Media Briefing - April 12, 2007 Darryl Siry VP Marketing Tesla Motors

Tesla Motors has achieved some significant milestones recently. The first of our Validation Prototypes (VPs) recently arrived in San Carlos. This car represents a significant step forward toward real production cars as it implements corrections to problems discovered in the Evaluation Prototypes (EPs), hard-tooled components for all body panels, production headlights and taillights, nearly-production interior components (including much more comfortable seats), and many other subtle changes.

We continue to test the Roadster prototypes, and recently performed our first actual driving range tests on an EPA-compliant dynamometer. Based on the results of these tests, we need to revise our initial range estimates downward. We now anticipate that the range of the Roadster will still be greater than 200 miles, but will not meet our original target of 250 miles.

Martin Eberhard, CEO, recently communicated this news to our customers, and we will continue to provide them with updates as we continue development of the Roadster. We think it is appropriate to always communicate to our customers first, and then more broadly to the media and the public.

These are the key factors for the revised expectation:
We made a significant number of design changes to maximize safety and durability of the Roadster, both in its chassis and in its battery pack. These changes added several hundred pounds to the weight to our original design.

We deliberately chose lithium ion cells with a slightly lower capacity because they have better long-term durability and higher tolerance for abuse.
I also think it is important to keep members of the media up to date on our progress to provide you with the context and background necessary for you to do your job. To that end, I am providing some additional context in this briefing.

It is important to note that at greater than 200 miles, the Tesla Roadster will still have the highest range of any production EV in history by a large margin, and we will be working hard to deliver even better range in the coming months.

The original premise of this groundbreaking car was that its range would be high enough that you would not have to worry about charging during a typical day, even if you have a long commute, take the car out for dinner and chores, or even take the scenic route home. Once home, you plug it in - just like you would your cell phone - and by the time you're ready for another day, your Tesla Roadster is fully charged and ready to go. We believe that this premise is still intact with a range above 200 miles.

Our communications strategy is intentionally conservative: we don't want to communicate any further revisions to range unless they are upward revisions. That's why we decided to say that the final EPA-certified range will be greater than 200, rather than try to communicate where we think it will actually land at the end of the day. When the final tests are performed by EPA just prior to start of production, we will communicate final numbers to customers, the press and to the public.

After extensive testing of our EPs, we are confident that we will achieve a final EPA-certified range above 200 miles. Now that we have completed cars and an understanding of the testing methodology, our future range estimates will be based on empirical testing, not simply modeled estimates. This is an important distinction that should be taken into account when comparing Tesla's estimates for range to other companies' claims. Since Tesla has undergone significant testing on our EP cars that have lead us to this revised expectation, I would suggest that these numbers cannot be compared apples to apples with range numbers that are expressed by other companies as aspirational goals or modeled estimates.

In the years that we have been working on the design and development of the Roadster, we have learned an enormous amount about the challenges of electric drivetrain development, including battery system management, power electronics and motor development. We have also learned a great deal about the challenges of developing a high quality electric vehicle for mass production. We expect that other companies in this emerging sector will also experience this steep learning curve when they move from concepts to prototypes or when they attempt to mass produce cars for the marketplace.

The original assumptions and models that lead to the claim of 250 miles were made in good faith based upon the knowledge available to us at the time and our anticipated design specifications for the Roadster (including a lower weight than what we have today.) Our customers who have reserved a car know that they are reserving a car that exists today in prototype form and that is subject to further development and validation. That is one reason that we chose to make the reservation payment fully refundable so that if customers decide to change their mind based upon how the program develops, they can give up their spot and receive a full refund.
As a leader in the field, we expect that we will often be the first to learn from experiences along the way. We plan to continue to be as transparent as we can about our progress (within reason for a company in a competitive marketplace.) That's why we have chosen to communicate this revised expectation as soon as was practical after the conclusion was known to us.