamped with the Borrower’s official seal; and 9.if the Advance will be in the form of an entrusted payment pursuant to Clause 8.2, submitting a scanned copyof the relevant agreement or proof of use of the entrusted payment or photocopies of such evidence stampedwith the Borrower’s official seal.4.3Conditions Precedent to Each DrawdownThe Facility Agent shall confirm that each of the conditions precedent set out below have been satisfied (suchconditions precedent shall be satisfactory to the Facility Agent provided that such satisfaction shall not beunreasonably withheld or delayed), or the Facility Agent (as decided by the Majority Lenders) has otherwisewaived the condition. Upon the confirmation of the Facility Agent, each Lender shall make its participation in eachAdvance through the Facility Agent in accordance with its then-applicable Commitment Percentage pursuant toClause 8.1 (Making Advances) hereof. 1.The Facility Agent has received a Drawdown Notice issued by the Borrower in accordance with Clause 4.1(Drawdown Notice) hereof.15Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 2.On the proposed Drawdown Date specified in the Drawdown Notice, each representation of fact made by theBorrower in Clause 10 (Representations of Facts) hereof shall be true and correct in all material respects withthe same effect as though such representation of fact had been made on such Drawdown Date; it beingunderstood and agreed that any representation of fact which by its terms is made as of a specified date. 3.On the proposed Drawdown Date specified in the Drawdown Notice, no Event of Default by the Borrower hasoccurred and is continuing. 4.The Borrower has provided the scanned copies of those construction site planning permit, constructionengineering planning permit and construction permit corresponding to the purpose of such drawdown orphotocopies of the aforementioned permits stamped with the Borrower’s official seal, except where suchpermits have already been provided. 5.The Borrower has provided the scanned copies of the Shanghai Foreign Investment Project Filing Certificateand Environment Influence Assessment Filing Certificate or photocopies of such certificates stamped withthe Borrower’s official seal, except where such evidence has already been provided. 6.If the Advance will be in the form of an entrustment payment pursuant to Section 8.2, the scanned copies ofrelevant supporting agreements or documents evidencing the loan purpose or photocopies of such evidencestamped with the Borrower’s official seal are provided, except where such materials have already beenprovided.5.INTEREST5.1Interest Rate 1.The rate of interest accrued on each Advance drawn in RMB under the Facility shall be fixed interest rate,which shall be the Loan Prime Rate (LPR) minus 0.7625%, i.e. 4.0375% per year (tax included (for theavoidance of doubt, excluding foreign taxes, similarly hereinafter)). 2.The rate of interest accrued on each Advance drawn in USD under the Facility shall be the sum of the USDBenchmark Rate plus 130 BPs (tax included). The Borrower and the Facility Agent shall adjust the InterestRate on the Interest Rate Adjustment Date, and the adjusted Interest Rate shall be the sum of the thenapplicable USD Benchmark Rate plus 130 BPs (tax included). After each Interest Rate Adjustment Date, theadjusted Interest Rate shall apply to all Advances drawn in USD.16Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. If the USD Benchmark Rate is no longer announced, the Borrower and the Facility Agent shall endeavor toestablish an alternate rate of interest to such USD Benchmark Rate (including any mathematical or otheradjustments to the benchmark (if any) incorporated therein), provided that, if such alternate rate of interest asso determined would be less than zero, such rate shall be deemed to be zero for the purposes of thisAgreement. Notwithstanding any contrary provisions in this Agreement, such amendment shall becomeeffective without any further action or consent of any other party to this Agreement so long as the FacilityAgent shall not have received, within five (5) Business Days of the date that the Facility Agent shall haveposted such proposed amendment to all Lenders, a written notice from the Majority Lenders stating that suchMajority Lenders object to such amendment5.2Default Interest Rate 1.If the Borrower fails to pay any sum payable on its due date pursuant to the provisions of this Agreement,interest shall accrue on such overdue sum, from its due date up to the date of full payment, at 130% of theInterest Rate (the “Overdue Rate”). 2.If any Advance is misappropriated by the Borrower, interest shall accrue on the misappropriated Advance,from the date of misappropriation until the date such misappropriation is remedied, including by using suchmisappropriated funds for a purpose set forth in the Finance Documents or repayment by Borrower of suchmisappropriated funds, at 150% of the Interest Rate (the “Misappropriation Rate”). 3.If an Advance is both overdue and misappropriated, the Default Interest Rate accrued thereon shall be thehigher of two. 4.The interest accruing on the overdue and/or misappropriated Advances shall be compounded and suchcompound interest shall be paid on the next Interest Payment Date after the date on which the overdueamount has been fully paid/the misappropriation is rectified pursuant to relevant regulations by the PBOC.The amount of the compound interest shall accrue on a daily basis, (1) if the Borrower fails to pay any sumpayable on its due date pursuant to the provisions of this Agreement, the compound interest shall accrue onsuch overdue sum, from its due date up to the date of full payment; or (2) if any Advance is misappropriatedby the Borrower, the compound interest shall accrue on the misappropriated Advance, from the date ofmisappropriation until the date such misappropriation is remedied.17Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 5.3Calculation of Interest 1.Interest and/or default interest on any amounts outstanding hereunder shall accrue from day to day and becomputed on the basis of a 360-day year and the actual number of days elapsed. 2.Interest shall accrue on each Advance commencing on the date on which such Advance is paid to the LoanAccount.5.4Payment of Interest 1.The Borrower shall pay accrued interest calculated in accordance with Clause 5.1 (Interest Rate) and Clause5.3 (Calculation of Interest) hereof on the Interest Payment Date. 2.The Facility Agent shall notify the Borrower in writing no later than fifteen (15) Business Days prior to eachInterest Payment Date of the amounts and calculation method of interest payable by the Borrower on eachInterest Payment Date. 3.As per the requirements of the Borrower, the Lenders shall issue the interest value-added tax invoices to theBorrower pursuant to applicable laws and regulations. 4.Notwithstanding any other provisions of this Agreement, the Borrower shall ensure that no later than ten (10)days prior to the next Interest Payment Date, the total capital balance of its Revenue Collection Account isnot less than the amount of interest payable on that Interest Payment Date. For the avoidance of doubt, theBorrower shall not be required to deposit any funds as an interest reserve in the Revenue Collection Accountin respect of any new drawdown made during the ten (10)-day period prior to the applicable Interest PaymentDate.6.REPAYMENT6.1Loan PeriodThe loan period under this Agreement shall commence from the first Drawdown Date and end on and include theFinal Maturity Date (the "Loan Period").18Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 6.2Repayment 1.The Borrower shall repay the principal on each Repayment Date as set forth in the table below: Repayment DateCumulative repayment percentage of the OutstandingAdvances as of the expiry date of the AvailabilityPeriodThe date falling thirty-six (36) months from the firstDrawdown Date7.5%The date falling forty-two (42) months from the firstDrawdown Date15%The date falling forty-eight (48) months from the firstDrawdown Date30%The date falling fifty-four (54) months from the firstDrawdown Date65%The Final Maturity Date100% 2.Notwithstanding any other provisions of this Agreement, the Borrower shall ensure that no later than ten (10)days prior to the next Repayment Date, the total capital balance of its Revenue Collection Account is not lessthan the amount of principal and interest payable on such Repayment Date.7.PREPAYMENTSThe Borrower may prepay all or part of the Outstanding Advances on any Business Day after the first DrawdownDate, provided that the Borrower shall notify the Facility Agent in writing no later than the 20th day of the monthimmediately preceding the month of the proposed prepayment date (the “Prepayment Notice”). The Borrowershall not pay any penalties or any fees regarding such prepayment, provided that prepayment of the principalamount shall be made together with the interest accrued on such prepaid principal through the applicableprepayment date. The Prepayment Notice shall specify the amount and the date of the prepayment. No amount soprepaid may be borrowed again.The amount of each prepayment by the Borrower shall not be less than RMB 100 million and shall be an integralmultiple of RMB 100 million. Amounts prepaid shall offset the principal of the Outstanding Advances in the reverseorder.19Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 8.PAYMENTS8.1Making AdvancesEach Lender participating in an Advance pursuant to Clause 4.3 (Conditions Precedent to Each Drawdown) hereofshall pay its portion of the Advance denominated in RMB or USD under the Facility to the Facility Agent’s accountno later than 11:00 a.m. (Beijing Time) on the proposed Drawdown Date specified in the Drawdown Notice inrespect of that Advance in accordance with its Commitment Percentage at the time of the Advance.8.2Payment of Advances 1.If any single payment amount exceeds RMB5,000,000 (IN WORDS: RMB five million) or its equivalent inUSD, payment by the Lenders upon entrustment shall be applicable. Entrusted payment by the Lendersrefers to the Facility Agent paying out each Advance to the Loan Account on each Drawdown Date inaccordance with the Borrower’s Drawdown Notice and entrustment of payment, and transferring the relevantAdvance to Borrower’s Counterparty Accounts on the same day.In the event of payment by the Lenders upon entrustment, the Borrower shall submit the agreements inrelation to the entrusted payment or documents evidencing the loan usage to the Facility Agent before eachAdvance is made. 2.In addition to the circumstances stipulated in the first paragraph above, the Borrower may choose to makepayment by either independent payment or entrusted payment at its own discretion. Independent payment bythe Borrower means that the Facility Agent pays out the Advances to the Loan Account in accordance withthe Borrower’s Drawdown Notice and the Borrower independently pays out to the Borrower’s counterpartiesin satisfaction of the usage purposes stipulated herein. The Borrower shall present the relevant payment listevidencing the payment status of each Advance on a quarterly basis to the Facility Agent. 3.If the Borrower has met the conditions under Article 4 (Drawdown) of this Agreement, the Lenders and theFacility Agent are obliged to make the Advance on the proposed Drawdown Date (whether in the case ofautonomous payment to the Loan Account or entrusted payment to the Borrower’s Counterparty Account). Ifany Lender fails to make the Advance on time, the Borrower shall have the right to require such Lender totransfer its Commitment, and the other Lenders have the priority right to such transfer.20Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 8.3Payment by the BorrowerThe Borrower shall pay any amount payable under this Agreement on its due date no later than 11:00 a.m. (BeijingTime) to the account designated by the Facility Agent at the Effective Date.8.4Payment by the Facility Agent 1.The Facility Agent shall pay to the Loan Account the proceeds of the relevant Advances actually received byit pursuant to Clause 8.1 (Making Advances) hereof and shall make payment pursuant to Clause 8.2(Payment of Advances) hereof no later than 3:00 p.m. (Beijing Time) on each Drawdown Date, and theFacility Agent is obliged to notify the payment of such Advance to each Lender. 2.The Facility Agent shall pay to the account of each Finance Party each amount actually received by itpursuant to Clause 8.3 (Payment by the Borrower) hereof on the date of receipt in such order and amount asset out in Clause 8.5 (Distribution Order) hereof.8.5Distribution OrderUnless otherwise required by the laws and regulations, each payment received by the Facility Agent under Clause8.3 (Payment by the Borrower) hereof shall be distributed in such order and amount as set out below: 1.in and towards any interest (including but not limited to any compound interest and default interest) due andpayable by the Borrower hereunder pro rata among the Lenders; and 2.in and towards any principal amount due and payable by the Borrower hereunder pro rata among theLenders.8.6Advances 1.If no Material Adverse Event has occurred, the Facility Agent shall advance any amount on behalf of anyLender within the Facility Agent’s Commitment when such Lender is unable to make the payment. TheFacility Agent is entitled to recover such advances from the Lender who fails to make the payment. 2.Other Lenders may make payment on account of any Lender who fails to make payment, and such otherLenders making such advances are entitled to recover from the Lender who fails to make the payment.21Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 8.7Currency of Payments 1.Any Advance shall be drawn in the currency specified in the Drawdown Notice in respect of that Advance. 2.Any interest accruing on any amounts shall be made in the currency in which such amounts aredenominated. 3.Any repayment or prepayment of any Outstanding Advances shall be made in the currency in which suchOutstanding Advances are denominated. 4.Other payments payable under this Agreement shall be made in the currency specified herein.8.8Set OffThe Borrower shall not exercise any right of set-off when making any payment under this Agreement.8.9Non Business DaysIf a payment payable is made on a day that is not a Business Day pursuant to the provisions of this Agreement, itshall be made on the next succeeding Business Day.8.10Pro Rata Sharing 1.Except as otherwise provided in Clause 8.10 (Pro Rata Sharing) hereof, if any Finance Party (the“Recovering Lender”) receives any payment due and payable under this Agreement from the Borrowerwhich is contrary to Clause 8.3 (Payment by the Borrower) hereof, that Recovering Lender shall forthwithnotify the Facility Agent of the receipt of such amount (the “Sharing Amount”) on the date of receipt andpromptly transfer such Sharing Amount to the Facility Agent. 2.The Facility Agent shall treat the Sharing Amount received by it pursuant to paragraph 1 of Clause 8.10 (ProRata Sharing) hereof as being made by the Borrower and shall distribute the same to each Finance Party’saccount in accordance with paragraph 2 of Clause 8.4 (Payment by the Facility Agent) hereof.22Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 3.Paragraph 1 of Clause 8.10 (Pro Rata sharing) hereof shall not be applicable to any of the following: (1)any payment received by any Lender under transfer under this Agreement. (2)any payment recovered by any Finance Party in arbitration against the Borrower in respect of thedisputes arising under this Agreement, provided that: (i) such Financing Party shall have given priornotice of such arbitration proceeding to other Finance Parties, and (ii) other Finance Parties have notparticipated in the said arbitration within twenty (20) Business Days after receipt of such notices.9.STAMP DUTIES AND FEES9.1Stamp DutiesAll stamp duties in respect of this Agreement shall be borne by the Borrower and each Finance Party respectivelypursuant to the laws and regulations.9.2No Syndication FeeThe Borrower shall not pay any fee in respect of the syndication loan under this Agreement, including but notlimited to syndication fees such as commitment fees, arrangement fees, agency fees or undrawn fees, upfrontfees, consulting fees and due diligence fees.9.3Costs and ExpensesAny costs and expenses (including legal fees, appraiser fees, etc.) incurred in relation to the execution of theFinance Documents and the syndication of the loan hereunder (including but not limited to the expenses incurredin relation to the preparation, negotiation, printing, enforcement and the syndication process of this Facility) shallbe borne by each party respectively.23Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 10.REPRESENTATIONS OF FACTSThe Borrower makes the following representations to each Finance Party respectively on the Effective Date andon each Drawdown Date (except for paragraph 9 (No Material Default) and paragraph 10 (No Material Litigationand Arbitration) which shall be given only on the Effective Date) with reference to the facts and circumstances thensubsisting: 1.Legal StatusThe Borrower is a company duly incorporated and validly existing under the laws and regulations of the PRC. 2.PowersThe Borrower has necessary capacity for civil conduct and capacity for civil rights to own its assets, to carryout its operations and to enter into and perform the Finance Documents. 3.AuthorizationAll necessary internal authorizations for the Borrower to enter into and perform the Finance Documents havebeen duly obtained, and each of the Finance Documents has been duly executed by the authorized signatoryof the Borrower. 4.LegalitySubject to the Legal Restraint, the obligations to be assumed by the Borrower under the Finance Documentsconstitute the legal, valid and binding obligations of the Borrower. 5.Breach of Other DocumentsThe entering into and performance by the Borrower of the Finance Documents do not and will not violate (a)its articles of association, and/or (b) any applicable law of the PRC. 6.Liquidation and Bankruptcy EventsThe Borrower has not entered into any liquidation process, nor is there any bankruptcy event.24Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 7.InformationAll written documents provided by the Borrower are true and valid in all material aspects as of the date ofdelivery of the same. 8.Material LicensesThe Borrower has obtained material licenses in relation to the Project pursuant to laws and regulations of thePRC. 9.No Material DefaultTo the Borrower’s knowledge, as of the Effective Date of this Agreement, there is no material default of theBorrower under any agreement to which it is a party (material is defined as RMB500,000,000 (or itsequivalent in other currency)). 10.No Material Litigation and ArbitrationTo the Borrower’s knowledge, as of the Effective Date of this Agreement, there is no litigation or arbitration ofthe Borrower that will produce any Material Adverse Effect (other than those of a frivolous or vexatious naturewhich the Borrower is contesting in good faith).11.COVENANTSThe Borrower undertakes with each Finance Party as follows: 1.Compliance with LawThe Borrower shall ensure that any laws, regulations and rules relevant to its business and operation will becomplied with in all material respects. 2.PermitsThe Borrower shall obtain, maintain and comply with all government approvals or filings in relation to theProject. 3.Supply of Information (1)The Borrower shall, within one hundred and eighty (180) days after the end of each financial year orsuch longer period as consented by the Facility Agent (and the Facility Agent shall not unreasonablyreject or delay to give such consent), provide the Facility Agent with its audited financial statements.25Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (2)The Borrower shall, within ninety (90) days after the end of each semi-financial year or such longerperiod as consented by the Facility Agent (and the Facility Agent shall not unreasonably reject ordelay to give such consent), provide the Facility Agent with its unaudited financial statements inrespect of that semi-financial year. (3)The Borrower shall provide the Facility Agent a statement with respect to the investment andconstruction progress of this Project at the end of each quarter. 4.Project CapitalThe Borrower shall ensure that the ratio of the paid-up capital funds of the Project and the aggregatedrawdown amount is no less than 2:8, and the Project capital funds shall be applied to the Project before theutilization of the Advance. The Borrower shall ensure that the Project capital has been fully paid on theearlier of: (1) the end of the Availability Period; or (2) the next Drawdown Date after the total drawn downamount reaches 90% of the Facility. For the avoidance of doubt, before the capital funds of the Project (i.e.20% of the total investment amount set forth in the Shanghai foreign investment project filing certificate forthe Project) is fully paid-up, the drawdown amount shall not exceed 90% of the Facility. 5.External FinancingIf the Borrower incurs any other financing for the Project, proceeds of such financings shall firstly be used torepay the Facility hereunder (for the avoidance of doubts, this provision does not limit the Borrower fromborrowing from its shareholders or other Affiliate Companies within the group; the Borrower may borrow fromits shareholders or other Affiliate Companies within the group without repaying the Facility hereunder). 6.Equity InvestmentWithout the consent of the Majority Lenders, the Borrower shall not make any equity investment during theLoan Period. 7.Reduction of Registered CapitalThere can be no reduction of the registered capital of the Borrower during the Loan Period without the priorconsent of the Facility Agent.26Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 8.Negative PledgeThe Borrower shall not create any Security Interests over any of its Project related assets, except for: (1)Any lien arising in the ordinary course of trading, any statutory priority arising from constructionprojects and other Security Interests arising by operation of laws and regulations, (2)Security Interests arising in the ordinary course of business of the Borrower (including but not limitedto any priority over goods, materials or equipment (acquired in an arm’s length transaction) incurredor constituted by any title retention arrangement in the terms and conditions set out by the supplier orseller in relevant agreements), (3)Security Interests created according to the Finance Documents, or (4)the Security Interest created with the consent of the Majority Lenders (such consent shall not beunreasonably withheld or delayed by the Majority Lenders). 9.Material Default NotificationThe Borrower shall notify the Facility Agent of material default under any liability of the Borrower to any thirdparty (material is defined as exceeding the greater of (i) RMB750,000,000 (or its equivalent in other currency)or (ii) 20% of the Borrower’s Net Assets). 10.Cost OverrunsAll cost overruns in the construction of the Project (exceeding the financing amount hereunder) shall be self-funded (for the avoidance of doubt, financings from banks other than the Lenders shall not be consideredself-funded) by the Borrower. 11.Revenue Collection Account Management (1)The Borrower shall collect all of its operating revenue directly into any of the Revenue CollectionAccounts. The foregoing provision shall not apply to any failure to collect such revenues which failureis not attributable to the Borrower.27Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (2)Subject to the Account Control Agreement, the Borrower shall be entitled to withdraw, utilize or applyfunds from any Revenue Collection Account for its daily business operation without limitation.Notwithstanding the above, the Borrower shall not transfer funds from the Revenue CollectionAccount to any of its accounts under the same account name opened with banks other than theFinance Parties, except for the following circumstances: (a)the transfer is used to repay loans for the purpose of the Project borrowed from the Borrower’sshareholders or any other Affiliate Company within the group; (b)the transfer is used for the purpose of repaying any of its working capital loans; (c)the transfer is used for currency conversion for the purpose of payment of expenses related tothe Project; or (d)other transfers agreed by the Majority Lenders (the Majority Lenders shall not unreasonablyrefuse or delay to give such consent). (3)Account Balance UndertakingDuring the Loan Period, the Borrower shall ensure the total capital balance of the Revenue CollectionAccounts is not less than the aggregate amount of principal and interest payable on the next InterestPayment Date and/or the next Repayment Date. 12.Conditions Subsequent (1)The Borrower shall complete the mortgage registration under the Mortgage Agreement over the Landwithin one-hundred and twenty (120) days after executing the Mortgage Agreement over the Land,provided that the Security Agent has, at the reasonable request of the Borrower, taken all necessaryacts and delivered all necessary documents for the purpose of the mortgage registration. (2)The Borrower shall execute the relevant mortgage agreements and further complete the mortgageregistration of the joint plant I mortgaged to the Security Agent within one-hundred and twenty (120)days upon obtaining the real estate certificate of the joint plant I of the Project, provided that theSecurity Agent has, at the reasonable request of the Borrower, taken all necessary acts anddelivered all necessary documents for the purpose of the mortgage registration.28Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (3)The Borrower shall execute the relevant mortgage agreements and further complete the mortgageregistration of the relevant plant mortgaged to the Security Agent within one-hundred and twenty(120) days upon obtaining all real estate certificates of the plant (except the joint plant I)the Project,provided that the Security Agent has, at the reasonable request of the Borrower, taken all necessaryacts and executed and delivered all necessary documents for the purpose of the mortgageregistration (4)If the Borrower has used its commercially reasonable endeavors but has not been able to completethe mortgage registrations required from item (1) through item (3) above due to the registrationauthority’s rejection to accept the mortgage registrations for any reason beyond the control of theBorrower it shall not constitute an Event of Default of the Borrower. The Borrower shall continue tocooperate with the Security Agent to conduct the mortgage registration herein. Meanwhile, theBorrower shall ensure that it will not create any Security Interests over the land use right and theplant to be mortgaged under relevant mortgage agreements in favor of any third party other than theLenders. (5)Conditions Subsequent in respect of the Borrower’s Insurance (a)The Borrower shall submit an endorsement showing that the Security Agent has beendesignated as the first beneficiary under the joint plant IV all-risks insurance within one-hundredand twenty (120) days after the Effective Date of this Agreement. (b)If the Borrower insures any equipment related to the Project, the Security Agent shall bedesignated as the first beneficiary of such insurance. (c)During the Loan Period, except the all-risk insurance of the joint plant I, the Borrower shallinsure any construction in progress or plant buildings related to the Project and timely renewthe insurance, and the Security Agent shall be designated as the first beneficiary of suchinsurance.29Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (d)Upon the occurrence of any insurance claim, (i) if the amount of insurance proceeds is lessthan or equal to 60% of the value of the insured assets of the Project, the Security Agent shall,after receiving the insurance proceeds, transfer the such insurance proceeds to the Borrowerfor replacing or repairing the corresponding insured assets; (ii) if the amount of insuranceproceeds exceeds 60% of the value of the insured assets of the Project, the Borrower and theSecurity Agent will negotiate in good faith on the use of the insurance proceeds. If the Borrowerhas provided its replacement or repair plan of the relevant insured assets, the Security Agentshall assess such plan. If the Security Agent confirms that the plan is acceptable, the SecurityAgent shall transfer the relevant insurance proceeds to Borrower. If the Security Agent refusesto accept such plan, such insurance proceeds may be used to prepay the loans under thisAgreement. However, the Security Agent shall not unreasonably refuse to accept such plan.12.EVENTS OF DEFAULT12.1Events of DefaultOnly the following events constitute Events of Default by the Borrower: 1.Payment DefaultThe Borrower fails to pay any amount due and payable on the Repayment Date or Interest Payment Date inaccordance with the provisions of this Agreement, and fails to remedy such default within twenty (20) daysfrom the Repayment Date or Interest Payment Date. 2.MisappropriationThe Borrower misappropriates any Advance within the Loan Period and fails to remedy, including by usingsuch misappropriated funds for a purpose set forth in the Finance Documents or repayment by Borrower ofsuch misappropriated funds, within twenty (20) days upon occurrence of such misappropriation. 3.MisrepresentationThe representations or statements made in Clause 10 (Representations of Facts) hereof by the Borrower isuntrue and causes a Material Adverse Effect, and the Borrower fails to remedy such default within forty-five(45) days from the date on which the Facility Agent issues a written notice to the Borrower.30Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 4.Breach of Other Obligation (a)The Borrower fails to perform the covenants made in Clause 11 (Covenants) hereof or comply withother obligations hereunder and causes a Material Adverse Effect, and fails to remedy such defaultwithin forty-five (45) days from the date on which the Facility Agent issues a written notice to theBorrower. (b)Notwithstanding the foregoing, it will not constitute an Event of Default by the Borrower under thisClause 12.1 solely on the grounds that Borrower failed to comply with item 11(3) of Article 11(Covenants). 5.Bankruptcy ProcessThe Borrower is insolvent or enters into bankruptcy process and fails to remedy or terminate the bankruptcyprocess within sixty (60) days upon the occurrence of such events. 6.Enforcement EventsThe assets of the Borrower with an aggregate value exceeding the greater of (i) RMB0750,000,000 (or itsequivalent in another currency) or (ii) 20% of the Borrower’s Net Assets are enforced, distressed, seized orfrozen based on the final judgment of the court, and such actions are not discharged within sixty (60) days. 7.Cross DefaultThe Borrower fails to pay any uncontested indebtedness with an aggregate value exceeding the greater of (i)RMB750,000,000 (or its equivalent in another currency) or (ii) 20% of the Borrower’s Net Assets on thematurity date or upon expiry of the grace period, and fails to remedy within one-hundred and eighty (180)days from the date on which the Facility Agent issues a written notice.12.2Remedies Available to the Finance Parties 1.Notices (1)Any Lender shall promptly notify the Facility Agent upon becoming aware of an Event of Default. (2)The Facility Agent shall notify each Lender upon being notified by the Borrower or any Lender of theoccurrence of an Event of Default.31Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (3)The Facility Agent shall notify the Borrower upon being notified by any person other than the Borrowerof the occurrence of an Event of Default, so that the Borrower can confirm and explain or makeremedies. 2.RemediesDuring the period when any Event of Default occurred and is continuing, the Facility Agent may (acting onthe decisions of the Majority Lenders), after giving written notice to the Borrower, exercise one or more of thefollowing rights in any order: (1)to grant any waiver or approve any remedy of the relevant Event of Default; (2)to declare suspension of all or any part of Advances requested in any Drawdown Notice which have notbeen drawn; (3)to cancel all or any part of Total Commitments; whereupon so declared the Commitment of eachLender shall be cancelled pro rata and the Total Commitments so cancelled may not be borrowedagain; (4)to declare all or any Outstanding Advances together with all accrued interests, fees (if any) and otheramounts hereunder immediately due and payable; and (5)to enforce the Security created under the Mortgage Agreement over the Land and any other FinanceDocuments. 3.Action by the Facility AgentEach right of remedies hereunder or the right of any Finance Party to commence and continue any legaldispute resolution proceedings against the Borrower may be exercised through the Facility Agent. 4.Undertakings of the Finance Parties (1)Each Finance Party agrees not to exercise any of its rights under this Agreement in a way that wouldconflict with this Agreement. (2)Each Finance Party undertakes with each other Finance Party that, except where this Agreementspecifically provides otherwise, (i)it will not demand from or accept any payment of any type to be separately applied towards thesatisfaction of any debt owing to it by the Borrower under this Agreement; and32Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (ii)it will not separately demand or accept any Security Interests or financial support with respect toany debt owing to it by the Borrower under this Agreement. 5.DeductionWhen an Event of Default is continuing, each Finance Party shall have the right to deduct from any accountopened by the Borrower with that Finance Party and transfer to the Facility Agent for pro rata sharing inaccordance with Clause 8.10 (Pro Rata Sharing) of this Agreement.13.RELATIONSHIP AMONG FINANCE PARTIES13.1Appointment of the Agent 1.Each of the other Finance Parties hereby irrecoverably appoints the Facility Agent to act as its agent underand in connection with this Agreement, and authorizes the Facility Agent to exercise the rights which arespecifically delegated to the Facility Agent under this Agreement together with any other reasonableincidental rights. 2.Each of the other Finance Parties hereby authorizes the Security Agent to directly execute the MortgageAgreement over the Land and any other Finance Documents to which the Security Agent is a party and thesupplementary or amendment agreements thereto with the Borrower in accordance with the principles andrelevant facts determined in this Agreement, or execute and submit the Mortgage Agreement over the Landand any other relevant Finance Documents in the form required by the local registration authority, orappropriately reduce the amount of the secured claims according to the requirements of the local registrationauthority to meet its internal requirements that the amount of secured claims must be lower than theevaluation value of the collateral.13.2Nature of Agency 1.The relationship among the Agent and other Finance Parties is that of principal and agent only. 2.The Agent is not the agent of the Borrower in any respect.33Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 13.3Duties of the Facility Agent 1.The Facility Agent shall, within one (1) Business Day upon receipt of the originals or copies of any documentfrom any party to this Agreement for any other party to this Agreement, forward the same to that other party;except where provided otherwise in this Agreement, the Facility Agent is not responsible for the adequacy,accuracy or completeness of the form and substance of any document it forwards to any other party to thisAgreement. 2.The Facility Agent shall open and maintain accounts in connection with this Agreement and, upon demand byeach Lender, provide that Lender with such accounts. 3.The Facility Agent shall be responsible for the management and control of making Advances and thepayment, and the payment of principal and interest by the Borrower in accordance with Clause 8.1 (MakingAdvances), 8.2 (Payment of Advances) and Clause 8.4 (Payment by the Facility Agent) hereof. 4.The Facility Agent shall, within one (1) Business Day upon receipt of a notice from any party to thisAgreement that the occurrence of an Event of Default, notify each Finance Party. 5.The Facility Agent shall notify each Finance Party within one (1) Business Day upon becoming aware offailure to make any payment due and payable by any party to this Agreement to any other Finance Partypursuant to this Agreement. 6.The Facility Agent shall, acting in accordance with the decisions of the Majority Lenders, organize eachFinance Party to commence and/or participate in any arbitration or legal dispute resolution proceedingsrelating to this Agreement, provided that, each Lender shall have indemnified or made advances to theFacility Agent against any and all costs, fees, expenses (including but not limited to legal fees) and liabilitiessustained or to be sustained or incurred by the Facility Agent in acting in accordance with such decisions. 7.The Facility Agent shall have no liability to any other party to this Agreement for any party’s breach of anyprovision of this Agreement. 8.If any decision of the Majority Lenders or all the Lenders or acting in accordance with such decisioncontravenes or would contravene the laws and regulations, after giving prior notice to each Finance Party,the Facility Agent may not act in accordance with such decisions. 9.The Facility Agent shall perform each of its obligations under this Agreement with care and diligence.34Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 10.The Facility Agent’s obligations under the Finance Documents are solely operational and administrative innature. The Facility Agent shall have no other obligations except as expressly provided in the FinanceDocuments.13.4 Duties of the Security Agent 1.The Security Agent shall notify the Facility Agent of any notice, document or payment notice received by it(acting in its capacity as the Security Agent for the Finance Parties) from any obligor under any FinanceDocuments as soon as possible. 2.The Security Agent shall deliver to any other party any original or copy of any document delivered by anyparty of this Agreement to the other party through the Security Agent upon received such documents; unlessotherwise agreed in this Agreement, the Security Agent shall not be responsible for reviewing the adequacy,accuracy or completeness of the format and content of any document delivered by it. 3.The Security Agent shall notify each Finance Party as soon as possible after receiving a notice from any partyof this Agreement that an Event of Default has occurred. 4.The Security Agent has the authority to enter into each of the Finance Documents expressly required to beentered into by it. 5.The Security Agent holds the relevant Security only on behalf of the Finance Parties in accordance with theterms of the relevant Finance Documents. 6.The Security Agent shall enforce any Security or exercise any right, power, authority or discretion specificallyvested in the Security Agent under or in connection with the Finance Documents. 7.The Security Agent’s obligations under the Finance Documents are solely operational and administrative innature. The Security Agent shall have no other obligations except as expressly provided in the FinanceDocuments.13.5 Rights of the Facility Agent 1.Unless it has the knowledge to the contrary, the Facility Agent may assume: (1)any representation of facts made under or in connection with this Agreement by any other party to thisAgreement is true, complete and accurate. (2)no Event of Default is continuing.35Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (3)no other party to this Agreement has breached its obligation under this Agreement. (4)any right vested in any other party to this Agreement or the Majority Lenders or all the Lenders has notbeen exercised. 2.The Facility Agent may engage, pay for and act in reliance on the advice and services of lawyers,accountants, appraisers, translators or other professional advisers as it deems necessary and accepted by allthe Lenders. 3.The Facility Agent may act in reliance on any communication or document believed by it to be true. 4.The Facility Agent may disclose to any other party to this Agreement any information believed by it to bereasonably received pursuant to the provisions of this Agreement.13.6 Independent Credit Appraisal and Subsequent Management of the LoanEach Lender confirms that it has been and will continue to be solely responsible for making an independentinvestigation, review and assessment of the financial condition, creditworthiness, business, legal status and otherconditions of the Borrower. Further, each Lender confirms that it has made independent judgments and decisionsand will assume the risks of such judgments and decisions, including but not limited to: 1.investigation, review and assessment of the adequacy, accuracy or completeness of any information relatingto any other party to this Agreement or the transactions contemplated under this Agreement whether suchinformation is supplied to that Lender by the Facility Agent or the Lead Arranger; 2.investigation, review and assessment of the financial condition, creditworthiness, business, legal status orother conditions of any other party to this Agreement; 3.investigation, review and assessment of the legality, effectiveness, binding effect, sufficiency or enforceabilityof this Agreement or any document in connection therewith or any action taken or to be taken by any otherparty to this Agreement; 4.The Facility Agent and the Account Bank shall fulfill its supervisory responsibility of the accounts opened byBorrower under this Agreement; and each Finance Party shall independently fulfill the subsequentmanagement responsibility of the loans, and may require material and information necessary for fulfillingsuch responsibilities through the Facility Agent.36Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 13.7 Agent and Lead Arranger as LendersIf the Agent or the Lead Arranger is also a Lender, it shall be entitled to rights and subject to liabilities as a Lenderin accordance with the provisions of this Agreement.13.8 Syndication Conference 1.Decision-making Mechanism of the Lenders (1)In the circumstance that the decisions of the Majority Lenders or all the Lenders are expressly requiredpursuant to the provisions of this Agreement, any Lender may notify the Facility Agent upon becomingaware of its occurrence, whereupon the Facility Agent shall promptly notify each Lender and requestdecisions to be made upon receipt of such notice or upon becoming aware of the same. (2)Each Lender shall, upon receipt of a notice issued by the Facility Agent pursuant to this Clause 13.8(Syndication Conference), notify the Facility Agent of its decisions within the time limit specified therein. (3)Unless otherwise provided in this Agreement, the Facility Agent shall act in accordance with thedecisions of the Majority Lenders or all the Lenders pursuant to the provisions of this Agreement; theFacility Agent shall bear no liability to other parties to this Agreement for taking or refraining from anyaction if it acts in accordance with the decisions of the Majority Lenders or all the Lenders. (4)The decisions of the Majority Lenders or all the Lenders made in accordance with the provisions of thisAgreement shall be binding on each Lender, and each Lender shall assist the Facility Agent in carryingout any such decision of the Majority Lenders or all the Lenders. (5)In the absence of a decision from the Majority Lenders or all the Lenders in accordance with theprovisions of this Agreement, the Facility Agent shall make a preliminary settlement proposal in respectof the circumstance and solicit opinions of each Lender in accordance with the procedures describedabove. If any Lender fails to notify the Facility Agent of its decisions within the time limit specified in thenotice issued by the Facility Agent, it shall be deemed as having approved such settlement proposal.37Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (6)The Facility Agent may (but is not obliged to) take or refrain from an action if it considers such action orinaction is in the best interest of the relevant Lenders. 2.Consent of all the LendersExcept as otherwise provided in this Agreement, without the consent of all Lenders, no amendment to thisAgreement shall: (1)change the Commitment, the Total Commitments or the currency of the Advances; (2)change the Loan Period; (3)a change of the Interest Rate or the Default Interest Rate, except as otherwise provided in thisAgreement; (4)change the currency, the amount or the payment date of any sum payable to any Finance Party underthis Agreement; (5)amend the definition of the "Majority Lenders"; (6)amend Clause 17 (Amendments and Waivers) hereof. 3.Syndication Conference Procedures and Rules (1)Upon the circumstances where the Facility Agent shall act in accordance with the decisions of theMajority Lenders or (as the case may be) all the Lenders pursuant to this Agreement, the Facility Agentshall convene and preside over the syndication conference. (2)In addition to the circumstances stipulated in the first paragraph above, the Facility Agent shall beresponsible for the convening of the syndication conference in time upon the following circumstances: (a)any material matter deemed as necessary to be decided by convening a syndication conferenceby the Lead Arranger; or (b)joint written proposal of the Lenders whose commitments aggregate one third or more of the TotalCommitments.38Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (3)If the Facility Agent convenes a syndication conference, it shall give written notice to each Lender atleast five (5) Business Days or a shorter period determined by the Facility Agent prior thereto. However,at the Facility Agent’s discretion and in accordance with this Agreement, it may give the notice of thesyndication conference in such manner that it deems to be positive for relevant Lenders. The notice ofthe conference shall include the time, place, manner and the proposal of the syndication conference. (4)The syndication conference may be held on site or by communications or by written consents (with theFacility Agent notifying each Lender by facsimile to get its consent). The manner of the conference willbe decided by the Facility Agent and will be specified in the notice of the conference. However, tominimize expense, the Facility Agent shall choose to hold the conference by written consent to theextent possible. In the case of a communication conference, the specific method of communication andmaking written resolutions will be decided by the Facility Agent and will be specified in the notice of theconference. (5)If any of the Lenders fail to instruct the Facility Agent in relation to a matter to be decided by theMajority Lenders or by all the Lenders (as the case may be) before the date of its decision, it shall bedeemed as having approved such matter. (6)Each Lender shall, within two (2) Business Days upon the receipt of the notice of conference, notify theFacility Agent whether it will attend the conference, and may submit the provisional proposal two (2)Business Days prior to the conference. The Facility Agent shall notify other Lenders of such provisionalproposal. (7)Each Lender may appoint one or two authorized representatives and several general representatives toattend the syndication conference. All representatives may participate in discussions and offer opinions,but only the authorized representatives are entitled to vote on behalf of that Lender. (8)A valid resolution of the syndication conference shall be recorded in writing by the Facility Agent andaffixed with the company chop of each Lender. An original of the valid resolution of the syndicationconference shall be sent to each Lender. Not all the valid resolutions need to be disclosed to theBorrower unless it is related to the rights, obligations or other interests of the Borrower under thisAgreement.39Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 4.Intercreditor AgreementThe Finance Parties may enter into an intercreditor agreement separately, provided that such agreementshall not prejudice any right or increase any obligation of the Borrower under this Agreement.13.9 Compensation by the LendersEach Lender shall, within three (3) Business Days upon the request of the Facility Agent, make compensation tothe Facility Agent against all reasonable costs, fees, losses, expenses (including legal fees) and liabilities (exceptthose caused by the negligence or misconduct of the Facility Agent) incurred or to be incurred by the Facility Agentin acting as an agent pursuant to this Agreement in proportion to its Commitment Percentage.13.10 Deduction by the AgentIf any Finance Party owes an amount to the Agent under this Agreement, the Agent may, after giving notice to thatFinance Party, deduct an amount not exceeding that amount from any payment to that Finance Party which theAgent would have otherwise obliged to make under this Agreement and apply the amounts deducted towards thesatisfaction of the amounts owed, and, the amounts so deducted shall be regarded as having been received by theindebted Finance Party.13.11 Other BusinessEach Finance Party (including its branches) may accept deposits from, make other loans to or engage in any otherbanking business with the Borrower.13.12 Dealings with the LenderUnless the Agent receives a notice from the relevant Lender issued in accordance with the provisions of this Agreementstating the contrary, it may assume that such Lender is entitled to payments under this Agreement.14.TRANSFER14.1 TransfereeThis Agreement is binding and effective on each party hereto and their respective successors and assignees.14.2 Transfer by the BorrowerUnless otherwise consented to by all Lenders, the Borrower may not transfer all or any of its rights or obligationsunder this Agreement.40Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 14.3 Transfer by the LendersAny Lender (the “Transferring Lender”) intending to transfer all or any of its rights and/or obligations hereunder toone or more financial institutions (the “Transferee Bank”) shall give at least ten (10) Business Days’ prior notice(the “Transfer Notice”) to the Borrower and the Facility Agent, and obtain the prior written consent of theBorrower. However, no prior written consent is required under the following circumstances: (1) the TransferringLender transfers all or any of its rights and/or obligations hereunder to other Lenders; (2) the Transferring Lendertransfers all or any rights and/or obligations hereunder to its branches or sub-branches (3) any transfer required bythe Borrower in accordance with paragraph 3 of Clause 8.2 hereof and (4) an Event of Default has occurred and iscontinuing. If the Transferring Lender transfers all or any of its rights and/or obligations hereunder to other financialinstitutions other than the Finance Parties, other Finance Parties shall enjoy the priority to acquire the transferupon the equal conditions.14.4 Effecting a TransferThe transfer made by a Lender in accordance with Clause 14.3 (Transfer by the Lenders) hereof shall take effectupon the date specified in a duly completed Transfer Certificate in the form and substance set out in Schedule 3(Form of Transfer Certificate) hereof and executed by the Transferring Lender, Transferee Bank and the FacilityAgent. The execution of a Transfer Certificate shall not be withheld or delayed by the Facility Agent.14.5 Binding Effect of a TransferAny transfer effected and completed in accordance with this Agreement shall be binding on each party to thisAgreement.14.6 Consequences of a TransferFrom the date a transfer takes effect, the Transferee Bank becomes a Lender and to the extent as specified in theTransfer Certificate: 1.the Transferring Lender shall no longer enjoy rights and bear liabilities under this Agreement in relation to thetransfer object; and 2.the Transferee Bank shall enjoy all the rights and bear all the obligations under this Agreement in relation tothe transfer object.41Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 14.7 Limitation of Liabilities of a Transferring LenderThe Transferring Lender shall bear no liability to the Transferee Bank for any of the followings: 1.the duly execution, genuineness, accuracy, completeness, legality, effectiveness or enforceability of thisAgreement or any other document in connection herewith; 2.the receivability of any payment due under this Agreement; and 3.the accuracy and completeness of the representations of facts made by any other party to this Agreement toany person under or in connection with this Agreement.14.8 Further Limitation of Liabilities of a Transferring LenderA Transferring Lender is not obliged to: 1.retrieve from any Transferee Bank any right and/or obligation which is already transferred to that TransfereeBank in accordance with provisions of this Agreement. 2.indemnify any Transferee Bank against any losses incurred by it as a result of the breach of any obligation bythe Borrower or any other Finance Party under this Agreement.14.9 RecordingThe Facility Agent shall maintain a name list of each party to this Agreement, be responsible for registration of thetransfer, record each transfer of the syndication loan, and shall promptly notify other parties of a transfer thereto.14.10 Change of Lending OfficesAny Lender may change its Lending Office by giving the Borrower and the Facility Agent at least twenty (20)Business Days’ prior notice.42Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 15.RELATIONSHIP OF RIGHTS AND OBLIGATIONS AMONG THE FINANCE PARTIES15.1 Independence of ObligationsThe obligations of each Finance Party under this Agreement are independent of each other. Failure by anyFinance Party to perform its obligations under this Agreement does not discharge the obligations of any otherFinance Party under this Agreement. No Finance Party shall have any responsibility to any other Finance Partiesfor their respective obligations under this Agreement.15.2 Independence of RightsThe rights of each Finance Party under this Agreement are independent of each other. Any debt arising from timeto time under this Agreement owing by any party to this Agreement to any Finance Party shall be a separate debt,but each Finance Party shall exercise its rights through the Facility Agent under this Agreement. No Finance Partyshall refuse to fulfill any obligation under this Agreement on the grounds of the independence of rights.16.CONFIDENTIALITY16.1 Scope of Confidentiality1. Confidentiality Obligation of the Finance PartiesEach Finance Party to the this Agreement agrees that it will not, and shall procure that its senior managers,directors, employees, affiliates, advisors and agents (each Finance Party may only disclose relevant information tothe said persons when necessary) will not disclose, announce or otherwise publish to any third party anyinformation including but not limited to provisions of the Finance Documents, this loan, the Project or Projectagreement, the Borrower and its shareholders. Each Finance Party shall especially abide by the followings: (1)Each Finance Party to this Agreement shall ensure that its senior managers, directors, employees, affiliates,advisors and agents will not disclose, announce or otherwise publish (including but not limited to publishingin any social media (including microblog and Wechat)) to any third party any information relating to theProject and the transactions contemplated hereunder, and the price information herein shall not be disclosedor otherwise used by the foresaid person.43Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (2)Each Finance Party to this Agreement will not, and shall ensure that its senior managers, directors,employees, affiliates, advisors and agents will not, accept any interview by any media (including but notlimited to any social media) in respect of the Project or the transactions contemplated hereunder or agree toreport the same.Any confidentiality agreement or agreement relating to information disclosure already signed by each party beforethe execution of this Agreement shall be still applicable to the confidential information of the Borrower provided bythe Borrower or any third party during the negotiation, execution and performance of this Agreement. During thetenor of this Agreement and until two (2) years or any longer period as may be required by applicable laws andregulations after the termination or expiration of this Agreement, the terms and conditions contained in suchconfidentiality agreement or agreement relating to information disclosure shall remain valid and effective. In theevent of any conflict between such confidentiality agreement or agreement relating to information disclosure andthis Agreement, the provisions imposing stricter confidentiality obligations on Finance Parties shall always prevail.However, the following disclosures made by the Finance Parties shall be exempted: (1)information already known to the public (other than by reason of that Finance Party’s breach of this clause); (2)information disclosed in compliance with and to the extent required by competent government or regulatoryauthority according to laws and regulations, and the relevant disclosure shall be limited to the minimumextent as required by the competent government, regulatory authority and laws and regulations; (3)information disclosed in compliance with the listing rules of the stock exchange where it is listed, and therelevant disclosure shall be limited to the minimum extent as required by the listing rules of the stockexchange where it is listed; (4)information disclosed with the Borrower’s prior written consent.2. Confidentiality Obligation of the BorrowerThe Borrower shall undertake confidentiality obligation in equal measure as required in paragraph 1 above withrespect to information obtained from each Finance Party.44Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 16.2 Other Permitted DisclosureAny Finance Party may disclose any of the following information to assignees consented to by the Borrowerpursuant to Clause 14 (Transfer) hereof: 1.copies of this Agreement; 2.any information known to that Finance Party with respect to the Borrower, this Agreement and/or thetransactions contemplated thereunder;provided that, the party such confidential information to be disclosed to shall have undertaken with that FinanceParty to comply with the confidentiality obligation under Clause 16 (Confidentiality) hereof prior to the receipt of anysuch confidential information.17.AMENDMENTS AND WAIVERS17.1 Application for Amendments and Waivers and Consent 1.If the Borrower makes an application for amendments and waivers to the provision of this Agreement, theFacility Agent shall, promptly notify each Lender and request decisions to be made upon receipt of suchwritten application and other relevant documents. 2.If any Lender proposes to amend the provision of this Agreement, it shall firstly notify the Facility Agent, andthe Facility Agent shall promptly notify other Lenders and request decisions to be made upon receipt of thenotice. Where the amendments proposed by the Lender is related to the Borrower, the Facility Agent shallcopy the notice to the Borrower and negotiate with the Borrower the amendments to the provisions of thisAgreement on behalf of the syndicate in accordance with the relevant provisions of this Agreement. 3.For amendments or waivers proposed by the Borrower or any Lender, the Facility Agent shall determine if itrequires consent of the Majority Lenders or all the Lenders pursuant to the relevant provisions of thisAgreement. 4.The Facility Agent shall complete the decision process pursuant to Clause 13.8 (Syndication Conference)upon receipt of such application for amendments or waivers from the Borrower or any Lender. The final validvoting result shall be promptly notified to each Lender and the Borrower.45Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 17.2 Written AmendmentsAny amendment to any provision of this Agreement shall be made in writing and a written amendment only takeseffect upon execution by the Facility Agent ((as determined by all the Lenders or the Majority Lenders (as the casemay be)) and the Borrower.17.3 Consents by the Facility AgentNotwithstanding the provision above, without the consent of the Facility Agent, no amendment to this Agreementshall: 1.amend Clause 8 (Payments), Clause 13 (Relationship among Finance Parties) or Clause 17 (Amendmentsand Waivers) hereof; 2.amend or waive any rights of the Facility Agent under this Agreement, or impose additional obligations on theFacility Agent.18.NOTICES18.1 Notices through the Facility AgentAll communications between the Borrower and any Finance Party with respect to this Agreement shall be madethrough the Facility Agent.18.2 Methods of NoticesAny notice, demand or other document from one party to the other hereto pursuant to the provisions of thisAgreement shall be made in writing and be delivered to that party at such correspondence address or emailaddress and marked for the attention of the persons (if any) as that party may designate from time to time inwriting. The initial address, telephone number, email address and contact persons designated by each party areset forth on the execution pages hereof.18.3 Delivery of NoticesAny communication between each party to this Agreement in accordance with the provisions of this Agreementshall be deemed as having been received upon the satisfaction of the following conditions: 1.if delivered in person, at the time of actual delivery; 2.if transmitted by email, when received in legible form;46Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 3.if sent by mail, on the fifth (5) Business Day following the date of posting by registered mail at the correctaddress.18.4 Change of AddressAny party to this Agreement shall promptly notify the Facility Agent of any change to its address, telephonenumber or email address. Any change to the aforesaid information of the Borrower will become effective uponnotification of the Borrower to the Facility Agent. Upon receipt of such notice from any party to this Agreement, theFacility Agent shall forthwith notify the other parties hereto of any such change.18.5 Language of NoticesAny notice under or in connection with this Agreement shall be prepared and issued in Chinese.19.RIGHTS ACCUMULATIVE AND SEVERABILITY19.1 Rights AccumulativeNeither failure to exercise nor delay in exercising on the part of any Finance Party any right under this Agreementshall operate as a waiver, nor shall any single or partial exercise of any right prevents that Finance Party from anyfurther or otherwise exercise of any other rights. The rights and remedies provided in this Agreement arecumulative and not exclusive of any rights or remedies granted to any Finance Party by laws and regulations.19.2 SeverabilityIf at any time any provision of this Agreement is held to be illegal, invalid, or unenforceable in any respect, thelegality, validity or enforceability of any other provisions of this Agreement shall not be affected or prejudiced.20.DOCUMENTATION20.1 LanguageThis Agreement is made and executed in Chinese; this English version is prepared for reference only; if there isany discrepancy, the Chinese version controls.47Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 20.2 CounterpartsThis Agreement is executed in ten originals. Each Finance Party and the Borrower shall each keep one original,and each original shall have the same legal effect.21.GOVERNING LAW AND DISPUTE RESOLUTION21.1 Governing LawThis Agreement is governed by and shall be construed in accordance with the laws of the PRC (for the purpose ofthis Agreement the laws of the PRC shall not include the laws of Hong Kong Special Administrative Region,Macau Special Administrative Region and Taiwan Region).21.2 Dispute ResolutionDisputes arising out of or in connection with this Agreement shall be submitted to the China InternationalEconomic and Trade Arbitration Commission, Shanghai Sub-Commission for arbitration, which shall be conductedin accordance with the arbitration rules in force at the time of the application for arbitration, and the number ofarbitrators is three (3). In respect of the dispute between any Finance Party and the Borrower arising out of or inconnection with this Agreement, the Facility Agent (acting on behalf of the Finance Party) and the Borrower, eachas a party, shall appoint one arbitrator respectively, and the third arbitrator shall be jointly appointed by the FacilityAgent (acting on behalf of the Finance Party) and the Borrower or appointed by the Chairman with jointauthorization granted by the Facility Agent and the Borrower. The arbitral award shall be final and binding on allparties.22.TAKING EFFECTThis Agreement shall take effect on the Effective Date. 48Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. SCHEDULE 1 ORIGINAL COMMITMENT Original LendersOriginal CommitmentAgricultural Bank of China Limited, ShanghaiChangning Sub-branchRMB2,250,000,000 (or the USD equivalent)China Construction Bank Corporation, China(Shanghai) Pilot Free Trade Zone Special Area BranchRMB2,250,000,000 (or the USD equivalent)Industrial and Commercial Bank of China Limited,China (Shanghai) Pilot Free Trade Zone Special AreaBranchRMB2,250,000,000 (or the USD equivalent)Shanghai Pudong Development Bank Co., Ltd.,Shanghai BranchRMB2,250,000,000 (or the USD equivalent)TotalRMB9,000,000,000 (or the USD equivalent) 49Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. SCHEDULE 2 FORM OF DRAWDOWN NOTICE[***]50Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. SCHEDULE 3 FORM OF TRANSFER CERTIFICATE [***]51Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. APPENDIX: FORM FOR PORTIONS OF COMMITMENT BEING TRANSFERREDUnder the Total Commitments:Commitment of the Transferring LenderCommitment being transferred [•][•]The Transferring Lender’s portion in the Outstanding Portions being transferred[•][•]Details of the Transferee Bank:Name:Lending Office:Address for Notices:Tel:Telex:Fax:Attention:[The Transferring Lender] [The Transferee Bank]Authorized Signatory:Authorized Signatory:______________(Company Chop) ________________(Company Chop)[The Facility Agent]Authorized Signatory:______________(Company Chop)52Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 9,000,000,000 (OR THE USD EQUIVALENT) FIXED ASSET SYNDICATION LOAN AGREEMENTEXECUTION PAGE Tesla (Shanghai) Co., Ltd.(as Borrower) Attention: Yu XianAddress: 8F, Tower 3, Central Place, No.77 Jianguo Road, Chaoyang District, Beijing, ChinaTel: [***]Email: [***] Authorized signatory:_/s/ Xiaotong Zhu___ ____________Name: Xiaotong Zhu Company ChopTitle:53Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 9,000,000,000 (OR THE USD EQUIVALENT) FIXED ASSET SYNDICATION LOAN AGREEMENTEXECUTION PAGE China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Primary Lead Arranger, Facility Agent, Account Bank, Original Lender) Attention: Lifan YangAddress: Pudong New District Xinyuan South Road No 555 B-3Tel: [***]Email: [***] Authorized signatory:_/s/ Qinghong Jin__ ____________Name: Qinghong Jin Company ChopTitle:54Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 9,000,000,000 (OR THE USD EQUIVALENT) FIXED ASSET SYNDICATION LOAN AGREEMENTEXECUTION PAGE Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Joint Lead Arranger, Security Agent, Account Bank, Original Lender) Attention: Jing OuyangAddress: Shanghai Pudong New District Xinyuan South Road No 555Tel: [***]Email: [***] Authorized signatory:_/s/ Jing Ouyang__ ____________Name: Jing Ouyang Company ChopTitle:55Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 9,000,000,000 (OR THE USD EQUIVALENT) FIXED ASSET SYNDICATION LOAN AGREEMENTEXECUTION PAGE Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch(as Joint Lead Arranger, Capital Account Bank, Original Lender) Attention: Qian HuangAddress: China (Shanghai) Pilot Free Trade Zone Special Area Pudong New District Xinyuan South Road No 58819th floorTel: [***]Email: [***] Authorized signatory:_/s/ Su’nan Wang___ ____________Name: Su’nan Wang Company ChopTitle:56Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 9,000,000,000 (OR THE USD EQUIVALENT) FIXED ASSET SYNDICATION LOAN AGREEMENTEXECUTION PAGE Agricultural Bank of China Limited, Shanghai Changning Sub-branch(as Joint Lead Arranger, Trade Finance Party, Original Lender) Attention: Zhifeng PanAddress: Shanghai Changning District Dingxi Road No 998Tel: [***]Email: [***] Authorized signatory:_/s/ Li Xu_____ ____________Name: Li Xu Company ChopTitle:57Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Schedules Listed Below Omitted Pursuant to Regulation S-K Item 601(a)(5)Schedule 2: Form of Drawdown NoticeSchedule 3: Form of Transfer CertificateAppendix: Form for Portions of Commitment Being Transferred 58Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. Exhibit 10.86English Convenience Translation-Original Agreement has been executed in Mandarin Chinese-Tesla (Shanghai) Co., Ltd.(as Borrower)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Primary Lead Arranger)Agricultural Bank of China Limited, Shanghai Changning Sub-branchIndustrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area BranchShanghai Pudong Development Bank Co., Ltd., Shanghai Branch(as Joint Lead Arrangers)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Facility Agent)Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Security Agent)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area BranchIndustrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Account Banks)Agricultural Bank of China Limited, Shanghai Changning Sub-branch(as Trade Finance Bank)Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch(as Capital Account Bank) 1Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. Agricultural Bank of China Limited, Shanghai Changning Sub-branchChina Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area BranchIndustrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area BranchShanghai Pudong Development Bank Co., Ltd., Shanghai Branch(as Original Lenders) SUPPLEMENTAL AGREEMENTrelating to a RMB Nine Billion (or its equivalent in USD)fixed asset syndication loan agreement 2Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. THIS SUPPLEMENTAL AGREEMENT (the “Supplemental Agreement”) is made on December 18, 2019.BETWEEN(1)Tesla (Shanghai) Co., Ltd., a limited liability company incorporated and existing under the laws of the PRC with its registeredaddress at D203A, No.168 Tonghui Road, Nanhui New Town, Pudong New District, as borrower (the “Borrower”);(2)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch as Primary Mandated LeadArranger and Bookrunner (the “Primary Lead Arranger”);(3)Agricultural Bank of China Limited, Shanghai Changning Sub-branch, Industrial and Commercial Bank of China Limited, China(Shanghai) Pilot Free Trade Zone Special Area Branch and Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch asJoint Mandated Lead Arrangers and Bookrunners (the "Joint Lead Arrangers", together with the Primary Lead Arranger referredto as the “Lead Arrangers”);(4)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch as Facility Agent (the"Facility Agent");(5)Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch as Security Agent(the "Security Agent");(6)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch as Account Bank A (the“Account Bank A”); Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special AreaBranch as Account Bank B (the “Account Bank B”, together with the Account Bank A referred to as the “Account Banks”);(7)Agricultural Bank of China Limited, Shanghai Changning Sub-branch as Trade Finance Bank (the "Trade Finance Bank");(8)Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch as Capital Account Bank (the “Capital Account Bank”); and(9)Agricultural Bank of China Limited, Shanghai Changning Sub-branch, China Construction Bank Corporation, China (Shanghai)Pilot Free Trade Zone Special Area Branch, Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free TradeZone Special Area Branch and Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch as Original Lenders (each beinga “Original Lender” and collectively referred to as the “Original Lenders”).(each a “Party” and collectively the “Parties”)1Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. WHEREAS(1)Pursuant to a RMB 9,000,000,000 (or its equivalent in USD) fixed asset syndication loan agreement (the “Initial FacilityAgreement”) entered into among, inter alia, the Borrower, the Lead Arrangers, the Facility Agent, the Security Agent, the AccountBanks, the Trade Finance Bank, the Capital Account Bank and the Original Lenders dated December 18, 2019 (the “FacilityAgreement”), the Original Lenders have agreed to make available to the Borrower a Facility up to the amount of RMB9,000,000,000 (or its equivalent in USD) upon the terms and subject to the conditions of the Facility Agreement; and(2)The Parties agree to execute the Supplemental Agreement, as a supplement and amendment to the Facility Agreement.IT IS AGREED as follows:1.DEFINITIONS AND INTERPRETATIONSIn this Supplemental Agreement, terms and interpretations defined in the Facility Agreement shall, unless the context otherwiserequires, have the same meanings when used herein.2.SUPPLEMENT TO FACILITY AGREEMENTThe Parties hereby agree that Clause 3.1 of the Facility Agreement shall be amended and supplemented in the following manner:The original clause as set out below: 3.1The Borrower shall apply the Advances drawn to the costs and expenses in relation to construction of the Project.IS HEREBY AMENDED AS 3.1The Borrower shall apply the Advances drawn mainly to the construction, development and operation of the Project landplot, including financing: (1)costs and expenses in relation to construction of the Project (including, among others, design, development,construction and remodeling); (2)costs and expenses in relation to purchase of equipment related to the production of vehicles and parts; (3)capital expenditure during the construction and operation of the Project, including but not limited to costs inconnection with daily operation, lease of the warehouse for the Project (including such warehouses which are notlocated on the Project land), payment of wages, and other capital expenditures; (4)repayment of any intercompany loan (which has already been used) between the Affiliate Companies (including butnot limited to the amount borrowed or to be borrowed by the Borrower from its Affiliate Company), provided that suchintercompany loan between the2Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. Affiliate Companies shall be used for the above purposes and the interest rate of such intercompany loan shall be incompliance with PRC laws; (5)repayment of any outstanding amount under any Permitted Trade Finance Facility; and (6)repayment of any outstanding amount under any Existing Loan.3.ENTIRE AGREEMENTExcept for the amendments herein, no terms or conditions of the Facility Agreement shall be revised, amended or changed andshall remain in full force and effect. This Supplemental Agreement is an integral part of the Facility Agreement and shall constitutea Finance Document referred to in the Facility Agreement. Any reference to the Facility Agreement shall include references to theFacility Agreement and this Supplemental Agreement. If there is any inconsistency between this Supplemental Agreement and theFacility Agreement, this Supplemental Agreement will prevail.4.EFFECTIVENESSThis Supplemental Agreement shall become effective upon duly signed by the authorized representative of the Parties and affixedwith their official seals.5.MISCELLANEOUS5.1This Supplemental Agreement is made and executed in Chinese; this English version is prepared for reference only; if there is anydiscrepancy, the Chinese version controls.5.2Clause 21 (Governing Law and Dispute Resolution) of the Facility Agreement shall apply to this Supplemental Agreement andshall be incorporated in this Supplemental Agreement as if they had been set out in full herein mutatis mutandis.This Supplemental Agreement has been executed by the Parties hereto on the date stated at the beginning of this SupplementalAgreement.3Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. SUPPLEMENTAL AGREEMENTrelating to a RMB Nine Billion (or its equivalent in USD) fixed asset syndication loan agreementEXECUTION PAGETESLA (SHANGHAI) CO., LTD.(as Borrower)Attention: Yu XianAddress: 8F, Tower 3, Central Place, No.77 Jianguo Road, Chaoyang District, Beijing, ChinaTel: [***]Email: [***] Authorized signatory: /s/ Xiaotong Zhu Name: Xiaotong Zhu Company ChopTitle: 4Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. SUPPLEMENTAL AGREEMENTrelating to a RMB Nine Billion (or its equivalent in USD) fixed asset syndication loan agreementEXECUTION PAGEChina Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Primary Lead Arranger, Facility Agent, Account Bank, Original Lender)Attention: Lifan YangAddress: Pudong New District Xinyuan South Road No 555 B-3Tel: [***]Email: [***] Authorized signatory: /s/ Qinghong Jin Name: Qinghong Jin Company ChopTitle: 5Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. SUPPLEMENTAL AGREEMENTrelating to a RMB Nine Billion (or its equivalent in USD) fixed asset syndication loan agreementEXECUTION PAGEIndustrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Joint Lead Arranger, Security Agent, Account Bank, Original Lender)Attention: Jing OuyangAddress: Shanghai Pudong New District Xinyuan South Road No 555Tel: [***]Email: [***] Authorized signatory: /s/ Jing Ouyang Name: Jing Ouyang Company ChopTitle: 6Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. SUPPLEMENTAL AGREEMENTrelating to a RMB Nine Billion (or its equivalent in USD) fixed asset syndication loan agreementEXECUTION PAGEShanghai Pudong Development Bank Co., Ltd., Shanghai Branch(as Joint Lead Arranger, Capital Account Bank, Original Lender)Attention: Qian HuangAddress: China (Shanghai) Pilot Free Trade Zone Special Area Pudong New District Xinyuan South Road No 588 19th floorTel: [***]Email: [***] Authorized signatory: /s/ Su’nan Wang Name: Su’nan Wang Company ChopTitle: 7Certain identified information has been omitted from this document because it is not material and would be competitively harmful ifpublicly disclosed, and has been marked with “[***]” to indicate where omissions have been made. SUPPLEMENTAL AGREEMENTrelating to a RMB Nine Billion (or its equivalent in USD) fixed asset syndication loan agreementEXECUTION PAGEAgricultural Bank of China Limited, Shanghai Changning Sub-branch(as Joint Lead Arranger, Trade Finance Party, Original Lender)Attention: Zhifeng PanAddress: Shanghai Changning District Dingxi Road No 998Tel: [***]Email: [***] Authorized signatory: /s/ Li Xu Name: Li Xu Company ChopTitle: 8Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Exhibit 10.87English Convenience Translation-Original Agreement has been executed in Mandarin Chinese-Tesla (Shanghai) Co., Ltd.(as Borrower)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Primary Lead Arranger)Agricultural Bank of China Limited, Shanghai Changning Sub-branchIndustrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area BranchShanghai Pudong Development Bank Co., Ltd., Shanghai Branch(as Joint Lead Arrangers)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Facility Agent)Agricultural Bank of China Limited, Shanghai Changning Sub-branch(as Trade Finance Bank)Financial Institutions set out in Schedule 1(as Original Lenders) SYNDICATION REVOLVING LOAN AGREEMENTRMB Two Billion Two Hundred and Fifty Million(or its equivalent in USD)December 18, 2019 Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. TABLE OF CONTENTS Clause Page 1. DEFINITIONS AND INTERPRETATION42. THE FACILITY103. PURPOSES104. DRAWDOWN115. INTEREST136. REPAYMENT147. PREPAYMENTS148. PAYMENTS159. STAMP DUTIES AND FEES1810. REPRESENTATIONS OF FACTS1811. COVENANTS1912. EVENTS OF DEFAULT2113. RELATIONSHIP AMONG FINANCE PARTIES2314. TRANSFER2915. RELATIONSHIP OF RIGHTS AND OBLIGATIONS AMONG THE FINANCE PARTIES3116. CONFIDENTIALITY3217. AMENDMENTS AND WAIVERS3318. NOTICES3419. RIGHTS ACCUMULATIVE AND SEVERABILITY3520. DOCUMENTATION3621. GOVERNING LAW AND DISPUTE RESOLUTION3622. TAKING EFFECT36SCHEDULE 1 ORIGINAL COMMITMENT37SCHEDULE 2 FORM OF DRAWDOWN NOTICE38SCHEDULE 3 FORM OF TRANSFER CERTIFICATE39EXECUTION PAGE41 1Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. THIS AGREEMENT is made in Shanghai on December 18, 2019 (the "Effective Date")AMONG(1)Tesla (Shanghai) Co., Ltd. as Borrower (the "Borrower") Legal Address: D203A, No.168 Tonghui Road, Nanhui New Town, Pudong New District Legal Representative: Xiaotong Zhu(2)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch asPrimary Mandated Lead Arranger and Bookrunner (the “Primary Lead Arranger”)(3)Agricultural Bank of China Limited, Shanghai Changning Sub-branch, Industrial and Commercial Bank ofChina Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch, Shanghai PudongDevelopment Bank Co., Ltd., Shanghai Branch as Joint Mandated Lead Arrangers and Bookrunners (the"Joint Lead Arrangers", together with the Primary Lead Arranger referred to as the “Lead Arrangers”)(4)China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch asFacility Agent (the "Facility Agent")(5)Agricultural Bank of China Limited, Shanghai Changning Sub-branch as Trade Finance Bank (the "TradeFinance Bank")(6)The following financial institutions as Original Lenders (the "Original Lenders")Agricultural Bank of China Limited, Shanghai Changning Sub-branch Legal Address: No.998 West Dingxi Road, Changning District, Shanghai Responsible Person:Li Xu Lending Office:Agricultural Bank of China Limited, Shanghai Changning Sub-branch2Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch Legal Address: Room 104-105, Building 1, Lingang Chengtou Building, 333 Huanhu West FirstRoad, Pudong New District Responsible Person: Lending Office:China Construction Bank Corporation, Shanghai Pudong BranchIndustrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch Legal Address: No.555, South Xinyuan Road, Pudong New District, Shanghai Responsible Person:Sheng Zhan Lending Office:Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot FreeTrade Zone Special Area BranchShanghai Pudong Development Bank Co., Ltd., Shanghai Branch Legal Address: No.588 South Pudong Road, China (Shanghai) Pilot Free Trade Zone Responsible Person:Su’nan Wang Lending Office: Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch IT IS HEREBY AGREED, after mutual and friendly discussion and based on the true intention of each party, as follows.3Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 1.DEFINITIONS AND INTERPRETATION1.1DefinitionsIn this Agreement, Financial Yearmeans a period commencing from and including January 1st and ending on andincluding December 31st of each calendar year.Commitment Percentagemeans, in relation to each Lender, the percentage proportion of that Lender’sCommitment for the time being to the Total Commitment for the time being.Commitmentmeans, (i)in relation to each Original Lender, the Original Commitment of such OriginalLender minus the participation of such Original Lender in all the Advances alreadydrawn and not been prepaid as well as its participation in the Total Commitmentcancelled and transferred under the terms of this Agreement;(ii)in relation to each Transferee Bank, any part of the Commitment transferred tosuch Transferee Bank minus the participation of such Transferee Bank in allAdvances already drawn and not been prepaid as well as its participation in theTotal Commitment cancelled and transferred under the terms of this Agreement. Original Commitmentmeans, in relation to each Original Lender, the original commitment amount of thatOriginal Lender in RMB (or its equivalent in USD) set out in Schedule 1 hereof. Loan Period Outstanding Advanceshas the meaning specified in Clause 6 of this Agreement. means the aggregate amount of all outstanding Advances drawn in RMB or USD. Loan Accountmeans the account opened by the Borrower with the Facility Agent for the purpose ofcollecting the Advances. Facility has the meaning given to it in Clause 2 hereof. Lender means the Original Lender and/or the Transferee Bank.4Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Loan Prime Rate (LPR)means the market quoted interest rate issued by the People’s Bank of China on 20November 2019 or by any authority which is authorized by the People’s Bank of China(currently the National Interbank Funding Center), i.e. 4.15%. Interest Rate means, (i)in relation to each Advance drawn in RMB, the interest rate referred to in paragraph1 of Clause 5.1 (Interest Rate) hereof.(ii)in relation to each Advance drawn in USD, the interest rate referred to in paragraph2 of Clause 5.1 (Interest Rate) hereof. Advancemeans any principal amount borrowed or to be borrowed (by any means) under theprovisions hereof. Security Interests means any mortgage, pledge, lien, deposit or any agreement or arrangement havingthe effect or for the purpose of a collateral security (whether such agreement orarrangement is governed by or construed in accordance with the laws of the PRC orotherwise). Majority Lendersmeans, at any time, (i)if the Facility has not been drawn, a Lender or the Lenders (either individually orcollectively) whose aggregate Commitments represent more than 50% (exclusive of50%) of the Total Commitment;(ii)if the Facility has been drawn, a Lender or the Lenders (either individually orcollectively) whose aggregate Outstanding Advances represent more than 50%(exclusive of 50%) of the total Outstanding Advances under the Facility. 5Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Legal Restraint Default Interest Ratemeans, (i)the principle that fair compensation may be granted or denied in accordance withthe discretion of the court;(ii)in relation to bankruptcy, reorganization and other legal events that may generallyaffect creditors, the laws that enforce the performance of priority obligations;(iii)statutory limitation period of legal restrictions;(iv)defense for set-off and counterclaims; and(v)any other restriction or reservation under any other generally applicable law set outin the legal opinion delivered to the Facility Agent under this Agreement. means the Overdue Rate and/or the Misappropriation Rate. Affiliate Company means in relation to any person, a Subsidiary of that person or a Holding Company ofthat person or any other Subsidiary of any Holding Company of that person. Borrower’s CounterpartyAccountmeans any such account set out in paragraph 2 part 2 of Schedule 2 (Form ofDrawdown Notice) hereof. Lending Officemeans, in relation to each Finance Party, its office through which it performs itsobligation hereunder including such changed Lending Office pursuant to Clause 14.10(Change of Lending Offices) hereof. Available Commitmentmeans, with respect to a Drawdown Notice, the Total Commitment minus theaggregate amount of all requested Advances in any prior Drawdown Notice for whichthe Drawdown Date has not yet occurred. Holding Companymeans, in relation to a company, enterprise or entity, any other company, enterpriseor entity in respect of which it is a Subsidiary. London Business Daymeans a day on which a bank located in London, United Kingdom is open for generalbusiness (other than a Saturday or Sunday). USD Benchmark Ratemeans, on the two (2) London Business Days prior to a relevant Drawdown Date, theone year London Interbank Offered Rate administered by ICE BenchmarkAdministration Limited (or any other person which takes over the administration of thatrate) for USD quoted at 11:00 a.m. (London time) displayed on pages LIBOR01 orLIBOR02 of the Thomson Reuters screen (or any replacement Thomson Reuterspage which displays that rate) or on the appropriate page of such other informationservice which publishes that rate from time to time in place of Thomson Reuters.6Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Misappropriation Ratehas the meaning given to it in paragraph 2 of Clause 5.2 (Default Interest Rate)hereof. PBOCmeans the People’s Bank of China and/ or its branches. Finance Partymeans each of the Lead Arrangers, the Facility Agent, the Trade Finance Bank, andthe Lenders. Effective Date has the meaning given to it at the beginning of this Agreement. Transferee Bankhas the meaning given to it in Clause 14.3 (Transfer by the Lenders) hereof. Drawdown Datemeans each date on which any Advance is drawn pursuant to this Agreement. Drawdown Noticemeans, in relation to each Advance, a notice of drawing duly completed and deliveredby the Borrower pursuant to Clause 4.1 (Drawdown Notice) hereof. Prepayment Noticehas the meaning given to it in Clause 7 (Prepayment) hereof. Event of Default means any circumstance set out in Clause 12.1 (Events of Default) hereof. Project means the project contained in the Shanghai foreign investment project filingcertificate (Project Shanghai Code: 310115MA1H9YGWX20195E2101001) (includingthe updates and changes of such filing certificate from time to time after the EffectiveDate) of the Borrower, i.e. the Tesla Gigafactory Project (First Phase) First Stagewhich is located at 1/1 Hill, 8th Street, Luchaogang Town, Shanghai. Business Daymeans a day on which each Lender is open for general business (other than aSaturday or Sunday (excluding Saturdays and Sundays adjusted to be business dayspursuant to national regulations) or any other statutory holidays). 7Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Permitted Trade FinanceFacilitymeans, each Finance Party agrees that the Borrower may subsequently apply to theTrade Finance Bank for issuing and/or conducting letter of credit (and subsequentimport billsadvance), domestic bank’s acceptance bill, guarantee of non-financing nature andproviding notes pool service, provided that at the end of any day within the LoanPeriod, the sum of the aggregate of outstanding amount under such trade financefacility and Outstanding Advances under this Agreement shall not exceed themaximum aggregate principal amount of the Facility set forth in Clause 2. Overdue Ratehas the meaning given to it in paragraph 1 of Clause 5.2 (Default Interest Rate)hereof. PRC means the People’s Republic of China. Material Adverse Effectmeans, in the reasonable opinion of all the Lenders, a material adverse effect on: (i)the ability of the Borrower to perform its payment obligations hereunder; or(ii)the legality, validity or enforceability of this Agreement. Total Commitmentsmeans the aggregate amount of each Lender’s Commitment. Net Assetsmeans at any time of determination thereof, the owner’s equity of the Borrower as setforth in the most recent financial statements of the Borrower delivered to the FacilityAgent pursuant to this Agreement. Transferring Lenderhas the meaning given to it in Clause 14.3 (Transfer by the Lenders) hereof. Transfer Noticehas the meaning given to it in Clause 14.3 (Transfer by the Lenders) hereof. Transfer Certificatemeans a transfer certificate duly executed and delivered by the Transferring Lender,the Transferee Bank and the Facility Agent substantially in the form and substance setout in Schedule 3 (Form of Transfer Certificate) hereof. 8Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Subsidiarymeans, in relation to any company, corporation or entity, a company, corporation orentity: (i)which is controlled, directly or indirectly, by the first mentioned company corporationor entity;(ii)more than half the issued equity share capital, registered capital or equity sharecapital of which is beneficially owned, directly or indirectly, by the first mentionedcompany, corporation or entity; or(iii)which is a Subsidiary of another Subsidiary of the first mentioned company,corporation or entity, and, for this purpose, a company, corporation or entity shall be treated as beingcontrolled by another if that other company, corporation or entity is able to direct itsaffairs and/or to control the composition of its board of directors or equivalent body. Final Maturity Datemeans the date falling one (1) year from the first Drawdown Date.1.2Principles of Interpretation In this Agreement: 1.The table of contents and clause headings inserted herein are for ease of reference only and may be ignoredin construing this Agreement. 2.The "assets" shall be construed to include all present and future, tangible or intangible asset, property,income, revenue, account receivable or each right and benefit in any asset. 3.A "person" shall be construed to include any individual, company, partnership, sole proprietary or any othercorporate or unincorporated person or any other legal entity. 4.An Event of Default is "continuing" if such Event of Default has occurred and is neither eliminated norremedied or waived pursuant to the provisions hereof. 5.A "month" means a period starting on one day in a calendar month and ending on the numericallycorresponding day in the next calendar month, provided that, if there is no such numerically correspondingday, it shall end on the last day in such next calendar month. 6.The RMB "equivalent" amount denominated in USD shall be converted at the exchange rate at the centralparity of the spot exchange rate for USD to RMB published or authorized to publish by the PBOC on 11:00a.m. (Beijing Time) on the previous Business Day of the calculation date, however, if no such central parityrate is available at that time, the exchange rate shall be determined through reasonable negotiation betweenthe Facility Agent and the Borrower.9Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 7.The "liquidation" or "bankruptcy" of any person shall be construed to include any identical or comparablelegal process carried out in accordance with the laws of its place of incorporation or its place of business,and "entering into" such legal process includes such legal process being commenced upon resolution of suchperson or upon application of any person. 8.Parties hereto or any other person shall include its legal successors and permitted assignees. 9.This Agreement, any other agreement or document shall be construed to include itself and any amendment,modification, substitution or supplement thereof made from time to time in accordance with the provisionstherein.2.THE FACILITYThe Lenders agree to make available to the Borrower a Facility (the "Facility") in a maximum aggregate principalamount of RMB2,250,000,000 (IN WORDS: RMB two billion two hundred and fifty million) (or the equivalentamount drawn in USD); whether the Facility is drawn in RMB or USD shall be determined according to theBorrower’s actual needs.3.PURPOSES3.1 The Borrower shall apply the Advances drawn to finance: 1.costs and expenses during the production process, including the purchase of raw materials related to theproduction of vehicles and parts; 2.operating expenses for the production process, including but not limited to the daily operation, wages, taxes,service fees and consulting fees; 3.repayment of any intercompany loan (which has already been used) between the Affiliate Companies(including but not limited to the amount borrowed or to be borrowed by the Borrower from its AffiliateCompany), provided that such intercompany loan between the Affiliate Companies shall be used for theabove purposes and the interest rate of such intercompany loan shall be in compliance with PRC laws; and 4.repayment of any outstanding amount under any Permitted Trade Finance Facility.3.2 The Borrower shall apply each Advance in accordance with the purposes agreed in this Agreement; and theBorrower shall not misappropriate any Advance.3.3 The Borrower shall use each Advance in accordance with the purposes permitted by laws and regulations of thePRC. The Advance shall not be used for fixed assets investment.10Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 4.DRAWDOWN4.1Drawdown Notice 1.The Borrower may (based on its actual needs) draw one or more Advances under the Facility before theFinal Maturity Date in accordance with the provisions hereof. There is no limitation on the number ofdrawdowns, but the total Outstanding Advances shall not exceed the Facility amount described in Clause 2. 2.In connection with a request for an Advance, the Borrowershall deliver a Drawdown Notice to the FacilityAgent no later than three (3) Business Days prior to the proposed Drawdown Date specified in theDrawdown Notice. 3.Each Drawdown Notice shall satisfy the following requirements: (1) it shall be substantially in the form andsubstance set out in Schedule 2 (Form of Drawdown Notice) hereof; (2) it shall be executed by the authorizedsignatory of the Borrower (including through handwritten signing or affixing chop of legal representative oraffixing signature chop) or by stamping the Borrower’s official seal; (3) the proposed Drawdown Datespecified in the Drawdown Notice shall be a Business Day; (4) the proposed drawdown amount shall notexceed the Available Commitment as of the date of such Drawdown Notice. 4.The Facility Agent shall, within one (1) Business Day upon receipt of each Drawdown Notice, forward suchDrawdown Notice to each Lender and notify each Lender of its Commitment Percentage for that Advance.4.2Conditions Precedent to the First DrawdownBefore the first drawdown, the Borrower shall provide the Facility Agent with the following documents or completethe following matters to the satisfaction of the Facility Agent, and the Facility Agent shall not unreasonably refuseor delay to confirm the satisfaction of each following conditions precedent: 1.this original copy of the executed version of this Agreement; 2.photocopies (stamped with the Borrower’s official seal) of the latest business license, the latest receipt offiling for foreign invested enterprise issued by the Ministry of Commerce and the latest articles of association,and the original copy of the board resolutions of the Borrower; 3.the Loan Account has been opened;11Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 4.the Shanghai foreign investment project filing certificate stamped with the Borrower’s official seal relating tothe Project obtained by the Borrower (the Project Shanghai Code: 310115MA1H9YGWX20195E2101001); 5.a photocopy of the evidence that the Borrower has obtained the environment impact assessment fillingcertificate in relation to the Project, stamped with the Borrower’s official seal; 6.a photocopy of the production permit stamped with the Borrower’s official seal; and 7.if the Advance will be in the form of an entrusted payment, submitting a scanned copy of the relevantagreement or proof of use of the entrusted payment or photocopies of such evidence stamped with theBorrower’s official seal.4.3Conditions Precedent to Each DrawdownThe Facility Agent shall confirm that each of the conditions precedent set out below have been satisfied (suchconditions precedent shall be satisfactory to the Facility Agent provided that such satisfaction shall not beunreasonably withheld or delayed), or the Facility Agent (as decided by the Majority Lenders) has otherwisewaived the condition. Upon the confirmation of the Facility Agent, each Lender shall make its participation in eachAdvance through the Facility Agent in accordance with its then-applicable Commitment Percentage pursuant toClause 8.1 (Making Advances) hereof. 1.The Facility Agent has received a Drawdown Notice issued by the Borrower in accordance with Clause 4.1(Drawdown Notice) hereof. 2.On the proposed Drawdown Date specified in the Drawdown Notice, each representation of fact made by theBorrower in Clause 10 (Representations of Facts) hereof is true and correct in all material respects with thesame effect as though such representation of fact had been made on such Drawdown Date, it beingunderstood and agreed that any representation of fact which by its terms is made as of a specified date shallbe required to be true and correct in all material respects only as of such specified date. 3.On the proposed Drawdown Date specificed in the Drawdown Notice, no Event of Default by the Borrowerhas occurred and is continuing. 4.The Borrower has provided the scanned copies of the Shanghai Foreign Investment Project Filing Certificateand Environment Influence Assessment Filing Certificate or photocopies of such certificates stamped withthe Borrower’s official seal, except where such evidence has already been provided.12Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 5.If the Advance will be in the form of an entrustment payment pursuant to Section 8.2, the scanned copies ofrelevant supporting agreements or documents evidencing the loan purpose or photocopies of such evidencestamped with the Borrower’s official seal are provided where entrusted payment applies, except where suchmaterials have already been provided.5.INTEREST5.1Interest Rate 1.The rate of interest accrued on each Advance drawn in RMB under the Facility shall be fixed interest rate,which shall be the Loan Prime Rate (LPR) minus 0.4525%, i.e. 3.6975% per year (tax included (for theavoidance of doubt, excluding foreign taxes, similarly hereinafter)). 2.The rate of interest accrued on each Advance drawn in USD under the Facility shall be the USD BenchmarkRate plus 80 BPs (tax included). If the USD Benchmark Rate is no longer announced, the Borrower and theFacility Agent shall endeavor to establish an alternate rate of interest to such USD Benchmark Rate thatgivers due consideration to the then prevailing market convention for determining a rate of interest for theFacility in the PRC in USD at such time, and shall enter into an amendment to this Agreement to reflect suchalternate rate of interest (including any mathematical or other adjustments to the benchmark (if any)incorporated therein), provided that, if such alternate rate of interest as so determined would be less thanzero, such rate shall be deemed to be zero for the purposes of this Agreement. Notwithstanding any contraryprovisions in this Agreement, such amendment shall become effective without any further action or consentof any other party to this Agreement so long as the Facility Agent shall not have received, within five (5)Business Days of the date that the Facility Agent shall have posted such proposed amendment to allLenders, a written notice from the Majority Lenders stating that such Majority Lenders object to suchamendment.5.2Default Interest Rate 1.If the Borrower fails to pay any sum payable on its due date pursuant to the provisions of this Agreement,interest shall accrue on such overdue sum, from its due date up to the date of full payment, at 130% of theInterest Rate (the “Overdue Rate”). 2.If any Advance is misappropriated by the Borrower, interest shall accrue on the misappropriated Advance,from the date of misappropriation until the date such misappropriation is remedied, including by using suchmisappropriated funds for a purpose set forth in this Agreement or repayment by Borrower of suchmisappropriated funds, at 150% of the Interest Rate (the “Misappropriation Rate”).13Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 3.If an Advance is both overdue and misappropriated, the Default Interest Rate accrued thereon shall be thehigher of two. 4.The interest accruing on the overdue and/or misappropriated Advances shall be compounded pursuant torelevant regulations by the PBOC.5.3Calculation of Interest 1.Interest and/or default interest on any amounts outstanding hereunder shall accrue from day to day and becomputed on the basis of a 360-day year and the actual number of days elapsed. 2.Interest shall accrue on each Advance commencing on the date on which such Advance is paid to the LoanAccount.5.4Payment of Interest 1.The Borrower shall pay accrued interest calculated in accordance with Clause 5.1 (Interest Rate) and Clause5.3 (Calculation of Interest) hereof on the repayment date of each Advance. 2.As per the requirements of the Borrower, the Lenders shall issue the interest value-added tax invoices to theBorrower pursuant to applicable laws and regulations.6.REPAYMENT6.1Loan PeriodThe loan period under this Agreement shall commence from the first Drawdown Date and end on and include theFinal Maturity Date (the "Loan Period").6.2RepaymentThe Borrower may repay any and all Outstanding Advances prior to the Final Maturity Date, and the Borrower shallrepay all Outstanding Advances on the Final Maturity Date.7.PREPAYMENTThe Borrower shall notify the Facility Agent in writing (the “Prepayment Notice”) no later than three (3) BusinessDays prior to the proposed prepayment date. The Borrower shall not pay any penalties or any fees regarding anysuch prepayment, provided that prepayment of the principal amount shall be made together with the interestaccrued on such prepaid principal through the applicable prepayment date. Any repayment amount made prior tothe Final Maturity Date could be borrowed again.14Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. The amount of each prepayment by the Borrower shall not be less than RMB 10 million, but the foregoing shall notapply if the Borrower prepays all Outstanding Advances in full. Amounts prepaid shall offset the principal of theOutstanding Advances in the reverse order.8.PAYMENTS8.1Making AdvancesEach Lender participating in an Advance pursuant to Clause 4.3 (Conditions Precedent to Each Drawdown) hereofshall pay its portion of the Advance denominated in RMB or USD under the Facility to the Facility Agent’s accountno later than 11:00 a.m. (Beijing Time) on the proposed Drawdown Date specified in the Drawdown Notice inrespect of that Advance in accordance with its Commitment Percentage at the time of the Advance.8.2Payment of Advances 1.If any single payment amount exceeds RMB 10,000,000 (IN WORDS: RMB ten million) or its equivalent inUSD, payment by the Lenders upon entrustment shall be applicable. Entrusted payment by the Lendersrefers to the Facility Agent paying out each Advance to the Loan Account on each Drawdown Date inaccordance with the Borrower’s Drawdown Notice and entrustment of payment, and transferring the relevantAdvance to Borrower’s Counterparty Accounts on the same day.In the event of payment by the Lenders upon entrustment, the Borrower shall submit the agreements inrelation to the entrusted payment or documents evidencing the loan usage to the Facility Agent before eachAdvance is made. 2.In addition to the circumstances stipulated in the first paragraph above, the Borrower may choose to makepayment by either independent payment or entrusted payment at its own discretion. Independent payment bythe Borrower means that the Facility Agent pays out the Advances to the Loan Account in accordance withthe Borrower’s Drawdown Notice and the Borrower independently pays out to the Borrower’s counterpartiesin satisfaction of the usage purposes stipulated herein. The Borrower shall present the relevant payment listevidencing the payment status of each Advance on a quarterly basis to the Facility Agent. 3.If the Borrower has met the conditions under Article 4 (Drawdown) of this Agreement, the Lenders and theFacility Agent are obliged to make the Advance on the proposed Drawdown Date (whether in the case ofautonomous payment to the Loan Account or entrusted payment to the Borrower’s Counterparty Account). Ifany Lender fails to make the Advance on time, the Borrower shall have the right to require such Lender totransfer its Commitment, and the other Lenders have the priority right to such transfer.15Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 8.3Payment by the BorrowerThe Borrower shall pay any amount payable under this Agreement on its due date no later than 11:00 a.m. (BeijingTime) to the account designated by the Facility Agent at the Effective Date.8.4Payment by the Facility Agent 1.The Facility Agent shall pay to the Loan Account the proceeds of the relevant Advances actually received byit pursuant to Clause 8.1 (Making Advances) hereof and shall make payment pursuant to Clause 8.2(Payment of Advances) hereof no later than 3:00 p.m. (Beijing Time) on each Drawdown Date, , and theFacility Agent is obliged to notify the payment of such Advance to each Lender. 2.The Facility Agent shall pay to the account of each Finance Party each amount actually received by itpursuant to Clause 8.3 (Payment by the Borrower) hereof on the date of receipt in such order and amount asset out in Clause 8.5 (Distribution Order) hereof.8.5Distribution OrderUnless otherwise required by the laws and regulations, each payment received by the Facility Agent under Clause8.3 (Payment by the Borrower) hereof shall be distributed in such order and amount as set out below: 1.in and towards any interest (including but not limited to any compound interest and default interest) due andpayable by the Borrower hereunder pro rata among the Lenders; and 2.in and towards any principal amount due and payable by the Borrower hereunder pro rata among theLenders.8.6Advances 1.If no Material Adverse Event has occurred, the Facility Agent shall advance any amount on behalf of anyLender within the Facility Agent’s Commitment when such Lender is unable to make the payment. TheFacility Agent is entitled to recover such advances from the Lender who fails to make the payment. 2.Other Lenders may make payment on account of any Lender who fails to make payment, and such otherLenders making such advances are entitled to recover from such Lender who fails to make the payment.16Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 8.7 Currency of Payments 1.Any Advance shall be drawn in the currency specified in the Drawdown Notice in respect of that Advance. 2.Any interest accruing on any amounts shall be made in the currency in which such amounts aredenominated. 3.Any repayment or prepayment of any Outstanding Advances shall be made in the currency in which suchOustanding Advances are denominated. 4.Other payments payable under this Agreement shall be made in the currency specified herein.8.8 Set OffThe Borrower shall not exercise any right of set-off when making any payment under this Agreement.8.9Non Business DaysIf a payment payable is made on a day that is not a Business Day pursuant to the provisions of this Agreement, itshall be made on the next succeeding Business Day.8.10 Pro Rata Sharing 1.Except as otherwise provided in Clause 8.10 (Pro Rata Sharing) hereof, if any Finance Party (the“Recovering Lender”) receives any payment due and payable under this Agreement from the Borrowerwhich is contrary to Clause 8.3 (Payment by the Borrower) hereof, that Recovering Lender shall forthwithnotify the Facility Agent of the receipt of such amount (the “Sharing Amount”) on the date of receipt andpromptly transfer such Sharing Amount to the Facility Agent. 2.The Facility Agent shall treat the Sharing Amount received by it pursuant to paragraph 1 of Clause 8.10 (ProRata Sharing) hereof as being made by the Borrower and shall distribute the same to each Finance Party’saccount in accordance with paragraph 2 of Clause 8.4 (Payment by the Facility Agent) hereof. 3.Paragraph 1 of Clause 8.10 (Pro Rata sharing) hereof shall not be applicable to any of the following: (1)any payment received by any Lender under transfer under this Agreement.17Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (2)any payment recovered by any Finance Party in arbitration against the Borrower in respect of thedisputes arising under this Agreement, provided that: (i) such Financing Party shall have given priornotice of such aribitration proceeding to other Finance Parties, and (ii) other Finance Parties have notparticipated in the said arbitration within twenty (20) Business Days after receipt of such notices.9.STAMP DUTIES AND FEES9.1Stamp DutiesAll stamp duties in respect of this Agreement shall be borne by the Borrower and each Finance Party respectivelypursuant to the laws and regulations.9.2No Syndication FeeThe Borrower shall not pay any fee in respect of the syndication loan under this Agreement, including but notlimited to syndication fees such as commitment fee, arrangement fees, agency fees or undrawn fees, upfront fees,consulting fees and due diligence fees.9.3Costs and ExpensesAny costs and expenses (including legal fees, appraiser fees, etc.) incurred in relation to the execution of thisAgreement and the syndication of the loan hereunder (including but not limited to the expenses incurred in relationto the preparation, negotiation, printing, enforcement and the syndication process of this Facility) shall be borne byeach party respectively.10.REPRESENTATIONS OF FACTSThe Borrower makes the following representations to each Finance Party respectively on the Effective Dateand on each Drawdown Date (except for paragraph 8 (No Material Default) and paragraph 9 (No Material Litigationand Arbitration) which shall only be given on the Effective Date) with reference to the facts and circumstances thensubsisting: 1.Legal StatusThe Borrower is a company duly incorporated and validly existing under the laws and regulations of the PRC. 2.PowersThe Borrower has necessary capacity for civil conduct and capacity for civil rights to own its assets, to carryout its operations and to enter into and perform this Agreement.18Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 3.AuthorizationAll necessary internal authorizations for the Borrower to enter into and perform this Agreement have beenduly obtained, and this Agreement has been duly executed by the authorized signatory of the Borrower. 4.LegalitySubject to the Legal Restraint, the obligations to be assumed by the Borrower under this Agreementconstitute the legal, valid and binding obligations of the Borrower. 5.Breach of Other DocumentsThe entering into and performance by the Borrower of this Agreement do not and will not violate (a) itsarticles of association, and/or (b) any applicable law of the PRC. 6.Liquidation and Bankruptcy EventsThe Borrower has not entered into any liquidation process, nor is there any bankruptcy event. 7.InformationAll written documents provided by the Borrower are true and valid in all material aspects as of the date ofdelivery of the same. 8.No Material DefaultTo the Borrower’s knowledge, as of the Effective Date of this Agreement, there is no material default of theBorrower under any agreement to which it is a party (material is defined as RMB500,000,000 (or itsequivalent in other currency). 9.No Material Litigation and ArbitrationTo the Borrower’s knowledge, as of the Effective Date of this Agreement, there is no litigation or arbitration ofthe Borrower that will produce any Material Adverse Effect (other than those of a frivolous or vexatious naturewhich the Borrower is contesting in good faith).11.COVENANTSThe Borrower undertakes with each Finance Party as follows: 1.Compliance with LawThe Borrower shall ensure that any laws, regulations and rules relevant to its business and operation will becomplied with in all material respects.19Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 2.Supply of Information (1)The Borrower shall, within one hundred and eighty (180) days after the end of each financial year orsuch longer period as consented by the Facility Agent (and the Facility Agent shall not unreasonablyreject or delay to give such consent), provide the Facility Agent with its audited financial statements. (2)The Borrower shall, within ninety (90) days after the end of each semi-financial year or such longerperiod as consented by the Facility Agent (and the Facility Agent shall not unreasonably reject ordelay to give such consent), provide the Facility Agent with its unaudited financial statements inrespect of that semi-financial year. 3.Reduction of Registered CapitalThere can be no reduction of the registered capital of the Borrower during the Loan Period without the priorconsent of the Facility Agent. 4.Negative PledgeThe Borrower shall not create any Security Interests over any of its inventory or account receivable, exceptfor: (1)Any lien arising in the ordinary course of trading, any statutory priority and other Security Interestsarising by operation of laws and regulations, (2)Security Interests arising in the ordinary course of business of the Borrower (including but not limitedto any priority over goods, materials or equipment (acquired in an arm’s length transaction) incurredor constituted by any title retention arrangement in the terms and conditions set out by the supplier orseller in relevant agreements), (3)Security Interests created according to this Agreement, or (4)Security Interests created with the consent of the Majority Lenders (such consent shall not beunreasonably withheld or delayed by the Majority Lenders). 5.Material Default NotificationThe Borrower shall notify the Facility Agent of material default under any liability of the Borrower to any thirdparty (material is defined as exceeding the greater of (i) RMB750,000,000 (or the equivalent in othercurrency) or (ii) 20% of the Borrower’s Net Assets).20Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 12.EVENTS OF DEFAULT12.1 Events of DefaultOnly the following events constitute Events of Default by the Borrower: 1.Payment DefaultThe Borrower fails to pay any amount due and payable on the Final Maturity Date in accordance with theprovisions of this Agreement, and fails to remedy such default within twenty (20) days from the Final MaturityDate. 2.MisappropriationThe Borrower misappropriates any Advance within the Loan Period and fails to remedy, including by usingsuch misappropriated funds for a purpose set forth in this Agreement or repayment by Borrower of suchmisappropriated funds, within twenty (20) days upon occurrence of such misappropriation. 3.MisrepresentationThe representations or statements made in Clause 10 (Representations of Facts) hereof by the Borrower isuntrue and causes a Material Adverse Effect, and the Borrower fails to remedy such default within forty-five(45) days from the date on which the Facility Agent issues a written notice to the Borrower. 4.Breach of Other ObligationThe Borrower fails to perform the covenants made in Clause 11 (Covenants) hereof or comply with otherobligations hereunder and causes a Material Adverse Effect, and fails to remedy such default within forty-five(45) days from the date on which the Facility Agent issues a written notice to the Borrower. 5.Bankruptcy ProcessThe Borrower is insolvent or enters into bankruptcy process and fails to remedy or terminate the bankruptcyprocess within sixty (60) days upon the occurrence of such events. 6.Enforcement EventsThe assets of the Borrower with an aggregate value exceeding the greater of (i) RMB750,000,000 (or itsequivalent in another currency) or (ii) 20% of the Borrower’s Net Assets are enforced, distressed, seized orfrozen based on the final judgment of the court, and such actions are not discharged within sixty (60) days.21Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 7.Cross DefaultThe Borrower fails to pay any uncontested indebtedness with an aggregate value exceeding the greater of (i)RMB750,000,000 (or its equivalent in another currency) or (ii) 20% of the Borrower’s Net Assets on thematurity date or upon expiry of the grace period, and fails to remedy within one-hundred and eighty (180)days from the date on which the Facility Agent issues a written notice.12.2 Remedies Available to the Finance Parties 1.Notices (1)Any Lender shall promptly notify the Facility Agent upon becoming aware of an Event of Default. (2)The Facility Agent shall notify each Lender upon being notified by the Borrower or any Lender of theoccurrence of an Event of Default. (3)The Facility Agent shall notify the Borrower upon being notified by any person other than theBorrower of the occurrence of an Event of Default, so that the Borrower can confirm and explain ormake remedies. 2.RemediesDuring the period when any Event of Default occurred and is continuing, the Facility Agent may (acting onthe decisions of the Majority Lenders), after giving written notice to the Borrower, exercise one or more of thefollowing rights in any order: (1)to grant any waiver or approve any remedy of the relevant Event of Default; (2)to declare suspension of all or any part of Advances requested in any Drawdown Notice which havenot been drawn; (3)to cancel all or any part of Total Commitments; whereupon so declared the Commitment of eachLender shall be cancelled pro rata and the Total Commitments so cancelled may not be borrowedagain; and (4)to declare all or any Oustanding Advances together with all accrued interests, fees (if any) and otheramounts hereunder immediately due and payable.22Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 3.Action by the Facility AgentEach right of remedies hereunder or the right of any Finance Party to commence and continue any legaldispute resolution proceedings against the Borrower may be exercised through the Facility Agent. 4.Undertakings of the Finance Parties (1)Each Finance Party agrees not to exercise any of its rights under this Agreement in a way that wouldconflict with this Agreement. (2)Each Finance Party undertakes with each other Finance Party that, except where this Agreementspecifically provides otherwise,(i) it will not demand from or accept any payment of any type to be separately applied towards thesatisfaction of any debt owing to it by the Borrower under this Agreement; and(ii) it will not separately demand or accept any Security Interests or financial support with respect toany debt owing to it by the Borrower under this Agreement. 5.DeductionWhen an Event of Default is continuing, each Finance Party shall have the right to deduct from any accountheld by the Borrower with that Finance Party and transfer to the Facility Agent for pro rata sharing inaccordance with Clause 8.10 (Pro Rata Sharing) of this Agreement. 13.RELATIONSHIP AMONG FINANCE PARTIES13.1 Appointment of the AgentEach of the other Finance Parties hereby irrecoverably appoints the Facility Agent to act as its agent underand in connection with this Agreement, and authorizes the Facility Agent to exercise the rights which arespecifically delegated to the Facility Agent under this Agreement together with any other reasonableincidental rights.13.2 Nature of Agency 1.The relationship among the Facility Agent and other Finance Parties is that of principal and agent only. 2.The Facility Agent is not the agent of the Borrower in any respect.23Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 13.3 Duties of the Facility Agent 1.The Facility Agent shall, within one (1) Business Day upon receipt of the originals or copies of any documentfrom any party to this Agreement for any other party to this Agreement, forward the same to that other party;except where provided otherwise in this Agreement, the Facility Agent is not responsible for the adequacy,accuracy or completeness of the form and substance of any document it forwards to any other party to thisAgreement. 2.The Facility Agent shall open and maintain accounts in connection with this Agreement and, upon demand byeach Lender, provide that Lender with such accounts. 3.The Facility Agent shall be responsible for the management and control of making Advances and thepayment, and the payment of principal and interest by the Borrower in accordance with Clause 8.1 (MakingAdvances), 8.2 (Payment of Advances) and Clause 8.4 (Payment by the Facility Agent) hereof. 4.The Facility Agent shall, within one (1) Business Day upon receipt of a notice from any party to thisAgreement that the occurrence of an Event of Default, notify each Finance Party. 5.The Facility Agent shall notify each Finance Party within one (1) Business Day upon becoming aware offailure to make any payment due and payable by any party to this Agreement to any other Finance Partypursuant to this Agreement. 6.The Facility Agent shall, acting in accordance with the decisions of the Majority Lenders, organize eachFinance Party to commence and/or participate in any arbitration or legal dispute resolution proceedingsrelating to this Agreement, provided that, each Lender shall have indemnified or made advances to theFacility Agent against any and all costs, fees, expenses (including but not limited to legal fees) and liabilitiessustained or to be sustained or incurred by the Facility Agent in acting in accordance with such decisions. 7.The Facility Agent shall have no liability to any other party to this Agreement for any party’s breach of anyprovision of this Agreement. 8.If any decision of the Majority Lenders or all the Lenders or acting in accordance with such decisioncontravenes or would contravene the laws and regulations, after giving prior notice to each Finance Party,the Facility Agent may not act in accordance with such decisions. 9.The Facility Agent shall perform each of its obligations under this Agreement with care and diligence. 10.The Facility Agent’s obligations under this Agreement are solely operational and administrative in nature. TheFacility Agent shall have no other obligations except as expressly provided in this Agreement.24Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 13.4 Rights of the Facility Agent 1.Unless it has the knowledge to the contrary, the Facility Agent may assume: (1)any representation of facts made under or in connection with this Agreement by any other party tothis Agreement is true, complete and accurate. (2)no Event of Default is continuing. (3)no other party to this Agreement has breached its obligation under this Agreement. (4)any right vested in any other party to this Agreement or the Majority Lenders or all the Lenders hasnot been exercised. 2.The Facility Agent may engage, pay for and act in reliance on the advice and services of lawyers,accountants, appraisers, translators or other professional advisers as it deems necessary and accepted by allthe Lenders. 3.The Facility Agent may act in reliance on any communication or document believed by it to be true. 4.The Facility Agent may disclose to any other party to this Agreement any information believed by it to bereasonably received pursuant to the provisions of this Agreement.13.5 Independent Credit Appraisal and Subsequent Management of the LoanEach Lender confirms that it has been and will continue to be solely responsible for making an independentinvestigation, review and assessment of the financial condition, creditworthiness, business, legal status and otherconditions of the Borrower. Further, each Lender confirms that it has made independent judgments and decisionsand will assume the risks of such judgments and decisions, including but not limited to: 1.investigation, review and assessment of the adequacy, accuracy or completeness of any information relatingto any other party to this Agreement or the transactions contemplated under this Agreement whether suchinformation is supplied to that Lender by the Facility Agent or the Lead Arranger; 2.investigation, review and assessment of the financial condition, creditworthiness, business, legal status orother conditions of any other party to this Agreement;25Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 3.investigation, review and assessment of the legality, effectiveness, binding effect, sufficiency or enforceabilityof this Agreement or any document in connection therewith or any action taken or to be taken by any otherparty to this Agreement; 4.The Facility Agent shall fulfill its supervisory responsibility of the accounts opened by Borrower under thisAgreement; and each Finance Party shall independently fulfill the subsequent management responsibility ofthe loans, and may require material and information necessary for fulfilling such responsibilities through theFacility Agent.13.6 Facility Agent and Lead Arranger as LendersIf the Facility Agent or the Lead Arranger is also a Lender, it shall be entitled to rights and subject to liabilities as aLender in accordance with the provisions of this Agreement.13.7 Syndication Conference 1.Decision-making Mechanism of the Lenders (1)In the circumstance that the decisions of the Majority Lenders or all the Lenders are expresslyrequired pursuant to the provisions of this Agreement, any Lender may notify the Facility Agent uponbecoming aware of its occurrence, whereupon the Facility Agent shall promptly notify each Lenderand request decisions to be made upon receipt of such notice or upon becoming aware of the same. (2)Each Lender shall, upon receipt of a notice issued by the Facility Agent pursuant to this Clause 13.7(Syndication Conference), notify the Facility Agent of its decisions within the time limit specifiedtherein. (3)Unless otherwise provided in this Agreement, the Facility Agent shall act in accordance with thedecisions of the Majority Lenders or all the Lenders pursuant to the provisions of this Agreement; theFacility Agent shall bear no liability to other parties to this Agreement for taking or refraining from anyaction if it acts in accordance with the decisions of the Majority Lenders or all the Lenders. (4)The decisions of the Majority Lenders or all the Lenders made in accordance with the provisions ofthis Agreement shall be binding on each Lender, and each Lender shall assist the Facility Agent incarrying out any such decision of the Majority Lenders or all the Lenders.26Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (5)In the absence of a decision from the Majority Lenders or all the Lenders in accordance with theprovisions of this Agreement, the Facility Agent shall make a preliminary settlement proposal inrespect of the circumstance and solicit opinions of each Lender in accordance with the proceduresdescribed above. If any Lender fails to notify the Facility Agent of its decisions within the time limitspecified in the notice issued by the Facility Agent, it shall be deemed as having approved suchsettlement proposal. (6)The Facility Agent may (but is not obliged to) take or refrain from an action if it considers such actionor inaction is in the best interest of the relevant Lenders. 2.Consent of all the LendersExcept as otherwise provided in this Agreement, without the consent of all Lenders, no amendment to thisAgreement shall: (1)change the Commitment, the Total Commitments or the currency of the Advances; (2)change the Loan Period; (3)change the Interest Rate or the Default Interest Rate, except as otherwise provided in thisAgreement; (4)change the currency, the amount or the payment date of any sum payable to any Finance Partyunder this Agreement; (5)amend the definition of the "Majority Lenders"; (6)amend Clause 17 (Amendments and Waivers) hereof. 3.Syndication Conference Procedures and Rules (1)Upon the circumstances where the Facility Agent shall act in accordance with the decisions of theMajority Lenders or (as the case may be) all the Lenders pursuant to this Agreement, the FacilityAgent shall convene and preside over the syndication conference. (2)In addition to the circumstances stipulated in the first paragraph above, the Facility Agent shall beresponsible for the convening of the syndication conference in time upon the followingcircumstances:(a)any material matter deemed as necessary to be decided by convening a syndicationconference by the Lead Arranger; or(b)joint written proposal of the Lenders whose commitments aggregate one third or more of theTotal Commitments.27Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. (3)If the Facility Agent convenes a syndication conference, it shall give written notice to each Lender atleast five (5) Business Days or a shorter period determined by the Facility Agent prior thereto.However, at the Facility Agent’s discretion and in accordance with this Agreement, it may give thenotice of the syndication conference in such manner that it deems to be positive for relevant Lenders.The notice of the conference shall include the time, place, manner and the proposal of thesyndication conference. (4)The syndication conference may be held on site or by communications or by written consents (withthe Facility Agent notifying each Lender by facsimile to get its consent). The manner of theconference will be decided by the Facility Agent and will be specified in the notice of the conference.However, to minimize expense, the Facility Agent shall choose to hold the conference by writtenconsent to the extent possible. In the case of a communication conference, the specific method ofcommunication and making written resolutions will be decided by the Facility Agent and will bespecified in the notice of the conference. (5)If any of the Lenders fail to instruct the Facility Agent in relation to a matter to be decided by theMajority Lenders or by all the Lenders (as the case may be) before the date of its decision, it shall bedeemed as having approved such matter. (6)Each Lender shall, within two (2) Business Days upon the receipt of the notice of conference, notifythe Facility Agent whether it will attend the conference, and may submit the provisional proposal two(2) Business Days prior to the conference. The Facility Agent shall notify other Lenders of suchprovisional proposal. (7)Each Lender may appoint one or two authorized representatives and several general representativesto attend the syndication conference. All representatives may participate in discussions and offeropinions, but only the authorized representatives are entitled to vote on behalf of that Lender. (8)A valid resolution of the syndication conference shall be recorded in writing by the Facility Agent andaffixed with the company chop of each Lender. An original of the valid resolution of the syndicationconference shall be sent to each Lender. Not all the valid resolutions need to be disclosed to theBorrower unless it is related to the rights, obligations or other interests of the Borrower under thisAgreement.28Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 4.Intercreditor AgreementThe Finance Parties may enter into an intercreditor agreement separately, provided that such agreementshall not prejudice any right or increase any obligation of the Borrower under this Agreement.13.8 Compensation by the LendersEach Lender shall, within three (3) Business Days upon the request of the Facility Agent, make compensation tothe Facility Agent against all reasonable costs, fees, losses, expenses (including legal fees) and liabilities (exceptthose caused by the negligence or misconduct of the Facility Agent) incurred or to be incurred by the Facility Agentin acting as an agent pursuant to this Agreement in proportion to its Commitment Percentage.13.9 Deduction by the Facility AgentIf any Finance Party owes an amount to the Facility Agent under this Agreement, the Facility Agent may, aftergiving notice to that Finance Party, deduct an amount not exceeding that amount from any payment to thatFinance Party which the Facility Agent would have otherwise obliged to make under this Agreement and apply theamounts deducted towards the satisfaction of the amounts owed, and, the amounts so deducted shall be regardedas having been received by the indebted Finance Party.13.10 Other BusinessEach Finance Party (including its branches) may accept deposits from, make other loans to or engage in any otherbanking business with the Borrower.13.11 Dealings with the LenderUnless the Facility Agent receives a notice from the relevant Lender issued in accordance with the provisions ofthis Agreement stating the contrary, it may assume that such Lender is entitled to payments under this Agreement.14.TRANSFER14.1 TransfereeThis Agreement is binding and effective on each party hereto and their respective successors and assignees.29Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 14.2 Transfer by the BorrowerUnless otherwise consented to by all Lenders, the Borrower may not transfer all or any of its rights or obligationsunder this Agreement.14.3 Transfer by the LendersAny Lender (the “Transferring Lender”) intending to transfer all or any of its rights and/or obligations hereunder toone or more financial institutions (the “Transferee Bank”) shall give at least ten (10) Business Days’ prior notice(the “Transfer Notice”) to the Borrower and the Facility Agent, and obtain the prior written consent of theBorrower. However, no prior written consent is required under the following circumstances: (1) the TransferringLender transfers all or any of its rights and/or obligations hereunder to other Lenders; (2) the Transferring Lendertransfers all or any rights and/or obligations hereunder to its branches or sub-branches, (3) any transfer requiredby the Borrower in accordance with paragraph 3 of Clause 8.2 hereof, and (4) an Event of Default has occurredand is continuing. If the Transferring Lender transfers all or any of its rights and/or obligations hereunder to otherfinancial institutions other than the Finance Parties, other Finance Parties shall enjoy the priority to acquire thetransfer upon the equal conditions.14.4 Effecting a TransferThe transfer made by a Lender in accordance with Clause 14.3 (Transfer by the Lenders) hereof shall take effectupon the date specified in a duly completed Transfer Certificate in the form and substance set out in Schedule 3(Form of Transfer Certificate) hereof and executed by the Transferring Lender, Transferee Bank and the FacilityAgent. The execution of a Transfer Certificate shall not be withheld or delayed by the Facility Agent.14.5 Binding Effect of a TransferAny transfer effected and completed in accordance with this Agreement shall be binding on each party to thisAgreement.14.6 Consequences of a TransferFrom the date a transfer takes effect, the Transferee Bank becomes a Lender and to the extent as specified in theTransfer Certificate: 1.the Transferring Lender shall no longer enjoy rights and bear liabilities under this Agreement in relation to thetransfer object; and 2.the Transferee Bank shall enjoy all the rights and bear all the obligations under this Agreement in relation tothe transfer object.30Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 14.7 Limitation of Liabilities of a Transferring LenderThe Transferring Lender shall bear no liability to the Transferee Bank for any of the followings: 1.the duly execution, genuineness, accuracy, completeness, legality, effectiveness or enforceability of thisAgreement or any other document in connection herewith； 2.the receivability of any payment due under this Agreement; and 3.the accuracy and completeness of the representations of facts made by any other party to this Agreement toany person under or in connection with this Agreement.14.8 Further Limitation of Liabilities of a Transferring LenderA Transferring Lender is not obliged to: 1.retrieve from any Transferee Bank any right and/or obligation which is already transferred to that TransfereeBank in accordance with provisions of this Agreement. 2.indemnify any Transferee Bank against any losses incurred by it as a result of the breach of any obligation bythe Borrower or any other Finance Party under this Agreement.14.9 RecordingThe Facility Agent shall maintain a name list of each party to this Agreement, be responsible for registration of thetransfer, record each transfer of the syndication loan, and shall promptly notify other parties of a transfer thereto.14.10 Change of Lending OfficesAny Lender may change its Lending Office by giving the Borrower and the Facility Agent at least twenty (20)Business Days’ prior notice.15.RELATIONSHIP OF RIGHTS AND OBLIGATIONS AMONG THE FINANCE PARTIES15.1 Independence of ObligationsThe obligations of each Finance Party under this Agreement are independent of each other. Failure by anyFinance Party to perform its obligations under this Agreement does not discharge the obligations of any otherFinance Party under this Agreement. No Finance Party shall have any responsibility to any other Finance Partiesfor their respective obligations under this Agreement.31Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 15.2 Independence of RightsThe rights of each Finance Party under this Agreement are independent of each other. Any debt arising from timeto time under this Agreement owing by any party to this Agreement to any Finance Party shall be a separate debt,but each Finance Party shall exercise its rights through the Facility Agent under this Agreement. No Finance Partyshall refuse to fulfill any obligation under this Agreement on the grounds of the independence of rights.16.CONFIDENTIALITY16.1 Scope of Confidentiality1. Confidentiality Obligation of the Finance PartiesEach Finance Party to the this Agreement agrees that it will not, and shall procure that its senior managers,directors, employees, affiliates, advisors and agents (each Finance Party may only disclose relevant information tothe said persons when necessary) will not disclose, announce or otherwise publish to any third party anyinformation including but not limited to provisions of this Agreement, this loan, the Project or Project agreement,the Borrower and its shareholders. Each Finance Party shall especially abide by the followings: (1)Each Finance Party to this Agreement shall ensure that its senior managers, directors, employees, affiliates,advisors and agents will not disclose, announce or otherwise publish (including but not limited to publishingin any social media (including microblog and Wechat)) to any third party any information relating to theProject and the transactions contemplated hereunder, and the price information herein shall not be disclosedor otherwise used by the foresaid person. (2)Each Finance Party to this Agreement will not, and shall ensure that its senior managers, directors,employees, affiliates, advisors and agents will not, accept any interview by any media (including but notlimited to any social media) in respect of the Project or the transactions contemplated hereunder or agree toreport the same.Any confidentiality agreement or agreement relating to information disclosure already signed by each party beforethe execution of this Agreement shall be still applicable to the confidential information of the Borrower provided bythe Borrower or any third party during the negotiation, execution and performance of this Agreement. During thetenor of this Agreement and until two (2) years or any longer period as may be required by applicable laws andregulations after the termination or expiration of this Agreement, the terms and conditions contained in suchconfidentiality agreement or agreement relating to information disclosure shall remain valid and effective. In theevent of any conflict between such confidentiality agreement or agreement relating to information disclosure andthis Agreement, the provisions imposing stricter confidentiality obligations on Finance Parties shall always prevail.32Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. However, the following disclosures made by the Finance Parties shall be exempted: (1)information already known to the public (other than by reason of that Finance Party’s breach of this clause); (2)information disclosed in compliance with and to the extent required by competent government or regulatoryauthority according to laws and regulations, and the relevant disclosure shall be limited to the minimumextent as required by the competent government, regulatory authority and laws and regulations; (3)information disclosed in compliance with the listing rules of the stock exchange where it is listed, and therelevant disclosure shall be limited to the minimum extent as required by the listing rules of the stockexchange where it is listed; (4)information disclosed with the Borrower’s prior written consent.2. Confidentiality Obligation of the BorrowerThe Borrower shall undertake confidentiality obligation in equal measure as required in paragraph 1 above withrespect to information obtained from each Finance Party.16.2 Other Permitted DisclosureAny Finance Party may disclose any of the following information to assignees consented to by the Borrowerpursuant to Clause 14 (Transfer) hereof: 1.copies of this Agreement; 2.any information known to that Finance Party with respect to the Borrower, this Agreement and/or thetransactions contemplated thereunder;provided that, the party such confidential information to be disclosed to shall have undertaken with that FinanceParty to comply with the confidentiality obligation under Clause 16 (Confidentiality) hereof prior to the receipt of anysuch confidential information.17.AMENDMENTS AND WAIVERS17.1 Application for Amendments and Waivers and Consent 1.If the Borrower makes an application for amendments and waivers to the provision of this Agreement, theFacility Agent shall, promptly notify each Lender and request decisions to be made upon receipt of suchwritten application and other relevant documents.33Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 2.If any Lender proposes to amend the provision of this Agreement, it shall firstly notify the Facility Agent, andthe Facility Agent shall promptly notify other Lenders and request decisions to be made upon receipt of thenotice. Where the amendments proposed by the Lender is related to the Borrower, the Facility Agent shallcopy the notice to the Borrower and negotiate with the Borrower the amendments to the provisions of thisAgreement on behalf of the syndicate in accordance with the relevant provisions of this Agreement. 3.For amendments or waivers proposed by the Borrower or any Lender, the Facility Agent shall determine if itrequires consent of the Majority Lenders or all the Lenders pursuant to the relevant provisions of thisAgreement. 4.The Facility Agent shall complete the decision process pursuant to Clause 13.7 (Syndication Conference)upon receipt of such application for amendments or waivers from the Borrower or any Lender. The final validvoting result shall be promptly notified to each Lender and the Borrower.17.2 Written AmendmentsAny amendment to any provision of this Agreement shall be made in writing and a written amendment only takeseffect upon execution by the Facility Agent ((as determined by all Lenders or the Majority Lenders (as the casemay be)) and the Borrower.17.3 Consents by the Facility AgentNotwithstandign the provision above, without the consent of the Facility Agent no amendment to this Agreementshall: 1.amend Clause 8 (Payments), Clause 13 (Relationship among Finance Parties) or Clause 17 (Amendmentsand Waivers) hereof; 2.amend or waive any rights of the Facility Agent under this Agreement, or impose additional obligations on theFacility Agent.18.NOTICES18.1 Notices through the Facility AgentAll communications between the Borrower and any Finance Party with respect to this Agreement shall be madethrough the Facility Agent.18.2 Methods of NoticesAny notice, demand or other document from one party to the other hereto pursuant to the provisions of thisAgreement shall be made in writing and be delivered to that party at such correspondence address or emailaddress and marked for the attention of the persons (if any) as that party may designate from time to time inwriting. The initial address, telephone number, email address and contact persons designated by each party areset forth on the execution pages hereof.34Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 18.3 Delivery of NoticesAny communication between each party to this Agreement in accordance with the provisions of this Agreementshall be deemed as having been received upon the satisfaction of the following conditions: 1.if delivered in person, at the time of actual delivery; 2.if transmitted by email, when received in legible form; 3.if sent by mail, on the fifth (5) Business Day following the date of posting by registered mail at the correctaddress.18.4 Change of AddressAny party to this Agreement shall promptly notify the Facility Agent of any change to its address, telephonenumber or email address. Any change to the aforesaid information of the Borrower will become effective uponnotification of the Borrower to the Facility Agent. Upon receipt of such notice from any party to this Agreement, theFacility Agent shall forthwith notify the other parties hereto of any such change.18.5 Language of NoticesAny notice under or in connection with this Agreement shall be prepared and issued in Chinese.19.RIGHTS ACCUMULATIVE AND SEVERABILITY19.1 Rights AccumulativeNeither failure to exercise nor delay in exercising on the part of any Finance Party any right under this Agreementshall operate as a waiver, nor shall any single or partial exercise of any right prevents that Finance Party from anyfurther or otherwise exercise of any other rights. The rights and remedies provided in this Agreement arecumulative and not exclusive of any rights or remedies granted to any Finance Party by laws and regulations.19.2 SeverabilityIf at any time any provision of this Agreement is held to be illegal, invalid, or unenforceable in any respect, thelegality, validity or enforceability of any other provisions of this Agreement shall not be affected or prejudiced.20.DOCUMENTATION35Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. 20.1 LanguageThis Agreement is made and executed in Chinese; this English version is prepared for reference only; if there isany discrepancy, the Chinese version controls.20.2 CounterpartsThis Agreement is executed in five originals. Each Finance Party and the Borrower shall each keep one original,and each original shall have the same legal effect.21.GOVERNING LAW AND DISPUTE RESOLUTION21.1 Governing LawThis Agreement is governed by and shall be construed in accordance with the laws of the PRC (for the purpose ofthis Agreement the laws of the PRC shall not include the laws of Hong Kong Special Administrative Region,Macau Special Administrative Region and Taiwan Region).21.2 Dispute ResolutionDisputes arising out of or in connection with this Agreement shall be submitted to the China InternationalEconomic and Trade Arbitration Commission, Shanghai Sub-Commission for arbitration, which shall be conductedin accordance with the arbitration rules in force at the time of the application for arbitration, and the number ofarbitrators is three (3). In respect of the dispute between any Finance Party and the Borrower arising out of or inconnection with this Agreement, the Facility Agent (acting on behalf of the Finance Party) and the Borrower, eachas a party, shall appoint one arbitrator respectively, and the third arbitrator shall be jointly appointed by the FacilityAgent (acting on behalf of the Finance Party) and the Borrower or appointed by the Chairman with jointauthorisation granted by the Facility Agent and the Borrower. The arbitral award shall be final and binding on allparties.22.TAKING EFFECTThis Agreement shall take effect on the Effective Date.SCHEDULE 1ORIGINAL COMMITMENT Original LendersOriginal Commitment36Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Agricultural Bank of China Limited, Shanghai ChangningSub-branchRMB562,500,000 (or the USD equivalent)China Construction Bank Corporation, China (Shanghai)Pilot Free Trade Zone Special Area BranchRMB562,500,000 (or the USD equivalent)Industrial and Commercial Bank of China Limited, China(Shanghai) Pilot Free Trade Zone Special Area BranchRMB562,500,000 (or the USD equivalent)Shanghai Pudong Development Bank Co., Ltd., ShanghaiBranchRMB562,500,000 (or the USD equivalent)TotalRMB2,250,000,000 (or the USD equivalent) 37Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. SCHEDULE 2FORM OF DRAWDOWN NOTICE[***] 38Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. SCHEDULE 3FORM OF TRANSFER CERTIFICATE[***] 39Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. APPENDIX: FORM FOR PORTIONS OF COMMITMENT BEING TRANSFERRED[***] 40Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 2,250,000,000 (OR THE USD EQUIVALENT) SYNDICATION REVOLVING LOAN AGREEMENTEXECUTION PAGE Tesla (Shanghai) Co., Ltd.(as Borrower) Attention: Yu XianAddress: 8F, Tower 3, Central Place, No.77 Jianguo Road, Chaoyang District, Beijing, ChinaTel: [***]Email: [***] Authorized signatory:_/s/ Xiaotong Zhu___ ____________Name: Xiaotong Zhu Company ChopTitle: 41Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 2,250,000,000 (OR THE USD EQUIVALENT) SYNDICATION REVOLVING LOAN AGREEMENTEXECUTION PAGE China Construction Bank Corporation, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Primary Lead Arranger, Facility Agent, Original Lender) Attention: Lifan YangAddress: Pudong New District Xinyuan South Road No 555 B-3Tel: [***]Email: [***] Authorized signatory:_/s/ Qinghong Jin__ ____________Name: Qinghong Jin Company ChopTitle: 42Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 2,250,000,000 (OR THE USD EQUIVALENT) SYNDICATION REVOLVING LOAN AGREEMENTEXECUTION PAGE Industrial and Commercial Bank of China Limited, China (Shanghai) Pilot Free Trade Zone Special Area Branch(as Joint Lead Arranger, Original Lender) Attention: Jing OuyangAddress: Shanghai Pudong New District Xinyuan South Road No 555Tel: [***]Email: [***] Authorized signatory:_/s/ Jing Ouyang____ ____________Name: Jing Ouyang Company ChopTitle: 43Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 2,250,000,000 (OR THE USD EQUIVALENT) SYNDICATION REVOLVING LOAN AGREEMENTEXECUTION PAGE Shanghai Pudong Development Bank Co., Ltd., Shanghai Branch(as Joint Lead Arranger, Original Lender) Attention: Qian HuangAddress: China (Shanghai) Pilot Free Trade Zone Special Area Pudong New District Xinyuan South Road No 58819th floorTel: [***]Email: [***] Authorized signatory:_/s/ Su’nan Wang___ ____________Name: Su’nan Wang Company ChopTitle: 44Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. RMB 2,250,000,000 (OR THE USD EQUIVALENT) SYNDICATION REVOLVING LOAN AGREEMENTEXECUTION PAGE Agricultural Bank of China Limited, Shanghai Changning Sub-branch(as Joint Lead Arranger, Trade Finance Party, Original Lender) Attention: Zhifeng PanAddress: Shanghai Changning District Dingxi Road No 998Tel: [***]Email: [***] Authorized signatory:_/s/ Li Xu____ ____________Name: Li Xu Company ChopTitle: 45Certain identified information has been omitted from this document because it is not material and would be competitively harmful if publicly disclosed,and has been marked with “[***]” to indicate where omissions have been made. Schedules Listed Below Omitted Pursuant to Regulation S-K Item 601(a)(5)Schedule 2: Form of Drawdown NoticeSchedule 3: Form of Transfer CertificateAppendix: Form for Portions of Commitment Being Transferred 46Exhibit 21.1SUBSIDIARIES OF TESLA, INC. Name of Subsidiary Jurisdiction ofIncorporation or OrganizationAllegheny Solar 1, LLC DelawareAllegheny Solar Manager 1, LLC DelawareAncon Holdings II, LLC DelawareAncon Holdings III, LLC DelawareAncon Holdings, LLC DelawareAncon Solar Corporation DelawareAncon Solar I, LLC DelawareAncon Solar II Lessee Manager, LLC DelawareAncon Solar II Lessee, LLC DelawareAncon Solar II Lessor, LLC DelawareAncon Solar III Lessee Manager, LLC DelawareAncon Solar III Lessee, LLC DelawareAncon Solar III Lessor, LLC DelawareAncon Solar Managing Member I, LLC DelawareArpad Solar Borrower, LLC DelawareArpad Solar I, LLC DelawareArpad Solar Manager I, LLC DelawareAU Solar 1, LLC DelawareAU Solar 2, LLC DelawareBanyan SolarCity Manager 2010, LLC DelawareBanyan SolarCity Owner 2010, LLC DelawareBasking Solar I, LLC DelawareBasking Solar II, LLC DelawareBasking Solar Manager II, LLC DelawareBeatrix Solar I, LLC DelawareBernese Solar Manager I, LLC DelawareBlue Skies Solar I, LLC DelawareBlue Skies Solar II, LLC DelawareCaballero Solar Managing Member I, LLC DelawareCaballero Solar Managing Member II, LLC DelawareCaballero Solar Managing Member III, LLC DelawareCardinal Blue Solar, LLC DelawareCastello Solar I, LLC DelawareCastello Solar II, LLC DelawareCastello Solar III, LLC DelawareChaparral SREC Borrower, LLC DelawareChaparral SREC Holdings, LLC DelawareChompie Solar I, LLC DelawareChompie Solar II, LLC DelawareChompie Solar Manager I, LLC DelawareChompie Solar Manager II, LLC DelawareCity UB Solar, LLC DelawareClydesdale SC Solar I, LLC DelawareCommon Assets Capital, LLC DelawareCommon Assets Financial, LLC DelawareCommon Assets Securities, LLC DelawareCommon Assets Technologies, LLC DelawareCommon Assets, LLC DelawareDahlia Holdings I, LLC DelawareDahlia Holdings II, LLC DelawareDom Solar General Partner I, LLC DelawareDom Solar Limited Partner I, LLC DelawareEiger Lease Co, LLC DelawareEnergy Freedom Coalition of America, LLC DelawareFalconer Solar Manager I, LLC DelawareFirehorn Solar Manager I, LLC DelawareFocalPoint Solar Borrower, LLC DelawareFocalPoint Solar I, LLC DelawareFocalPoint Solar Manager I, LLC DelawareFontane Solar I, LLC DelawareFotovoltaica GI 4, S. de R.L. de C.V. MexicoFotovoltaica GI 5, S. de R.L. de C.V. MexicoFTE Solar I, LLC DelawareGrohmann Engineering Trading (Shanghai) Co. Ltd. ChinaGrohmann USA, Inc. DelawareGuilder Solar, LLC DelawareHammerhead Solar, LLC DelawareHangzhou Silevo Electric Power Co., Ltd. ChinaHarpoon Solar I, LLC DelawareHarpoon Solar Manager I, LLC DelawareHaymarket Holdings, LLC DelawareHaymarket Manager 1, LLC DelawareHaymarket Solar 1, LLC DelawareHibar China Co. Ltd. ChinaHibar International Holdings, Inc. CanadaHibar Korea Ltd. Republic of KoreaHibar Systems Europe GmbH GermanyHibar Systems Limited CanadaIkehu Manager I, LLC DelawareIL Buono Solar I, LLC DelawareIliosson, S.A. de C.V. MexicoKnight Solar Managing Member I, LLC DelawareKnight Solar Managing Member II, LLC DelawareKnight Solar Managing Member III, LLC DelawareLandlord 2008-A, LLC DelawareLML Partnership, LLC DelawareLML 2018 Warehouse SPV, LLC DelawareLML Warehouse SPV, LLC DelawareLouis Solar II, LLC DelawareLouis Solar III, LLC DelawareLouis Solar Manager II, LLC DelawareLouis Solar Manager III, LLC DelawareLouis Solar Master Tenant I, LLC DelawareLouis Solar MT Manager I, LLC DelawareLouis Solar Owner I, LLC DelawareLouis Solar Owner Manager I, LLC DelawareMako GB SPV Holdings, LLC DelawareMako GB SPV, LLC DelawareMako Solar Holdings, LLC DelawareMako Solar, LLC DelawareMaster Tenant 2008-A, LLC DelawareMatterhorn Solar I, LLC DelawareMaxwell Holding GmbH GermanyMaxwell Technologies Korea Co., Ltd. Republic of KoreaMaxwell Technologies Hong Kong Limited Hong KongMaxwell Technologies Shanghai Trading Co., Ltd. ChinaMaxwell Technologies GmbH GermanyMaxwell Technologies, Inc. DelawareMaxwell Technologies Shenzhen Trading Co., Ltd. ChinaMaxwell Technologies Systems Division, Inc. CaliforniaMegalodon Solar, LLC DelawareMML Acquisition Corp. DelawareMonte Rosa Solar I, LLC DelawareMound Solar Manager V, LLC DelawareMound Solar Manager VI, LLC DelawareMound Solar Manager X, LLC DelawareMound Solar Manager XI, LLC DelawareMound Solar Manager XII, LLC DelawareMound Solar Master Tenant IX, LLC DelawareMound Solar Master Tenant V, LLC CaliforniaMound Solar Master Tenant VI, LLC DelawareMound Solar Master Tenant VII, LLC DelawareMound Solar Master Tenant VIII, LLC DelawareMound Solar MT Manager IX, LLC DelawareMound Solar MT Manager VII, LLC DelawareMound Solar MT Manager VIII, LLC DelawareMound Solar Owner IX, LLC DelawareMound Solar Owner Manager IX, LLC DelawareMound Solar Owner Manager VII, LLC DelawareMound Solar Owner Manager VIII, LLC DelawareMound Solar Owner V, LLC CaliforniaMound Solar Owner VI, LLC DelawareMound Solar Owner VII, LLC DelawareMound Solar Owner VIII, LLC DelawareMound Solar Partnership X, LLC DelawareMound Solar Partnership XI, LLC DelawareMound Solar Partnership XII, LLC DelawareMS SolarCity 2008, LLC DelawareMS SolarCity Commercial 2008, LLC DelawareMS SolarCity Residential 2008, LLC DelawareMT Solar Corporation DelawareNBA SolarCity AFB, LLC CaliforniaNBA SolarCity Commercial I, LLC CaliforniaNBA SolarCity Solar Phoenix, LLC CaliforniaNorthern Nevada Research Co., LLC NevadaOranje Solar I, LLC DelawareOranje Solar Manager I, LLC DelawareParamount Energy Fund I Lessee, LLC DelawareParamount Energy Fund I Lessor, LLC DelawarePEF I MM, LLC DelawarePerbix Machine Company, Inc. MinnesotaPoppy Acquisition LLC DelawarePresidio Solar I, LLC DelawarePresidio Solar II, LLC DelawarePresidio Solar III, LLC DelawarePukana La Solar I, LLC DelawareRoadster Automobile Sales and Service (Beijing) Co., Ltd. ChinaRoadster Finland Oy FinlandSequoia Pacific Holdings, LLC DelawareSequoia Pacific Manager I, LLC DelawareSequoia Pacific Solar I, LLC DelawareSequoia SolarCity Owner I, LLC DelawareServicios de Technología Y Admninstración Ilioss, S.A. de C.V. MexicoSierra Solar Power (Hong Kong) Limited Hong KongSilevo, LLC DelawareSolar Aquarium Holdings, LLC DelawareSolar Energy of America 1, LLC DelawareSolar Energy of America Manager 1, LLC DelawareSolar Explorer, LLC DelawareSolar Gezellig Holdings, LLC DelawareSolar House I, LLC DelawareSolar House II, LLC DelawareSolar House III, LLC DelawareSolar House IV, LLC DelawareSolar Integrated Fund I, LLC DelawareSolar Integrated Fund II, LLC DelawareSolar Integrated Fund III, LLC DelawareSolar Integrated Fund IV-A, LLC DelawareSolar Integrated Fund V, LLC DelawareSolar Integrated Fund VI, LLC DelawareSolar Integrated Manager I, LiLC DelawareSolar Integrated Manager II, LLC DelawareSolar Integrated Manager III, LLC DelawareSolar Integrated Manager IV-A, LLC DelawareSolar Integrated Manager V, LLC DelawareSolar Integrated Manager VI, LLC DelawareSolar Services Company, LLC DelawareSolar Ulysses Manager I, LLC DelawareSolar Ulysses Manager II, LLC DelawareSolar Voyager, LLC DelawareSolar Warehouse Manager I, LLC DelawareSolar Warehouse Manager II, LLC DelawareSolar Warehouse Manager III, LLC DelawareSolar Warehouse Manager IV, LLC DelawareSolarCity Alpine Holdings, LLC DelawareSolarCity Amphitheatre Holdings, LLC DelawareSolarCity Arbor Holdings, LLC DelawareSolarCity Arches Holdings, LLC DelawareSolarCity AU Holdings, LLC DelawareSolarCity Cruyff Holdings, LLC DelawareSolarCity Electrical New York Corporation DelawareSolarCity Electrical, LLC DelawareSolarCity Engineering, Inc. CaliforniaSolarCity Finance Company, LLC DelawareSolarCity Finance Holdings, LLC DelawareSolarCity Foxborough Holdings, LLC DelawareSolarCity FTE Series 1, LLC DelawareSolarCity FTE Series 2, LLC DelawareSolarCity Fund Holdings, LLC DelawareSolarCity Grand Canyon Holdings, LLC DelawareSolarCity Holdings 2008, LLC DelawareSolarCity International, Inc. DelawareSolarCity Leviathan Holdings, LLC DelawareSolarCity LMC Series I, LLC DelawareSolarCity LMC Series II, LLC DelawareSolarCity LMC Series III, LLC DelawareSolarCity LMC Series IV, LLC DelawareSolarCity LMC Series V, LLC DelawareSolarCity Mid-Atlantic Holdings, LLC DelawareSolarCity Nitro Holdings, LLC DelawareSolarCity Orange Holdings, LLC DelawareSolarCity Series Holdings I, LLC DelawareSolarCity Series Holdings II, LLC DelawareSolarCity Series Holdings IV, LLC DelawareSolarCity Steep Holdings, LLC DelawareSolarCity Ulu Holdings, LLC DelawareSolarCity Village Holdings, LLC DelawareSolarRock, LLC DelawareSolarStrong, LLC DelawareSparrowhawk Solar I, LLC DelawareSREC Holdings, LLC DelawareTALT Holdings, LLC DelawareTALT TBM Holdings, LLC DelawareTBM Partnership II, LLC DelawareTES 2017-1, LLC DelawareTES 2017-2, LLC DelawareTES 2018-K2, LLC DelawareTES Holdings 2017-1, LLC DelawareTES Holdings 2018-K2, LLC DelawareTesla (Beijing) New Energy R&D Co., Ltd. ChinaTesla 2014 Warehouse SPV LLC DelawareTesla Auto Lease Trust 2018-A DelawareTesla Auto Lease Trust 2018-B DelawareTesla Motors (Beijing) Co., Ltd. ChinaTesla Automobile Sales and Service (Beijing) Co., Ltd. ChinaTesla Automobile Sales and Service (Changsha) Co., Ltd. ChinaTesla Automobile Sales and Service (Chengdu) Co., Ltd. ChinaTesla Automobile Sales and Service (Chongqing) Co., Ltd. ChinaTesla Automobile Sales and Service (Dalian) Co., Ltd. ChinaTesla Automobile Sales and Service (Guangzhou) Co., Ltd. ChinaTesla Automobile Sales and Service (Hangzhou) Co., Ltd. ChinaTesla Automobile Sales and Service (Nanjing) Co., Ltd. ChinaTesla Automobile Sales and Service (Nanning) Co., Ltd. ChinaTesla Automobile Sales and Service (Ningbo) Co., Ltd. ChinaTesla Automobile Sales and Service (Qingdao) Co., Ltd. ChinaTesla Automobile Sales and Service (Shanghai) Co., Ltd. ChinaTesla Automobile Sales and Service (Shanghai) Co., Ltd., Xinhong Branch ChinaTesla Automobile Sales and Service (Shanghai) Co., Ltd., Yangpu Branch ChinaTesla Automobile Sales and Service (Shenzhen) Co., Ltd. ChinaTesla Automobile Sales and Service (Shenzhen) Co., Ltd., Futian Branch 2 ChinaTesla Automobile Sales and Service (Shenyang) Co., Ltd. ChinaTesla Automobile Sales and Service (Suzhou) Co. Ltd. ChinaTesla Automobile Sales and Service (Tianjin) Co. Ltd. ChinaTesla Automobile Sales and Service (Wenzhou) Co., Ltd. ChinaTesla Automobile Sales and Service (Wuhan) Co., Ltd. ChinaTesla Automobile Sales and Service (Xi'an) Co., Ltd. ChinaTesla Automobile Sales and Service (Xiamen) Co., Ltd. ChinaTesla Automobile Sales and Service (Zhengzhou) Co. Ltd. ChinaTesla Automobiles Sales and Service Mexico, S. de R.L. de C.V. MexicoTesla Belgium BVBA BelgiumTesla Canada GP Inc. CanadaTesla Canada LP CanadaTesla Czech Republic s.r.o. Czech RepublicTesla Energia Macau Limitada MacauTesla Energy d.o.o. SloveniaTesla Energy Electrical LLC DelawareTesla Energy Operations, Inc. DelawareTesla Energy Sales LLC DelawareTesla Finance LLC DelawareTesla Financial Leasing (China) Co., Ltd. ChinaTesla Financial Services GmbH GermanyTesla Financial Services Holdings B.V. NetherlandsTesla Financial Services Limited United KingdomTesla France S.à r.l. FranceTesla Germany GmbH GermanyTesla Greece Single Member P.C. GreeceTesla Grohmann Automation GmbH GermanyTesla Insurance, Inc. DelawareTesla Insurance Holdings, LLC DelawareTesla Insurance Services, Inc. CaliforniaTesla International B.V. NetherlandsTesla Italy S.r.l. ItalyTesla Jordan Car Trading LLC JordanTesla Korea Limited Republic of KoreaTesla Lease Trust DelawareTesla Manufacturing Brandenburg SE GermanyTesla Michigan, Inc. MichiganTesla Motors Australia, Pty Ltd AustraliaTesla Motors Austria GmbH AustriaTesla Motors Canada ULC CanadaTesla Motors Coöperatief U.A. NetherlandsTesla Motors Denmark ApS DenmarkTesla Motors FL, Inc. FloridaTesla Motors HK Limited Hong KongTesla Motors Iceland ehf. IcelandTesla Motors Ireland Limited IrelandTesla Motors Israel Ltd. IsraelTesla Motors Japan GK JapanTesla Motors Limited United KingdomTesla Motors Luxembourg S.à r.l. LuxembourgTesla Motors MA, Inc. MassachusettsTesla Motors Netherlands B.V. NetherlandsTesla Motors New York LLC New YorkTesla Motors NL LLC DelawareTesla Motors Norway AS NorwayTesla Motors NV, Inc. NevadaTesla Motors PA, Inc. PennsylvaniaTesla Motors Sales and Service LLC TurkeyTesla Motors Singapore Holdings Pte. Ltd. SingaporeTesla Motors Singapore Private Limited SingaporeTesla Motors Stichting NetherlandsTesla Switzerland GmbH SwitzerlandTesla Motors Taiwan Limited TaiwanTesla Motors TN, Inc. TennesseeTesla Motors TX, Inc. TexasTesla Motors UT, Inc. UtahTesla New Zealand ULC New ZealandTesla Portugal, Sociedade Unipessoal LDA PortugalTesla Poland sp. z o.o. PolandTesla Puerto Rico LLC Puerto RicoTesla Sales, Inc. DelawareTesla Services Sdn. Bhd. MalaysiaTesla Shanghai Co., Ltd ChinaTesla Spain, S.L. Unipersonal SpainTesla Transport B.V. NetherlandsTesla, Inc. DelawareThe Big Green Solar Holdings, LLC DelawareThe Big Green Solar I, LLC DelawareThe Big Green Solar Manager I, LLC DelawareThree Rivers Solar 1, LLC DelawareThree Rivers Solar 2, LLC DelawareThree Rivers Solar 3, LLC DelawareThree Rivers Solar Manager 1, LLC DelawareThree Rivers Solar Manager 2, LLC DelawareThree Rivers Solar Manager 3, LLC DelawareTM International C.V. NetherlandsTM Sweden AB SwedenUSB SolarCity Manager 2009, LLC DelawareUSB SolarCity Manager 2009-2010, LLC DelawareUSB SolarCity Manager III, LLC DelawareUSB SolarCity Manager IV, LLC DelawareUSB SolarCity Master Tenant 2009, LLC CaliforniaUSB SolarCity Master Tenant 2009-2010, LLC CaliforniaUSB SolarCity Master Tenant IV, LLC CaliforniaUSB SolarCity Owner 2009, LLC CaliforniaUSB SolarCity Owner 2009-2010, LLC CaliforniaUSB SolarCity Owner IV, LLC CaliforniaVisigoth Solar 1, LLC DelawareVisigoth Solar Holdings, LLC DelawareVisigoth Solar Managing Member 1, LLC DelawareVPP Project 1 (SA) Pty Ltd. AustraliaWeisshorn Solar I, LLC DelawareWeisshorn Solar Manager I, LLC DelawareZep Solar Hong Kong Limited Hong KongZep Solar LLC CaliforniaZep Solar Trading Ltd China  Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-231168, 333-230180, and 333-221378)and S-8 (Nos. 333-232079, 333-223169, 333-216376, 333-209696, 333-198002, 333-187113, 333-183033, and 333-167874) of Tesla, Inc. of ourreport dated February 13, 2020 relating to the financial statements and the effectiveness of internal control over financial reporting, which appearsin this Form 10-K./s/ PricewaterhouseCoopers LLPSan Jose, CaliforniaFebruary 13, 2020  Exhibit 31.1CERTIFICATIONSI, Elon Musk, certify that:1.I have reviewed this Annual Report on Form 10-K of Tesla, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: February 13, 2020 /s/ Elon Musk Elon Musk Chief Executive Officer (Principal Executive Officer)  Exhibit 31.2CERTIFICATIONSI, Zachary J. Kirkhorn, certify that:1.I have reviewed this Annual Report on Form 10-K of Tesla, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: February 13, 2020 /s/ Zachary J. Kirkhorn Zachary J. Kirkhorn Chief Financial Officer (Principal Financial Officer) Exhibit 32.1SECTION 1350 CERTIFICATIONSI, Elon Musk, certify, pursuant to 18 U.S.C. Section 1350, that, to my knowledge, the Annual Report of Tesla, Inc. on Form 10-K for the annual period endedDecember 31, 2019, (i) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) that the informationcontained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Tesla, Inc. Date: February 13, 2020 /s/ Elon Musk Elon Musk Chief Executive Officer (Principal Executive Officer)I, Zachary J. Kirkhorn, certify, pursuant to 18 U.S.C. Section 1350, that, to my knowledge, the Annual Report of Tesla, Inc. on Form 10-K for the annual periodended December 31, 2019, (i) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) that the informationcontained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Tesla, Inc. Date: February 13, 2020 /s/ Zachary J. Kirkhorn Zachary J. Kirkhorn Chief Financial Officer (Principal Financial Officer) 

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