Tesla’s SEC Filing Lists Risks, Production Assumptions Associated With Model 3

2 years ago by Eric Loveday 38

Tesla Model 3

Tesla Model 3

Under SEC guidelines, Tesla Motors must release all known risk factors to its investors.

In Tesla’s latest 10-Q filing, the Model 3 is front and center in the “risks” category.

Tesla openly admits that it has experienced delays in production of vehicles in the past and says that it could very well experience similar issues in association with the Model 3. The automaker further adds that it has “no experience to date in manufacturing vehicles at the high volumes that we anticipate for Model 3.”

Obviously, Tesla is throwing a few red flags up for investors, but it seems that any Tesla investor that has stuck it out so far has made a tidy profit, so despite the risks, investors continue to jump on board.

Further down in the SEC filing, Tesla says that its target of mid- to late 2017 production of the Model 3 is contingent on lots of assumptions. These assumptions include:

  • that we will be able to develop, build and equip a new dedicated final assembly line for high volume production of Model 3 at the Tesla Factory without exceeding our projected costs and on our projected timeline
  • that we will be able to build and bring online the Gigafactory in a timely manner to produce high volumes of quality lithium-ion cells and integrate such cells into finished battery packs for the Model 3, all at costs that allow us to sell the Model 3 at our target gross margins
  • that the equipment which we select and install for Model 3 production will be able to accurately manufacture high volumes of Model 3 vehicles within specified design tolerances and with high quality
  • that we will be able to engage suppliers for the necessary components on terms and conditions acceptable to us and that we will be able to obtain components on a timely basis and in the necessary quantities to support high volume production
  • that we will be able to complete our design and engineering plans for Model 3 and deliver final component designs to our suppliers in a timely manner; and
  • that we will be able to attract, recruit, hire and train skilled employees, including employees on the production line, to operate our planned high volume Model 3 production facilities at the Tesla Factory and the Gigafactory

Here’s a look at the pages from the SEC filing that deal specifically with Model 3 risks and production assumptions.

Tesla Model 3 Associated Risks

Tesla Model 3 Associated Risks

Tesla Model 3 Associated Risks

Tesla Model 3 Associated Risks

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38 responses to "Tesla’s SEC Filing Lists Risks, Production Assumptions Associated With Model 3"

  1. Get Real says:

    Self obvious.

    1. evcarnut says:

      No Red Flags ., Just pointing out all the possibilities of things that can go wrong & the Uncertainty of such a process, not that these will necessarily actually occur…They are Being Honest to those that do not realize this .., THERE ARE NO GARANTEE’S LIFE….Nothing is ever 100% For sure , there are “always” risks involved…ie..crossing the street is taking a risk…On rare occasions people do get struck by cars..

    1. theflew says:

      Too funny!

    2. Rick Danger says:

      OK, that’s effing hilarious 😀

    3. Jychevyvolt says:

      ?

    4. ffbj says:

      You need to put on a deerstalker and have him smoking a pipe.

    5. Speculawyer says:

      Can never have too much cow bell.

    6. Pushmi-Pullyu says:

      ROTFLMAO!!

      😀 😀 😀

      Thanks very much for the belly laugh, kdawg!

    7. CDAVIS says:

      @kdwag,
      +1; good one!

    8. TomArt says:

      Great catch and illustration!

      Priceless!

  2. Speculawyer says:

    Good. That’s the way these things are written by lawyers. They don’t want shareholder class action lawsuits. Do your own analysis and make you own decisions.

    1. Four Electrics says:

      Tesla won’t be sued–they don’t have any money for shareholders to be awarded. It’s only after they’re acquired by a rich suitor that you’d see the lawsuits.

      1. JakeY says:

        Class action suits have been brought against Tesla plenty of times. It is just that no one ever joined the class action, so they die off.

  3. Anon says:

    LA Times based their latest hit-piece against Tesla, on these same SEC disclosures

    Haters gonna hate. Any straw to grasp in a storm, I guess. 😛

    1. mxs says:

      You really think this is about hating?? Try again.

  4. HVACman says:

    SEC disclosures are not exactly “straws in a storm”. More like the results of the actual cardiogram and cholesterol test of an overweight Big Mac eater. Sobering, to say the least.

    1. Anon says:

      Have you not actually read investor disclosures before? Or previous anti-Tesla FUD from the LA Times? They’re almost as bad as The Detroit Free Press. Almost.

      1. ffbj says:

        Yeah, I was wondering if someone would mention that. In fact it seems to be almost a contest between journalists to see who can dis’ Tesla the most. Our maybe it’s a owner imperative to have at least one anti-Tesla article a week, taking shots at Tesla within the yellowing pages of the tabloids.

    2. Pushmi-Pullyu says:

      Oh, please. After you’ve read a few of these boilerplate SEC filing disclaimers, you can see they’re virtually all the same, regardless of which company they come from. It’s a legal requirement, not an indication of a company’s health… or lack thereof.

      Nothing to see here. Move along; move along.

      1. TomArt says:

        Yep, after reading those disclosures, you get this momentary compulsion to sell all stocks and mutual funds, etc., that you have and hide the money in your zombie apocalypse bunker.

  5. Get Real says:

    The forces against Tesla are getting pretty desperate now because they know that if Tesla gets the M3 into full-scale production then it is really going to b impossible to stop them.

    These forces include, but are not limited to: Big Oil and the Koch Heads and all the ancillary businesses like pipeline companies, the politicians and political parties and political movements they heavily influence if not control, NADA, laggard auto OEMs, and last but not least those massively unpatriotic financial leaches that want Tesla to fail so they can become even richer (some of them have a habit of FUD posting here on a regular basis).

    So in short (pun intended), Tesla has a lot of enemies both in numbers of people employed and especially in total wealth controlled.

    However, once the number of people driving Tesla and other electric cars starts to get into the hundreds of thousands it will be GAME OVER for the archaic and greed-driven opposition.

    1. HVACman says:

      Taking your thought to its logical conclusion, the LA Times and their reporters are controlled by Big Oil, the Koch Heads, pipeline companies….etc. etc. NADA, laggard auto OEMs. Perhaps the LA Times is an unpatriotic leach that wants Tesla to fail so they (the LA Times) can become richer.

      Get Real!

      1. Get Real says:

        Tesla doesn’t pay for advertising, all the others do and in fact dealerships alone are one of the largest sources of advertising revenue for newspapers.

        1. Gears says:

          Yep, follow the money.

      2. Stimpacker says:

        LA Times and WSJ are prime examples of biased media. They have a pro-GOP stance and have been against Solar and EVs from the very beginning.

        I am still a WSJ subscriber.

      3. Anon says:

        Conservative Politics often transcend reason…

      4. Pushmi-Pullyu says:

        We certainly don’t have to believe that the LA Times is actually controlled by Big Oil and the Hard Right talking points echo chamber to believe that they might publish a “hit piece” about EVs in general, or Tesla Motors in particular.

        With all newspapers drastically cutting back on their investigative staff, it’s only to be expected that they’ll rely more on “articles” which are nothing more than thinly disguised (if even that) propaganda promoted by some think tank or other.

        Heck, when even notorious anti-EV propagandist John Petersen can get an anti-Tesla hit piece published at Green Tech Media.com, now hard is it to believe that the LA Times might publish an anti-EV article motivated by one or more of the political and economic institutions who have an axe to grind against the EV revolution?

        http://cleantechnica.com/2012/06/11/ev-black-knight-rides-again-john-petersen-on-mortal-enemies/

        https://www.greentechmedia.com/articles/read/guest-post-teslas-gift-box-inefficiency-wrapped-in-hype

  6. Nix says:

    Meh. The Risks listed before the Model S and Model X had the exact same tone. This is typical of any company’s Risk disclosures who are releasing a new product.

    Heck, Apple’s Risk Factors (found in section S-7) are so long I couldn’t even post them here. Even if I broke them up into 2 posts. Same tone.

    http://investor.apple.com/secfiling.cfm?filingid=1193125-14-383437

    1. mxs says:

      Sure, they are … except for, most car manufacturers producing high volumes of cars sum up the risks in 2 pages and most of them rather talk about Forex affect.

      If Honda cited these type of risks in their filing a shit storm would hit a fan …

      People just think that Musk can defy manufacturing laws long time in place for a reason …. keep believing that dream.

      1. Nix says:

        mrs — It is funny that people still make the mistake of comparing the risks of a company in massive expansion to the risks of an old company with stagnant growth. Of course the risks are completely different, but then so are the rewards of owning stock in a company that is out-growing Honda by full orders of magnitude.

        But even then, if you look at the Risk Factors in the sec filings for HONDA GIKEN KOGYO KABUSHIKI KAISHA (HONDA MOTOR CO., LTD), they have 5 pages of Risk Factors too. Everything from pension risks to lawsuits. Heck, they even listed nuclear radiation risk due to Japan’s nuke disaster in recent sec filings.

      2. Pushmi-Pullyu says:

        mxs said:

        “If Honda cited these type of risks in their filing a [censored] storm would hit a fan”

        I’m rather slow to label someone a serial anti-Tesla FUDster, mxs, but you’ve made enough anti-Tesla posts in such a short time that I think it’s safe to conclude that you need to be added to the short list of Tesla bashers who have a hidden agenda for posting here; an agenda which has nothing to do with truth or veracity.

        I won’t do a “wall of text” post, repeating the entire “Risk Factors” section from Honda’s latest annual report, but here is about 1/4 of that section.

        So go peddle your papers elsewhere.

        ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
        Honda relies on external suppliers for the provision of certain raw materials and parts
        Honda purchases raw materials and parts from numerous external suppliers, and relies on certain suppliers for some of the raw materials and parts which it uses in the manufacture of its products. Honda’s ability to continue to obtain these supplies in an efficient and cost-effective manner is subject to a number of factors, some of which are outside of Honda’s control. These factors include the ability of its suppliers to provide a continued source of raw materials and parts and Honda’s ability to compete with other users in obtaining the supplies. In particular, the loss of a key supplier could affect our production and increase our costs.

        Honda relies on business alliances and joint ventures with other companies
        Honda engages in business operations through alliances and joint ventures with other companies in expectation of synergy effects and increased efficiency, or in accordance with requirements from the countries in which Honda conducts its businesses. However, if disagreements occur between the parties to an alliance or joint venture, or if an alliance or joint venture is changed or cancelled, it may have an adverse effect on Honda’s business, financial condition, or results.

        Honda may be adversely affected by wars, terrorism, political uncertainty and labor strikes
        Honda conducts business operations in countries worldwide and is exposed to risks including wars, terrorism, political uncertainty and labor strikes in those countries or neighboring regions. If such unforeseeable events occur, and operations are delayed or suspended, Honda’s business, financial condition, or results
        could be adversely affected.

        Honda may be adversely affected by natural disasters
        In order to minimize the impact on its business operations when events such as large-scale natural disasters, accidents, or the outbreak of infectious diseases occur, Honda conducts a risk evaluation of these events and constructs business continuity plans (BCPs) in each region. However, if operations are delayed or suspended due to the occurrence of disasters, accidents, or the outbreak of infectious diseases that exceed assumptions, Honda’s business, financial condition or results could be adversely affected.
        ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

        More of Honda’s “Risk Factors” in pp. 31-32 of this document:
        http://world.honda.com/investors/library/annual_report/2015/honda2015ar-all-e.pdf

  7. Mike says:

    The 10-Q just states the obvious facts that could delay production. You can’t build a car with only 99.9% of the parts, so supplier issues would be my guess for the biggest concern.

    I think this is a pretty realistic list of risks and it is probably far more honest than Exxon, Arch and Peabody Coal,… ever produced. The term “standed assets” wasnt invented last week.

    It would be interesting to see what Chrysler-Fiat, Ford and the other car companies list as risks. Maybe we should check for something like “missing the boat on EVs will result in loss of market share”.

    1. Nix says:

      GM’s Risk Factors include a statement that they are heavily reliant on SUV and truck sales to make profits. They go on to say that rising gas prices are a risk that would hurt company profits when SUV and truck sales dropped.

      Sadly, nobody there seems to be able to do the math, and figure out that they could greatly hedge that risk by building a PHEV SUV. That way when gas prices go back up, they could maintain SUV sales.

      1. TomArt says:

        Agreed – and that would be a great way to sell the idea to ass-backwards fools in business and politics: hedge your bets! Make money all the time!! Convert a few to PHEVs!!!

  8. Priusmaniac says:

    Is it dangerous…count me in.

  9. Pushmi-Pullyu says:

    This is standard boilerplate stuff. I have no doubt you can see similar disclaimers in the SEC filing from any major publicly owned auto maker.

    What would concern me far more, if I a stock investor considering an investment in TSLA, is Elon’s public remarks about setting company goals which are literally impossible to achieve. That certainly helps explain why Tesla appeared to be two years late (or more) at getting both the Model S and the Model X into production. And it certainly gives me no confidence at all about Tesla’s announced goals for Model ≡ production; not getting it started by mid-2017, nor achieving a run rate of at least 100k per year by the end of 2018.

    Sorry if this comes across like a Tesla bashing post. I’m very impressed by what Tesla has accomplished, and continues to accomplish. But I’m continually disappointed at the very high level of hype coming from Tesla and Elon. What they actually achieve should be quite sufficient to promote the company.

    I think Tesla would do better, and improve the company’s image, by toning down the hype quite a bit. Under-promising and over-delivering is the way to build a company’s reputation… not the opposite.

    1. TomArt says:

      I’ve already commented a few times that the recent announcement of accelerated production is unsettling to the point that I can’t see any reasonable defense.

      It is true that the Model 3 is very straightforward, with the kinds of features and design and structure and powertrain that they already know how to build thanks to Model S. It is also true that the drivetrain is already production-ready and that the remaining design is close to 90% complete.

      However, they haven’t done anything even close to being on time, and when they did start production, it was not without major initial quality problems among the first 10s of thousands of deliveries.

      I gave them a $1k interest-free loan so that I can order my car by, say, early 2019 (east coast USA, non-owner). I want my car, not a refund.

      Considering all the better the competition can do, and has announced so far, the previous (yet still aggressive) goal of 500k by 2020 would be fine and dandy. Moving that up to 2018 (not just 2019, but 2018!!) shakes my confidence.