Ivana Tong ◊ Sid Shekhar ◊ Matt Tomlinson ◊ Haswiny Deva Powering the Future Tesla is a visionary and not a but the leader in EV development thus we are excited to join you in this journey of realizing Tesla’s dream-creating an affordable EV. You have been successful with the development and release of luxury Evs however, producing a mass-market EV is a different animal and we are here to provide what we believe is the best path to achieving this. Ivana Tong ◊ Sid Shekhar ◊ Matt Tomlinson ◊ Haswiny Deva

What’s the Current Situation? 2017 500,000 Teslas on the road 2020 GOAL } How will Tesla get here? Issue: Bring Gen III to mass market Disruptor: Financing Solution: Model S & X sales to fund Gen III We began by understanding Tesla. Its goals a 2017 release of Gen III and in 2020 500,000 annual car sales-all audacious goals. But the issue is how will you get here? What is inhibiting Tesla? We came to conclude financing. You need a lot of capital for R&D, and production for Gen III. How might we achieve this necessary capital? By using Mr. Musk’s vision of using profits generated from Models S & X and in order to create the profit we want many initiatives will be undertaken to create the necessary infrastructure, technological capabilities, and consumers for this. Not only will these create profit to fund Gen III but they will help with adaption of Evs into society. All of these initiatives will lead to the end goal of Gen III on road in 2017. Specifically we want to zoom in on our initiatives. END Gigafactory Creating an environment Building a market International Expansion Gen III Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Product Capabilities and Innovation Bring existing consumer base up to speed with company innovations while maximizing core internal competencies Product Capabilities and Innovation Giga-factory with a capability to produce multiple battery types Push forward in battery innovation Sell battery technology across industries Consumers Chinese consumer market Converting consumers to the EV Gen III for Gen Y Competitively position our operations such that Tesla is the leading EV component manufacturer Reinvest profits from sale of EV components in Gen 3 R&D and production Expand upon Model S and Model X sales Internationally Develop Battery Charging Station infrastructure in Europe and China We are emphasizing on bringing current and potential customers up to speed with an EV lifestyle while continuing technological innovations as that’s Tesla’s core competency. To address this we have split the issue and recommendations into three sections: The first being product innovation where we focus on the Gigafactory and its added benefits. The second is focusing on the consumer market: tapping into China, converting consumers to the EV lifestyle, and specifically looking into Generation Y. The third is looking into the competitive landscape and positioning Tesla as not only the leader in Evs but as the leading EV component manufacturer. Matt will now be speaking about product innovation. Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Converting Consumers to the EV Benefits of Owning a Tesla Time Benefits - Carpool Lane - No gas station visits Cost Benefits - Servicing - Government incentives - Fuel Guaranteed Resale Value Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Converting Consumers to the EV Range Anxiety Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Converting Consumers to the EV Our Recommendation: Leasing Allowing consumers to “own” an EV without having to commit fully will increase confidence Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Global Interest in the Electric Vehicle Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Zooming in on China The growing luxury market in China leads us to believe that it will receive Tesla’s luxury cars well. Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

TESLA Gen III Our Recommendation: Marketing to Generation Y Generation Y is a good fit for the Generation III model. Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

The Gen III Model for Generation-Y Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Generation Y is all for the EV Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Generation Y is all for the EV Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

The U.S Auto Market Key Takeaway–Tesla has an opportunity to capture much larger market share with cheaper Gen 3 model Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Gen 3’s Main Competitors Car MSRP 2013 Mercedes Benz C Class $35,350 2013 Audi A4 $32,500 2013 BMW 3-Series $32,550 2013 Infinity G37 $32,850 2013 Acura TSX $30,510 2016 Tesla Gen 3 $35,000 Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Gen 3 v. Current Electric Models Car MSRP Range (per charge) 2013 Nissan Leaf SV $31,280 73 miles 2013 Ford Focus Electric $39,200 76 miles 2016 Tesla Gen 3 $35,000 200 miles - Opportunity to achieve what porter calls the golden position – low cost leadership and differentiated products (with features such as range twice that of any existing IC or EV car) to raise customers willingness to pay. Key Takeaway–Integrated cost leadership and differentiation opportunity with Gen 3 Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Recommendation Our Recommendation: Reinvest in production Use revenues earned from sale of EV components in Gen 3 R&D and production. Tesla’s Giga-factory is being constructed with the goal of reducing the cost of lithium-ion batteries by 30% in three years and 50% in 2020 For a standard 85 kW version of the Model S, average battery cost is $20,250 or $238/kWh Provision of technology and components to both Toyota and Daimler for their electric vehicles Diversify suppliers of battery cells (Panasonic is currently the only supplier. Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Potential Risks Potential for competitors to innovate and ‘catch up’ by 2017 Maintain distinctive competence of valuable human assets and intellectual capital Panasonic is currently the primary supplier of battery cells Giga-factory will mitigate risk as Tesla can manufacture own cells Customer willingness to switch brands Charging station network and brand positioning Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Long term cost of ownership Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Tesla’s Charging Network U.S. Supercharger stations, 2015 Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Tesla’s Charging Network Europe Supercharger stations, 2015 Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Tesla’s Charging Network Chinese Supercharger stations, 2015 Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Recommendation Our Recommendation: Focus on sales of Model S and X in Europe and Asia Use charging station infrastructure as well as long-term cost savings to capture luxury car demand in China and Europe Blue ocean advantage – high differentiation Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Analysis of the Gigafactory Increasing production Lowering costs Lowering flexibility To reach the desired cost reduction of 30% from current lithium ion production, Musk is bringing all production of the batteries into the factory. Unlike others, this Gigafactory will build its batteries from the raw materials rather than simply assemble parts developed elsewhere. While this will offer Musk the ability to drag costs down enough to achieve his vision of a competitively-priced car for a wider consumer market, Tesla will also be tying itself to its current production. By investing too much capital into lithium ion battery production, Tesla risks losing the flexibility and adaptability that has enabled it to stay at the forefront of automobile innovation, while competitors have stagnated due to their huge facilities and engrained design and sales practices. Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Competition in Battery Production Lithium Air IBM Toyota VW This risk is especially worrisome as the battery industry is currently innovating at 5-8% per year, with numerous companies and universities researching new battery technologies that, if successful, would completely revolutionize the battery industry. One such technology is the Lithium Air Battery. We’ve provided a brief technical description of the technology in the handout, but essentially a Lithium Air Battery, if successfully built, will be lighter, smaller, faster-charging, and capable of taking a car hundreds of miles farther on a single charge. Many major competitors in the automaking industry as well as the tech industry are in the process of developing lithium-air batteries for cars, including Volkswagen, Toyota, and IBM. IBM specifically is scheduled to release a prototype of their battery this year, and has set a goal of 2020 for achieving commercial viability. Higher energy density than lithium-ion batteries because they replace the heavy conventional compounds used in lithium-ion batteries with air Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Expanding Batteries into Other Industries While the Global Automotive Lithium-Ion Battery market is forecasted to reach $9.6 billion by 2015, the global market for Consumer Batteries is projected to reach $55.4 billion by 2017. With the completion of the Gigafactory, Tesla will have the capacity to produce more lithium-ion batteries than currently produced in the entire world. Thus, Tesla has a tremendous opportunity to leverage its competitive advantage in battery design across a variety of industries. We recommend specifically devoting attention to developing batteries for Utilities and Phones. Tesla has already engaged in talks with Apple to discuss collaborations. As a principal battery supplier to Apple and other phone manufacturers, Tesla would stand to potentially gain XYZ in revenue. Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Recommendation Our Recommendation: Adaptable Design Create factories capable of mass production, with emphasis on machine tools that can be easily retrofitted when new technology is developed That said, a wait-and-see approach would be foolish for Tesla, and would prevent the company from attaining profitability in the short-run. We therefore recommend that Tesla aggressively pursues its current technological advantage over competitors by developing the Gigafactory and mass-producing its current generations of vehicles – The Model S, X, and E. However, we advise designing the factory with a focus on production capabilities that can be quickly and affordably adapted as the technology improves. If the Lithium-Air battery or another emerges as a viable alternative to the Lithium-Ion battery, Tesla needs to be prepared to make the switch. We therefore think that Tesla should be prepared to sacrifice a degree of its Gigafactory’s total production and efficiency in order to ensure its adaptability. Dynamic production with machines that can be used to build numerous different types of batteries Consider expansion into other industries Utilities Phone batteries Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Competition in Battery Production This risk is especially worrisome as the battery industry is currently innovating at 5-8% per year, with numerous companies and universities researching new battery technologies that, if successful, would completely revolutionize the battery industry. One such technology is the Lithium Air Battery. We’ve provided a brief technical description of the technology in the handout, but essentially a Lithium Air Battery, if successfully built, will be lighter, smaller, faster-charging, and capable of taking a car hundreds of miles farther on a single charge. Many major competitors in the automaking industry as well as the tech industry are in the process of developing lithium-air batteries for cars, including Volkswagen, Toyota, and IBM. IBM specifically is scheduled to release a prototype of their battery this year, and has set a goal of 2020 for achieving commercial viability. Higher energy density than lithium-ion batteries because they replace the heavy conventional compounds used in lithium-ion batteries with air Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Recommendation Our Recommendation: Adaptable Products Expand sale of lithium-ion battery into other industries to take advantage of much larger market opportunities That said, a wait-and-see approach would be foolish for Tesla, and would prevent the company from attaining profitability in the short-run. We therefore recommend that Tesla aggressively pursues its current technological advantage over competitors by developing the Gigafactory and mass-producing its current generations of vehicles – The Model S, X, and E. However, we advise designing the factory with a focus on production capabilities that can be quickly and affordably adapted as the technology improves. If the Lithium-Air battery or another emerges as a viable alternative to the Lithium-Ion battery, Tesla needs to be prepared to make the switch. We therefore think that Tesla should be prepared to sacrifice a degree of its Gigafactory’s total production and efficiency in order to ensure its adaptability. Dynamic production with machines that can be used to build numerous different types of batteries Consider expansion into other industries Utilities Phone batteries Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Our Plan of Action 2014 2015 2016 2017 2018 2019 2020 500,000 Teslas Superchargers: US, Europe 100,000 Tesla International Expansion Gen III: Europe Superchargers: China Gigafactory production 2020 500,000 Teslas on the road We’ve given you a lot of information but what have we told you? To achieve Tesla’s goal of Gen III and 2020 500,000 annual car sales we are recommending expanding the consumer base, creating the infrastructure and technology for Gen III, and preparing the company for the meteoric success expected after the 2017 Gen III release. How we see achieving this is by providing you the timing and placement of all our initiatives. 2014 has already seen efforts in international expansion and moving forward with the Gigafactory which will begin construction by the end of this year. 2015 is the release of Model X, increasing production to make room for this, and unveiling Gen III. 2016 will see the necessary infrastructure of Evs in the US and Asia and hitting the milestone of selling 100,000 Teslas annually. 2017, will be the release of the long-awaited Gen III, the Gigafactory beginning production and generating revenue, and focusing our attention to China with constructing a factory. 2018 is international expansion part 2: Gen III to Europe and Superchargers in coastal and Southern China. 2019 will be R&D for a new car and evaluating Tesla’s efforts to see what has been successful and what has not. This will all funnel to 2020 where Tesla will achieve its 500,000 annual sales. Model X 1,000 production: 700 X, 300 S Gen III Unveiled Construction of Chinese facility New product development Revise & evaluate Gen III: US Gigafactory begins production Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Tesla’s Projected Growth in Sales 2014: 32,500 Model S $598 million — 2015: 36, 400 Model X $400 million 15, 600 Model S $287 million 2016: 70,000 Model X $686 million 30,000 Model S $552 million 2017: 35,000 Model E $350 million 85,000 Model X $784 million 47,000 Model S $736 million 2018: 60,000 Model E $600 million 97,000 Model X $950 million 70,000 Model S $$1.2 billion 2019: 130,000 Model E $1.3 billion 100,000 Model X $980 million 83,000 Model S $1.52 billion 2020: 300,000 Model E $3 billion 108,000 Model X $1.05 billion 92,000 Model S $1.69 billion 32,500: $598 million } 52,000: $687 million } 100,000: $1.24 billion } 167,000: $1.87 billion } 227,000: $2.75 billion What we mean by meteoric success is that we have estimated what we believe to be the sales of Tesla for the next 6 years. As you can see 2017 onwards the company will experience rapid growth in sales and revenue. } 313,000: $3.8 billion } 500,000: $5.74 billion Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

Implementation & Feasibility 2014 2015 2016 2017 2018 2019 2020 Sales Revenue $687 million $1.24 billion $1.87 billion $2.75 billion $3.8 billion $5.74 billion $598 million Operating Expenses -$488 million -$532 million -$672 million -$ 850 million -$976 million -$1.06 billion -$1.13 billion $110 million $155 million $568 million $1.02 billion $1.77 billion $2.74 billion $4.61 billion Profit Other -$5 billion -$51.7 million -$5.6 million -$18 million -$415 million -$500 million -$18 million 80 Chinese Superchargers -$2 billion Tesla -$2.3 billion bonds - $1 billion Japanese partners - $2-3 billion partners These are all great ideas but how will we make these a reality? Our emphasis is creating the environment and from that the market. What you see is the profits for the company in the next 6 years and how we can use these to fund our projects as you can see the capital necessary for these projects can be readily paid for by Tesla’s profits. All this leads to reaching expanding EV consumers and reaching the 500,000 sales mark but most all 230 US Superchargers Production of Chinese facility -$438 million 25 US Superchargers 80 European superchargers New production line Gigafactory Introduction Key Issues & Recommendations Consumer Analysis Competitive Analysis Gen III Product Development Implementation

What we see as the future of Tesla What we see as the future of Tesla. A leader in not only EV and battery technology but at the forefront of creating a cleaner environment.

Thank you.

Questions?